## Facts

- Arnold and Maureen Weber and related family trusts maintained investment accounts with Merrill Lynch under agreements requiring mandatory, binding arbitration before the NYSE.
- The Webers initiated NYSE arbitration alleging Merrill Lynch made unsuitable investment recommendations over several years.
- After an arbitrator resigned, the NYSE appointed Dean P. Guerin and disclosed his social membership in the Dallas Country Club.
- The Webers challenged Guerin because Merrill Lynch broker Robert Cecil and Cecil’s son were also Dallas Country Club members; Merrill Lynch contended Cecil did not know Guerin personally.
- The arbitration panel denied the challenge, held proceedings including a five-day hearing, and rejected certain Weber requests, including efforts to add the Cecils as individual respondents and certain discovery requests.
- The panel issued a final award for Merrill Lynch, denying all Weber claims.
- The Webers filed a federal action under the Federal Arbitration Act (FAA), seeking vacatur based on (i) “evident partiality” and (ii) alleged misconduct in discovery and party-joinder rulings.
- In the vacatur action, the Webers additionally asserted that Guerin failed to disclose that his wife shared memberships in multiple organizations with Cecil’s wife.

## Issues

1. Whether the arbitration award should be vacated under FAA § 10(a)(2) for “evident partiality” based on Guerin’s disclosed and alleged undisclosed social connections to the Cecil family.
2. Whether the award should be vacated under FAA § 10(a)(3) because discovery limitations and refusal to add individual respondents amounted to misconduct that denied the Webers a fundamentally fair hearing.

## Decision

- The court denied the motion to vacate and left the arbitration award in force.
- The Webers failed to show “evident partiality” because the asserted connections (shared club membership and overlapping spousal organizational memberships) were too attenuated and did not create a reasonable impression of bias from a significant compromising connection.
- The court held that the panel’s discovery and joinder decisions fell within arbitral discretion and did not deprive the Webers of a fair opportunity to present their case.

## Legal Principles

- FAA review of arbitration awards is extraordinarily narrow; vacatur is limited to the grounds specified in 9 U.S.C. § 10.
- “Evident partiality” under § 10(a)(2) requires more than an appearance of bias; it requires a reasonable impression of bias grounded in a significant compromising connection, not trivial or speculative social relationships.
- Disclosed, generalized social affiliations (such as membership in a large club) ordinarily do not establish evident partiality without facts showing a direct, definite, and demonstrable relationship likely to affect impartiality.
- Under § 10(a)(3), arbitrators have broad discretion over procedure and evidence; vacatur requires a showing that rulings (including discovery limits) prevented consideration of pertinent and material evidence or otherwise denied a fundamentally fair hearing.
- Parties who could have investigated and raised conflict-based objections during arbitration face a substantial burden when asserting them only after an unfavorable award.

## Conclusion

The court upheld the NYSE arbitration award for Merrill Lynch because the Webers did not prove a disqualifying arbitrator relationship amounting to evident partiality and did not show that procedural rulings on discovery or party joinder constituted misconduct or denied a fair hearing under the FAA.


Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 455 F. Supp. 2d 545 (N.D. Tex. 2006)