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Huitt v. Wilbanks Securities, Inc.

United States District Court, D. Colorado

October 19, 2017

GRACE S. HUITT, Plaintiff,



         This matter comes before the Court on Plaintiff's Petition to Confirm Arbitration Award (the “Petition”), filed April 14, 2017 [#1], and Defendant's Opposition to Petition to Confirm Arbitration Award and Cross-Motion to Vacate Arbitration Award (the “Cross-Motion”), filed July 20, 2017 [#23]. The Petition and Cross-Motion are before the Court on the Parties' consent to have a United States magistrate judge conduct all proceedings in this action and to order the entry of a final judgment. [#13, 14] This Court has carefully considered the Petition and Cross-Motion and related briefing, the entire case file, and the applicable case law, and has determined that oral argument would not materially assist in the disposition of the Petition and Cross-Motion. For the following reasons, I GRANT the Petition to the extent it seeks confirmation of the arbitration award and DENY the Cross-Motion.

         I. BACKGROUND

         On September 23, 2008, Plaintiff purchased an ING Landmark Variable Annuity (the “Annuity”) through Defendant's then-registered representative, John Stevens. [#23 at 3, #26-3 at 2-3] According to Plaintiff, Mr. Stevens promised a seven percent annual growth guarantee on the Annuity for at least the first four years of the contract, after which there would be no surrender fees. [#26-3 at 3] The New Account Form signed by Plaintiff and Mr. Stevens (on behalf of Defendant) contained an arbitration provision pursuant to which “[a]ll parties to [the] agreement [gave] up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.” [#1-1] The arbitration provision contained a number of agreed upon guidelines for the arbitration, including that “[t]he arbitrators do not have to explain the reason(s) for their award.” [Id.]

         In addition to the arbitration provision, the New Account Form also included a separate provision entitled “Governing Law.” [Id.] This section of the agreement stated that the “agreement shall be governed by the laws of the State of Oklahoma, exclusive of that state's choice-of-law provisions.” [Id.] The Governing Law section also included a sentence stating that “[t]he provisions of this Agreement shall be continuous and cover individually and collectively all accounts which the undersigned may open or reopen with you and shall inure to the benefit of yourselves, your successors and assigns and shall be binding upon the undersigned and/or the estate, executors, administrators and assigns of the undersigned.” [Id.]

         According to Plaintiff, at some point in 2012, she received $2, 158, 536.18 from the Annuity, which was $594, 135.44 less than what was promised by Mr. Stevens. [#26-3 at 3] On January 22, 2016, Plaintiff initiated arbitration against Defendant by filing a Statement of Claim (the “Claim”). [#23 at 3] The arbitration was conducted before a Financial Industry Regulation Authority (“FINRA”) panel of three arbitrators (the “Panel”). [Id.]

         During the course of the arbitration, Defendant filed a motion to dismiss arguing that Plaintiff's claims were barred by FINRA's six-year statute of limitations. [#26-1] Although Defendant represents in its Cross-Motion that the motion to dismiss argued “that Plaintiff's claims were time-barred under the relevant state statutes of limitations, and that the Panel lacked jurisdiction to hear the claims under FINRA Rule 12206” [#23 at 3-4], the motion to dismiss does not reference state statutes of limitations but instead relies exclusively upon FINRA Rule 12206. [#26-1 at 7] Plaintiff responded to the motion to dismiss advancing several arguments against dismissal, including the fact that the motion to dismiss was filed after the deadline established by FINRA's Code of Arbitration Procedure. [#26-3]

         The Panel initially scheduled an evidentiary hearing for December 13-15, 2016. [#23 at 4] On December 3, 2016, Defendant's counsel, John Gibson, swore an affidavit saying that he had been experiencing a condition known as Spinal Stenosis and that he had been scheduled for emergency surgery on December 6, 2016. [#8-2, ¶¶ 5, 7] Mr. Gibson's affidavit stated that, in the best case scenario, he could “return to light work as early as January and may be able to travel towards the end of February or March.” [Id. at ¶ 11] On December 15, 2016, the Panel continued the evidentiary hearing and rescheduled it for March 14-17, 2017, in Salt Lake City, Utah. [#8-3 at 2; #23 at 4]

