United States Court of Appeals
For the First Circuit
No. 09-1356
KASHNER DAVIDSON SECURITIES CORP., VICTOR L. KASHNER,
MATTHEW MEISTER, TIMOTHY VARCHETTO,
Plaintiffs, Appellees,
v.
STEVEN MSCISZ, MARK MSCISZ, LYNDA MSCISZ,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Mark L. Wolf, U.S. District Judge]
Before
Lipez, Stahl, and Howard, Circuit Judges.
John A. Stern, Greenberg Traurig LLP, with whom Jason C.
Moreau was on brief, for appellants.
Richard J. Babnick, Jr., Sichenzia Ross Friedman Ference LLP,
with whom Marc J. Ross was on brief, for appellees.
April 1, 2010
LIPEZ, Circuit Judge. This matter is before us for the
second time. In Kashner Davidson Securities Corp. v. Mscisz, 531
F.3d 68, 79 (1st Cir. 2008), we held that the arbitration award at
issue in this case must be vacated because the arbitrators acted in
manifest disregard of the law. We did not specify what, if
anything, the district court should do after vacating the award.
On remand, the district court entered an order vacating the
arbitration award and remanding the matter to the arbitral body for
further proceedings. It then denied the appellants' motion under
Federal Rule of Civil Procedure 60(b) for relief from the remand
order. The appellants now challenge both the remand order and the
order denying their Rule 60(b) motion, arguing that both contravene
our mandate.
For the reasons that follow, we affirm the decision of
the district court to issue the remand order. However, we also
direct the district court to clarify its position on whether the
arbitration should proceed before the same panel of arbitrators or
a newly constituted panel.
I.
The background facts are recounted in detail in our
previous opinion. See Kashner Davidson, 531 F.3d at 71-74. In
2004, the underlying dispute between appellants Steven Mscisz, Mark
Mscisz, and Lynda Mscisz ("the Customers") and appellee Kashner
Davidson Securities Corp. ("Kashner Davidson") was submitted to
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arbitration before the National Association of Securities Dealers
("NASD"). A panel of three arbitrators found the Customers jointly
and severally liable to Kashner Davidson for $421,000 in
compensatory damages, attorneys' fees, and costs. The panel also
dismissed the Customers' counterclaims and third-party claims with
prejudice as a sanction for the Customers' failure to comply with
a discovery order.
The district court confirmed that award, and the
Customers appealed to this court. We held that the arbitration
panel improperly dismissed the Customers' counterclaims and
third-party claims as a sanction of first resort rather than a
sanction of last resort, noting that the NASD Code of Arbitration
Procedure provides for dismissal of a claim or defense as a
sanction only when "lesser sanctions have proven ineffective."
Kashner Davidson, 531 F.3d at 76. We concluded that the dismissal
reflected the arbitration panel's "intentional and willful
disregard of the clear and unequivocal language" of the NASD rules,
which under our circuit precedent was sufficient to justify vacatur
of the award. Id. at 79. Consequently, we "reverse[d] the
decision of the district court and remand[ed] the case for entry of
an order vacating the arbitration award."1 Id.
1
Our judgment was phrased in materially identical
language. Kashner Davidson has suggested that our mandate left the
money damages portion of the arbitration award untouched. That is
not correct. We instructed the district court to vacate the entire
award, which it did.
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After we filed our opinion, but before the mandate
issued, counsel for Kashner Davidson sent a letter to the district
court judge. Referring to the Financial Industry Regulatory
Authority ("FINRA"), the successor organization to the NASD,
counsel requested that "the Court remand the matter to FINRA and
direct FINRA to reconstitute the original Arbitration
Panel . . . for further proceedings consistent with the [Court of
Appeals'] decision." There is no indication in the record that the
district court took any immediate steps in response to the letter.
Once our mandate had issued, the district court entered an order
vacating the arbitration award and remanding the matter to FINRA
"for further proceedings consistent with the First Circuit's
opinion." The district court's remand order did not address
whether the original arbitration panel should be reconstituted.
The Customers then filed a brief motion in which they
argued that a remand to FINRA was inappropriate because the
judgment on appeal did not mention such a remand. Treating the
Customers' motion as one for relief from an order pursuant to Fed.
