## Facts

- Beginning in August 1998, Rick Tripi maintained a retirement account at Prudential Securities, Inc. (Prudential).
- Prudential broker Glenn Malloff managed Tripi’s account; Malloff previously had been censured and suspended by the New York Stock Exchange.
- Tripi wanted the account to serve retirement goals but accepted aggressive investing.
- The account’s value peaked at about $980,000 in January 1999 and fell to less than $110,000 by November 1999.
- Tripi claimed that, in January 1999, he verbally instructed Malloff to liquidate holdings into cash; Malloff denied receiving that instruction.
- Tripi alleged improper management, including unauthorized and excessive trading that was inconsistent with a retirement account and aimed at generating commissions.
- Prudential pointed to Tripi’s receipt of written trade confirmations and monthly account statements; Tripi said he did not closely review them and focused on the “bottom line.”
- Prudential also argued defenses including ratification (Tripi’s acceptance of the trading after notice) and failure to mitigate damages.
- In October 2000, Tripi began arbitration against Prudential before an NASD arbitration panel.
- The panel awarded Tripi $25,000 in compensatory damages and declined to explain the basis for the amount.
- Tripi sought to vacate the award in federal court; Prudential moved to confirm it.

## Issues

1. Whether the arbitration award should be vacated under the Federal Arbitration Act based on alleged arbitrator misconduct or the arbitrators exceeding their powers.
2. Whether the panel’s failure to provide reasons, and the small lump-sum award in relation to Tripi’s losses, justified vacatur (including on a “manifest disregard of the law” theory).
3. Whether the court should confirm the NASD arbitration award despite the absence of an explained rationale.

## Decision

- The court denied Tripi’s motion to vacate the arbitration award.
- The court granted Prudential’s motion to confirm the arbitration award.
- The court held that the narrow grounds for vacatur were not met merely because the panel issued a lump-sum award without explaining its reasoning.
- The court refused to reweigh the evidence or second-guess the arbitrators’ assessment of fault and damages.

## Legal Principles

- Judicial review of arbitration awards under the FAA is highly limited; confirmation is required unless a statutory ground for vacatur or modification is proven.
- Arbitrators generally are not required to issue reasoned awards; the lack of an explanation, by itself, is not a basis to vacate.
- “Manifest disregard of the law” requires more than an asserted legal error; it requires a showing that the arbitrators knew a clearly controlling rule and chose not to apply it.
- A court may not vacate an award simply because it believes the damages are too low or because it would have reached a different result on liability or causation.

## Conclusion

Tripi v. Prudential Securities, Inc. applies the FAA’s narrow vacatur standards to uphold an NASD arbitration outcome: even where an investor alleged unauthorized and excessive trading and the panel awarded only a modest, unexplained sum, the federal court confirmed the award and declined to reopen the merits.


Tripi v. Prudential Securities, Inc., 303 F. Supp. 2d 349 (2003)