Arbitrator Refusal to Hear Evidence

Refusal to Hear Evidence is Misconduct Only if Prejudice to Fair Hearing Results

Woodley vs. Auerbach, Pollack & Richardson, Inc., Case NO 01-8489-CIV (SD Fla. 11-14/01)

Woodley v. Auerbach, Pollak & Richardson, Inc., Case No. 01-8489-CIV-Middlebrooks (S.D. Fla., 11/14/01): An Arbitrator’s refusal to hear “pertinent and material” evidence constitutes misconduct under the FAA’s vacatur provisions only when the refusal prejudices the offering party’s right to a fair hearing.

We reported on the underlying Award (NASD ID #98-04806, 5/29/01) in this vacatur proceeding, when it first issued in SAC’s Arbitration Alert (SAA 01-24), in part, because it resulted in an award to an individual investor of nearly $3 million and, also, because it contained some interesting remarks by the Arbitrators.

Here, both Auerbach Pollak (APR) and the broker, Robert Pierce Onthank, challenge the Award on a variety of grounds. Indeed, APR proffers so many that the Court offers wry comment: “[a]lthough APR makes a valiant effort at citing in rote fashion all or nearly all of the grounds upon which an arbitration award may be vacated by a reviewing court, the substance of its motion lacks specifics to back up many of these contentions.”

Among the several which the Court treats substantively in its Opinion is the contention that Mr. Onthank was not permitted to offer rebuttal evidence of a sexual relationship that Ms. Woodley testified to. However, the Court points to indications that Mr. Onthank did testify on the subject; he was simply deterred from going further in disproving the relationship. On this, the Court complains, it might know more, but it was not provided by APR or Onthank with the full transcript of proceedings. This failure seriously hampers Respondents in meeting their burden of proof.

Additionally, the Arbitrators stated in their Award that the relationship issue was not pertinent to their decision on liability or damages. That statement must be given due weight and cannot be reviewed by the Court, absent proof that the refusal deprived these Respondents of a fair hearing. All other grounds for vacatur are denied, the Award is confirmed, and jurisdiction is retained only to determine the amount of attorney fees to be awarded. (Editorial thanks to Lonnie K. Martens, Kelley & Warren, P.A., West Palm Beach, FL. Ms. Martens represented Ms. Woodley in this matter.) (SLC Ref. No. 2001-50-01)

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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.