FINRA Arbitrator Sings Signed, Sealed, Delivered and Return to Sender In Default Award

Side Bar: Online FINRA BrokerCheck records disclose that on August 18, 2017, Vandyke was barred by FINRA for failure to respond to FINRA request for information.

The Arbitrator determined that Respondent Victoria Anne Vandyke was served notice of the Statement of Claim by regular mail, Overdue Notice and Notification of Arbitrator by certified mail and is therefore bound by the Arbitrator's ruling and determination. 

The respondent is a retired investment banker. In 2000, she entered into an agreement with the petitioner to act as its investment advisor and broker. The respondent managed the petitioner's investment account until May 4, 2016, when the petitioner terminated her services. The Financial Industry Regulatory Authority ("FINRA") subsequently opened an investigation concerning the respondent's alleged mishandling of customer accounts, including the petitioner's account. On May 15, 2017, FINRA issued a notice of its intention to suspend the respondent due to her failure to respond to FINRA's request for information. On June 5, 2017, she appeared and requested a hearing. On June 26, 2017, she withdrew her request for a hearing. As a result, she was deemed to have abandoned her claimed defense, and she was permanently barred from the securities industry effective August 18, 2017.

[B]y a memorandum dated July 26, 2017, FINRA advised the respondent that she had been named as a party in an arbitration commenced by the petitioner. The memo also advised the respondent that, pursuant to FINRA's rules, she was required to use the DR Portal, inter alia, to download the petitioner's Statement of Claim. The memo was sent by certified mail to the respondent's home addresses in New York City and Sag Harbor, New York. Both were returned as "unclaimed, unable to forward." In a memorandum dated August 24, 2017, that was sent to the respondent's New York City address, FINRA advised the respondent that all of the petitioner's claims against the other respondents had been dismissed and that the case would continue to proceed against her. In a memorandum dated September 18, 2017, that was sent to the respondent's New York City address, FINRA again advised the respondent that she was required to use the DR Portal and that her failure to register therefor would prevent her from submitting pleadings, selecting arbitrators, and receiving notifications related to the case. The record does not reflect that either the August 24, 2017, memo or the September 18, 2017, memo was returned. FINRA also sent an Overdue Notice and List of Potential Arbitrators to the respondent's New York City address. The record reflects that the Overdue Notice and List of Potential Arbitrators was not returned. 

avers that, while she was in California, the mail sent to her Sag Harbor address was held at the Post Office and that the mail sent to her New York City address was de minimus enough to fit in the mailbox. She contends that, when she returned to New York, she did not prioritize going through the months of held mail and that she was still going through it when she was served with the petition and arbitration award on January 19, 2018. The respondent contends that, since the petitioner knew how to contact her by email, it should have notified her of the arbitration by email. The respondent also contends that FINRA advised the petitioner that service had not been perfected. In support thereof, she relies on a memorandum dated September 13, 2017, from FINRA to the petitioner's counsel advising him that FINRA had been unable to perfect service on her and that, since the petitioner had the burden of proving proper service, it might use an outside source to locate and serve her.[FN2] The respondent also relies on FINRA's September 18, 2017, memorandum to her, which was copied to counsel for the plaintiff, in which FINRA recommended that the petitioner serve her "by first class mail, overnight mail or delivery service, hand delivery, facsimile, or electronic mail" until she was registered on the DR Portal. The respondent contends that, instead of attempting to [*4]perfect service, the petitioner continued to prosecute its claim against her while she was in California and unaware of the arbitration

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Footnote 2: The petitioner contends that the September 13, 2017, memo was sent in error and subsequently withdrawn. In support thereof, the petitioner relies on a hearsay email between two of its own attorneys and the fact that the memo does not appear in the case docket on the DR Portal.

FINRA served the respondent by certified mail, in accordance with its rules, at that address and at an alternate address in Sag Harbor. After the initial notices were returned as "unclaimed," FINRA sent multiple documents and correspondence to one or both addresses that were not returned. In addition to the August 24, 2017, memo; the September 18, 2017, memo; and the Overdue Notice and List of Potential Arbitrators, FINRA sent three mailings to the respondent after she returned to New York. Copies of the petitioner's Supplemental Submission in Further Support of the Statement of Claim were sent to the respondent's New York City address by certified mail and to her Sag Harbor address by regular mail on December 5, 2017. Another copy was sent to her New York City address on December 20, 2017, and an updated copy of the Arbitrator Disclosure Report was sent to her New York City address on January 2, 2018. The record does not reflect that any of those mailings were returned. Moreover, all of the documents and correspondence related to the arbitration were available to the respondent on FINRA's DR Portal. Pursuant to FINRA's rules, the respondent was required to register for the DR Portal. The respondent proffers no excuse for her failure to register for the DR Portal or for her failure to update her address with FINRA while she was in California. 

