Petition for Writ of Certiorari — Ameritas Investment Corp. v. Slinkard

Supreme Court, U.S.

so FIL®D

¥51997 JUN 1 2 19%

NO. _orsice os sue CLERK

IN THE

SUPREME C..URT OF THk UNITED STATES

OCTOBER TERM, 1996

AMERITAS INVESTMENT CORP., a Nebraska

Corporation f/k/a BLN INVESTMENT CORP.,

Petitioner,

STEVEN M. SLINKARD, An Individual,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE STATE OF OKLAHOMA SUPREME COURT

PETITION FOR WRIT OF CERTIORARI

Norman M. Krivosha

Counsel of Record for Petitioner

David M. Williams

5900 "O" Street/PO Box 81889

Lincoln, NE 68501

(402) 467-7176

QUESTIONS PRESENTED FOR REVIEW

1. Where a Plaintiff a) fi’! a lawsuit in an Oklahoma

State court eventually allegisg, only state law causes of

action; b) that case was ordeved to arbitration by a state

court judge; c) the arbitrators rendered their award citing

€ <lahoma state laws as the bass for their award; and d) the

award was confirmed by a state court judge, will the entirety

of Oklahoma state law be pre-empted by the Federal

Arbitration Act and an award permitted to be entered

contrary to state law simply because the case in some way

invi:lves interstate commerce?

2. By failing to permit any meaningful review of the

arbitrators’ decision on punitive damages or attorney’s fees,

was Ameritas Investment Corp. denied due process as

guaranteed by the Fourteenth Amendment te the United

States Constitution?

LIST OF PARTIES

Petitioner: Ameritas Investment Corp., f/k/a BLN

Investment Corp.

Parent Company of Petitioner: AMAL Corporation

Subsidiary Companies of Petitioner: None

Respondent: Steven M. Slinkard

ii

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW .......

Fg fo ee er a a a re il

CITATIONS OF THE OFFICIAL AND

UNOFFICIAL REPORTS OF THE

OPINIONS AND ORDERS ENTERED

IN THE CASE BY COURTS OR

ADMINISTRATIVE AGENCIES .............. 1

CONCISE STATEMENT OF THE

BASIS FOR JURISDICTION IN THIS COURT ..... 1

CONSTITUTIONAL PROVISIONS,

TREATIES, STATUTES, ORDINANCES,

AND REGULATIONS INVOLVED IN THE CASE .. 2

CONCISE STATEMENT OF THE CASE

SETTING OUT FACTS

MATERIAL TO CONSIDERATION

OF THE QUESTIONS PRESENTED ........... 3

A. summAms OF PACTS .........;. 3

B. HISTORY OF WHEN

FEDERAL QUESTIONS

SOUGHT TO BE REVIEWED

I cs ac o's. 0 oo 0: % ¥ 0 5

iii

BS ee

DIRECT AND CONCISE ARGUMENT

AMPLIFYING THE REASONS RELIED

ON FOR ALLOWANCE OF THE WRIT ........ 9

A. SUMMARY OF ARGUMENT ...... 9

B. ARGUMENT bocce ete te ees 10

1. Federal Arbitration Act

PIO GIENE sis ees See es 10

2. EE Te oe ic cee eee ea 23

CONICLINIIONS oo oe Se PRS eae ere 29

APPENDIX

N.A.S.D. Award, 12-09-93... 2.2 e ees 1A

Judgment, District Court of Oklahoma

County, Oklahoma, 03-29-94 ........... 8A

Memorandum Opinion of the Court

of Appeals of the State of

Oklahoma, 10-31-95 .......-ccceees 12A

Order of the Supreme Court of

the State of Oklahoma, 03-25-96 ........ 23A

Cote: Dat Ea eee. bo Oe es res 25A

Cite: Sek a, Tas See hee es tee 26A

iv

oy 6G SO Sg a ere 28A

See ee, ae Ps es vo ree 29A

8 A a ee eee eee 30A

U.S. Comet. amend. AIV, $1 .......... 31A

Cas a ea 8 os Es ea Oe eS 32A

DP Tr yee tie a AS PR 33A

CASES:

Allied-Bruce Terminix Co., 115 S. Ct.

Oe ft. eae reer rr Ee ee

Browning-Ferris Indus. v. Kelco

Disposal, Inc., 492 U.S. 257, 278,

109 S. Ct. 2909, 2922, 106 L. Ed. 3d

BAP CE 6 be ERE ee aa

BMW of North America, Inc. v. Gore,

Re LR SPs ar ee

Casarotto v. Lombardi, 268 Mont. 369,

ge ee ee re

Commonwealth v. Perkins, 342 Pa. 529,

21 A.2d 45, aff'd, 314 U.S. 586 (1941) ..

Daniels v. Williams, 474 U.S.

ST; SOWA CEES ee ee

Dean Witter Reynolds, Inc. v. Trimble,

GSi N. yee eee Cees vb eee es

Dent v. West Virginia, 129 U.S. 114, 123,

9 S. Ct. 231, 32 L. Ed. 623 (1889) .....

vi

9,17,19,21

PR See ee ae.

en Se I Se sg kg 5 kw ab 6 vo 6 68's 21

Fahnestock & Co. v. Waltman, 935 F.2d 512 (2nd

Cir. 1991), cert. denied, 112 S. Ct. 1241 (1992) ... 14

Garrity v. Lyle Stuart. Inc., 386 N.Y.S.2d

Shs Sale Wee Fe ED | ne he cee eee ee 15

Hines v. Davidowitz, 312 U.S. 52, 67,

61 S. Ct. 399, 404, 85 L. Ed. 581 (1941) ..... 14,15

Hyde Park Partners. L.P. v. Connolly,

839 F.2d 837, 849 (Ist Cir. 1988) ............ 12

Lee v. Chica, 983 F.2d 883 889 (8th Cir. 1993) ... 26

Louisiana Public Service Comm’n v. FCC,

476 U.S. 355, 368-69, 106 S. Ct. 1890,

1898-99, 90 L. Ed. 2d 369 (1986) ............ 12

Mastrobuono v. Shearson Lehman Hutton, Inc.,

Ba ee ees ee ee Sk see a ek es a ee 16,17,18

New England Energy, Inc. v. Keystone

Shipping Co., 855 F.2d 1 (1st Cir. 1988)........ 13

Oberg v. Honda Motor Company,

Ses Ge ee ws Sa he ene ew we 5,7,10,23

vil

Haeslin, 111 S. Ct. 1032 (1991)... 2... we 24,25

Parker v. Brown, 317 U.S. 341 (1943) ......... 28

Perry v. Thomas, 482 U.S. 483, 491 (1987) ..... 9,14

Railway Express Agency, Inc. v.

New York, 336 U.S. 106, 112,

Soe eee Oe re 26

u- in v. M i

742 F.2d 45, 49 n.5. (2d Cir. 1984) ........... 15

Societe de Surveillance v. Ra ,

643 F.2d 863, 867 (1st Cir. 1981) .......... 12,13

S65 GS. 4, Te ois 5 65 vhs 9,13,14,19,20

Thorneburg Hosiery Co. v. G. L. Wilson

Building Company, 381 S.E.2d 718

CT I es ahs, eras cy nae en 22

United States v. Darby, 312 U.S. 100 (1941) ..... 28

Van Gemert v. Boeing Co., 553 F.2d 812,

OES OO re is eo es ee Kee 15

viii

—=_———— wa

Volt Information Services, Inc. v._

Board of Trustees of Leland Stanford

Junior University, 489 U.S. |

WR ATT GE hk cd ks 9,13,14,18,20,21,28

STATUTES AND RULES:

I OU a ator Gale ely bik 6-0. wo ee fe 1

i OOM? Dag 6k ogo kg 6 uv ee, 00 8. €'s 1

RR ee eR a ed ee ee l

Se ey ME ee a SS tee iit eee Sees ]

Gee en Se ey es BO, PO ee es aN 6,9

oe SS eee ee re eee 2,4,5,6,23

2 RE Oe eae 2,10,23,26

Okla. Stat. tit. 23, 99 ...... 2,3,4,5,6,8,9,21,22,23,26

SS a ok eee cle ews os 3,22

ene I Mt ay a by) 6 a ole 6) os eae 2

ns a IS RR a en oe be ews 2,26

Fe EO re a eae eae 28

ix

U.S. Comat. mond. ATV, §f .. 2.5.5.2... 2,7,23,24

9 U.S.C. §1, et. seq.

(Federal Arbitration Act) ........, 1,5,6,7,9,10,11,12,

13,14,15,16,17,18,

19,20,21,23,26,28

P Ra a oS ho a eee 2,6

PF Dae a aoe oe le Pie ee ee 2,10

PUBLICATIONS

Stewart, Punitive Damages Arbitration:

Fish or Cut Bait, N.Y.L.J.,

Pees ke es Oe a sk oo beh a we De 15

a ee ee ee ee ee

EE

No such opinions and orders were or have been published.

