## Facts

- William F. and Jeanene McCollough maintained an investment account with A.G. Edwards & Sons, Inc., a brokerage firm.
- The McColloughs initiated NYSE arbitration alleging misconduct causing substantial losses, asserting federal and Arizona RICO, securities, and consumer-protection claims.
- Edwards answered and asserted fourteen affirmative defenses; the McColloughs attacked at least two defenses as legally meritless during the arbitration.
- The NYSE arbitration panel entered an award for Edwards and against the McColloughs for $310,850.12, without stating reasons.
- Edwards sought confirmation of the award in federal district court; the McColloughs moved to vacate or, alternatively, to remand for a statement of reasons.
- The district court rejected claims of arbitrator misconduct and fraud, but vacated the award under 9 U.S.C. § 10(a)(1), reasoning the award was “procured by undue means” because Edwards asserted two “facially meritless” defenses, and ordered a remand to a different panel.
- Edwards appealed.

## Issues

1. Whether an arbitration award may be vacated under 9 U.S.C. § 10(a)(1) as “procured by ... undue means” based solely on the prevailing party’s assertion of allegedly meritless affirmative defenses that were disclosed and contested in the arbitration.
2. Whether a court may remand for a statement of reasons where arbitrators issued an unexplained award and no requirement for reasons applies.

## Decision

- The Ninth Circuit reversed the order vacating the arbitration award.
- The court held that asserting allegedly meritless defenses, fully exposed and disputed during the arbitration, did not amount to “fraud” or “undue means” under 9 U.S.C. § 10(a)(1).
- The court rejected remand for a statement of reasons because arbitrators are not required to explain an award absent an applicable requirement.
- The case was remanded with instructions to confirm the arbitration award in favor of Edwards.

## Legal Principles

- Judicial review of arbitration awards under the FAA is limited; vacatur under 9 U.S.C. § 10(a)(1) requires corruption, fraud, or “undue means” in procuring the award.
- “Fraud” or “undue means” generally requires serious impropriety comparable to corruption or concealed misconduct, not ordinary advocacy.
- Misstatements or weak legal defenses do not constitute “fraud” or “undue means” when they are discoverable during the proceeding and actually contested before the arbitrators.
- Arbitrators need not provide reasons for an award unless the parties’ agreement or governing rules require a reasoned decision.

## Conclusion

The Ninth Circuit required confirmation of the NYSE arbitration award because the asserted defenses, even if meritless, were part of adversarial presentation and did not qualify as “undue means” under FAA § 10(a)(1), and the unexplained award did not justify judicial remand for reasons.


A.G. Edwards & Sons, Inc. v. McCollough, 967 F.2d 1401 (9th Cir. 1992)