United States District Court, E.D. Virginia, Norfolk Division
OPINION AND ORDER
G. DOUMAR UNITED STATES DISTRICT JUDGE
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.
FACTUAL AND PROCEDURAL HISTORY
8, 2016, Charanjit and Parbhur Singh ("the Singhs")
and Brar Family Partnership L.P.
("BFP") (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,
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.
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.
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.
11, 2019, Plaintiffs filed the instant Motion to Vacate or
Modify the Arbitration Award ("Motion to Vacate or
Modify Award"). 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.
October 22, 2019, the Court held a hearing on the pending
motions. Based on a procedural development 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.
STANDARD OF REVIEW
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.
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)).
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
1) where the award was procured by corruption, fraud, or
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
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 ...