Adviser Dealer Services v. ICON Advisers, Inc., 10th Cir. (2014)

FILED
United States Court of Appeals

Tenth Circuit
February 12, 2014
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court
ADVISER DEALER SERVICES, INC.;

MEEDER ASSET MANAGEMENT,
INC.; MEEDER FINANCIAL, INC.,
Petitioners-Appellees/
Cross-Appellants,
v.
ICON ADVISERS, INC.; ICON
DISTRIBUTORS, INC.; ICON
MANAGEMENT & RESEARCH
CORPORATION,
No. 13-1178 & 13-1187

(D.C. No. 1:12-CV-01104-REB)
(D. Colo.)
Respondents-Appellants/
Cross-Appellees.
ORDER AND JUDGMENT *

Before LUCERO, SEYMOUR, and TYMKOVICH, Circuit Judges.
This appeal and cross-appeal arise out of an arbitration proceeding before

the Financial Industry Regulatory Authority (FINRA) between ICON Advisers,
Inc., ICON Distributors, Inc., and ICON Management & Research Corporation
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, or collateral estoppel. Although the
court generally disfavors the citation of an order and judgment, it may be cited for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
(collectively ICON), and Adviser Dealer Services, Inc., Meeder Asset

Management, Inc., Meeder Financial, Inc. (collectively Meeder), and
Stephen C. Holmes. ICON appeals the district courts order vacating the
arbitration panels award to ICON of $164,170 in attorneys fees, and Meeder
cross-appeals the courts order upholding the panels award to ICON of $250,000
in nominal damages. 1 We affirm in part and vacate in part.
Mr. Holmes was hired by ICON as a wholesaler in 1998 but eventually
became an owner and executive officer in 2003. In 2009, an ICON internal
investigation revealed problems with Mr. Holmes management approach, and
ICON decided he should be fired. Mr. Holmes requested that he be allowed to
retire, and ICON agreed. While ICON searched for his replacement, Mr. Holmes
continued to work as ICON Distributors interim President and ICON Advisers
head of sales.
As a result of his transition to retirement, ICON and Mr. Holmes executed a
Retirement Agreement, which specifically noted that [i]n any action to enforce,
interpret, or seek damages for violation of this Agreement, the prevailing Party
shall recover all reasonable attorneys fees, litigation expenses and costs. The
Retirement Agreement incorporated by reference a Confidential Information,
Inventions, and Non-Solicitation Agreement, which essentially forbade Mr.
The arbitration panel awarded other damages to ICON that are not at issue
on appeal.
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Holmes from working with any of ICONs competitors for two years. The
non-compete agreement also prohibited Mr. Holmes from using any of ICONs
confidential information.
In light of a subsequent investigation into the conduct of one of Mr.
Holmes subordinates, Mr. Holmes left ICON in March 2010 under a separation
agreement that did not alter the terms of his non-compete agreement. Meeder, a
direct competitor of ICON, hired Mr. Holmes to act as its Senior Vice President
of Sales and Marketing in April 2010. After several attempts by ICON to make
Mr. Holmes comply with the non-compete agreement, the parties agreed to
arbitrate their dispute. All parties to the dispute, including ICON, Meeder, and
Mr. Holmes, signed FINRA Uniform Submission Agreements, stating that each
agreed to be bound by FINRAs rules, by-laws, and Code of Arbitration
Procedure.
ICON filed a Statement of Claim, alleging breach of contract against Mr.
Holmes, tortious interference with a contract against Meeder, and interference
with a prospective business relationship against both Mr. Holmes and Meeder.
ICON sought, among other things, damages and attorneys fees pursuant to the
Retirement Agreement and the Non-Compete Agreement . . . . Aplt. App. at 27.
Mr. Holmes and Meeder filed a Statement of Answer and Counterclaims,
requesting the panel award Respondents their reasonable attorneys fees, costs
and expenses, forum fees and such further relief as the Panel may deem just and
-3-
proper. Aplt. App. at 65 (emphasis added). ICON filed an Answer to

