## Facts

- A.G. Edwards merged into Wachovia on October 1, 2007; Frank J. Brand II, Stephen N. Jones, Marvin E. Slaughter, and George W. Stukes became Wachovia financial advisors at the Florence, South Carolina branch.
- Wachovia terminated the advisors on June 26, 2008; they joined competitor Stifel Nicolaus & Co., Inc.
- Wachovia initiated FINRA arbitration on June 27, 2008, alleging breach of contract, misappropriation of trade secrets, breach of loyalty, and improper solicitation/misuse of confidential client information.
- The former employees counterclaimed for unpaid wages and sought attorneys’ fees and costs under the South Carolina Frivolous Civil Proceedings Act (FCPA).
- The FINRA panel denied Wachovia’s claims, awarded the former employees more than $15,000 in wage-related relief, and found Wachovia’s claims frivolous under the FCPA, awarding approximately $1.1 million in attorneys’ fees and costs.

## Issues

1. Whether the arbitration was fundamentally unfair so as to warrant vacatur for arbitrator misconduct under FAA § 10(a)(3).
2. Whether the panel manifestly disregarded South Carolina law by awarding FCPA attorneys’ fees and costs without complying with asserted statutory procedural prerequisites.

## Decision

- The Fourth Circuit affirmed the district court’s confirmation of the arbitration award.
- Wachovia failed to show misconduct or prejudice rising to a denial of a fair hearing under FAA § 10(a)(3).
- Assuming “manifest disregard” remains a valid vacatur doctrine, Wachovia failed to show the panel intentionally refused to apply a clearly defined, controlling legal rule regarding the FCPA’s procedures.
- The court declined to reweigh evidence supporting the panel’s finding that Wachovia’s claims were frivolous.

## Legal Principles

- Vacatur under FAA § 10(a)(3) requires misconduct or misbehavior that deprives a party of a fundamentally fair hearing; routine procedural or evidentiary complaints are insufficient absent prejudice.
- “Manifest disregard of the law” (if available) requires (1) a clearly defined legal principle not subject to reasonable debate and (2) a refusal by the arbitrator to heed that principle; legal error, even serious error, does not suffice.
- Judicial review of arbitral awards is exceptionally narrow; courts do not review arbitral factfinding and will not overturn an award where the arbitrators are arguably applying governing law and acting within their authority.
- When state fee-shifting statutes are invoked in arbitration, arbitrators have discretion to apply them within the arbitral forum’s procedures unless controlling law clearly forbids that approach.

## Conclusion

The Fourth Circuit left intact a FINRA award granting former employees wages and substantial FCPA fees, holding that Wachovia received a fair arbitration hearing and that any asserted misapplication of FCPA procedural requirements did not amount to intentional disregard of clearly controlling law.


Wachovia Securities, LLC v. Brand, 671 F.3d 472 (4th Cir. 2012)