Fraud in Execution of Agreement is Defense in Arbitration

Fraud In Execution of Arbitration Agreement is Defense to Confirmation of Award 

Even if the appellant did not move to vacate or object to the arbitration proceeding.

Trading Direct v. LaRusso, 2002 Conn. Super. LEXIS 480 (Conn. Super., 2/7/02).

Agreement to Arbitrate * Appealability * Award Challenge * Collateral Attack * Enforceability (Forgery) * Remedies (Restitution) * Confirmation of Award * Timeliness * State Law, Applicability of * Jurisdiction (Subject Matter).

Fraud in the execution of arbitration agreement may be asserted in defense to confirmation of Award even in absence of timely motion to vacate or object.

Broker-dealer sues husband and wife in arbitration proceeding to recover loss on liquidation of trades made by wife for which she failed to pay. After defaulting at the scheduled arbitration hearing, despite receiving notice, both LaRussos failed to timely move to vacate or object to the Panel’s Award within the statutory period. However, when the firm sought to confirm the Award in court, both opposed on different grounds. John LaRusso claimed that his wife had forged his signature on brokerage agreement containing arbitration clause without his knowledge or consent.

Despite the law’s favorable stance toward arbitration and the burden resting on the party challenging the Award, if there was no agreement to arbitrate by the party the arbitration Panel and the Court lack subject matter jurisdiction. Lack of jurisdiction cannot be waived and can be challenged at any time prior to final judgment.

An evidentiary hearing was scheduled on the question of whether John assented to the arbitration. Michelle LaRusso also opposes entry of judgment on the basis of accord and satisfaction in that she settled criminal proceedings against her by agreeing to a plan of restitution. The Court declines to reach Michelle’s public policy defense, ruling that, even though no party is entitled to a double recovery, this would not prohibit the broker-dealer from pursuing civil remedies. The broker-dealer might thereby protect itself against a possible default in payment of restitution and Defendant could, if necessary, seek an order that any amounts paid as criminal restitution be deducted from the civil recovery. (SLC Ref. No. 02-12-02)


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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 


Mark J. Astarita is a veteran securities attorney representing investors and financial professionals nationwide in securities investigations and arbitrations. Have a question? Email him at, call his office at 212-509-6544, or visit The Securities Lawyer

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.