The only opinion that was to have been published was the 2-

1 opinion of the Oklahoma Court of Appeals which was

ordered withdrawn som publication by the Supreme Court

of the State of Oklahoma on March 25, 1996:

NCISE F THE B FOR

JURISDICTION IN THIS COURT _

(i) The Order sought to be reviewed is an Order by the

Supreme Court of the State of Oklahoma denying Ameritas

Investment Corp.’s Petition for Certiorari, which Order is

dated March 25, 1996.

(ii) No Orders respecting rehearing or extension of time

have been entered.

(ili) No cross-petition for a writ of certiorari is being filed.

(iv) Rules 10(b) and 10(c) of the Rules of the Supreme

Court of the United States confer on this Court’s jurisdiction

to review on a writ of certiorari the Order in question.

(v) No notifications pursuant to Sup. Ct. R. 29.4(b) or (c)

are required, as the constitutionality of an Act of Congress

or a Statute of the state of Oklahoma has not been drawn into

question.

| i

CONSTITUTIONAL PROVISIONS, TREATIES,

STA RDINAN AND

REGULATIONS INVOLVED IN THE CASE

Okla. Stat. tit. 15, §810

Okla. Stat. tit. 15, §812

Okla. Stat. tit. 23, §9

Okla. Const. art. 2, §7

Okla. Const. art. 27, §8

U.S. Const. amend. XIV, §1

9 U.S.C. §2

9 U.S.C. §10

eee

A. SUMMARY OF FACTS

On March 22, 1991, Mr. Steven M. Slinkard

("Mr. Slinkard") filed a lawsuit in the District Court of

Oklahoma County, State of Oklahoma. This lawsuit alleged

that certain securities were sold to Mr. Slinkard by

Mr. Steven McQueen ("Mr. McQueen"), allegedly an agent

of Ameritas Investment Corp. ("AIC"), and also alleged

various Oklahoma state statutory and state common law

violations by Mr. McQueen and AIC. Because Mr. Slinkard

had entered into an Option Agreement with AIC, AIC asked

the District Court of Oklahoma County to stay that lawsuit

and to compel arbitration. On February 27, 1992, the

Motion was granted and the vase proceeded to arbitration.

On September 20, 1993, Mr. Slinkard filed his First

Amended Claim in the arbitration proceeding alleging

violations of Sections 301 and 408 (a)(1) of the Oklahoma

Securities Act (Count I); Section 408 (a)(2) of the Oklahoma

Securities Act (Count II); Breach of Fiduciary Duty (Count

III); Common Law Fraud (Count IV); and Gross Negligence

(Count V). The arbitration was held from September 20,

1993, to September 23, 1993.

On December 9, 1993, the panel made an Award to

Mr. Slinkard of $238,571.59 which consisted of the

following: a) actual damages ($40,500.00); b) punitive

damages ($100,000.00) pursuant to Okla. Stat. tit. 23, §9;

c) attorney’s fees ($71,452.13) pursuant to Okla. Stat. tit.

71, §408; d) costs ($4,142.76); and e) pre-judgment interest

i

($22,476.70) plus interest on the amount of actual damages

awarded ($40,500.00) at 10 percent from September 23,

1993, until the actual damages were paid in full.

Although citing to Okla. Stat. tit. 23, §9, the

arbitration panel failed to comply with that statute which

mandates that, in order to support any award of punitive

damages in excess of actual damages (here $40,500.00),

there must be a finding by a court, on the record:

that there is clear and convincing evidence

that the defendant is guilty of conduct

evincing a wanton or reckless disregard for

the rights of another, oppression, fraud or

malice...

Likewise, the arbitration panel, in awarding attorneys fees of

$71,452.13 (even though the actual damages were only

$40,500.00), simply ignored Okla. Stat. tit. 15, §810 which

prohibits the awarding of attorneys fees as part of an

arbitration award.

Nonetheless, on March 29, 1994, Judge John M.

Amick of the District Court of Oklahoma County, Oklahoma

affirmed the arbitration panel’s award and entered a

Judgment in favor of Mr. Slinkard.

The matter was timely appealed to the Oklahoma

Supreme Court on April 8, 1994. On April 11, 1995, the

Oklahoma Supreme Court assigned the appeal to the

Oklahoma Court of Appeals. By a 2-1 published decision on

October 31, 1995, the Oklahoma Court of Appeals

essentially affirmed the District Court Opinion.

SE ne Bie 6 inka entire *_“Seekabh ok eres

Se wt ninth SM

DAE ld Peet Ge tt alte ae:

On November 17, 1995, Ameritas Investment Corp.

filed a Petition for Certiorari with the Oklahoma Supreme

Court.

On March 25, 1996, the Writ was denied; however,

the Oklahoma Supreme court also removed the Oklahoma

Court of Appeals decision from publication.

B. HISTORY OF WHEN FEDERAL QUESTIONS

SOUGHT TO BE REVIEWED WERE RAISED

A summary of the two questions sought to be reviewed are:

1. The scope of the pre-emptive effect of the Federal

Arbitration Act.

2. The effect of the case of Oberg v. Honda Motor

Company, 114 S. Ct. 2331 (1994), on an arbitration

proceeding.

As to the first question, the original award by the

arbitrators dated December 9, 1993, contained no references

to the Federal Arbitration Act ("FAA"). The panel awarded

damages solely based on Oklahoma state law but failed to

make the "wanton or reckless disregard for tic rights of

another, oppression, fraud or malice" finding required by

Okla. Stat. tit. 23, §9 and awarded attorneys fees although

such an award is prohibited by Okla. Stat. tit. 15, §810.

In any event, the first time that the issue of FAA pre-

emption was raised was in Mr. Slinkard’s Motion to Affirm

the Arbitration Award filed on February 15, 1994. AIC, at

its first possible opportunity, raised the issue on the first

page of its Reply to Mr. Slinkard’s Motion to Affirm filed

i

with the District Court of Oklahoma County on March 3,

1994: "The present action is not pre-empted by the Federal

Arbitration Act ("FAA"), but is governed by Oklahoma

law..." On March 29, 1994, the District Court of Oklahoma

County, Oklahoma granted Mr. Slinkard’s Motion to Affirm

finding in its Order specifically that pursuant "to the Federal

Arbitration Act, the arbitrators did not exceed their

authority." This was the first time the trial court had made

any reference to the Federal Arbitration Act.

The matter was timely appealed to the Oklahoma

Supreme Court on April 8, 1994. The assignments of error

by AIC were as follows:

1. The arbitration proceeding was governed by

the Oklahoma Uniform Arbitration Act, Okla.

Stat. tit. 15, §801, et. seq., not the Federal

Arbitration Act ("FAA"), 9 U.S.C. §1, et.

seq.

y 3 Punitive damages were awarded by the

arbitrators in excess of their powers.

3 Attorneys’ fees and prejudgment interest were

awarded by the arbitrators in excess of their

powers.

On October 31, 1995, the Order of the District Court

was affirmed in part and reversed in part (on the issue of

appellate attorneys fees) by the Court of Appeals of the State

of Oklahoma. That Opinion (although later withdrawn from

publication by the Oklahoma Supreme Court), found, as a

matter of law, that Okla. Stat. tit. 15, §810 (pertaining to

attorneys fees in arbitration) and Okla. Stat. tit. 23, §9

(pertaining to procedure for awarding punitive damages in

santas hep i in —

the state of Oklahoma) were pre-empted by the Federal

Arbitration Act. In its Petition for Certiorari to the

Oklahoma Supreme Court AIC again raised the FAA pre-

emption issue:

The Court of Appeals failed to follow

applicable precedent, including decisions of

the United States Supreme Court, and erred in

holding that the FAA pre-empts all state laws

on arbitration in all cases involving interstate

commerce.

As to the due process issue explained in the Oberg

case, that United States Supreme Court case was not decided

by this Court until June 24, 1994, which was after this case

had been appealed from the District Court of Oklahoma

County, Oklahoma to the Oklahoma Supreme Court. That

case, therefore, was not cited by Ameritas Investment Corp.

until its Reply Brief to the Oklahoma Supreme Court which

was filed on December 16, 1994. The due process argument

is contained in that Reply Brief as follows:

Moreover, the United States Supreme court in

the recent case of Honda Motor Co., Ltd.,

__ U.S. __, 114 S. Ct. 2331 (1994), has

held that any statutory system which does not

adequately safeguard against arbitrary awards

of punitive damages is violative of the

Fourteenth Amendment’s Due Process Clause.

