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Allied Beacon Partners, Inc. v. Bosco

United States District Court, N.D. Illinois, Eastern Division

February 12, 2014

ALLIED BEACON PARTNERS, INC., f/k/a Waterford Investor Services, Inc., Plaintiff,
v.
LOUIS BOSCO, ANNETTE BOSCO, LOUIS AND ANNETTE BOSCO, TRUSTEES OF THE BOSCO FAMILY TRUST DTD 6/25/96, LOUIS AND ANNETTE BOSCO, TRUSTEES OF THE BOSCO FAMILY TRUST DTD 7/31/96, MARY BOROWIAK, MARY BOROWIAK, TRUSTEE OF THE MARY BOROWIAK TRUST, MICHAEL BOROWIAK, RICHARD RUBEL, and DIANE RUBEL, Defendants.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

Allied Beacon Partners, Inc., formerly known as Waterford Investment Services, Inc. ("ABP" or "Waterford/ABP") bring this Applicaton and Motion to Vacate the Arbitration Award entered in favor of Louis Bosco; Annette Bosco; Louis and Annette Bosco, Trustees of the Bosco Family Trust DTD 6/25/96; Louis and Annette Bosco, Trustees of the Bosco Family Trust DTD 7/31/96; Mary Borowiak; Mary Borowiak, Trustee of the Mary Borowiak Trust; Michael Borowiak; Richard Rubel; and Diane Rubel (collectively, the "Boscos") on May 20, 2013, pursuant to 9 U.S.C. ยง 10. (Dkt. Nos. 1, 23.) The Boscos, in turn, filed an Application and Motion to Confirm the Arbitration Award. (Dkt. Nos. 8, 21.) For the reasons stated below, the Court denies ABP's Application and Motion to Vacate the Arbitration Award and grants the Boscos' Application and Motion to Confirm the Arbitration Award. The Court thereby converts the arbitration award entered in the Boscos' favor into a judgment against ABP.

BACKGROUND

Beginning in 2005, the Boscos invested their "life savings" with George Gilbert, who was a financial advisor at Waterford (now ABP), and before that was with Community Bankers Securities, LLC ("CBS"). Waterford Inv. Servs., Inc. v. Bosco, 682 F.3d 348, 350-51 (4th Cir. 2012). The largest investment the Boscos made at Gilbert's suggestion were in companies that turned out to be Ponszi schemes, and by 2009, the Boscos had lost over one million dollars. Id. at 351. The Boscos brought claims for these losses before the Financial Industry Regulatory Authority ("FINRA"), alleging that Gilbert and his firms failed to do the proper due diligence on these investments, made misrepresentations and omissions regarding them, did not disclose the risks associated with them, and recommended them despite being unsuitable for the Boscos' needs. Id. at 352.

Waterford/ABP filed a declaratory action in the Eastern District of Virginia seeking a judgment that it was not required to arbitrate the dispute with the Boscos and an injunction against it being required to participate in any arbitration. Id. Specifically, Waterford/ABP argued that Gilbert was not an "associated person" of Waterford/ABP, and that Waterford was not a successor-in-interest to CBS and CBS's agreement to arbitrate its customers' claims. Id. Magistrate Judge Dohnal and Senior District Judge Payne disagreed, and Waterford/ABP was ordered to arbitrate the Boscos' claims. Waterford Inv. Servs., Inc. v. Bosco, 2011 WL 3820723 (E.D. Va. July 29, 2011) (Dohnal, Mag. J.); Waterford Inv. Servs., Inc. v. Bosco, 2011 WL 3820496, 1, 999 (E.D. Va. Aug. 26, 2011) (Payne, J.). Waterford/ABP appealed and the Fourth Circuit affirmed. Waterford, 682 F.3d at 350.

The parties conducted an arbitration hearing in Chicago, Illinois between May 14, 2013 and May 16, 2013. The arbitrators found in favor of the Boscos and ordered ABP to pay the Boscos[1] a total of $1, 207, 500 plus 10% per annum interest beginning on April 14, 2010, as well as $400, 000 in attorneys fees. (Dkt. No. 21-1 at pp. 5-6.) ABP now argues the award is invalid because:

1. The award was procured by undue means;
2. There was evident partiality in the arbitrators;
3. The arbitrators refused to hear evidence pertinent and material to the controversy;
4. The arbitrators failed to adhere to and follow Virginia [law], exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made; and
5. The arbitrators finding of successor liability, without hearing or receiving any evidence at all, deprived ABP of due process of law in violation of the Virginia and United States Constitutions.

(Dkt. No. 1 at pp. 1-2.) The Boscos counter that the award was fairly entered, and that in either event, ABP's grounds for challenging it are meritless and unsupported because ABP did not provide the record or arbitration transcripts.

STANDARD OF REVIEW

Motions to vacate arbitration awards are highly disfavored in the Seventh Circuit, and this Court's review of such an award is "extremely limited." See Yasuda Fire & Marine Ins. Co. of Europe, Ltd v. Cont'l Cas. Co., 37 F.3d 345, 349 (7th Cir. 1994); see also Nat'l Wrecking Co. v. Int'l Bhd. of Teamsters, Local 731, 990 F.2d 957, 960 (7th Cir. 1993). Courts may not interfere with an arbitrator's findings of fact merely because it disagrees with them, otherwise the purpose of arbitration proceedings as speedy and cost-effective dispute resolution options would be undermined. See Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1258 (7th Cir. 1992) ("Thus, the court's function in confirming or vacating an arbitration award is severely limited. If it were otherwise, the ostensible purpose for resort to arbitration, i.e., avoidance of litigation, would be frustrated."); see also United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987) (collective bargaining agreement context); Flexible Mfg. Sys. Pty. Ltd. v. Super Prods. Corp., 86 F.3d 96, 100 (7th Cir. 1996) ("Thinly veiled attempts to obtain appellate review of an ...


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