Federal Courts Affirm Forgiveness of Barclays Promissory Notes Repayment

After three days of hearings, the arbitration panel properly denied all of Platt and Urquidi's employment-related claims with prejudice, but the panel exceeded its powers by ruling that "all debt owed by Claimants [Platt and Urquidi] on the Notes executed on November 26, 2012, is forgiven" and thus denying Barclays' counterclaim on the Notes. . . 

[F]irst, the Chairperson of the arbitration panel failed to disclose to Barclays that his nine-member CPA firm had been retained and compensated approximately $60,000 to give expert testimony for two other former employees against Barclays in a virtually identical FINRA case, which was tried March 2-5, 2015 - less than two weeks after the Award was served. The Chairperson knew or should have known of this conflict of interest prior to the arbitration hearing involving Platt and Urquidi and, pursuant to FINRA arbitrator-disclosure rules discussed below, should have revealed it; instead, he stated at the outset of the hearing that he did not have any further disclosures. This is exactly the type of substantial, hidden relationship that creates a potential for bias and a reasonable impression of partiality, which the United States Supreme Court and the Eleventh Circuit have held require vacatur of the Award. The Chairperson's concealment of this obvious conflict of interest undermined the integrity of a dispute resolution process that must be transparent and neutral. 

Second, the Court should vacate the portion of the Award that is adverse to Barclays because the FINRA arbitrators exceeded their powers by imposing a loan "forgiveness" (a) that was not requested in Platt and Urquidi's arbitration claim, (b) that is contrary to the express, unambiguous, and undisputed repayment terms of the Notes, and (c) that lacks any contractual or other basis in applicable rule or law. . .

Movant now moves to vacate the arbitration award in part on two grounds: (1) "[t]he portion of the Award adverse to Barclays Capital should be vacated under § 10(a)(2) because there was evident partiality on the part of the Chairperson of the arbitration panel as he failed to disclose to Movant that his CPA firm " had been retained and compensated approximately $60,000 to give expert testimony for two other employees'' against Movant "in a virtually identical FINRA case" and (2) the arbitration award "should be vacated under § 10(a)(4) because the arbitrators 'exceeded their powers' by entering an Award that is contrary to the express, unambiguous, and undisputed terms of the Notes''  . . .

[P]rior to the arbitration hearing, which took place from February 2, 2015 through February 4, 2015, David G. Russel, counsel for Movant, stated that in January 2015, he spoke with Jacob Buchdahl, counsel for Respondents, who told him that Respondents "were considering engaging a Miami-based CPA, Harvey Muskat, as their damages expert, and that Mr. Muskat was affiliated with the same CPA firm as Jerrold Levine, the Chairperson of the Platt arbitration panel'' [ECF No. 5-1 ¶ 6]. Mr. Russel then advised Mr. Buchdahl "in substance that this would be an unacceptable conflict of interest that Barclays would not consent to.'' Id  Mr. Russel further stated that Mr. Muskat was not listed as a witness in the Platt proceedings. Id ¶ 7. There is nothing in the record that suggests Movant raised any objection at this time, or during the arbitration proceedings, to Chairperson Levine based on his purported affiliation with Mr. Muskat and his firm.

[D]uring his testimony, Mr. Muskat testified under oath that the Chairperson Levine was "retired'" from Mr. Muskat's firm (ECF No. 5-18, at 105:23-241). When questioned as to why he still appears on the firm's website as a member, Mr. Muskat answered, "b]ut, he's really not. He's been - he's been hanging around for years. But, now he doesn't even come to the office any more.'' Id at 105:2-4. Moreover, Mr. Muskat added that he "notified the attorney that - a person who we were - was - was 'a member of our firm' for many years, was on the panel.'' Id. at 105:7-1 1 . This sworn testimony, which is uncontroverted, establishes that Chairperson Levine was not a member of Mr. Muskat's firm. Nevertheless, notwithstanding the foregoing, Mr. Muskat's retention as a witness in the Platt proceedings would have certainly created a conflict, as aptly noted by Chairperson Levine. Id. at 105: 13-14. However, Mr. Muskat was never retained as a witness in this matter. After his conversation with Chairperson Levine, Mr. Muskat stated he "was unable to serve as an expert'' in the case. Id. 105: 16-1 7. Furthermore, this Court finds that Movant has failed to show that Chairperson Levine knew, and failed to disclose, that Mr. Muskat  was "retained and compensated $60,000 to assist and testify on behalf of two claimants adverse to Barclays in a 'mirror image' FINRA arbitration'' (ECF No. 1 ¶ 34]. The only record evidence before this Court on that issue is Mr. Muskat's sworn testimony, where he stated that he did not know or remember whether he discussed with Chairperson Levine that he would be taking an assignment (or be retained) for the Gallo proceedings (ECF No. 5-1 8, at 106:1-8]. The Court finds that this alleged partiality is "remote, uncertain and speculative.'' . . .

