Georgia Court of Appeals Overturns Vacatur of FINRA Arbitration Award in Wells Fargo case

On August 2, 2022, the Georgia Court of Appeals reversed a Georgia lower court’s decision to vacate a Financial Industry Regulatory Authority (FINRA) arbitration award in a controversial investment dispute between Wells Fargo Clearing Services, LLC (“Wells Fargo”) and its clients (the “investors”).

The Court of Appeals found that the Superior Court “provided no proper basis for vacating the arbitration award,” in which, after a nine-day hearing, the FINRA arbitration panel denied investors’ claims and awarded Wells Fargo costs and fees (the “FINRA Award”).

In January of this year, citing the Federal Arbitration Act (“FAA”), the Superior Court granted a motion to vacate filed by the investors. The Court of Appeals disagreed with the Superior Court in both its findings of fact and conclusions of law and reversed the vacatur award. The Court of Appeals reasoned as follows:

First, the Court of Appeals found that “[n]othing indicates that Wells Fargo “manipulated” the arbitrator pool . . . Although the investors claim that a ‘secret agreement’ existed between FINRA and [Wells Fargo’s counsel] Weiss to automatically exclude the Postell arbitrators from any arbitrator list generated on a case involving Weiss, there is no evidence that such agreement was at play here.”

Second, the Court concluded that “the investors have not shown that they were prejudiced by the arbitrators’ initial refusal to continue the hearing, the trial court erred in vacating the arbitration award on this ground.”

Third, the Court held that “after hearing argument and considering the matter, the arbitrators found the requested rebuttal testimony unnecessary, given the other evidence in the record. Although the investors disagree with this ruling, ‘a mere difference of opinion between the arbitrators and the moving party as to the correct resolution of a procedural problem will not support vacatur under section 10 (a) (3) [of the FAA].”’

Fourth, the Court found that “Wells Fargo’s conduct provides no grounds for a fraud-based vacatur.”

Finally, the Court found that the FINRA arbitration panel had assessed appropriate costs and fees pursuant to FINRA Rule 12902.

The decision can be found here.

Winget, Spadafora & Schwartzberg, LLP is closely monitoring these developments.  Any questions can be directed to our Securities Litigation Practice Group at 212-221-6900.