Pfannenstiel vs. Merrill Lynch Pierce, No. 04-1274 (10th Cir. 2007)
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F I L E D United States Court of Appeals Tenth Circuit PUBLISH February 20, 2007 UNITE D STA TE S CO URT O F A PPE ALS Elisabeth A. Shumaker Clerk of Court TENTH CIRCUIT ________________________ RO BERT PFANN ENSTIEL, Plaintiff-A ppellant, v. No. 04-1274 M ERRILL LYN CH , PIERCE, FENNER & SM ITH; NA TION AL ASSOCIATION OF SECURITIES DEALERS, IN C., Defendants-Appellees. _________________________ APPEAL FROM THE UN ITED STATES DISTRICT CO URT FO R TH E D ISTR IC T O F C OLO RA DO (D.C. NO . 04-B-268(M JW )) ________________________ Paul H. Schwartz, Cooley Godward LLP, Broomfield, Colorado for PlaintiffAppellant. Thomas P. Howell (Bruce W. Day, Bill P. Guest, Tara A. LaClair with him on brief) Day, Edwards, Propester & Christensen, P.C., Oklahoma City, Oklahoma, for Defendant-Appellee M errill Lynch, Pierce Fenner & Smith. Terri L. Reicher, National Association of Securities Dealers, Inc., W ashington D.C. for D efendant-Appellee National A ssociation of Securities Dealers. _________________________ Before BR ISC OE, SIL ER , * and M cCO NNELL, Circuit Judges. * The Honorable Eugene E. Siler, Jr., Senior United States Circuit Judge for the Sixth Circuit, sitting by designation. _________________________ SILER, Circuit Judge. _________________________ Robert Pfannenstiel (Pfannenstiel) appeals the district court s dismissal of his motion to vacate the judgment of an arbitration panel and the district court s decision that the arbitration panel was protected by arbitral immunity. Pfannenstiel contends that his motion was timely because he served it at the earliest possible date he could have known that grounds to vacate existed and that arbitral immunity does not apply because the arbitration panel committed misconduct outside of its judicial function. Because Pfannenstiel s arguments lack merit, we AFFIRM . BACKGROUND In 1998, Pfannenstiel advised M errill Lynch, Pierce Fenner & Smith (M errill Lynch) that he felt that his account statements were incorrect and that M errill Lynch owed him compensation. M errill Lynch maintained that it had not committed any errors in Pfannenstiel s account and denied his request. Shortly thereafter, and for the next several months, Pfannenstiel repeatedly attempted to convince M errill Lynch that it had made accounting errors in his account by submitting an unsigned letter on M errill Lynch letterhead as evidence. M errill Lynch believed that the letter was false and again refused Pfannenstiel s demands. In September 2003, Pfannenstiel submitted his claim to a three-member panel of National Association of Securities Dealers (NASD ) arbitrators requesting -2- $217,785.00 plus damages. The panel denied his claim on November 7, 2003. Tw o months later, Pfannenstiel discovered that the boxes of evidence and the hearing tapes w ere missing after he contacted the NA SD in an effort to retrieve a docum ent he presented at the hearing. By letter dated January 5, 2004, the NASD case manager informed Pfannenstiel that upon conclusion of the hearing, the boxes containing exhibits and audiotapes of the hearing were delivered to the front desk of the hotel where the hearing had been conducted and someone claiming to be a NASD representative had taken the materials. H ow ever, no one at the NASD admitted taking the boxes from the hotel nor could the NASD locate them. Pfannenstiel then filed a Complaint and Request for Federal Intervention against M errill Lynch and the N ASD, requesting: 1) vacation of the arbitrators ruling; 2) that he be awarded unspecified damages because the N ASD lost the boxes of evidence and the transcripts, failed to m anage his case properly, tried to coverup the loss of evidence, breached the arbitration contract, and disregarded his rights; and 3) for an order compelling the NASD to establish a protocol for preserving evidence and transcripts. M errill Lynch received Pfannenstiel s Complaint on February 16, 2004; the N A SD received its copy the follow ing day on February 17, 2004. The magistrate judge assigned to the case recommended that the court dismiss the complaint because service