         Mr. Gibson underwent heart surgery on December 19, 2016, and underwent spinal surgery on December 26, 2016. [#23 at 4] A January 12, 2017 letter from Mr. Gibson's doctor stated that Mr. Gibson was “making appropriate progress and [was] recovering as expected.” [#8-2 at 1] The letter further stated as follows:

It has come to my attention that Mr. Gibson had professional obligations that were scheduled during this time. Again, it should be stressed the patient had profound spinal cord compression causing myelopathy and was at very high risk for permanent spinal cord injury that could have resulted in permanent paraplegia. Under my direction, he was informed to cease performing his typical professional duties until we were able to properly decompress and stabilize his cervical spine.

[Id.] The January 12 letter made no mention of future professional or travel restrictions. [Id.]

         In early March, approximately one week before the rescheduled evidentiary hearing, Mr. Gibson withdrew as counsel. [#23 at 4-5; #25 at 9-10] According to Defendant, Mr. Gibson withdrew because he was “[m]edically unfit to travel out of Oklahoma.” [#23 at 4] Following Mr. Gibson's withdrawal, Defendant submitted several motions requesting a postponement of the evidentiary hearing or a change of venue to Oklahoma City. [#23 at 5; #25 at 9-10; #8-8; #8-11] In support thereof, Defendant attached both Mr. Gibson's December 3 affidavit and the January 12 doctor's letter. [#8-8 at 3; #25 at 10; #36 at 16] Defendant also claims that, on January 26, 2017, Mr. Gibson testified in “Beres v. Wilbanks Securities, Inc., the sister arbitration companion case” about his health condition.[1] [#36 at 17] The Panel denied Defendant's request for a continuance or transfer of the proceedings to Oklahoma City. [#23 at 5; # 25 at 10]

         The final evidentiary hearing was held between March 14 and March 16, 2017. [Id.] On April 13, 2017, the Panel issued its decision. [#1-2] The Panel found that Defendant's conduct “which is the subject of the arbitration continued from 2008 to within six years of the date of [Plaintiff's] filing of the Statement of Claim, ” and therefore denied Defendant's motion to dismiss. [Id. at 3] The Panel awarded Plaintiff compensatory damages of $536, 720 and punitive damages of $536, 720 (collectively, the “Award”). [Id.] The decision does not give a written explanation for the punitive damages portion of the Award. [Id.]

         On April 14, 2017, Plaintiff filed her Petition in this Court. [#1] On April 20, 2017, Defendant filed an Emergency Motion to Stay Arbitration Award and Motion to Vacate Arbitration Award (the “Emergency Motion”). [#8] On April 21, 2017, this Court held a hearing on the Emergency Motion and declined to make a ruling on the Emergency Motion but granted Defendant leave to file supplementation. [#12] On July 20, 2017, Defendant filed the Cross-Motion [#23], which mooted the Emergency Motion [#24]. On August 2, 2017, Plaintiff responded to the Cross-Motion [#25], and Defendant replied on September 15, 2017 [#36].


         Courts must “exercise caution in setting aside arbitration awards because one purpose behind arbitration agreements is to avoid the expense and delay of court proceedings.” Bowen v. Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir. 2001) (quotation omitted). As a result, “[t]he standard of review of arbitral awards is among the narrowest in the law.” Richardson v. Citigroup, Inc., No. 12-cv-0485-WJM-KMT, 2014 WL 3892967, at *1 (D. Colo. Aug. 8, 2014) (citing Litvak Packing Co. v. United Food & Commercial Workers, Local Union No. 7, 886 F.2d 275, 276 (10th Cir. 1989)). Indeed, “[o]nce an arbitration award is entered, the finality of arbitration weighs heavily in its favor and cannot be upset except under exceptional circumstances.” Ormsbee Dev. Co. v. Grace, 668 F.2d 1140, 1146-47 (10th Cir. 1982). Accordingly, a party ...

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