## Facts

- A brokerage customer alleged that two employees of an NYSE-member firm induced him to buy 10,200 shares of a company’s stock between December 1965 and March 1966 through material misstatements and omissions.
- The customer claimed the firm was responsible for the employees’ conduct and that he suffered losses after selling the stock in May 1968 to fix damages for arbitration purposes.
- The customer demanded arbitration under NYSE rules governing customer-member controversies arising out of the member’s business.
- A five-person NYSE arbitration panel held hearings and received detailed pleadings, legal memoranda, and written summations.
- The panel issued a bare award denying the customer’s claim and denied reconsideration, providing no written explanation.

## Issues

1. Whether a federal court may require arbitrators to provide reasons for a bare award when the arbitration involves alleged violations of federal securities laws.
2. Whether the absence of a reasoned award prevents meaningful judicial review under standards such as “manifest disregard of the law.”

## Decision

- The court of appeals reversed the district court’s order remanding the matter to the arbitrators for an explanation.
- It held that arbitrators are generally not obligated to state reasons for their awards absent an agreement or governing rule requiring a reasoned decision.
- It concluded that the securities-law context did not justify imposing a judicially created requirement for reasoned awards.
- It directed that the district court proceed to address confirmation or vacatur on the existing arbitration record.

## Legal Principles

- Arbitrators ordinarily may issue lump-sum or “no-reason” awards; courts do not impose a general duty to explain the basis for the decision.
- Parties who want a reasoned award may contract for one; absent such an agreement, the default rule favors final, informal arbitration awards.
- Judicial review of arbitration awards is limited; review for “manifest disregard of the law” does not require arbitrators to disclose their reasoning and may be assessed from the record and submissions.
- Federal statutory claims, including federal securities claims, do not by themselves alter the general rule permitting bare arbitration awards.
- Courts should avoid procedural requirements that materially transform arbitration into litigation by increasing formality, cost, delay, and judicial second-guessing.

## Conclusion

The court held that an NYSE arbitration panel had no obligation to provide a written explanation for its denial of a customer’s securities-related claims, and that a federal court may not remand solely to compel reasons where the parties did not require a reasoned award.


Sobel v. Hertz, Warner & Co., 469 F.2d 1211 (2d Cir. 1972)