Dan Salamie v. Bruce P. Conrad ( 2013 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Dan Salamie, FILED
Plaintiff Below, Petitioner June 24, 2013
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
vs) No. 12-0969 (Kanawha County 11-C-587) OF WEST VIRGINIA
Bruce P. Conrad,
Defendant Below, Respondent
MEMORANDUM DECISION
Petitioner Dan Salamie, by counsel Dana F. Eddy, appeals the order of the Circuit Court
of Kanawha County, entered July 9, 2012, granting respondent’s cross-motion for summary
judgment on the ground that petitioner’s complaint seeking vacatur of an arbitration award made
on January 11, 2011, was not timely served on respondent. Petitioner filed his complaint in the
Circuit Court of Kanawha County on April 11, 2011, and the complaint was served on April 15,
2011. Respondent Bruce Conrad appears by counsel William V. DePaulo.
This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision is appropriate under Rule 21 of the Rules of Appellate
Procedure.
Respondent is a registered investment advisor who is the sole proprietor and employee of
Diversified Investment Strategies. The complaint asserts that respondent is “associated” with TD
Ameritrade, Inc. Petitioner had an account agreement with TD Ameritrade’s predecessor
company, TD Waterhouse, which contained an “agreement to arbitrate controversies[.]” Pursuant
to that agreement, petitioner filed a statement of claim with the Financial Industry Regulatory
Authority (“FINRA”) in June of 2009. Petitioner’s claims were based on the asserted loss of
$835,000 in October of 2010, through his investments with TD Ameritrade. Petitioner claimed
that he gave respondent explicit instructions about his investment portfolio during a telephone
conversation three years earlier, and that respondent acted contrary to the instructions.
On June 22, 2010, after concluding its first hearing session, the FINRA arbitration panel
granted TD Ameritrade’s motion to dismiss for reasons unspecified in the record on appeal, but
respondent remained a party to that arbitration.1 Soon thereafter, on January 11, 2011, the
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While the arbitration proceedings were ongoing, petitioner filed a complaint in the
United States District Court for the Southern District of West Virginia seeking to vacate the
arbitration panel’s dismissal of TD Ameritrade from the arbitration proceedings. The federal
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arbitration panel made its final award, and petitioner initiated separate actions in the Circuit
Court of Kanawha County attacking the arbitration award: This action, filed on April 11, 2011,
and a later action naming TD Ameritrade as the defendant, filed on November 23, 2011.
Petitioner filed a motion for summary judgment on March 14, 2012. Respondent filed a
motion for summary judgment on February 16, 2012, and a cross-motion for summary judgment
on April 4, 2012. The question of timeliness of service was first raised in respondent’s cross-
motion. The circuit court granted the respondent’s April 4th cross-motion by order entered July 9,
2012, on the ground that the application to vacate the arbitration award was served on respondent
four days late. In doing so, the circuit court treated the cross-motion as a motion to amend
respondent’s answer to assert a statute of limitations defense, a right which he had reserved when
he filed his answer.
Petitioner filed his notice of appeal on August 8, 2012. He asserts three assignments of
error. First, petitioner argues that the arbitration panel improperly proceeded to hear the claims
against respondent after TD Ameritrade was dismissed from the arbitration, because respondent
was not a party to the agreement to arbitrate. Second, he argues that respondent waived the
defense that his claims were barred by the statute of limitations because he first raised the
defense in a responsive pleading on the merits more than a year after filing his answer. Third, he
argues that he substantially complied with the Federal Arbitration Act.
We review a summary judgment order under a de novo standard of review. Syl. Pt. 1,
Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). “A motion for summary judgment
should be granted only when it is clear that there is no genuine issue of fact to be tried and
inquiry concerning the facts is not desirable to clarify the application of the law.” Syl. Pt. 2, Id.
(citation omitted).
The agreement to arbitrate provided, in part:
I agree that any controversy relating to any of my accounts or any agreement that
I have with you will be submitted to arbitration conducted only under the
provisions of the Constitution and Rules of the New York Stock Exchange, Inc. or
pursuant to the code of the Arbitration of the National Association of Securities
Dealers, Inc. Arbitration must be initiated by service upon the other party of a
written demand for arbitration or notice of intention to arbitrate. Judgment, upon
any award rendered by the arbitrator, may be enforced in any court having
jurisdiction. . . .