[I]n fact, the arbitrator's written decision does not contain any information beyond denying the parties' other requests, finding that each party is responsible for their own attorneys' fees, and forgiving the debt owed by Respondents on the notes (ECF No. 5- 5, at 4). This Court finds that the arbitrators did not exceed their powers under 9 U.S.C. § 10(a)(4) and follows the Eleventh Circuit's mandate in Shaw, which dictates that "[i]f arbitration is to be a meaningful alternative to litigation, the parties must be able to trust that the arbitrator's decision will be honored sooner instead of later.'' . . .

Respondents Platt and Urquidi's requests that they owe nothing to Barclays Capital, Inc. ("Barclays Capital'') pursuant to the signed Notes executed on November 26, 2012, are granted and all debt owed by Respondents on the Notes executed on November 26, 2012, is forgiven. Respondents are not liable and Barclays Capital's Counterclaim is denied in its entirety, with prejudice. The parties are responsible for their respective attorneys' fees. Respondents remaining requests for relief are denied, with prejudice. Any and all relief not specifically addressed herein, including Respondents' request for punitive damages, is denied.

Barclays Capital Inc. ("Barclays") appeals the district court's confirmation of an arbitration award in favor of Ileana Platt and Rafael Urquidi ("Claimants") and the denial of Barclays's motion to vacate this award. No reversible error has been shown; we affirm.

During the 3-day arbitration hearing, Claimants argued (relying in part on two recent FINRA decisions) that Barclays's decision to terminate business in Latin America constituted such a dramatic, unilateral change in the terms of Claimants' employment contracts that Barclays should be precluded from enforcing the Notes. Claimants also sought compensatory damages totaling $4.5 million for lost clients and commissions. In response, Barclays contended that the plain language of the Offer Letters and the Notes mandated -- without exception -- repayment of the outstanding loan amounts.

The arbitration panel here did what the parties requested: the panel made a determination about Claimants' obligation to repay the outstanding loan amounts under the Notes and about Claimants' entitlement to additional damages. In doing so, the panel considered expressly the parties' pleadings, testimony, and evidence. Resolution of the parties' claims necessitated consideration not only of the plain language of the Offer Letters and Notes, but also about the enforceability of that contract language in the light of Barclays's alleged breach of its duties. The record included evidence and argument both about the pertinent contract language and about the parties' intentions in entering into the employment relationship. We are thus persuaded that the arbitration panel at least arguably interpreted and applied the underlying contracts in making its award determination. 

We reject Barclays's contention that the arbitration panel ignored the plain language of -- and modified impermissibly -- the underlying employment agreements by "forgiving" Claimants' debt under the Notes. This case is not one of mere contract interpretation: the plain meaning of the language in the Offer Letters and Notes is not in dispute. Instead, the central issue before the arbitration panel was whether Barclays's decision to terminate its Latin American business constituted such a "dramatic unilateral change" to the material conditions of Claimants' employment that it rendered the Notes unenforceable. 

The arbitration award recited Claimants' request for "a declaratory judgment that any amount due under their ‘loan' agreements would be subject to an equitable set-off and that they would owe nothing under the Notes." In announcing the award, the panel said that "Claimants' requests that they owe nothing to Respondent pursuant to Claimants' signed Notes executed on November 26, 2012, are granted and all debt owed by Claimants on the Notes executed on November 26, 2012, is forgiven." The panel thus acknowledged the Notes but concluded that Claimants, given the circumstances, were not liable to pay any debt evidenced by the Notes. Although the panel provided no written reasons for its award, we can infer reasonably that the panel agreed with Claimants' position that Barclays's conduct rendered the Notes unenforceable. The enforceability of the Notes was a matter that was properly before the arbitration panel. See Wiand v. Schneiderman, 778 F.3d 917, 925 (11th Cir. 2015) ("Disputes regarding whether a contract was performed in accordance with its terms, like disputes about the validity of the contract as a whole, go to the arbitrator."). Whether the resulting decision was legally or factually erroneous is beyond the scope of our limited review. 

Considering the arbitration award and the record as a whole, we cannot say that it is "apparent" that the panel acted in excess of its power. Barclays has thus failed to satisfy its heavy burden of showing that a vacatur is warranted under section 10(a)(4). 

• FINRA
• Arbitration
• Barclays
• Urquidi
• Platt
• SDFL
• 11Cir
• Motion to Vacate
• Motion to Confirm
• BrokeAndBroker
• Bill Singer