The opinion of the court was delivered by: Judge John A. Nordberg
MEMORANDUM OPINION AND ORDER
Petitioner Wachovia Securities, LLC ("Wachovia") seeks to vacate a $783,729 arbitration award in favor of a former branch manager in its Gurnee branch office, respondent James M. Barnes, who claimed that he was wrongfully terminated based on what he says was at best a "paperwork" violation of a firm policy. Wachovia recognizes that this Court's review of an arbitration award under the Federal Arbitration Act ("FAA") is very narrow but argues that the arbitrators exceeded their powers by basing the award on a legal claim never raised or addressed in the hearing.
The basic facts are not in dispute. After working many years for Wachovia and its predecessors, Barnes was fired on Friday November 14, 2003. He was fired without notice in a brief meeting at a nearby Holiday Inn. The first written explanation of why he was fired was made several days later when Wachovia submitted to the NASD, as it was required to do, the Form U-5. On that form, which is a key part of this action, Wachovia explained that it terminated Barnes for "failure to follow firm policy regarding the opening of new accounts."
In September 2004, Barnes initiated the arbitration with the NASD by filing a submission agreement and a Statement of Claim. In his Claim, Barnes described his claims as ones for "wrongful termination" and for "denial of severance benefits." With the exception of one reference to the Illinois Wage Payment and Collection Act, a reference that related to recovery of attorneys' fees, Barnes did not tie his wrongful termination claim to any particular statute or common law doctrine. However, his claim was couched in the language of Title VII in that he argued that Wachovia's official explanation for his firing was pretextual. To Barnes, it made no sense to fire one of its branch managers who had "a spotless compliance record covering twenty-five years of service, a growing revenue base, no customer complaints, no loss  of customer assets, no substance abuse problems and no allegations of misconduct toward or disrespect for his fellow employees." He theorized that he was fired because Wachovia needed a "fall guy" so that it could look tough to regulators and thereby forestall further investigation into those higher up in the company. Although Barnes never formally conceded that he violated firm policy, his main argument was that any such violation was not serious and that the customary response, both at Wachovia and in the industry at large, was to allow a person in these circumstances to remain at the firm but no longer in a supervisory capacity. Barnes also alleged that particular way he was fired -- summarily with no notice -- was done so that Wachovia could "poach" his $42 million book of business. Barnes eventually was hired by another company, although by then he had only $14 million in client assets. Barnes alleged that he should have received severance benefits under a company policy tied to length of service. These benefits were not available, however, if the employee was fired for good cause.
In its Answer, Wachovia's laid out its theory of the case, setting forth numerous facts allegedly showing that Barnes knowingly violated Firm policy on more than one occasion and that he also tried to "keep his actions secret" from the Firm's Compliance Department.*fn1 Barnes allegedly had been warned about this Firm policy and was aware that Wachovia had began during this time taking a stricter approach regarding regulatory compliance due to the then recent passage of the Patriot Act. Barnes (according to Wachovia) ignored these warnings and in fact took extra steps to hide his activities. Wachovia therefore concluded that his failures to follow firm policy were serious. To Wachovia, Barnes' experience and supervisory position cut against him, suggesting that instead of leniency he should have been held to a higher standard.*fn2
The arbitration hearing began on November 2, 2005 in Chicago before a panel of three arbitrators. The hearing lasted two and a half days with opening and closing arguments and testimony from witnesses. The transcript of the hearing is 548 pages. Based on both the opening and closing statements, which we have read, and based on the parties' description of the testimony during the hearing, the parties stuck to the same themes and arguments contained in the Statement of Claim and Answer. Barnes continued to argue that the termination was pretextual because the violation was at best technical, and Wachovia maintained its position that the firing was not pretextual because of the serious nature of the violation.
The hearing ended on Friday, November 4th. That same day, the arbitrators signed a 4-page unanimous award, which is in what appears to be a standard format. There is a brief case summary describing the parties' positions set forth in the Statement of Claim and Answer. The substantive explanation of the ruling consists of the following two sentences. The second one is the central focus of this opinion:
Wachovia Securities LLC is liable for and will pay to James M. Barnes the sum of $783,729.00 . In making this determination, the Arbitration Panel finds that the reason identified on Mr. Barnes' Form U-5 is inappropriate and does not correctly reflect the actual reason for termination. (Award at 2.)
Upon first glance, especially after reading the first sentence, one would think that this was a straightforward and clear-cut victory for Barnes. He was awarded over $700,000, an amount in the range of damages he requested in his closing argument.*fn3 The finding set forth in the second sentence seemingly indicates that the arbitrators believed Barnes' wrongful termination argument. Not so fast, says Wachovia. It believes, based on this same sentence, that the arbitrators actually made a dramatic U-turn in their reasoning. According to Wachovia, the arbitrators actually ruled against Barnes on the only claim he brought (wrongful termination) but then decided to rule for him on a separate and an entirely new claim that was never raised or argued in the hearing. This claim is sometimes referred to as a Form U-5 defamation claim. Wachovia is upset about what it believes was a sudden change in rationale and argues that it had a good defense to a defamation claim but did not raise it because it had no idea that the arbitrators were considering such a claim. Wachovia argues that the arbitrators therefore "exceeded their powers," which is one of the four statutory grounds under Section 10 of the FAA for vacating an award. See 9 U.S.C. § 10(a)(4).