R. Civ. P. 60(b),2 Kashner Davidson argued that the Customers'
2
The Customers styled their motion as a "Motion for
Reconsideration" under Federal Rule of Civil Procedure 7(b) and
District of Massachusetts Local Rule 7.1, which are general rules
governing motion practice. In its opposition, Kashner Davidson
construed the motion as one for relief from an order under Rule
60(b). The Customers adopted that characterization in their reply
brief. Nothing in this appeal turns on the precise grounding of
the motion in the rules; for clarity, we will refer to it as a Rule
60(b) motion.
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perfunctory motion did not demonstrate an entitlement to relief
under the exacting requirements of that rule. It requested that
the district court "allow the parties to work towards reaching a
final resolution of this dispute before the original FINRA
arbitrators by allowing FINRA to hold further proceedings
consistent with the First Circuit's Decision." In a reply brief,
the Customers added that even if a remand to FINRA were
appropriate, "established case law mandates the composition of a
new panel when, as here, the initial panel manifestly disregarded
the law."
The district court denied the Customers' motion in a
brief electronic order: "Essentially for the reasons stated in
[Kashner Davidson's] Opposition, this motion is hereby DENIED."
The Customers then initiated the present appeal, which challenges
both the district court's remand order and its electronic order
denying the Customers' Rule 60(b) motion.
II.
We have jurisdiction to review the district court's
orders under section 16 of the Federal Arbitration Act. See 9
U.S.C. § 16(a)(1)(E); Bull HN Info. Sys. v. Hutson, 229 F.3d 321,
327-28 (1st Cir. 2000).
Before turning to the Customers' arguments, we address an
issue raised in the appellees' brief. Kashner Davidson argues that
a recent Supreme Court decision, Hall Street Assocs. v. Mattel,
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Inc., 552 U.S. 576 (2008), undermines our earlier mandate in this
case. In Hall Street, the Supreme Court held that the grounds for
prompt vacatur or modification of an arbitral award enumerated in
the Federal Arbitration Act, 9 U.S.C. §§ 10-11, are exclusive and
may not be supplemented by contract. 552 U.S. at 584. Kashner
Davidson contends that our holding in the first appeal -- that the
award must be vacated because the arbitrators manifestly
disregarded the law -- is in conflict with Hall Street because
manifest disregard of the law is not explicitly listed as a ground
for vacatur in section 10 of the FAA.
The continued vitality of the manifest disregard doctrine
in FAA proceedings is a difficult and important issue that the
courts have only begun to resolve. See, e.g., Citigroup Global
Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009) (manifest
disregard of the law is no longer an "independent, nonstatutory
ground" for setting aside an arbitration award); Comedy Club, Inc.
v. Improv West Assocs., 553 F.3d 1277, 1281 (9th Cir. 2009)
(manifest disregard of the law "remains a valid ground for vacatur
of an arbitration award under § 10(a)(4) of the Federal Arbitration
Act"); Stolt-Nielsen SA v. AnimalFeeds Int'l Corp., 548 F.3d 85,
94-96 (2d Cir. 2008) (manifest disregard doctrine is "a judicial
gloss on the specific grounds for vacatur enumerated in section 10
of the FAA"), cert. granted on other grounds, 129 S. Ct. 2793
(2009). We have referred to the issue in dicta, see Ramos-Santiago
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v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st Cir. 2008), but
have not squarely determined whether our manifest disregard case
law can be reconciled with Hall Street.
In an effort to have us decide that issue now, Kashner
Davidson has asked us to take the unusual step of recalling our
earlier mandate.3 We will not oblige. The power to recall a
mandate is "one of last resort, to be held in reserve against
grave, unforeseen contingencies." Calderon v. Thompson, 523 U.S.
538, 550 (1998). We have exercised that power sparingly over the
course of many years, recalling mandates in only the most
extraordinary circumstances.4
3
We note that the recall of a mandate is ordinarily
requested by motion. See 20A James Wm. Moore et al., Moore's
Federal Practice § 341.11 (3d ed. 2009). Contrary to the usual
practice, Kashner Davidson raised the issue for the first (and
only) time in its brief on appeal. We do not intend our discussion
to suggest approval of the manner in which the argument was raised.
4
Compare United States v. Fraser, 407 F.3d 9, 10-11 (1st
Cir. 2005) (per curiam) (declining to recall mandate); Conley v.
United States, 323 F.3d 7, 14 (1st Cir. 2003) (same); Boston &
Maine Corp. v. Town of Hampton, 7 F.3d 281, 283 (1st Cir. 1993)
(same); Powers v. Bethlehem Steel Corp., 483 F.2d 963, 964-65 (1st
Cir. 1973) (same); Legate v. Maloney, 348 F.2d 164, 166 (1st Cir.
