## Facts

- George Corey, Trust Fund suffered substantial losses in a Merrill Lynch brokerage account after investing heavily in 1972–73 based on advice from a Merrill Lynch account executive who had previously suffered a stroke.
- After the account’s value fell and was liquidated to satisfy margin requirements, Corey claimed roughly $175,000 in losses and attributed them to the broker’s impaired judgment and Merrill Lynch’s negligence in allowing him to advise customers.
- In 1976, Corey chose NYSE-sponsored arbitration against Merrill Lynch under NYSE rules permitting nonmembers to arbitrate claims against member firms.
- The NYSE administered the arbitration pursuant to its procedural rules, including selection of a five-member arbitration panel; an NYSE arbitration official (Cavell) handled administrative functions such as arranging panels, scheduling hearings, and communicating decisions.
- Corey appeared at two arbitration hearings without counsel; the arbitration panel dismissed his claim.
- Corey did not seek to vacate or modify the award under the Federal Arbitration Act (FAA), 9 U.S.C. §§ 10–11, and instead filed a damages action against the NYSE alleging wrongful arbitration procedures.

## Issues

1. Whether claims seeking damages from the NYSE based on alleged misconduct by arbitrators in an NYSE-sponsored arbitration are barred by arbitral immunity.
2. Whether claims challenging the arbitration’s administration and procedures constitute an impermissible collateral attack on the arbitral award where the FAA provides specific mechanisms for vacatur or modification.

## Decision

- The Sixth Circuit affirmed the dismissal of Corey’s action against the NYSE.
- Claims against the NYSE predicated on the arbitrators’ adjudicative acts were barred by arbitral immunity.
- Claims based on alleged procedural irregularities and the arbitration administrator’s actions were treated as an impermissible collateral attack on the arbitration award and were foreclosed because the FAA supplies the route to challenge an award.

## Legal Principles

- Arbitrators are protected by quasi-judicial (arbitral) immunity for acts within their adjudicative function; a sponsoring organization cannot be held liable in damages based on those protected decisional acts.
- Allegations that arbitration procedures were biased or unfair must be pursued through the FAA’s specified, time-limited remedies for vacating or modifying an award under 9 U.S.C. §§ 10–11.
- A post-award damages suit against the arbitral forum or its administrators, when aimed at undermining the award’s validity, is an impermissible collateral attack that would circumvent the FAA’s remedial scheme.

## Conclusion

The court held that the NYSE could not be sued for damages for the arbitrators’ conduct due to arbitral immunity and that procedural-fairness complaints about the arbitration’s administration had to be raised through the FAA’s vacatur or modification process rather than through a separate collateral damages action.


Corey v. N.Y. Stock Exch., 691 F.2d 1205 (6th Cir. 1982)