(Emphasis supplied.) Petitioner acknowledged in his complaint that respondent is an investment
advisor associated with TD Ameritrade. Petitioner’s claims against respondent arose from the
management of the accounts described in the agreement. Under the facts presented, it was not
district court judge later granted, on August 19, 2011, motions to dismiss by TD Ameritrade and
FINRA, motions to which petitioner had not responded. The federal district court noted that the
arbitration panel had not entered a final award and it therefore lacked authority to consider the
plaintiff’s claims under the Federal Arbitration Act.
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improper for the arbitration to proceed against respondent even after the dismissal of TD
Ameritrade.
We turn then to petitioner’s argument that respondent waived the statute of limitations
defense. Under the Federal Arbitration Act, “notice of a motion to vacate, modify, or correct an
award must be served upon the adverse party or his attorney within three months after the award
is filed or delivered.” 9 U.S.C. § 12 (emphasis supplied). In this case, the award was filed on
January 11, 2011. Petitioner therefore had until April 11, 2011, to file and serve his motion to
vacate the award. However, he did not serve that complaint on respondent until April 15, 2011.
The United States Fourth Circuit Court of Appeals has explained that the service
requirement of Section 12 is “mandatory[.]” Sverdup Corp. v. WHC Constructors, Inc., 989 F.2d
148, 151 (4th Cir. 1993). It has also explained the effect of the three-month period for filing:
We adopt the rule embraced by the Second Circuit in Florasynth, Inc. v. Pickholz,
750 F.2d 171 (2d Cir.1984), where that court held that once the three-month
period has expired, an attempt to vacate an arbitration award could not be made
even in opposition to a later motion to confirm. 750 F.2d at 174–75. A
confirmation proceeding under 9 U.S.C. § 9 is intended to be summary:
confirmation can only be denied if an award has been corrected, vacated, or
modified in accordance with the Federal Arbitration Act. Under the Act, vacation
of an award is obtainable by serving a motion to vacate within three months of the
rendering of the award. 9 U.S.C. § 12. Because [appellant] did not move for
confirmation until April 10, 1985, almost seven months after the award was filed,
[appellee] would be prevented from seeking a vacatur of the award unless there
was pending in the district court a timely-filed motion to vacate or unless a tolling
or due diligence exception operated to excuse his failure to make a timely motion.
We also conclude, however, that the district court erred in holding that
[appellant’s] failure to make a motion to vacate within three months of the filing
of the award was excused by due diligence or tolling. The existence of any such
exceptions to § 12 is questionable, for they are not implicit in the language of the
statute, and cannot be described as common-law exceptions because there was no
common-law analogue to enforcement of an arbitration award. See Florasynth,
750 F.2d at 174–77 (three-month limit is absolute); Piccolo v. Dain, Kalman &
Quail, Inc., 641 F.2d 598, 601 (8th Cir.1981) (due diligence exception
questionable, but due diligence did not appear on facts of this case).
Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir. 1986) (footnote omitted). In footnote two of Taylor,
the federal circuit court explained that “[u]nder the Act, a party seeking confirmation of an award
may petition for confirmation within one year of the date the award is made. 9 U.S.C. § 9 (1982).
We note that if a party opposing confirmation were always permitted to seek a vacatur in
opposition to a petition to confirm, the three-month limit would have little practical effect.” Id. at
225 n. 2.
In light of the clear construction by the Fourth Circuit Court of Appeals that an attempt at
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vacatur “could not be made” after the expiration of the three-month period, Taylor, 788 F.2d at
225, and inasmuch as respondent preserved in his answer the right to raise a statute of limitations
defense, we find that the circuit court did not err in determining that the untimely service barred
petitioner’s claims. Because this requirement is mandatory, respondent did not substantially
comply with the Federal Arbitration Act.
For the foregoing reasons, we affirm.
Affirmed.
ISSUED: June 24, 2013
CONCURRED IN BY:
Chief Justice Brent D. Benjamin
Justice Robin Jean Davis
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II
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