1965) (same); Haverhill Gazette Co. v. Union Leader Corp., 333 F.2d
808, 809-10 (1st Cir. 1964) (same), with Alsamhouri v. Gonzales,
471 F.3d 209, 209-10 (1st Cir. 2006) (recalling mandate where an
asylum seeker subject to removal raised a "serious" jurisdictional
argument, and the Supreme Court had not yet acted on a pending
petition for writ of certiorari); In re: Unión Nacional de
Trabajadores, 527 F.2d 602, 604 (1st Cir. 1975) (per curiam)
(recalling writ of mandamus where the original decision requiring
the district court to hold an "unprecedented" jury trial was
"demonstrably wrong and created manifest injustice"). We have
occasionally recalled a mandate for the purpose of correcting a
clerical error or matter of form. See, e.g., Estate of Abraham v.
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Kashner Davidson's current predicament is hardly
extraordinary. The company failed to take advantage of numerous
earlier opportunities to raise the Hall Street argument through
ordinary procedures.5 Most immediately, it could have cross-
appealed in this proceeding from the district court's remand order
and urged us to revisit our previous decision under ordinary law of
the case principles. See Nkihtaqmikon Nkihtaqmikon v. Impson, 585
F.3d 495, 498 (1st Cir. 2009) ("We could revisit our own earlier
decision if [the appellant] could show that controlling legal
authority has changed dramatically; proffer significant new
evidence, not earlier obtainable in the exercise of due diligence;
or convince the court that a blatant error in the prior decision
will, if uncorrected, result in a serious injustice.") (internal
quotation marks and citations omitted). Kashner Davidson did not
do so, and now it is faced with the well-settled rule that an
appellee who fails to file a cross-appeal may "urge in support of
Comm'r, 429 F.3d 294 (1st Cir. 2005). That is not the situation
presented here.
5
The Supreme Court decided Hall Street on March 25,
2008 -- after we heard oral argument in the first appeal but before
we issued our decision. Kashner Davidson could have submitted a
letter bringing Hall Street to our attention while the first appeal
was pending. See Fed. R. App. P. 28(j). Once the appeal was
decided, it could have requested panel rehearing and/or rehearing
en banc. See Fed. R. App. P. 35, 40. It could have petitioned the
Supreme Court for a writ of certiorari. See Sup. Ct. R. 12, 13.
On remand, it could have attempted to show that "exceptional
circumstances" justified deviation from our mandate. United States
v. Wallace, 573 F.3d 82, 89 (1st Cir. 2009).
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a decree any matter appearing in the record" but may not "attack
the decree with a view either to enlarging his own rights
thereunder or of lessening the rights of his adversary." El Paso
Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999) (quoting
United States v. Am. Ry. Express Co., 265 U.S. 425, 435 (1924));
see also Greenlaw v. United States, 128 S. Ct. 2559, 2564 (2008).
Considering the circumstances, we cannot say that we are
faced with the sort of "grave, unforeseen contingenc[y]" that would
justify the recall of a mandate. Thompson, 523 U.S. at 550. By
strategic choice or through lack of diligence, Kashner Davidson
waited until the last possible moment to raise its Hall Street
argument. It cannot now circumvent the cross-appeal rule by
invoking a remedy reserved for extraordinary situations. Kashner
Davidson's request is denied.
III.
The Customers advance two arguments on appeal. First,
they argue that the district court's remand order contravenes our
mandate because we did not direct the district court to remand the
matter to FINRA.6 Second, they argue that the district court
abused its discretion in denying the Rule 60(b) motion. Although
the second argument is primarily a reformulation of the first
argument, we address it separately because the parties have raised
6
We note that this is an odd position for the Customers to
take. They specifically asked for a remand in the district court
and in the first appeal.
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distinct concerns about the scope of the district court's Rule
60(b) order.
A. Remand Order
The applicable legal principles are straightforward.
Subject to a few narrow exceptions not implicated here, "[a]n
appellate court's mandate controls all issues that were actually
considered and decided by the appellate court, or as were
necessarily inferred from the disposition on appeal." NLRB v.
Goodless Bros. Elec. Co., 285 F.3d 102, 107 (1st Cir. 2002)
(internal quotation marks and citations omitted). At the same
time, "issues that were not decided by the appellate
court . . . are not affected by the mandate." De Jesús-Mangual v.
Rodríguez, 383 F.3d 1, 6 (1st Cir. 2004).