AIC believes it is clear that such "adequate

safeguards" are not present in this case.

However, from the time of AIC’s filing on January 7, 1994,

of its Motion to Vacate Arbitration Award, AIC has

continuously made the argument that, even if the arbitrators

were empowered to award punitive damages, it would be

improper for them to do so without complying with Okla.

Stat. tit. 23, §9. In its Petition for Certiorari, AIC set forth

as Question Presented Number (2):

The Court of Appeals failed to address AIC’s

constitutional argument. AIC believes that by

failing to permit any meaningful review of the

arbitrator’s decision on punitive damages or

attorneys fees, AIC was denied due process,

which Constitutional right cannot be waived.

In any event, the issue was squarely before the

Oklahoma Supreme Court and the Court of Appeals of the

State of Oklahoma prior to the Court of Appeals decision

dated October 31, 1995, and certainly prior to the Oklahoma

Supreme Court’s denial of certiorari on March 25, 1996.

‘aia Pa 20

ie

A. SUMMARY OF ARGUMENT

The present action is not pre-empted by the FAA, but

is governed by Oklahoma law, specifically by the Oklahoma

Uniform Arbitration Act, Okla. Stat. tit. 15, §801, et. seq.

and the Oklahoma statute on punitive damages Okla. Stat.

tit. 23, §9.

The Federal Arbitration Act was enacted in 1925 to

ensure that courts enforced agreements to arbitrate. Allied-

Bruce Terminix Co., 115 S. Ct. 834, 838 (1995). This

Court has held that the "FAA contains no express pre-

emptive provision, nor does it reflect a congressional intent

to occupy the entire field of arbitration.” Volt Information

ice __v. Board of Trustees of Leland Standford

Junior University, 489 U.S. 468, 477 (1989). Indeed,

Congress expressly limited the pre-emptive reach of the FAA

by allowing states to invalidate arbitration provisions "on

such grounds as exist at law or equity for the revocation of

any contract." 9 U.S.C. §2.

This Court has held that only state laws which

"require a judicial forum for the resolution of claims which

the contracting parties agreed to resolve by arbitration" are

pre-empted. Southland Corp. v. Keating, 465 U.S. 1, 10

(state law that made agreements to arbitrate certain franchise

claims unenforceable held pre-empted because it "directly

conflicts" with section 2 of the Act); Perry v. Thomas, 482

U.S. 483, 491 (1987) (similar state law barring enforcement

of agreement to arbitrate wage-collection claims held pre-

empted because it was in “unmistakable conflict" with

federal policy).

Therefore, since Mr. Slinkard chose to litigate solely

state law issues in a state forum and is complaining only of

State statutory and state common law causes of action, and

because the arbitrators themselves supported their award by

reference to Oklahoma state statutes, state law applies to the

issue of the remedies available to Mr. Slinkard. If

Oklahoma state statutory law had been applied in this case,

the arbitration panel would not have been able to award

punitive damages, attorneys’ fees, or interest in the manner

that it did.

Secondly, as can be seen from an examination of

Okla. Stat. tit. 15, §812 (listing the sole bases for vacating

an arbitration award) or 9 U.S.C. §10 (the FAA version),

the permitted grounds for vacating an arbitration award are

exceedingly narrow. As such, these statutes simply do not

provide the type of procedural due process required to justify

an award of punitive damages. Oberg v. Honda Motor

Company, 114 S. Ct. 2331 (1994).

B. ARGUMENT

1. Federal Arbitration Act Pre-emption

In this case the "contract" providing for arbitration,

an Option Agreement (in paragraph 13), while requiring

arbitration, does not give the arbitrators any express

authority except to award actual damages. In any event, it

10

is undisputed that the Option Agreement did not authorize

the arbitrators to award punitive damages, attorneys’ fees, or

interest nor did it contain a choice of laws provision. The

defendant, aware of Oklahoma state law a) requiring a

finding by a Court of "wanton or reckless disregard for the

rights of another, oppression, fraud or malice" before an

award of punitive damages in excess of actual damages

could; and b) prohibiting an award of attorneys fees or

interest by arbitrators, sought arbitration.

As this Court recently held:

Elementary notions of fairness enshrined in

our constitutional jurisprudence dictate that a

person receive fair notice, not only of the

conduct that will subject him to punishment

but also of the severity of the penalty that a

State may impose.

BMW of North America, Inc. v. Gore, 1996 WL 262429,

262437 (U.S.).

Here such "fair notice" was absent in that the

arbitrators failed to follow Oklahoma law.

A major underpinning of Mr. Slinkard’s argument has

been that all Oklahoma laws are pre-empted by the FAA

simply because this case involved interstate commerce. AIC

suggests that this is not a correct proposition of law.

Because state law cannot be used to "defeat arbitration,” pre-

emption occurs only when a state law affects arbitrability.

Arbitrability is not at issue here, however, because neither

of the parties have disputed the arbitrability of this matter

11

and because the Oklahoma state statutes, as does the FAA,

favor arbitrability. As the First Circuit held in 1988:

We note first that, even when federal law

applies to an arbitration agreement [footnote

omitted], the Federal Arbitration Act has

never been construed to pre-empt all state law

on arbitration. We do not read the recent

series of Supreme Court arbitration cases to

establish such a proposition by implication.

Those cases concerned only laws that would

override the parties’ choice to arbitrate rather

than litigate in court, in direct conflict with

the Act’s primary purpose of ensuring the

enforcement of privately negotiated arbitration

agreements. . . . At best, the Supreme

Court’s decisions support a conclusion that all

state laws seeking to limit the use of the

arbitral process are superseded by federal

law. None of the various pre-emption

standards suggests that Congress intended the

federal Act to supersede all state arbitration

law, and appellee Keystone does not argue to

the contrary. See Hyde Park Partners, L.P.

vy. Connolly, 839 F.2d 837, 849 (ist Cir.

1988) (detailing the "variants" of the pre-

emption doctrine, quoting Louisiana Public

Service Comm’n v. FCC, 476 U.S. 355, 368-

69, 106 S. Ct. 1890, 1898-99, 90 L. Ed. 2d

369 (1986)). See also Societe Generale de

Surveillance v. Raytheon, 643 F.2d 863, 867

12

(1st Cir. 1981) (Federal Arbitration Act pre-

empts "only that state law inconsistent with its

express provisions").

New England Energy, Inc. v. Keystone Shippin g Co., 855

F.2d 1 (1st Cir. 1988).

The "standard of review" in a case where one of the

ultimate issues is pre-emption, i.e., whether or not federal

law or state law applies, has been enunciated by this Court

in Volt Information Sciences, Inc. v. Board of Trustees of

Leland Stanford Junior University, 489 U.S. 468 (1989). In

that case the parties had in their contract an agreement to

arbitrate all disputes between the parties "arising out of or

relating to this contract or the breach thereof." The contract

also contained a choice-of-law clause providing that "[t}he

Contract shall be governed by the law of the place where the

Project is located." In the course of that litigation, the issue

arose as to whether the FAA pre-empted a specific

California state statute:

In recognition of Congress’ principal purpose

of ensuring that private arbitration agreements

are enforced according to their terms, we

have held that the FAA pre-empts state laws

which "require a judicial forum for the

resolution of claims which the contracting

parties agreed to resolve by arbitration."

Southland Corp. v. Keating, 465 U.S. 1, 10

(1984). See, e.g., id., at 10-16 (finding pre-

empted a state statute which rendered

agreements to arbitrate certain franchise

13

the logic of Volt.

claims unenforceable); Perry v. Thomas, 482

U.S., at 490 (finding pre-empted a state

statute which rendered unenforceable private

agreements to arbitrate certain wage collection

claims). But it does not follow that the FAA

prevents the enforcement of agreements to

arbitrate under different rules than those set

forth in the Act itself (emphasis added).

Several Circuit Courts of Appeal have followed up on

For example, the Second Circuit in

Fahnestock & Co. v. Waltman, 935 F.2d 512 (2nd Cir.

1991), cert. denied, 112 S. Ct. 1241 (1992), held as follows:

While it is true that in enacting the FAA,

"Congress intended to foreclose state

legislative attempts to undercut the

enforceability of arbitration agreements,"

Southland Corp. v. Keating, 465 U.S. 1, 16,

104 S.Ct. 852, 861, 79 L.Ed.2d 1 (1984), it

also is true that "[t]he FAA contains no

express pre-emptive provision, nor does it

reflect a congressional intent to occupy the

entire field of arbitration," Volt Info. Sciences

v. Board of Trustees of th land ord

Jr. Univ., 489 U.S. 468, 477, 109 S.Ct.

1248, 1254, 103 L.Ed.2d 488 (1989).

Accordingly, state law may be applied in

arbitration matters, subject to pre-emption

only "to the extent that it actually conflicts

with federal law." Id.; see also Hines v.

Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399,

eee eS

OR Ee a aoe

404, 85 L. Ed. 581 (1941) (pre-emption is

found in cases where state law "stands as an

obstacle to the accomplishment and execution

of the full purposes and objectives of

Congress."). We find no conflict between the

provisions of the FAA and the Garrity rule.

Ordinarily, "[iJn a diversity action, or in any

other lawsuit where state law provides the

basis of decision, the propriety of an award of

punitive damages for the conduct in question

[is a] question{] of state law."

Browning-Ferris Indus. v. Kelco Disposal,

Inc., 492 U.S. 257, 278, 109 S. Ct. 2909,

2922, 106 L. Ed. 2d 219 (1989). The

measure of damages in general is a matter

controlled by New York substantive law

where federal jurisdiction in New York is

predicated on the diversity of the parties. See

Shu-Tao Lin v. McDonnell Douglas Corp.,

742 F.2d 45, 49 n.5. (2d Cir. 1984); Van

Gemert v. Boeing Co., 553 F.2d 812, 813

(2d Cir. 1977). It follows that in this action

the Garrity rule prohibiting the award of

punitive damages by arbitration must be

applied. That the rule is grounded in state

policy concerns renders it no less a rule of

substantive law. See Stewart, Punitive

Damages Arbitration: Fish or Cut Bait,

N.Y.L.J., Feb. 21, 1991, at 5, col. 1.

iS

‘

Certainly if state law applies in a diversity federal court

action, all the more does it follow that it would control in a

purely state court action. Therefore, it seems clear that

Oklahoma state law controls here.

The recent case of Dean Witter Reynolds, Inc. v.

Trimble, 631 N.Y.S.2d 215 (1995), although, of course, not

binding on this Court, is virtually identical with this case and

very logically holds that, even in a case involving interstate

commerce, state law of the state where the arbitration takes

place applies and, therefore, that the FAA simply does not

pre-empt all state law. In Trimble, most of the facts are the

same as in the instant case. Furthermore, the New York

Court in Trimble noted this Court’s opinion in Mastrobuono

v. Shearson Lehman Hutton, Inc., 115 S. Ct. 112 (1995),

but ruled that it had no effect on its outcome since the

Trimble case simply did not involve contract interpretation

concerning a choice of law provision. It was also conceded

in Trimble that that case involved interstate commerce,

however, the Plaintiff had filed for arbitration in New York.

Here, there is an even more compelling case for state law as

controlling, as here Mr. Slinkard filed a lawsuit in state

court in Oklahoma and did not simply commence arbitration.

AIC believes that the logic in Trimble is persuasive. And,

in any event, AIC believes that this case and Trimble,

among others, highlight the fact that the issue of which law

to apply when a lawsuit or arbitration is commenced in a

particular state, even if the matter involves interstate

commerce, is unsettled.

Mr. Slinkard’s counsel has argued that two recent

decisions of this court control the outcome of this case. AIC

simply does not believe that to be the case.

16

In Allied-Bruce Terminix Co., 115 S. Ct. 834,838

(1995), the issue was narrow. Prior to that case, it was

clear that the issue of arbitrability was to be determined by

whether or not a transaction in interstate commerce was

contemplated at the time the parties entered into the contract.

If so, the Federal Arbitration Act ("FAA") would pre-empt

State law to the extent that state law absolutely prevented

arbitration. All that the Allied-Bruce Terminix case made

clear is that if a transaction or a series of actions between

parties in fact turned out to involve interstate commerce

(even if not contemplated at the time the contract was

entered into), the FAA would dictate that arbitration must

take place. The only issue was arbitrability. Allied-Bruce

Terminix had no further precendental value as to what rules

that arbitration could utilize. In the present case, there is no

issue as to arbitrability. In fact, it was AIC who moved to

arbitrate the matter. Therefore, AIC believes that the Allied-

Bruce Terminix case has no bearing on this appeal.

In Mastrobuono v. Shearson Lehman Hutton, Inc.,

115 S. Ct. 1212 (1995), a federal court case, the issue was

different; but the effect on this appeal is the same. That

case involved an arbitration agreement between the parties

which apparently had two conflicting clauses. One of those

clauses purported to identify the scope of the arbitrator’s

powers. The arbitration agreement also contained a conflicts

of law provision indicating that New York law would

control. The Mastrobuono case arose out of a federal court

in Illinois.

Here, of course, the facts are dramatically different.

There is no choice of law provision in the contract. More

importantly, the case began with a petition by the Plaintiff in

a state court in Oklahoma seeking relief based upon state law

17

Board of T

causes of action. Accordingly, any reliance upon

Mastrobuono in this appeal would be misplaced. AIC

believes that Mr. Justice Thomas’ dissent in Mastrobuono

accurately explained the "scope" of that decision:

Thankfully, the import of the majority’s

decision is limited and narrow. The case

amounts to nothing more than a federal court

applying Illinois and New York contract law

to an agreement between parties in Illinois.

Much like a federal court applying a state rule

of decision to a case when sitting in diversity,

the majority’s interpretation of the contract

represents only the understanding of a single

federal court regarding the requirements

imposed by state law. As such, the

majority’s opinion has applicability only to

this specific contract and to no other. But

because the majority reaches an erroneous

result on even this narrow question, I

respectfully dissent.

Here the ultimate issue is whether or not a state

arbitration proceeding brought pursuant to state law is, in

fact, governed by Oklahoma state law. Ameritas believes

that it is clear that it is. In fact, this Court in Mastrobuono

again cited the case of Volt Information Sciences. Inc. v.

18

rustees of Leland Stanford Junior Univ., 489 U.S.

468 (1989), which held that "it does not follow that the FAA

prevents the enforcement of agreements to arbitrate under

different rules than those set forth in the Act itself.". AIC

a ee. ee

believes that there is no support for the position that the

FAA entirely pre-empts all other state statutes especially in

a case commenced in state court and dealing solely with state

law claims.

This Court has grappled with the issue of the pre-

emptive effect of the FAA for almost 13 years. In the case

of Southland Corp. v. Keating, 465 U.S. 1 (1983), this

Court initially decided the issue of whether or not the

Federal Arbitration Act even applied at all to state court

cases. In that case, over a vigorous dissent by Justice

O’Connor in which Chief Justice Rehnquist joined, the Court

.found that, at least on the facts of that case, the FAA to

some extent did apply to some cases filed in a state court.

Justice O’Connor, however, in her dissent stated that the

Court’s decision in Southland Corp.:

. . -S impelled by an understandable desire to

encourage the use of arbitration, but it utterly

fails to recognize the clear Congressional

intent underlying the FAA. Congress

intended to require Federal, not State, courts

to respect arbitration agreements.

Therefore, in the case of Allied Bruce Terminix Co. v.

Dobson, _—SWU.S. __, 115 S.Ct. 834, 130 L. Ed. 2d 753

(1995), although Justice O’Connor concurred in the result,

she continued to state her opinion that "Congress never

intended the Federal Arbitration Act to apply in State

courts." Also, in the Allied Bruce Terminix case, Justice

Scalia dissented along with Justice Thomas; specifically

Stating that "Southland clearly misconstrues the Federal

19

‘

Arbitration Act." Justice Scalia went so far as to say that

while he would not in the future dissent from judgments that

rest on Southland, he "will, however, stand ready to join

four Justices in overruling it, since Southland will not

become more correct over time."

Since at least four Justices of this Court are on record

as questioning the validity of Southland, AIC believes this

Court should strongly consider overruling Southland. Even

if this Court does not go that far, AIC believes that this

Court should re-affirm the basic principle of Volt and clarify

the limited extent of pre-emption by the FAA in state court

cases, 1.€., only as to questions of arbitrability of the entire

matter. AIC further believes that the facts of this case are

compelling enough for this Court to find that there is simply

no support for a FAA pre-emption of all Oklahoma law in a

case such as this one where:

a) Plaintiff filed a case in state court alleging

only state law causes of action;

b) That case was ordered to arbitration by a state

court judge;

9) The arbitrators rendered their award citing

state law as a basis for their award;

d) The award was confirmed by a state court

judge.

In 1994, the Supreme Court of Montana in Casarotto

v. Lombardi, 268 Mont. 369, 886 P.2d 931 (1994), held

that a state law requiring notice of an arbitration agreement

on the first page of the contract was not pre-empted by the

20

FAA. This Court recently decided the appeal of that case on

May 20, 1996 (Doctors’ Associates, Inc. v. Casarotto, Case

No. 95-559).