Respondents Counterclaims, in which it requested reasonable attorneys fees.
Aplt. App. at 74. In addition, all the parties submitted affidavits for attorneys
fees to the panel.
In March 2012, the FINRA panel found Meeder jointly and severally liable
and awarded ICON damages, including the $250,000 in nominal damages and
$164,170 in attorneys fees pursuant to the terms of the Retirement Agreement
at issue here. Aplt. App. at 12. Meeder filed a motion to vacate the arbitration
award in the district court, arguing that it was never a party to the Retirement
Agreement and cannot be forced to pay attorneys fees based on an agreement to
which it was never a party, that ICON never requested attorneys fees from
Meeder, and that there was no support for the award of $250,000 in nominal
damages. The district court confirmed the panels award of $250,000 in nominal
damages but vacated the award of $164,170 in attorneys fees. It reasoned that
Meeder was not [a] part[y] to the Retirement Agreement, that ICON never
requested attorneys fees from Meeder based on the Retirement Agreement, and
that attorney fees were payable only by the parties to the agreement. Aplt.
App. at 71.
A district court may vacate an arbitration award only for the reasons
enumerated in the Federal Arbitration Act, 9 U.S.C. 10, or for a handful of
-4-
judicially created reasons. 2 Burlington N. & Santa Fe Ry. Co. v. Pub. Serv. Co.
of Okla., 636 F.3d 562, 567 (10th Cir. 2010) (quoting Sheldon v. Vermonty, 269
F.3d 1202, 1206 (10th Cir. 2001)). These judicially created reasons include
violations of public policy, manifest disregard of the law, and denial of a
fundamentally fair hearing. Sheldon, 269 F.3d at 1206. In reviewing a district
court order vacating an arbitration award, we review factual findings for clear
error and legal determinations de novo. Hollern, 458 F.3d at 1172. But we
give extreme deference to the determination of the arbitration panel for the
standard of review of arbitral awards is among the narrowest known to law. Id.
(internal quotation marks and citation omitted). This narrow standard has been
interpreted to mean that as long as the arbitrator is even arguably construing or
applying the contract and acting within the scope of his authority, that a court is
convinced he committed serious error does not suffice to overturn his decision.
Intl Bhd. of Elec. Workers, Local Union No. 611, AFL-CIO v. Pub. Serv. Co. of
N.M., 980 F.2d 616, 618 (10th Cir. 1992) (quoting United Paperworkers Intl
Section 10 of the Federal Arbitration Act allows a district court to vacate

