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Singh v. Interactive Brokers, LLC

United States District Court, E.D. Virginia, Norfolk Division

December 17, 2019

CHARANJIT SINGH, et al., Plaintiffs,
v.
INTERACTIVE BROKERS LLC, et al., Defendants.

          OPINION AND ORDER

          ROBERT G. DOUMAR UNITED STATES DISTRICT JUDGE

         This consolidated action has been stayed since November 30, 2016, when, on motion of defendant Interactive Brokers LLC ("IB"), the Court compelled arbitration and stayed the matter pending the same. ECF No. 24. Consistent with such order, the plaintiffs and IB submitted to arbitration before the FINRA Office of Dispute Resolution. On April 16, 2019, FINRA awarded damages, costs, and fees in favor of IB and against the plaintiffs. See ECF No. 42-2 ("Award"). The plaintiffs thereafter filed a Motion to Vacate or Modify the Award, ECF No. 42, and IB filed a cross Motion to Confirm the Award, ECF No. 51. For the reasons below, plaintiffs' Motion to Vacate or Modify the Award is DENIED, and IB's Motion to Confirm the Award is GRANTED.

         I. FACTUAL AND PROCEDURAL HISTORY

         On June 8, 2016, Charanjit and Parbhur Singh ("the Singhs") and Brar Family Partnership L.P. ("BFP")[1] (collectively, "Plaintiffs"), filed lawsuits against the Singhs' nephew, Vikas Brar; his financial advising firm, Brar Capital LLC; and IB, an online broker-dealer and securities investment firm. Singh Case, ECF No. 1; BFP Case, ECF No. 1. These two lawsuits relate to two IB investment accounts held by Plaintiffs: the Singhs' joint account established in August 2011 ("Joint Account") and BFP's account established in March 2012 ("Partnership Account"). See Amended Compl., Singh Case, ECF No. 2 ¶ 21; BFP Case, ECF No. 3 ¶ 21. The Singhs named Vikas Brar of Brar Capital LLC as their designated financial advisor for both accounts, Id

         A. Factual Background

         According to their Amended Complaints, by August 2015, both the Joint Account and the Partnership Account consisted almost entirely of options on the VXX, which is an exchange-traded note designed to expose options positions to the CBOE Volatility Index. See Singh Case, ECF No. 2 ¶ 30; BFP Case, ECF No. 3 ¶ 31. On August 20, 2015, the Joint Account was allegedly worth $406, 794.04 and the Partnership Account was allegedly worth $1.8 million. See Singh Case, ECF No. 2 ¶ 30; BFP Case, ECF No. 3 ¶ 33. However, in August 2015, the stock market plunged, and the value of the Joint Account dropped to a value of-$409, 565.95, with a margin deficit of approximately $1.2 million, and the value of the Partnership Account dropped to a value of $651, 811.26, with a margin deficit of approximately $1.79 million. Singh Case, ECF No. 2 ¶ 32; BFP Case, ECF No. 3 ¶¶ 35-38. To cover these significant margin deficits, IB liquidated the positions in both accounts. See Singh Case, ECF No. 2 ¶¶ 32-33; BFP Case, ECF No. 3 ¶¶ 39, 42. After liquidation, both the Joint Account and the Partnership Account had insufficient funds to satisfy their margin debts, so IB demanded approximately S461, 000 from the Singhs and $1.72 million from BFP to cover their respective debts. See Singh Case, ECF No. 2 ¶¶ 32-33; BFP Case, ECF No. 3 ¶¶ 39, 42.

         B. Arbitration Proceedings

         On November 27, 2015, IB commenced arbitration proceedings against Plaintiffs before FINRA alleging breach of contract for failure to pay their account margin debts. See Award, ECF No. 42-2. In June 2016, Plaintiffs commenced the above-captioned lawsuits, which this Court consolidated pursuant to Rule 42(a) of the Federal Rules of Civil Procedure. See Singh Case ("Lead Case"), ECF No. 23; BFP Case, ECF No. 25. On November 30, 2016, on IB's motion, this Court compelled Plaintiffs to arbitrate their dispute with IB pursuant to their binding arbitration agreements and stayed the instant litigation pending completion of the arbitration, ECF No. 24.