The Casarotto case involved a situation where

arbitration would be denied if the notice of arbitration was

not on the first page of the contract and thus is dissimilar to

this case, a Volt-like case involving the rules under which an

arbitration will take place. This Court’s recent holding in

Casarotto, AIC believes, evidences that there is no blanket

FAA pre-emption of all state laws. In fact, this Court

distinguished Volt and Casarotto in that in Volt the state rule

determined only the procedural issues; it did not affect the

enforceability of the arbitration agreement itself. Of course,

here the enforceability of the arbitration agreement is not at

issue.

It appears clear, in any event, that this Court is still

trying to come to terms with the extent of the pre-emptive

effect of the FAA and considering the dissenting opinions of

Chief Justice Rehnquist and Justices O’Connor, Thomas, and

Scalia, it is this type of case which gives the Court a clear-

cut vehicle for clarifying such an important issue.

The reason the distinction between federal law and

State law is so important in this case is that AIC believes that

Okla. Stat. tit. 23, §9 simply does not give arbitrators the

power to award punitive damages. However, even if it did

SO, it is Clear that the arbitrators deprived AIC of its due

process rights by wholly disregarding the specific wording

of that statute which by its very terms "shall be strictly

construed" (emphasis added). The award of punitive

damages in this case ($100,000.00) obviously exceeded the

amount of actual damages ($40,500.00) without any

"finding" by the "Court" that:

There is clear and convincing evidence that

[AIC] is guilty of conduct evincing a wanton

or reckless disregard for the right of another,

oppression, fraud or malice, actual or

presumed... (emphasis added).

Okla. Stat. tit. 23, §9.

The arbitrators’ award of pre- and post-judgment

interest and attorneys fees were apparently both predicated

upon Okla. Stat. tit. 71, §408, which provides as follows in

subsection (a)(2)(4):

(I]n the case of an offer or sale of a security

by such means [described in §408(a)(2)]...the

person buying the security may sue at law or

in equity to recover the consideration paid for

the security together with interest at ten

percent (10%) per year from the date of

payment, costs, and reasonable attorneys

fees ... (emphasis added)

As such, it is clear that interest and attorneys fees can

be awarded only in a suit at law or in equity. No reference

is made to arbitration proceedings. Thus, the award of

interest and attorneys fees by the arbitrators in this matter

clearly exceeded their statutory power. Thorneburg Hosiery

Co. v. G.L. Wilson Building Company, 381 S.E.2d 718

(N.C. App. 1989) (since attorneys fees were expended in

22

——————————————

arbitration not litigation, actual attorneys fees in the

arbitration were not recoverable).

This is especially true in Oklahoma as Oklahoma’s

controlling arbitration statute, Okla. Stat. tit. 15, §810 (part

of the Uniform Arbitration Act), specifically excludes

attorneys’ fees from being included in an arbitration award:

Unless otherwise provided in the agreement to

arbitrate, the expenses and fees of the

arbitrator, together with other expenses, not

i l i in ct

of the arbitration, shall be paid as provided in

the award. (emphasis added)

Therefore, it is clear that, by applying Oklahoma law, the

award of punitive damages, interest, and attorneys’ fees in

this case was improper.

2. Due Process

AIC also believes there are significant constitutional

issues implicated by this case as arbitrators in Oklahoma

appear to have the unfettered right to award any amount of

punitive damages (without having to comply with Okla. Stat.

tit. 23, §9) and any amount of attorneys fees (See, Okla.

Stat. tit. 15, §812 (or, even if the FAA applies, 9 U.S.C.

§1) for the sole, limited grounds to challenge an arbitrator’s

decision) without any avenue for meaningful review.

This Court in Oberg v. Honda Motor Company, 114

S. Ct. 2331 (1994), has held that any statutory system which

does not adequately safeguard against arbitrary awards of

punitive damages is violative of the Fourteenth Amendment’s

23

Due Process Clause. In that case, the State of Oregon had,

by statute, only provided limited judicial review of the size

of punitive damages awards. This Court held as follows:

Punitive damages pose an acute danger of

arbitrary deprivation of property. Jury

instructions typically leave the jury with wide

discretion in choosing amounts, and the

presentation of evidence of a defendant’s net

worth creates the potential that juries wil! use

their verdicts to express biases against big

businesses, particularly those without strong

local presences. Judicial review of the

amount awarded was one of the few

procedural safeguards which the common law

provided against that danger. Oregon has

removed that safeguard without providing any

substitute procedure and without any

indication that the danger of arbitrary awards

has in any way subsided over time. For these

reasons, we hold that Oregon’s denial of

judicial review of the size of punitive damage

awards violates the Due Process Clause of the

Fourteenth Amendment. [footnote omitted]

In the concurring opinion of Justice Breyer, Justice

O’Connor and Justice Souter in BMW _of North America,

Inc. v. Gore, 1996 WL 2622429 (U.S.), this logic was

repeated:

The reason flows from the Court’s emphasis

in Haslip upon the Constitutional importance

24

of legal standards that provide "reasonable

constraints" within which "discretion is

exercised," that assure "meaningful and

adequate review by the trial court wherever a

jury has fixed the punitive damages" and

permit "appellate review [that] makes certain

that the punitive damages are reasonable in

their amount and rationale in light of their

purposes to punish what has occurred and to

deter its repetition." [Haslip] at 20-21. See

also [Haslip] at 18 ("[UJnlimited jury

discretion--or unlimited judicial discretion for

that matter--in the fixing of punitive damages

may invite extreme results that jar one’s

constitutional sensibilities").

This constitutional concern, itself

harkening back to the Magna Carta arises out

of the basic unfairness of depriving citizens of

life, liberty, or property, through the

application, not of law and legal processes,

but of arbitrary coercion. Daniels _v.

Williams, 474 U.S. 327, 331 (1986); Dent v.

West Virginia, 129 U.S. 114, 123, 9S. Ct.

231, 32 L. Ed. 623 (1889). Requiring the

application of law, rather than a

decisionmaker’s caprice, does more than

simply provide citizens notice of what actions

may subject them to punishment; it also

helps to assure the uniform general treatment

of similarly situated persons that is the

25

essence of law itself. See Railway Express

Agency, Inc. v. New York, 336 U.S. 106,

112, 69 S.Ct. 463, 93 L. Ed. 533 (1949)

(Jackson, J., concurring).

Even a cursory review of either the Oklahoma or

federal statutes setting forth the standards of the review of

arbitration awards shows that, beyond any doubt, the

requisite level of judicial review was simply not available to

AIC to contest the propriety of the punitive damages

awarded by the arbitration panel. This is even more

egregious here because it is clear from the lower court

decisions that, even though Okla. Stat. tit. 23, §9 is the law

of Oklahoma in regard to awarding punitive damages, it was

not utilized here. Even had it been used, because of the

limited standard of review of Okla. Stat. tit. 15, §812 (or 9

U.S.C. §1) AIC would have been deprived of its due process

rights.

In Oklahoma, furthermore, because of Art. 23 §8 of

the Oklahoma Constitution, those due process rights cannot

be waived by agreeing to submit to arbitration:

Any provision of a contract, express or

implied, made by any person, by which any

of the benefits of this Constitution is sought to

be waived, shall be null and void.

Although not part of the opinion of the Eighth

Circuit, the concurring and dissenting comments of Judge

Beam in Lee v. Chica, 983 F.2d 883 889 (8th Cir. 1993),

nicely capture the fundamental inconsistency between the

26

nature of arbitration and the due process requirements for

awards of punitive damages:

Finally [Pacific Mutual Life Insurance Co. v.]

Haslip [111 S. Ct. 1032 (1991)] is about due

process and protections that must be

employed for punitive damages to be

permissible in any event. In the arbitration

setting we have almost none of the protections

that fundamental fairness and due process

require for the imposition of this form of

punishment. Discovery is abbreviated if

available at all. The rules of evidence are

employed, if at all, in a very relaxed manner.

The factfinders (here the panel) operate with

almost none of the controls and safeguards

assumed in Haslip. The proceeding at issue

in Haslip was conducted in the Alabama State

Supreme Court system with full appellate

review. Here, as noted by the opinion of the

court, the scope of the review of the

arbitrator’s award is narrowly limited if not

almost nonexistent.

AIC believes one additional reason exists why state

law should control. The Tenth Amendment to the United

States Constitution provides:

Powers reserved to states or people:

The powers not delegated to the United States

by the Constitution, nor prohibited by it to the

States, are reserved to States, respectively, or

to the people.

The purpose of the Tenth Amendment was to allay fears that

the national government might seek to exercise powers not

granted to it and that states might not be able to exercise

fully their reserved rights. United States v. Darby, 312 U.S.

100 (1941). Even in commerce among states, the power of

a state to promulgate regulations is not taken away until

Congress enters and covers a field. Commonwealth v.

