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Rules and Proof Prove No Problem for Promissory Note Award: Bogar v. Ameriprise Financial Services, Inc.
Posted on Categories Court Decisions, Securities ArbitrationTags , ,

By Sarah G. Anderson

*A court’s inquiry under §10(a)(4) of the FAA is whether the arbitrator had the power to reach a certain issue, not whether he or she decided the issue correctly. **FINRA Rule 13806 does not preclude an arbitrator from considering nominally different causes of action than breach of a promissory note, as long as they are all based on an associated person’s failure to pay money owed on a promissory note. ***A petition to vacate an Award on the ground that the arbitrator lacked sufficient evidence to enter it must be supported by sufficient evidence of that defect, not unsupported speculation that the evidence might not exist.

Bogar vs. Ameriprise Financial Services, Inc., No. 1:16-CV-7199 (S.D. N.Y., 5/4/17).

An Unopposed Arbitration

When broker Bogar resigned from Ameriprise and refused the latter’s demand for repayment of a promissory note, Ameriprise filed a FINRA arbitration against him, demanding payment of the unpaid balance of the note, asserting four counts: breach of promissory note, unjust enrichment, conversion of loan funds and attorneys’ fees and costs. All of the counts alleged failure to repay the amount due on the note and requested repayment of the principal, with costs and fees associated with the action. When Bogar did not appear in the arbitration, a single Arbitrator issued an Award in Ameriprise’s favor (ID #16-00529 (On the Papers, 7/27/16, modified 9/28/16).

But a Motion to Vacate

Bogar petitioned to vacate the Award under §10(a)(4) of the Federal Arbitration Act, contending that the Arbitrator exceeded his powers in two respects, and Ameriprise petitioned to confirm. “A court’s inquiry under § 10(a)(4),” the Court explains, “focuses on ‘whether the arbitrators had the power, based on the parties’ submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrators correctly decided that issue…. It is only when an arbitrator … effectively dispenses his own brand of industrial justice that his decision may be unenforceable” (emphasis in the original). In the Court’s view, neither of Bogar’s asserted bases come close to clearing this high hurdle.


His first argument is that Rule 13806, under which the Arbitrator reached his decision, only allows him to consider Ameriprise’s claim that he “failed to pay money owed on a promissory note,” not its additional counts for unjust enrichment and conversion of loan funds. Here, though, the Court need not consider whether and under what circumstances an arbitrator’s violation of a FINRA rule could provide a basis for vacatur under FAA §10(a)(4), because no such violation occurred. Ameriprise’s pleading of alternative nominal causes of action, it rules, does not remove its claim for recovery of the debt from the scope of Rule 13806, since they are all plainly based on an associated person’s failure to pay money owed on a promissory note. Moreover, even if the Arbitrator could not consider those additional counts, the breach of contract claim, uncontested by plaintiff, provides a sufficient basis for the Award.


Bogar also argues that the Award must be vacated because Ameriprise did not submit to the Arbitrator any proof of Bogar’s failure to make payment on the note. An arbitrator’s factual findings are generally not open to judicial challenge and a court accepts the facts as the arbitrator finds them. Here, Bogar has made no concrete showing that the arbitrator lacked sufficient evidence to support a finding of non-payment in the verified Petition by, for example, affirming that he did make the payment. He had the opportunity to appear at the arbitration hearing to contest the evidence presented to the arbitrator and cannot undermine the arbitrator’s conclusions here based on unsupported speculation. The Award is confirmed.

(S. Anderson)

(SLC Ref. No. 2017-25-04)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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