Securities Litigation

The Tenth Circuit joined a majority holding that the Federal Arbitration Act (“FAA”) permits modification of an arbitration award for a “material miscalculation of figures” if the miscalculation is “evident” on the face of the award and precludes consideration of the underlying record.

Section 11 of the FAA provides:

In either of the following cases, the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration—

(a)         Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.

(b)         Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.

(c)          Where the award is imperfect in matter of form not affecting the merits of the controversy.

The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.

9 U.S.C. § 11.

In Mid-Atlantic Capital Corp. v. Bien, No. 18-1195, 2020 WL 1860125 (10th Cir. Apr. 14, 2020), the Court held that the text of Section 11(a), its context from the prior New York law on which the FAA was based, and the purpose of the FAA did not permit a reviewing court to consider the underlying record.  Thus, modification for “miscalculation of figures” is limited to the face of the award.  The Mid-Atlantic Court affirmed the District Court’s refusal to modify a FINRA Panel’s award that gave the Claimant investors both their net-out-of-pocket damages plus their alternative market-adjusted damages.

With its Mid-Atlantic Capital decision, the Tenth Circuit joins the Fourth, Sixth, and Eleventh Circuits in adopting the “face of the award” limitation.  See, e.g., Grain v. Trinity Health, Mercy Health Services, Inc., 551 F. 3d 374 (6th Cir. 2008); AIG Baker Sterling Heights LLC v. American Multi-Cinema, Inc., 508 F. 3d 995 (11th Cir. 2007); Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F. 3d 188 (4th Cir. 1998).

The Fifth and Seventh Circuits allow consideration of the underlying arbitration record to discern material miscalculations.  See, e.g., Eljer Mfg, Inc. v. Kowin Devel. Corp., 14 F. 3d 1250 (7th Cir. 1994); Valentine Sugars, Inc. v. Donau Corp., 981 F. 2d 210 (5th Cir. 1993).

The Mid-Atlantic Capital decision is here.