Perkins, 342 Pa. 529, 21 A.2d 45, aff'd, 314 U.S. 586

(1941). Governments of states are sovereign within their

territory save only as they are subject to prohibitions of the

United States Constitution or if their actions in some way

conflict with the powers delegated to the national

government or with congressional legislation enacted in

exercise of those powers. Parker v. Brown, 317 U.S. 341

(1943).

Admittedly, the Federal Arbitration Act is an exercise

of the federal government’s Commerce Clause powers; and,

if it so chose, Congress could actually have pre-empted any

state law affecting arbitration of disputes arising from

interstate commerce. This Court in Volt, however, has

explicitly held that Congress did not choose to do so.

28

CONCLUSION

AIC believes this case is one of critical importance.

As evidenced by the increased popularity of non-trial

methods of dispute resolution such as arbitration, parties

with differences are choosing less-expensive, less time-

consuming alternatives which significantly help to unburden

the courts. By selecting arbitration, however, a litigant

Should not thereby be deprived of all due process or

protection which the state law affords in litigation. To take

such an approach is to discourage parties from seeking

alternative means of resolving disputes. If arbitrators have

unfettered, essentially unreviewable, powers to award all

damages as a matter of right, the use of arbitration will be

greatly curtailed, if it is used at all.

WHEREFORE, for these reasons, AIC respectfully

requests that this Court grant its Petition for Writ of

Certiorari.

Respectfully Submitted,

Norman M. Krivosha

Counsel of Record for Petitioner

David M. Williams

5900 "O" Street/PO Box 81889

Lincoln, NE 68501

(402) 467-7176

29

APPENDIX

“ —

© . ”

Fup ny

8 aR _— * Vote

N.A.S.D. AWARD

NATIONAL ASSOCIATION OF SECURITIES DEALERS

In the Matter of the Arbitration Between

Name of Claimant

Steven M. Slinkard

92-03295

Name of Respondents

Donaldson Lufkin & Jenrette Securities

Ameritas Investment Corporation

Steven Dale McQueen

PRESENTATION

For Claimant at the hearing: Jerry L. Colclazier, Esq. of

Colclazier, Rose & Associates, P.C., Seminole, Oklahoma.

For Respondents, Ameritas Investment Corporation at the

hearing: Rodney K. Vincent, Esq. of Ameritas Investment

Corporation, Lincoln, Nebraska. For Respondent Donaldson

Lufkin & Jenrette Securities at the hearing: Joseph

Donnelly, Esq. of Donaldson Lufkin & Jenrette Securities,

New York, New York. For Respondent, Steven Dale

McQueen at the hearing: Pro Se.

1A

CASE INFORMATION

Statement of Claim filed: September 28, 1992. First

Amended Claim filed: June 10, 1993. Claimant’s

Submission Agreement signed on: September 14, 1992.

Joint Statement of Answer filed by Respondents, Ameritas

Investment Corporation and Donaldson Lufkin & Jenrette

Securities Corporation on: December 8, 1992. Respondent,

Donaldson Lufkin & Jenrette Securities Corporation’s

Submission Agreement signed on: December 7, 1992.

HEARING INFORMATION

Hearing Dates/Sessions: September 20, 1993 for three

(3) sessions;

September 21, 1993 for two

(2) sessions;

September 22, 1993 for two

(2) sessions;

September 23, 1993 for three

(3) sessions.

Hearing Location: Oklahoma City, Oklahoma

CASE SUMMARY

Claimant Steven Slinkard ("Slinkard") alleged the

following counts against Respondents Ameritas Investment

Corporation ("Ameritas"), Donaldson Lufkin & Jerrette

Securities Corporation ("DLJ") and Steven McQueen

("McQueen") as agent for Ameritas and DLJ: Count 1: Sale

2A

of Unregistered Securities (Investment Contracts) In

Violation of Section 301 and 408(a)(1) of the Oklahoma

Securities Act; Count II: Sale of Securities (investment

Contracts) through Misrepresentations and Omissions in

violation of Section 408(a)(2) of the Oklahoma Securities

Act; Count III: Sale of Securities by An Unregistered Agent

in violation of Section 201(a) and Section 408(a)(1) of the

Oklahoma Securities Act; Count IV: Commission of Fraud

by an Investment Adviser in Violation of Section 408(c)(2)

of the Oklahoma Securities Act; Count V: Violation of

Broker-Dealer Rules; Count VI: Breach of Fiduciary Duty;

Count VII: Conversion; Count VIII: Common Law Fraud;

and Count IX: Negligence.

Slinkard, in his Amended Claim, alleged the

following counts against Respondents Ameritas, DLJ, and

McQueen: Count I: Sale of unregistered Securities

(Investment Contracts) in Violation of Section 301 and

408(a)(1) of the Oklahoma Securities Act; Count II: Sale of

Securities through Misrepresentations and Omissions in

Violation of Section 408(a)(2) of the Oklahoma Securities

Act; Count III: Breach of Fiduciary Duty; Count IV:

Common Law Fraud; Count V: Gross Negligence.

Respondents, Ameritas and DLJ, generally denied the

counts as set forth in the Statement of Claim. Ameritas and

DLJ specifically denied that Slinkard was their customer in

connection with any of the transactions set forth in the claim

and denied that McQueen acted as an agent or had any

contractual relationship with Ameritas and/or DLJ.

| | ;

‘ i

RELI U D

Claimant requested actual damages as set forth at 71

Okl. Stat. Section 408(a)(2)(A), which is the return of all

money invested with McQueen, equal to the sum of

$42,700.00, together with interest at ten percent (10%) per

year from the date of payment, together with costs and a

reasonable attorneys fee plus exemplary damages in excess

of $100,000.00 and such other and further relief that the

arbitrator deems fair and equitable.

Respondents Ameritas and DLJ requested that the

claim be dismissed and that all claims be denied and that

they be awarded costs and attorney’s fees.

OTHER ISSUES CONSIDERED & DECIDED

Respondents, Ameritas Investment Corporation and

Steven Dale McQueen did not file with the NASD properly

executed submissions to arbitration but are required to

submit to arbitration pursuant to Section 8 of the NASD

Code of Arbitration Procedure and having answered the

claim, appeared and testified the hearing, are bound by the

determination of the panel on all issued submitted.

Respondent McQueen did not file an Answer to the

Statement of Claim. However, the panel determined that

McQueen was properly served with the Statement of Claim

and also had proper notice of the hearing.

4A

Prior to the hearing, respondent Donaldson Lufkin &

Jenrette Securities was dismissed by the Claimant from the

claim.

The parties have agreed that the Award in this matter

may be executed in counterpart copies or that a handwritten,

signed Award may be entered. In either case, the parties

have agreed to receive conformed copies of the Award while

the originals remain on file with the NASD.

AWARD

After considering the pleadings, the testimony and the

evidence presented at the hearing and post hearing

submissions, the undersigned arbitrators have decided in full

and final resolution of the issues submitted for determination

as follows:

The panel found Respondents, Ameritas Investment

Corporation and Steven Dale McQueen, jointly and severally

liable on the following counts as set forth in the amended

claim: sale of non-registered securities, sale of securities

through misrepresentations and omissions, breach of

fiduciary duty, fraud, and gross negligence.

1. Respondents, Ameritas Investment Corporation

and Steven Dale McQueen are jointly and severally liable for

and shall pay to the Claimant, Steven Slinkard, actual

damages in the amount of Forty Thousand Five Hundred

Dollars and No Cents ($40,500.00);

5A

2. Respondents, Ameritas Investment Corporation

and Steven Dale McQueen are jointly and severally liable for

and shall pay to the Claimant, Steven Slinkard, interest in

the amount of Twenty Two Thousand Four Hundred Seventy

Six Dollars and Seventy Cents ($22,476.70). (This interest

was determined from the date of damage up to the date of

judgment.) Respondents, Ameritas Investment Corporation

and Steven Dale McQueen also shall continue to be jointly

and severally liable for paying interest on the actual damages

of $40,500.00 at 10% per annum from September 23, 1993

until the actual damages are paid in full.

3. Respondents, Ameritas Investment Corporation

and Steven Dale McQueen are jointly and severally liable for

and shall pay to the Claimant, Steven Slinkard, punitive

damages in the amount of One Hundred Thousand Dollars

and No Cents ($100,000.00). The panel awarded punitive

damages under the authority of Okl. Stat. Tit. 23 Section 9;

4. Respondents, Ameritas Investment Corporation

and Steven Dale McQueen are jointly and severally liable for

and shall pay to the Claimant, Steven Slinkard, attorneys’

fees in the amount of Seventy One Thousand Four Hundred

Fifty Two Dollars and Thirteen Cents ($71,452.13). The

panel awarded attorneys’ fees under the authority of Okl.