an arbitration award if: (1) the award was procured by corruption, fraud, or
undue means; (2) there was evident partiality or corruption in the arbitrators;
(3) the arbitrators were guilty of misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of
any party have been prejudiced; or (4) the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final, and definite award upon the
subject matter submitted was not made. 9 U.S.C. 10.
-5-
Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)). Once an arbitration
award is entered, the finality of arbitration weighs heavily in its favor and cannot
be upset except under exceptional circumstances. Burlington, 636 F.3d at 567
(internal quotation marks and citation omitted).
On appeal, Meeder again contends ICON never requested attorneys fees
from Meeder pursuant to the Retirement Agreement or otherwise, Aple. Br. at
17 (emphasis in original), and therefore the issue was never submitted to the
panel. Meeder also argues that because it was never a party to the Retirement
Agreement, it cannot be bound by the panels decision to award attorneys fees
based on that agreement. We disagree.
FINRA guidelines expressly allow a panel to award attorneys fees when
all of the parties request or agree to such fees. Aplt. App. at 55 (emphasis
added). A submission agreement is considered to be a contract between the
parties, which gives an arbitration panel authority to act. See Hollern v.
Wachovia Sec., Inc., 458 F.3d 1169, 1174 (10th Cir. 2006) ([I]ncorporating a
document by reference into a contract makes that document an express part of the
contract. (citing Plunkett v. Plunkett, 624 S.E.2d 39, 42 (Va. 2006))).
Arbitrators derive their authority from the parties arbitration agreement, and
parties may extend that authority . . . in their submissions to the arbitrators so
long as the submissions do not violate an express provision of the original
arbitration agreement. Id.
-6-
All parties to the dispute filed Submission Agreements, in which they each
agreed to submit the matter in controversy, as set forth in the attached statement
of claim, answers, and all related cross claims, counterclaims and/or third-party
claims which may be asserted, to arbitration in accordance with the FINRA ByLaws, Rules, and Code of Arbitration Procedure. Aplt. App. at 45-53. The
agreements state that each party agree[s] to abide by and perform any award(s)
rendered pursuant to this Submission Agreement. Id. Both ICON and Meeder
specifically requested attorneys fees: ICON in its Statement of Claim and
Answer to Respondents Counterclaims, and Meeder in its Statement of Answer
and Counterclaims. Where, as here, parties incorporate by reference their
Statement of Claim and Answer, which both contain requests for attorneys fees,
into a Uniform Submission Agreement that states they agree to submit all issues
identified in those pleadings to arbitration, . . . the parties expressly empower[]
the arbitrators to award attorneys fees. Hollern, 458 F.3d at 1174.
Thus, the issue of attorneys fees was submitted to the panel by agreement
of the parties and the FINRA guidelines clearly gave the panel authority to rule
on and award such fees. Meeders argument that ICON never requested
attorneys fees is contradicted by the record. Moreover, [i]t is the arbitrators
construction which was bargained for; and so far as the arbitrators decision
concerns construction of the contract, the courts have no business overruling him
because their interpretation of the contract is different from his. United
-7-
Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 599 (1960).
Even assuming the panel erred in awarding attorneys fees based
specifically on the Retirement Agreement, we are not at liberty to overturn that
decision. In line with the deferential standard of review, we have recognized that
[e]rrors in an arbitration panels factual findings, or its interpretation and
application of the law, do not justify vacating an award. Hollern, 458 F.3d at
1172. Because the arbitration panel had general authority pursuant to the
Submission Agreements to award attorneys fees, an erroneous reference to the
Retirement Agreement as a basis for its award was merely an error of fact, which
does not justify overturning the panels award of attorneys fees. We therefore
hold the district court erred in vacating the award of attorneys fees to ICON.
Meeder also appeals the district courts order upholding the panels award
of $250,000 in nominal damages to ICON. It contends that [a]warding damages
on a claim never submitted to the Panel clearly exceeded the authority of the
Panel as set forth in the Submission Agreement[s]. Aple. Br. at 28. The district
court held the nominal damages award was ambiguous, stating:
[O]ne possible interpretation is that the award is a general,
undifferentiated award on the claims for tortious interference with
existing and prospective business relationships, which general award
is then followed by specific awards on each of those claims. If so
construed, the award is within the purview of the authority granted
by the parties to the Panel.
Aplt. App. at 71.
-8-
Whether or not we agree, we are mindful of the strong presumption

requiring all doubts concerning whether a matter is within the arbitrators powers
to be resolved in favor of arbitrability. Hollern, 458 F.3d at 1173. Accordingly,
we affirm the district courts order upholding the panels award of nominal
damages to ICON. 3
In sum, we REVERSE the district courts order vacating the panels award
to ICON of $164,170 in attorneys fees, and AFFIRM the district courts order
upholding the panels award to ICON of $250,000 in nominal damages.
ENTERED FOR THE COURT
Stephanie K. Seymour
Circuit Judge
ICON has also filed a Motion for Attorneys Fees. We deny ICONs
motion.
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FILED

United States Court of Appeals

February 12, 2014

UNITED STATES COURT OF APPEALS

ADVISER DEALER SERVICES, INC.;

No. 13-1178 & 13-1187

ORDER AND JUDGMENT *

This appeal and cross-appeal arise out of an arbitration proceeding before

(collectively ICON), and Adviser Dealer Services, Inc., Meeder Asset

proper. Aplt. App. at 65 (emphasis added). ICON filed an Answer to

Section 10 of the Federal Arbitration Act allows a district court to vacate

Whether or not we agree, we are mindful of the strong presumption

ENTERED FOR THE COURT

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