         On April 9, 2019, the FINRA Office of Dispute Resolution issued its Award in the consolidated matter of the arbitrations between IB and the Singhs and between IB and BFP. ECF No. 42-2, Such Award constitutes the full and final resolution of the issues submitted by the parties and was decided after the panel considered the parties' pleadings, the testimony and evidence presented at an evidentiary hearing, and the parties' post-hearing submissions. Id. at 4. The Award finds the Singhs liable to IB for unpaid account deficits in the amount of $461, 225.13, plus interest, costs, and $103, 279.07 in attorneys' fees. IcL at 4. The Award further finds BFP liable to IB for unpaid account deficits in the amount of $1, 720, 983.06, plus interest, costs, and $240, 984.48 in attorneys' fees. Id. The Award also denies in their entirety all counterclaims filed by the Singhs and BFP in the arbitration. Id.

         C. Pending Motions

         On July 11, 2019, Plaintiffs filed the instant Motion to Vacate or Modify the Arbitration Award ("Motion to Vacate or Modify Award").[2] ECF No. 42. On July 30, 2019, IB filed a cross motion to confirm the arbitration award ("Motion to Confirm Award") pursuant to Section 9 of the Federal Arbitration Act, 9 U.S.C. § 9. ECF No. 51. Plaintiffs' Motion to Vacate or Modify Award and IB's Motion to Confirm Award were fully briefed.

         On October 22, 2019, the Court held a hearing on the pending motions. Based on a procedural development[3] that Plaintiffs brought to the Court's attention, the Court ordered further briefing. ECF No. 56. Plaintiffs filed their Brief in Response to Court Order on November 6, 2019, ECF No. 57, and IB filed a Supplemental Memorandum of Law in Support of Motion to Confirm Arbitral Award, ECF No. 66. The parties then each filed a reply. ECF Nos. 68, 69. Plaintiffs' Motion to Vacate or Modify Award and IB's Motion to Confirm Award are now before the Court.

         II. STANDARD OF REVIEW

         Pursuant to the Federal Arbitration Act (the "FAA") and its animating principles, arbitration must remain a viable means of resolving disputes and not merely "a preliminary step to judicial resolution." Apex Plumbing Supply. Inc. v. U.S. Supply Co.. 142 F.3d 188, 193 n.5 (4th Cir. 1998). Therefore, an arbitration award carries a "strong presumption" of validity, Williamson Farm v. Diversified Crop Ins. Servs.. 917 F.3d 247, 253 (4th Cir. 2019), and judicial review of arbitration awards is "severely circumscribed." Apex Plumbing, 142 F.3d at 193. Indeed, it "is among the narrowest known at law." Id.

         When a party moves to vacate an arbitration award, the district court does not conduct a de novo review of the award's legal or factual findings. See Williamson Farm, 917 F.3d at 253; see also Mays v. Lanier Worldwide. Inc.. 115 F.Supp.2d 1330, 1335 (M.D. Ala. 2000) (citing In re Arbitration between Griffin Indus.. Inc. & Petroiam. Ltd.. 58 F.Supp.2d 212, 221 (S.D.N.Y. 1999)). Rather, the court's review is limited to applying the standards created under the FAA and relevant case law in order to determine whether the remedy of vacating the arbitration award is appropriate. Id. As the Fourth Circuit has often stated, "a district or appellate court is limited to determining] whether the arbitrators did the job they were told to do - not whether they did it well, or correctly, or reasonably, but simply whether they did it." Williamson Farm. 917 F.3d at 253 (quoting Remmev v. PaineWebber. Inc., 32 F.3d 143, 146 (4th Cir. 1994)).

         Therefore, to prevail, a party seeking vacatur "must clear a high hurdle. It is not enough . . . to show that the [arbitrator] committed an error-or even a serious error." Stolt-Nielsen S.A. v. Animalfeeds Int'l Corp.. 130 S.Ct. 1758, 1773 (2010). Rather, "the moving party must sustain the heavy burden of showing one of the grounds specified in the Federal Arbitration Act or one of certain limited common law grounds." MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 857 (4th Cir. 2010). The FAA's four grounds for vacatur of an award include:

1) where the award was procured by corruption, fraud, or undue means;
2) where there was evident partiality or corruption in the arbitrators, or either of them;
3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a), The limited common law grounds for vacatur include "those circumstances where an award fails to draw its essence from the contract, or the award evidences a manifest disregard of the law." MCI Constructors. 610 F.3d at 857 (internal quotation omitted).

         Furthermore, if the movant fails to allege sufficient bases to support its claims for vacatur, the court may deny the motion without a hearing. See, e.g., Q.R. Sec, Inc. v. Prof 1 Planning Assocs.. Inc.. 857F.2d742, 746 n.3 (11thCir. 1988); see also Legion Ins. Co. v. Ins. Gen. Agency, Inc.. 822 F.2d 541, 543 (5th Cir. 1987) (finding that neither the FAA nor the Federal Rules require a reviewing court to conduct a hearing on a motion to vacate ...


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