Stat. Tit. 71 Section 408;

5. Respondents, Ameritas Investment Corporation

and Steven Dale McQueen are jointly and severally liable for

and shall pay to the Claimant, Steven Slinkard, costs in the

amount of Four Thousand One Hundred Forty Two Dollars

and Seventy Six Cents ($4,142.76).

6A

Forum Fees

Pursuant to Section 43c of the Code of Arbitration

Procedure, the following Forum Fees are assessed:

10 sessions X $750 = $7500 minus hearing session

deposit of $750 = net $6750 due.

The additional forum fees are assessed against

Respondents Ameritas Investment Corporation and Steven

Dale McQueen, jointly and severally, in the amount of

$6750 and are payable to the National Association of

Securities Dealers, Inc.

By the Arbitration Panel:

Dated:

December 7, 1993 Kelley Cornelius

Kelley L. Cornelius, Esq.,

Presiding Public Arbitrator

December 8, 1993 John Ulrey

John E. Ulrey, Sr.

Public Arbitrator

December 8, 1993 Anne Long-Larsen

Anne M. Long-Larsen

Industry Arbitrator

Date Award Served By The NASD: December 9, 1993

7A

i

IN THE DISTRICT COURT OF OKLAHOMA COUNTY

STATE OF OKLAHOMA

STEVEN M. SLINKARD, )

an individual; WYNN )

CONSTRUCTION )

COMPANY INC., )

WYNN CONSTRUCTION )

CO. PROFIT SHARING _)

PLAN; SCOTT BELDON _)

AND JUDY G. PIPER, )

now BELDON; SUMMIT _)

ADDITION )

HOMEOWNERS )

ASSOCIATION, INC., )

d/b/a SUMMIT )

CONDOMINIUMS; )

DAVID M. and PHYLLIS )

E. BATTLE; WANDA )

PIPER; CORNELIA )

DeBELL; DANIEL R. )

KETCHUM,III; GLEN E. )

BILLEN AND )

DOROTHY J. )

BILLEN; CRISTI A. )

BRYANT; PREMIER )

CAPITAL CORPORATION; )

MEDICAL REGULATORY )

INCORPORATED, )

)

Plaintiffs, )

8A

tn! ESAT PO LPEMION, F BL

ened cabled bceta nh ek

Case No. CJ-91-2218-61

)

)

)

)

)

individual; )

PREMIER FINANCIAL )

ADVISORS, INC., )

an Oklahoma )

Corporation; )

AMERITAS INVESTMENT )

CORP., a Nebraska )

Corporation )

a\k\a BLN )

INVESTMENT CORP., )

and DONALDSON, )

LUFKIN & JENRETTE )

SECURITIES )

CORPORATION, )

a Corporation, )

)

)

JUDGMENY

The cause is before the Court this 11th day of March,

1994, on Defendants’ Motion to Vacate Arbitration Award

and on Plaintiff's Motion to Affirm Arbitration Award

rendered in favor of the Plaintiff Steven M. Slinkard and

against the Defendants Ameritas Investment Corp. and

Steven Dale McQueen, on December 9, 1993. Plaintiff

appears by and through his counsel of record, Jerry L.

9A

Colclazier and Joseph C. Long. Defendant Ameritas

Investment Corp. appears by and through their counsel

James M. Chaney, Norman Krivosha, and David M.

Williams. The Court, having considered the briefs and

arguments of counsel, and being fully advised, finds that the

Federal Arbitration Act applies to this matter. Pursuant to

the Federal Arbitration Act, the arbitrators did not exceed

their authority and therefore Defenaants’ Motion to Vacate

is denied and Plaintiff Slinkard’s Motion to Affirm is

granted.

IT IS THEREFORE ORDERED, ADJUDGED, AND

DECREED that the Plaintiff, Steven M. Slinkard, have and

recover judgment of and from the Defendants Ameritas

Investment Corp. and Steven Dale McQueen, jointly and

severally, for the sum of $40,500.00 actual damages,

$22,476.70 prejudgment interest, $100,000.00 punitive

damages, $71,452.13 attorney’s fees, and $4,142.76 costs,

for the total sum of $238,571.59, for all of which let

execution issue.

Dated this 29th day of March, 1994.

s/John M. Amick

JUDGE OF THE DISTRICT COURT

10A

sinks sbilllar acai bitthlnch cit ae

:

2

APPROVED:

s/Jerry L. Colclazier _

Jerry L. Colclazier

COLCLAZIER, ROSE &

ASSOCIATES

404 North Main Street

Seminole, OK 74868

ATTORNEY FOR THE

PLAINTIFFS

s/James M. Chaney

James M. Chaney

John R. Preston

KIRK & CHANEY

101 Park Avenue, Suite

800

Oklahoma City, OK 73102

- and -

Norman Krivosha

David M. Williams

In-House Counsel

P.O. Box 81889

Lincoln, NE 68501-1889

I, TOM PETUSKEY,

Court Clerk for Oklahoma

County, Okla., hereby

certify that the foregoing

is a true, correct and

complete copy of the

instrument herewith set

out as appears of record in

the District Court Clerk’s

Office of Oklahoma

County, Okla., this 29 day

of March, 1994.

TOM PETUSKEY,

Court Clerk

s/Joe W Deputy

ATTORNEYS FOR AMERITAS INVESTMENT

CORP.

RELEASE FOR PUBLICATION BY ORDER OF

COURT OF APPEALS

THE COURT OF APPEALS OF THE STATE OF

OKLAHOMA

DIVISION I FILED

COURT OF APPEALS

STEVEN M. SLINKARD,

an individual, STATE OF OKLAHOMA

OCT 31 1995

JAMES W. PATTERSON

CLERK

)

)

)

Appellee, )

)

) Case Number 83,376

)

)

)

)

)

)

versus

AMERITAS INVESTMENT

CORP., a Nebraska

corporation, a/k/a BLN

INVESTMENT CORP.,

Appellants.

APPEAL FROM THE DISTRICT COURT

OF OKLAHOMA COUNTY, OKLAHOMA

HONORABLE JOHN M. AMICK, JUDGE

AFFIRMED IN PART AND REVERSED IN PART

James M.- Chaney,

John R. Preston,

Thomas J. Daniel, IV,

Kirk & Chaney,

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Oklahoma City, Oklahoma, and

Norman Krivosha,

David M. Williams,

In-House Counsel,

Lincoln, Nebraska, For Appellant,

Joseph C. Long,

Norman, Oklahoma, and

Jerry L. Colclazier,

Colclazier, Rose & Assoc.,

Seminole, Oklahoma, For Appellee.

RAND PINI

GARRETT, Chief Judge:

Appellant, Ameritas Investment Corp., a Nebraska

Corporation, a/k/a BLN Investment Corp. (Ameritas), brings

this appeal from the trial court’s order affirming a December

9, 1993, arbitration award. The trial court’s March 11,

1994, Judgment [filed March 29, 1994] in favor of Appellee,

Steven M. Slinkard (Slinkard) awarded him actual damages,

prejudgment interest, punitive damages, attorney fees and

costs from Ameritas and Steven Dale McQueen (McQueen)

jointly and severally. McQueen is not a party to this appeal.

The Judgment also provides:

Pursuant to the Federal Arbitration Act, the

arbitrators did not exceed their authority and

therefore Defendants’ Motion to Vacate is

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denied and Plaintiff Slinkard’s Motion to

Affirm is granted.

Ameritas contends the Federal Arbitration Act (FAA)

does not preempt state law in this case. It claims that

because arbitrability is not an issue, and Oklahoma’s

arbitration law is not inconsistent with the FAA, state law is

the appropriate law to apply. It contends the petition raised

only state law claims and was filed in an Oklahoma state

court. It also contends because of the Option Agreement

which the parties executed; because the case was filed in

State court; and because the petition raised only state law

claims, arbitration was governed by the Code of Arbitration

Procedure of the National Association of Securities Dealers,

Inc. (NASD) and the Oklahoma Uniform Arbitration Act

(the Act), 15 O.S. 1991 §801 et seq. It also contends the

Option Agreement does not give arbitrators any authority

except to award actual damages, and does not authorize an

award of punitive damages, interest or attorneys’ fees.

Paragraph 13 of the Option Agreement provides:

13. It is agreed that any controversy between

us arising out of your business or this

agreement, except for those disputes between

us arising under the federal securities laws

which are or are held to be non-arbitrable as

a matter of law, shall be submitted to

arbitration conducted under the provisions of

the Constitution and Rules of the Board of

Governors of the New York Stock Exchange,

Inc. or any other national securities exchange

on which a transaction giving rise to the claim

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took place or pursuant to the Code of

Arbitration Procedures of the National

Association of Securities Dealers, Inc., as the

undersigned may elect. Arbitration must be

commenced by service upon the other party of

a written demand for arbitration or a written

notice of intention to arbitrate, therein

electing the arbitration tribunal. In the event

the undersigned does not make such election

within five (5) days of such demand or notice,

then the undersigned authorizes you to do so

on behalf of the undersigned.