[T]he parties have revealed a deep misunderstanding of the interplay between the constitutional rights to due process and freedom of contract, and the somewhat thorny issues that may arise when the parties have agreed to arbitrate their disputes in a nonjudicial setting. Given the parties' confusion and the relatively few writings devoted to this issue, we deem it appropriate to set forth some guidance on this topic in an effort to promote certainty and predictability in this important area of the law.

In this case, the appellant does not dispute that she agreed to arbitrate this dispute pursuant to FINRA's rules, which, as relevant here, set forth a mailing procedure by which service was to be effected (see generally Harris v Wells Fargo Clearing Servs., LLC, 2018 WL 6523384, 2018 US Dist LEXIS 202576 [SD NY, No. 18 Civ 4625 (GBD)]). The arbitrator in this case determined that the appellant was properly served in accordance with FINRA's rules. The appellant does not contend that FINRA's rules precluded the arbitrator from deciding this issue (cf. CPLR 7511[b][1][iii]), or contend that service was effected in violation of those rules (cf. Matter of Republique Francaise [Cellosilk Mfg. Co.], 309 NY at 275-276).

In short, the appellant does not contend that the agreement to arbitrate was breached in any way. Rather, she asks this Court to find that FINRA's notice of arbitration procedure, to which she consented and which was concededly followed, violated her right to due process. The appellant asks this Court, in effect, to refuse enforcement of the contractual notice provision unless it would have, in the absence of the parties' consent to the arbitral forum, formed an adequate and independent basis for a court to exercise personal jurisdiction over her. It is unnecessary to analyze this hypothetical scenario, however, as the arbitrator's power was derived from the appellant's consent, and the appellant's argument misapprehends the basic role of a court in enforcing a contract, regardless of whether it implicates arbitration or not.

In this case, we have little difficulty in concluding that the appellant is bound by the procedure to which she consented. The appellant agreed to receive notice of any dispute requiring arbitration by certified mail sent to an address that she provided to FINRA. The appellant did not dispute that, pursuant to those rules, she was required to maintain and update her mailing address with FINRA for that specific purpose. Although the initial notice of the arbitration that was sent to that address was returned "unclaimed," the appellant's decision not to claim mail sent to her designated residence, regardless of her reasons, does not render the contractual provision void against public policy. The appellant was on notice of the method by which she would receive notification and, by agreeing to that method, she was bound to take steps to ensure that such notice would be received. The appellant's contention that the contractual notice provision, to which she agreed, was inadequate in light of her travel habits, without more, does not justify their invalidation on public policy grounds. "The fact that with the benefit of hindsight, a party believes that it had agreed to an unfavorable contractual term, does not provide courts with authority to rewrite the terms of a contract or to extricate parties from poor bargains" (159 MP Corp. v Redbridge Bedford, LLC, 160 AD3d 176, 190 [Dillon, J.], affd 33 NY3d 353).

The appellant cites no authority to support her contention that public policy prohibits the enforcement of the specific mailing procedure set forth in the arbitration agreement. To the contrary, it has long been recognized that "[i]t is not contrary to natural justice that [an individual] who has agreed to receive a particular mode of notification of legal proceedings should be bound by a judgment in which that particular mode of notification has been followed, even though he [or she] may not have actual notice of them" (Pennoyer v Neff, 95 US 714, 735 [internal quotation marks omitted]; see Gilbert v Burnstine, 255 NY at 355-356).

Where, as here, the parties to an arbitration agreement set forth in that agreement the procedure that is to be used to provide notice of arbitration, the contractual notice provision, like the other terms of the arbitration agreement, remains "valid, enforceable and irrevocable save upon such grounds as exist at law or in equity for the revocation of any contract" (Gilbert v Burnstine, 255 NY at 353; see Matter of Monarch Consulting, Inc. v National Union Fire Ins. Co. of Pittsburgh, PA, 26 NY3d 659, 665; see also 9 USC § 2). Contrary to the appellant's contention, in this case, there is "no constitutional or other legal impediment" to the enforcement of her consent to this arbitration procedure . . .

(d) Notice

. . .

If the Adjudicator or FINRA staff responsible for mailing or otherwise transmitting the notice to the member or person has actual knowledge that the address in the Central Registration Depository is out of date or inaccurate, then a copy of the notice shall be mailed or otherwise transmitted to:

(1) the last known business address of the member or the last known residential address of the person as reflected in the Central Registration Depository; and

(2) any other more current address of the member or the person known to the Adjudicator or FINRA staff who is responsible for mailing or otherwise transmitting the notice.

If the Adjudicator or FINRA staff responsible for mailing or otherwise transmitting the notice to the member or person knows that the member or person is represented by counsel regarding the investigation, complaint, examination, or proceeding that is the subject of the notice, then the notice shall be served upon counsel by mailing or otherwise transmitting the notice to the counsel in lieu of the member or person, and any notice served upon counsel shall be deemed received by the member or person.

• FINRA
• Arbitration
• Vandyke
• Notice
• Certified Mail
• Regular Mail
• Motion to Confirm
• Motion to Vacate
• Last Known Address
• Rule 8210
• Rule 9134
• BrokeAndBroker
• Bill Singer