Former Wells Broker Seeks to Vacate Order to Repay $256,000 Loan Balance
In another example of brokers attempting the formidable challenge of vacating an arbitration award, a Michigan man has asked a court to set aside a decision requiring him to pay Wells Fargo Advisors $235,000 for promissory notes that became due when he left Wells in May 2019, plus interest and lawyers’ fees.
Tracy L. Allen failed to disclose before her selection as arbitrator that she had previously handled two similar cases presented by the same outside lawyers who represented Wells in the Gilroy-Sodano case, according to the June 12 filing in the Southern District of New York.
The omission, which Allen allegedly repaired after her selection by Wells and Gilroy-Solano, deprived the broker of the opportunity to select another arbitrator from candidates Finra had made available, according to the complaint.
Allen, who Finra classifies as a public rather than an industry arbitrator, did not return a call for comment. Gilroy-Solano, who did not participate in the arbitration hearing and who claimed he did not have time to hire a lawyer after being notified of Wells’ filing, declined to comment on the vacature motion.
Courts rarely overturn arbitration decisions, and under the Federal Arbitration Act can do so only when convinced that arbitrators were prejudiced because of misconduct or abuse of power, or showed “manifest disregard of law.” Finra’s Rule 13408 requires arbitrators to follow procedures that include timely disclosure of existing or past relationships with any party or representative that might “create an appearance of partiality or bias,” according to Gilroy-Soldano’s claim.
Courts have tossed attempts to vacate arbitration decisions in which brokers alleged bias because arbitrators improperly classified themselves as public rather than industry representatives or where Finra’s alleged failure to send notifications of promissory note claims to a broker’s correct address or to postpone hearings to accommodate schedules constituted procedural misconduct.
Christopher Warren, the New York lawyer representing Gilroy-Solano, said he does not comment on ongoing litigation but conceded that convincing a court will be “tough.”
In his petition, which the court said must be resubmitted to correct a filing error, Warren characterized Allen’s failure to initially disclose that she had worked with the Wells lawyers as a “procedural defect” that deprived the broker of his rights to due process and a fair hearing.
Miles Hart, a lawyer in Birmingham, Mich., who was on the team representing Wells in the arbitration, did not return a call for comment.
In her arbitration award decision, Allen granted Wells the balances it sought on three promissory notes tied to loans it gave to the broker, plus interest and almost $10,000 in attorneys’ fees. She also ordered Gilroy-Soldano to reimburse $1,000 to Wells for the nonrefundable portion of its Finra filing fee.
Bradley Schnurr, a Long Island lawyer who recently lost a bid to have a court vacate a promissory note award to UBS on behalf of a former broker, said that brokers representing themselves or hiring lawyers should carefully vet disclosures by arbitrators. But he said they are disadvantaged by the deference courts give arbitrators and because of weak oversight by Finra.
“It’s very important for advisors representing themselves or through legal counsel to review arbitrator biographies and backgrounds to weed out in any way, shape or form an association with the financial services industry,” he said, “but I don’t believe that the broker has a duty to continue to ask. Finra stresses to arbitrators that they have to make full and accurate disclosures but they don’t necessarily police it.”