Milliner v. Bock

Background

Charlotte B. Milliner, acting as trustee of the Charlotte B. Milliner Trust and as owner and holder of the Charlotte B. Milliner SEP IRA, filed a claim with the Financial Industry Regulatory Authority (FINRA) in 2014 against Thomas H. Bock, Mary C. Evans, Mutual Securities, Inc., and Bock Evans Financial Counsel, Ltd. She alleged that Bock and Evans, as licensed and registered principals of Mutual Securities, Inc., violated federal law, state law, and FINRA rules in managing an investment account funded by her retirement savings. She sought more than $3 million in compensatory damages.

The arbitration was stayed while related federal litigation proceeded. After Milliner settled with Mutual Securities, Inc. and dismissed her claims against that company, the arbitration resumed. The parties agreed to a schedule that required discovery responses by November 8, 2019, with the arbitration hearing set for November 12 and 13, 2019.

Bock and Evans asked the arbitration panel to postpone the hearing. They argued that the schedule left too little time to review discovery responses, comply with FINRA rules concerning exhibits and motions to compel discovery, and address potential discovery disputes. Milliner opposed postponement, arguing that they had not identified information they needed and had not met and conferred in good faith. The panel denied the postponement request.

The hearing took place as scheduled. Afterward, the panel requested additional evidence from both sides. The panel issued a unanimous award on January 13, 2020, finding Bock and Evans jointly and severally liable and awarding Milliner $773,527.13 in compensatory damages.

Legal standard

Under the Federal Arbitration Act, a court generally must confirm an arbitration award when the parties agreed that a judgment could be entered on it, unless one of the statute’s specific grounds for vacating, modifying, or correcting the award is established. The party seeking to vacate an award bears the burden of proving such a ground.

Bock and Evans relied on two statutory grounds for vacatur: alleged misconduct in refusing to postpone the hearing and alleged failure to provide adequate discovery. Milliner also argued that their motion was untimely, but the court found it timely because the three-month deadline fell on a Sunday and the motion was filed on the next day.

Court’s analysis

The court held that the panel had reasonable grounds to deny postponement. Bock and Evans had agreed to the discovery deadlines and did not identify a specific discovery dispute when they sought postponement. Milliner had also asserted that they had not identified anything they needed that they did not already have and had not met and conferred as required by FINRA rules. The court explained that vacatur based on refusal to postpone requires a showing that the decision denied the party a fundamentally fair arbitration proceeding.

The court also rejected the challenge based on discovery. Bock and Evans did not move to compel discovery after receiving Milliner’s responses, and they could have made such a motion orally during the hearing. They did not show that they raised an inability to defend themselves because of inadequate discovery. The panel also received additional evidence after the hearing, including documents Milliner produced in response to a discovery request. Bock and Evans could have asked the panel to reopen the record or allow further proceedings, but they did not do so.

Disposition

The court concluded that Bock and Evans had not shown misconduct or that the arbitration hearing was fundamentally unfair. It denied Respondents’ motion to vacate and confirmed the arbitration award in favor of Petitioner. The order disposed of Docket Nos. 1 and 10, and the clerk was authorized to close the file.