When we decided the first appeal, we instructed the
district court to enter an order vacating the arbitration award.
Kashner Davidson, 531 F.3d at 79. We did not say what, if
anything, the district court should do after that. Id. The
Customers seize on that silence, arguing that the district court
"impermissibly exceed[ed] the scope of [the] mandate" by issuing a
remand order "in the absence of any language . . . directing it to
do so." Their argument rests on a faulty premise, however. The
district court was not constrained to perform only those actions
that we specifically listed in the mandate. Although "the mandate
of an appellate court forecloses the lower court from reconsidering
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matters determined in the appellate court, it leaves to the [lower]
court any issue not expressly or impliedly disposed of on appeal."
Biggins v. Hazen Paper Co., 111 F.3d 205, 209 (1st Cir. 1997)
(internal quotation marks and citation omitted); see also Sprague
v. Ticonic Nat'l Bank, 307 U.S. 161, 168 (1939) ("While a mandate
is controlling as to matters within its compass, on the remand a
lower court is free as to other issues.").
The dispositive question is thus whether we explicitly or
implicitly decided that a remand to FINRA was inappropriate. There
is no serious contention that we did so explicitly; our mandate
simply did not address the subject. Nor did we decide the issue by
necessary implication. As the Customers acknowledged below, the
FAA provides that a district court "may, in its discretion, direct
a rehearing by the arbitrators" after an award is vacated. 9
U.S.C. § 10(b). In the closely related context of labor
arbitration, the Supreme Court has indicated that remand will often
be "the appropriate remedy" following vacatur of an award. Major
League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 511 (2001)
(per curiam) (emphasis added); see also United Paperworkers Int'l
Union v. Misco, Inc., 484 U.S. 29, 41 n.10 (1987). Nothing in our
mandate touched on these background rules, let alone abrogated
them.
The Customers contend that remand is incompatible with
our holding that the entire arbitration award must be vacated in
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light of the arbitrators' actions. On their view, fresh
arbitration proceedings must be initiated because a fair proceeding
before the same panel of arbitrators is not possible. As the
Customers conceded at oral argument, however, the question of
whether a new panel of arbitrators should be constituted on remand
is distinct from the question of whether a remand is appropriate at
all. We address the issue of panel composition below. There is no
suggestion that FINRA itself is biased or incapable of providing a
fair arbitration proceeding.
Because our mandate did not explicitly or implicitly
prohibit the district court from remanding this matter to FINRA for
further proceedings, we reject the Customers' argument that the
remand order contravened the mandate.
B. Rule 60(b) Order
The Customers' discussion of the Rule 60(b) order is, for
the most part, a reformulation of their argument regarding the
remand order. One ancillary issue deserves attention, however.
The district court denied the Customers' Rule 60(b) motion
"[e]ssentially for the reasons stated in [Kashner Davidson's]
Opposition." The Customers suggest that this language could be
read as "tacit approval" of Kashner Davidson's argument that the
district court intended to remand the matter to the original
arbitration panel. Kashner Davidson did take this position in its
opposition to the Customers' Rule 60(b) motion. Kashner Davidson
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goes further, flatly stating that the district court "remanded this
arbitration dispute back to FINRA's original arbitration panel for
further proceedings . . . ." FINRA was also confused by the
original remand order, stating in a letter that "counsel will need
to seek clarification from the district court on the remand issue
before FINRA will proceed with this case."
Although we have decided to affirm the remand order of
the district court, we are also going to remand this matter to the
district court so that it can consider the parties' arguments and
then specify whether (1) a new arbitration panel should be
constituted, (2) the original arbitration panel should be
reconstituted, or (3) FINRA should decide the issue in the first
instance according to its own practices and procedures. The
resolution of that issue lies within the sound discretion of the
district court. See Aircraft Braking Sys. Corp. v. Local 856,
United Auto., Aerospace & Agric. Implement Workers, 97 F.3d 155,
162 (6th Cir. 1996); 1 Martin Domke et al., Domke on Commercial
Arbitration § 40:6 (3d ed. & Supp. 2009); 4 Thomas H. Oehmke,
Commercial Arbitration § 155:4 (3d ed. & Supp. 2009).
IV.
This matter is REMANDED to the district court for the
limited purpose of clarifying the terms of its remand order, as
described in this opinion. In all other respects, the district
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court's remand order and order denying the Customers' Rule 60(b)
motion are AFFIRMED. Each party shall bear its own costs.
SO ORDERED.
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