It seems relatively clear under the case law that, if Wachovia's explanation of what occurred is true, then the arbitrators exceeded their powers. Barnes does not really dispute the legal conclusion, although he does strongly disagree with the factual premise. See Resp. at 9 ("One can imagine circumstances where a claimant might attempt to sneak in a new issue during the hearing that had not been included in the Statement of Claim, hoping to capitalize on the element of surprise, but that is not what occurred here [.] In that type of situation, a due process challenge might be appropriate."). So the question here is whether there is any evidence to support Wachovia's interpretation that the arbitrators made this sudden shift in the rationale or basis for their decision.
Before addressing this question, we should provide some context. The explanation for the award in this case was one sentence. By itself, is that unusual or improper? Based on several recent articles on the subject, the answer is no. First, there is apparently no current NASD rule that requires arbitrators to provide any explanation for their award, although this issue is the subject of some debate and the NASD is apparently considering a new rule that would require some minimal explanation. See Steven C. Bennett, Explained Awards In Arbitration: The NASD's Proposed Experiment, 61 APR Disp. Resol. J. 15, *16 (Feb-April 2006) ("The NASD Code of Arbitration Procedure  does not now require arbitrators to produce 'reasoned' awards or even to briefly explain the basis for the decision."). Second, the great majority of NASD awards contain no explanation for the decision. See Jennifer J. Johnson, Wall Street Meets The Wild West: Bringing Law and Order To Securities Arbitration, 84 N.C. L. Rev. 123, 144-45 (2005) (in 2003 and 2004, fewer than 5% of the NASD arbitration decisions contained "even a brief explanation of the panel's decision").*fn4 Viewed in this context, the one-sentence explanation in this case is longer than the typical award. Third, the Seventh Circuit has held that a Court may not vacate an arbitration award under the FAA on the ground that it contained no explanation for the decision. See Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1254 (7th Cir. 1994) (an arbitrator is "simply not required to state the reasons for his decision" because such a requirement would "serve only to perpetuate the delay and expense which arbitration is meant to combat"). Based on the Seventh Circuit's decision in Eljer, the award in this case would have been immune from any challenge if the arbitrators had simply stopped after the first sentence.
But the arbitrators did include the second sentence, opening the door for Wachovia to argue that the arbitrators exceeded their powers. In considering Wachovia's interpretation, we must determine what standard applies. How clear must it be that the arbitrators did rely on a claim not raised in the hearing? The parties don't clearly answer this question in their briefs. However, Barnes, relying on an unreported Missouri federal district court opinion, does argue that a Court may vacate an award only where the arbitrators "clearly and manifestly" decided an issue not before them. (Resp. at 3, quoting Chesney v. Dunhill Investments, Ltd., 1989 U.S. Dist. LEXIS 539, *6- 7 (W.D. Mo. 1989).) In its reply brief, Wachovia suggests that Barnes has the burden of proof, although Wachovia at the same time argues that it is "clear" (Reply at 3) that the arbitrators did exceed their powers. For the reasons explained below, we find that, under the particular facts of this case, Wachovia must come forward with evidence showing that it is at least more likely than not that the arbitrators exceeded their powers.
As an initial matter, this standard is consistent with the fact that review of arbitration awards under the FAA is in general "tightly limited" and "perhaps it ought not be called 'review' at all." Baravati v. Josephthal, Lyon & Ross, 28 F.3d 704, 706 (7th Cir. 1994); Eljer, 14 F.3d at 1253-54 (scope of review is "grudgingly narrow" and "[e]rrors in the arbitrator's interpretation of law or findings of fact do not merit reversal under this standard"). Courts have refused to vacate arbitration awards even when there was uncertainty about the basis for, or logic behind, the award. A good illustration is the Seventh Circuit's decision in IDS Life Ins. Co. v. Royal Alliance Assocs., Inc., 266 F.3d 645 (7th Cir. 2001). In the first part of that opinion, Judge Posner described the arbitration award as being "so incomprehensible that three years later the judges and the parties are still trying to figure it out." Id. at 648. The party challenging the award complained that it was "internally inconsistent," "incomplete," and based on claims that were "not arbitrable" because they involved insurance business. Id. at 649. Judge Posner noted that the arbitrators even may have "lacked the professional competence required to resolve the parties' dispute." Id. This award might appear to be a good candidate for being overturned.
Yet, in the second part of the opinion, Judge Posner explained that, under the narrow standard of review, the district court properly confirmed the award. Judge Posner noted that "neither error nor clear error nor even gross error is a ground for vacating an award" and indicated that a court is not ...