on the defendant was untimely under § 12 of the Federal Arbitration Act (FA A), which requires service of a motion to vacate an arbitration award within three -3- months of the delivery of the award. The magistrate judge also concluded that an action for damages against the NA SD was barred by the doctrine of arbitral immunity. The district court upheld the magistrate judge s recommendations. DISCUSSION A district court s decision whether to equitably toll a period of limitation is reviewed for abuse of discretion. M ontoya v. Chao, 296 F.3d 952, 957 (10th C ir. 2002). W e review a dism issal based on arbitral immunity de novo. Salt Lake Tribune Pub. Co., LLC v. M anagement Planning, Inc., 390 F.3d 684, 688 (10th Cir. 2004). 1. W hether Pfannenstiel Timely Served H is Complaint The FAA requires notice of a motion to vacate, modify, or correct an arbitration award to be served upon the adverse party or his attorney within three m onths after the award is filed or delivered. 9 U.S.C. § 12. A party to an arbitration award who fails to comply with the statutory precondition of timely service of notice forfeits the right to judicial review of the award. Int l Bhd. of Elec. Workers, Local Union No. 969 v. Babcock & Wilcox, 826 F.2d 962, 966 (10th Cir. 1987). Pfannenstiel received the NASD panel s decision on November 12, 2003. Under 9 U.S.C. § 12, he was required to serve notice of his application to vacate the award upon M errill Lynch by February 12, 2004, three months from the date he received the decision. He did not serve M errill Lynch until February 16, 2004. -4- Pfannenstiel contends that the doctrine of equitable tolling should apply because he had no way of knowing about the missing evidence until he contacted the NASD . Equitable tolling suspends the running of a statute, and it should be applied unless Congress provides to the contrary. United States v. Clymore, 245 F.3d 1195, 1197 (10th Cir. 2001). Although Pfannenstiel received the arbitrators decision on November 12, 2003, it was not until January 7, 2004, that the NASD informed him that it lost the materials immediately following the hearing. Nonetheless, Pfannenstiel could have served the defendants before the expiration of the three-month time limit. He had approximately one month left after he learned that the evidence w as no longer available in order to timely file his motion to vacate, but he did not file it within that time period. The one-month time period provided Pfannenstiel am ple opportunity to serve the defendants in a timely fashion. Thus, equitable tolling does not apply. 2. W hether the N ASD Arbitrators Enjoy Arbitral Immunity This circuit has not yet ruled on the doctrine of arbitral immunity. The doctrine generally rests on the notion that arbitrators acting within their quasijudicial duties are the functional equivalent of judges and, as such, should be afforded similar protection. See Olson v. Nat l Ass n of Securities Dealers, 85 F.3d 381, 382 (8th Cir. 1996). M ore specifically, arbitral im m unity has been held to be essential to protect the decision-makers from undue influence and protect the decision-making process from reprisals by dissatisfied litigants. -5- New England Cleaning Servs., Inc. v. American Arbitration Ass n, 199 F.3d 542, 545 (1st Cir. 1999). Every other circuit that has considered the issue of arbitral immunity recognizes the doctrine. See, e.g., Hutchins v. Am. Arbitration Ass n, 199 F.3d 542, 545 (1st Cir. 1999); Austern v. Chicago Bd. of Options Exch., Inc., 898 F.2d 882 (2d Cir. 1990); Cahn v. Int l Ladies Garment Union, 311 F.2d 113 (3d Cir. 1962); Shrader v. NASD, Inc., 54 F.3d 774 (4th Cir. 1995); Hawkins v. NASD, Inc., 149 F.3d 330 (5th Cir. 1998); Corey v. New York Stock Exch., Inc., 691 F.2d 1205 (6th Cir. 1982); Int l M ed. Group, Inc. v. American Arbitration Ass n, 312 F.3d 833 (7th Cir. 2002); Honn v. NASD, 182 F.3d 1014 (8th Cir. 1999); Wasyl, Inc. v. First Boston Corp., 813 F.2d 1579 (9th Cir. 1987). These courts uniform ly hold that arbitration forums and sponsors, like courts of law, are immune from liability for actions taken in connection with administering arbitration. Supreme Court precedent also supports the doctrine of arbitral