Sonnenblick v. Cadaret, Grant & Co., Inc.

Background

Charles and Mark Sonnenblick worked as registered representatives for Cadaret, Grant & Co., Inc. Mark had originally worked for Cadaret’s predecessor, BNL Securities. The opinion states that no signed representative agreement was located for Mark, although Cadaret argued that he must have signed one because signing such an agreement was standard practice. Charles worked for Cadaret under a Securities Sales Agreement.

Both petitioners resigned on March 23, 2023, and became registered representatives with LPL Financial LLC. Cadaret paid each of them trails and commissions for 90 days after departure, then stopped those payments. The petitioners claimed that Cadaret owed them additional payments and initiated arbitration through the Financial Industry Regulatory Authority. After a hearing on August 28, 2024, the arbitrator issued an award without an explanation denying their claims on September 5, 2024.

The Motions

The petitioners asked the court to vacate, or set aside, the arbitration award under Section 10(a)(3) of the Federal Arbitration Act. That provision permits vacatur when an arbitrator engages in misconduct, including refusing to hear material evidence or otherwise prejudicing a party’s rights. The petitioners challenged the arbitrator’s admission into evidence of their contracts with LPL in a Transition Assistance Package.

Cadaret filed a cross-motion to confirm the arbitration award. Confirmation would make the award enforceable as a court judgment.

Court’s Analysis

The court explained that judicial review of an arbitration award is narrowly limited and that arbitration decisions receive substantial deference. Under the Federal Arbitration Act, a court generally confirms an award unless the party seeking to vacate it proves one of the statute’s limited grounds. The court also noted that an award may be vacated for “manifest disregard” of the law, meaning that the arbitrator knowingly ignored a clearly applicable legal rule.

The court held that admitting the LPL contracts did not deny the petitioners a fundamentally fair proceeding. The evidence was consistent with the absence of a contractual basis for commissions after the initial 90-day period. The court also held that the arbitrator had not manifestly disregarded the law by deciding that the petitioners were not entitled to additional commission payments.

Disposition

The court denied the petitioners’ petition to vacate the arbitration award and granted Cadaret’s motion to confirm it. The Clerk was directed to terminate the open motion and close the case.