Magazine article Dispute Resolution Journal

Securities: Alleged Defense Counsel Misconduct

Magazine article Dispute Resolution Journal

Securities: Alleged Defense Counsel Misconduct

Article excerpt

SECURITIES

The Court of Appeals of Michigan, in a case of first impression, held that alleged improper conduct by defense counsel was no basis to vacate a National Association of Securities Dealers arbitration award since the alleged impropriety had no impact on the award.

In this dispute between Mr. Bell and his employer, Prudential Insurance Co., the court suggested that the parties attempt mediation. They did so, but were unsuccessful in reaching a settlement. Thereafter the court ordered arbitration pursuant to the arbitration clause in the Form U-4 agreement. Outside counsel for Prudential acted both as a neutral "mediator" in the mediation (together with a Prudential in-house lawyer), and as defense counsel for Prudential in the arbitration. Bell made no objection to defense counsel's appearance in the arbitration for almost a year. Then he moved before the arbitral panel to disqualify defense counsel, claiming that defense counsel gained an unfair advantage and learned confidential information in the mediation that could be used against Bell. The panel refused the request in order to avoid any delays but granted Bell one full day of discovery as a remedy. After 36 hearing days, the panel rejected and dismissed all the parties' claims and counterclaims.

Bell sought to vacate the award on the ground that defense counsel's conduct was unethical and rendered the award unenforceable. But the trial court found that Bell had a full and fair hearing and that the arbitrators were impartial and knowledgeable. Most importantly, the panel found that any impropriety on counsel's part did not influence or procure the award (procurement by corruption, fraud or undue means being a ground for vacatur under section 10(a)(1) of the Federal Arbitration Act). …

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