immunity. In Butz v. Econom ou, 438 U .S. 478, 508-511 (1978), the C ourt held that there are certain persons whose special functions require a full exem ption from liability for acts committed within the scope of their duties. Id. at 508. The Court felt this was necessary to protect the decision-makers from bias or intimidation caused by fear of a lawsuit arising out of the exercise of their official functions. W hile not mentioning NASD arbitrators specifically, the Court s reasoning would certainly apply to them as well. -6- Here, Pfannenstiel has not sued the individual m em bers of the NASD arbitration panel that ruled against him. Instead, he has sued the NASD itself, claiming, in pertinent part, that it is responsible for losing his personal property following the arbitration hearing. The N ASD argued below , and the district court agreed, that it was entitled to arbitral immunity from Pfannenstiel s claim. In his appeal, Pfannenstiel argues that the doctrine of arbitral immunity does not shield arbitration organizations from liability for misconduct that is separate from their judicial function. He contends that the NASD committed a tort against him when it lost his personal property, and that the NASD misconduct has nothing to do with the NASD arbitration decision. W e agree with Pfannenstiel that the doctrine of arbitral immunity does not protect arbitrators or their employing organizations from all claims asserted against them. The key question, w e believe, is whether the claim at issue arises out of a decisional act. M aureen A. W eston, Reexamining Arbitral Immunity in an Age of M andatory and Professional Arbitration, 88 M in. L. Rev. 449, 505 (Feb. 2004). In other w ords, does the claim, regardless of its nominal title, effectively seek to challenge the decisional act of an arbitrator or arbitration panel? If so, then the doctrine of arbitral immunity should apply. Id. If not, the doctrine would not apply. Id. at 506; see Caudle v. American Arbitration Ass n, 230 F.3d 920, 922 (7th Cir. 2000) (suggesting that arbitration association would not be immune from a claim for a refund due to its failure to provide promised arbitration services); cf. Geitz v. -7- Overall, 62 Fed. Appx. 744, 746 (8th Cir. 2003) (concluding that state-court clerks were absolutely immune only for acts that may be seen as discretionary, or for acts taken at the direction of a judge according to court rule ); M cCray v. M aryland, 456 F.2d 1, 4 (4th Cir. 1972) ( A state officer is generally not immune under common law for failure to perform a required ministerial act. ). W e reject Pfannenstiel s assertion, however, that his claim concerning the NASD s loss of his property has nothing to do with the arbitration decision rendered against him. The face of Pfannenstiel s complaint listed both M errill Lynch and the NASD as defendants, and expressly stated, that, [d]ue to the unseparable [sic] nature of the issues, the[] two cases [we]re presented under one complaint. The complaint further stated under a heading entitled REQUEST, that Pfannenstiel was seeking vacatur of the arbitration panel s decision on the grounds of denial of rights to get a fair trial, due in pertinent part to the NASD s [n]eglectful[] handling of evidence after the trial, neglectful[] handling of trial tape recordings after the trial, neglectful protocol to set standards for transfer of evidence after the trial and cover-up after the fact rendering undue delay. According to the complaint, the NASD s actions in this regard rendered unfair advantage to [M errill Lynch] and deni[ed] plaintiff s rights to appeal or obtain vacancy under normal methods. Ultimately, the complaint sought damages against the N ASD in the amount of $217, 785, the identical amount Pfannenstiel sought from M errill Lynch in the underlying arbitration proceeding. Given these allegations, we conclude that Pfannenstiel s -8- claim is little more than a veiled attack on the decision rendered against him by the arbitration panel, and that, accordingly, the NASD is entitled to arbitral immunity from that claim. C ON CLU SIO N The judgment of the district court is AFFIRM ED. -9-
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