The United States Supreme Court held in Southland

Corp. V. Keating, 465 U.S. 1, 14-15, 104 S.Ct. 852, 860,

79 L.Ed.2d 1 (1984), that the FAA preempted state law in

cases "involving commerce". The Court stated:

If it is correct that Congress sought only to

create a procedural remedy in the federal

courts, there can be no explanation for the

express limitation in the Arbitration Act to

contracts "involving commerce." 9 U.S.C.

§2.... We would expect that if Congress, in

enacting the Arbitration Act, was creating

what is thought to be a procedural rule

applicable only in federal courts, it would not

so limit the Act to transactions involving

commerce. On the other hand, Congress

would need to call on the Commerce Clause

if it intended the Act to apply in state courts.

Yet at the same time, its reach would be

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limited to transactions involving interstate

commerce. We therefore view the "involving

commerce" requirement in §2, not as an

inexplicable limitation on the power of the

federal courts, but as a necessary qualification

on a Statute intended to apply in state and

federal courts. (Citation omitted).

9 U.S.C. §2 provides:

§2 Validity, irrevocability and

enforcement of agreements to arbitrate.

A written provision in any maritime

transaction or a contract evidencing a

transaction involving commerce to settle by

arbitration a controversy thereafter arising out

of such contract or transaction, or the refusal

to perform the whole or any part thereof, or

an agreement in writing to submit to

arbitration an existing controversy arising out

of such a contract, transaction, or refusal,

shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in

equity for the revocation of any contract.

(Emphasis added).

The Option Agreement executed in the instant case is

the contract, and the wired transmissions between Oklahoma

City and New York are sufficient to satisfy the "involving

commerce" requirement of section 2. See Mayaja v.

Bodkin, 803 F.2d 157 (Sth Cir. 1986), rev’d on other

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grounds sub nom. Shearson Lehman Brothers vy. Mayaja,

Inc., 482 U.S. 923 (1987); Grunial & Co., Inc. vy.

Steinberg, 854 F.Supp. 324 (D.N.J. 1994), affirmed 46 F.3d

1116.

Citing Allied-Bruce Terminix Companies, Inc. y.

Dobson, _U.S. __, 115 S.Ct. 834 (1995), Division 4 of

this Court examined the "involving commerce" language of

section 2, in Southern Oklahoma Health Care Corp. d/b/a

Memorial Hospital of Southern Oklahoma, v. JHBR-Jones-

Hester-Bates-Riek, Inc., 900 P.2d 1017 (Okl.App. 1995):

The Allied-Bruce Terminix court held

that in order to extend the FAA’s reach to the

limits of Congress’ Commerce Clause power,

the "contract evidencing a transaction" and

"involving commerce" language of section 2

should be read broadly. (Emphasis added.) It

determined that "involving commerce" as

used in section 2 is the "functional equivalent

of ‘affecting,’ " which normally denotes that

Congress intended to exercise commerce

power to the full, id. at__, 115 S. Ct. at

841 (citing Russell v. United States, 471 U.S.

858, 859 (1985)), or a full exercise of

constitutional power. _—_—sSU.S. at _, 115

S.Ct. at 841; Bernhardt v. Polygraphic Co. of

America, 350 U.S. 395 (1967).

Although the parties could have specified Oklahoma

law would apply which would have controlled,’ they did not

do so. Therefore, we agree with the trial court’s

determination the FAA is applicable to this case, preempting

state law.

Next, Ameritas contends the arbitrators were not

authorized to award punitive damages. Whether Oklahoma

law permits such an award is immaterial, because we have

determined Oklahoma law is preempted in the instant case.

Appellees contend a majority of courts agree the

federal substantive common law under the FAA allows

arbitrators to award punitive damages on two bases:? (1) the

Supreme Court’s preference for arbitration as a legitimate

form of dispute resolution, citing Shearson/American

Express, Inc. v. McMahon, 482 U.S. 220 (1987); (see also

Kelley v. Michaels, 59 F.3d 1050 (10th Cir. 1995)); and (2)

under the FAA, the parties, by agreement, may allow the

arbitrators to award such damages. Appellees contend both

bases of this conclusion are met in this case.

It was stated in Mastrobuono v. Shearson Lehman

Hutton, Inc., __ U.S. __ , 115 S.Ct. 1212, 131 L.Ed.2d

76 (1995), that if contracting parties agree to include claims

for punitive damages as an issue to be arbitrated, "the FAA

*See Merrill Lynch and Co. v. City of Waterbury, 640 A.2d

122, 34 conn.App. 11 (Conn.App. 1994) and Merrill Lynch, Pierce,

Fenner & Smith, Inc. v. Jana, 835 F.Supp. 406 (N.D. Ill. 1993).

?The Garrity rule, under Garrity v. Lyle Stuart, Inc., 40

N.Y.2d 354, 386 N.Y.S.2d 831, 353 N.E.2d 793 (1976), described as

representing a public policy decision that punitive damages should not be

awarded except by a court, is offered by Ameritas as authority against

punitive damages. Appellees contend this rule is not the preferred

authority for the reasons described above.

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ensures that their agreement will be enforced according to its

terms even if a rule of state law would otherwise exclude

such claims from arbitration." Id. at 1216. There was no

specific mention of punitive damages in Mastrobuono.

similar to the arbitration agreement in the instant case.

Contrary to the agreement in the instant case, however, the

Mastrobuono agreement contained a choice of law provision,

providing the contract would "governed by the laws of the

State of New York." Notwithstanding this inclusion, the

Supreme Court ruled the FAA would apply and punitive

damages could be awarded. The Court stated, at 1217:

The choice-of-law provision, when

viewed in isolation, may reasonably be read

as merely a substitute for the conflict-of-laws

analysis that otherwise would determine what

law to apply to disputes arising out of the

contractual relationship. Thus, if a similar

contract, without a choice-of-law provision,

had been signed in New York and was to be

performed in New York, presumably "the

laws of the State of New York" would apply,

even though the contract did not expressly so

state. In such event, there would be nothing

in the contract that could possibly constitute

evidence of an intent to exclude punitive

damages claims. Accordingly, punitive

damages would be allowed because, in the

absence of contractual intent to the contrary,

the FAA would pre-empt the Garrity rule.

(Emphasis added).

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At most, the choice-of-law clause introduces

an ambiguity into an arbitration agreement

that would otherwise allow punitive damages

awards. As we pointed out in Volt,? when a

court interprets such provisions in an

agreement covered by the FAA, "due regard

must be given to the federal policy favoring

arbitration, and ambiguities as to the scope of

the arbitration clause itself resolved in favor

of arbitration." 489 U.S., at 476, 109 S.Ct.,

at 1254. See also Moses H. Cone Memorial

Hospital v. Mercury Constr. Corp. , 460 U.S.

1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d

765 (1983).

We think the best way to harmonize the

choice-of-law provision with the arbitration

provision is to read "the laws of the State of

New York" to encompass substantive

principles that New York courts would apply,

but not to include special rules limiting the

authority of arbitrators. Thus, the choice-of-

law provision covers the rights and duties of

the parties, while the arbitration clause covers

arbitration; neither sentence intrudes upon the

other. In contrast, respondents’ reading set

up the two clauses in conflict with one

another: one foreclosing punitive damages,

Volt Information Sciences, Inc. V. Board of Trustees of

Leland Stanford Junior Univ., 489 U.S. 468, 109 S.Ct. 1248, 103

L.Ed.2d 488 (1989).

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the other allowing them. This interpretation

in untenable.

Even in the case of an arbitration agreement which

specifies New York law, which does not provide for punitive

damages, the Supreme Court held punitive damages could be

awarded when the FAA applies to the case. See also Kelley

v. Michaels, supra,* wherein the U.S. Court of Appeals for

the Tenth Circuit held directly in accordance with

Mastrobuono. In the instant case, in which no such

specification of state law is made, there is an even stronger

case to be made in favor of allowing arbitrators to award

punitive damages. Thus, we hold the arbitrators were within

their authority to make the award.

Next, Ameritas contends the district court had no

power to award "additional damages", i.e., punitive

damages, attorney fees and interest, after the arbitration was

concluded. However, the original (March 11, 1994)

judgment of the trial court only affirmed the awards made by

the arbitrators. The FAA permitted an award of attorney

fees. The trial court, on July 1 1994, entered an order

allowing Slinkard $9,631.25 additional attorney’s fees and

$1,618.72 in costs as "additional fees and costs pursuant to

the arbitration of this matter." The authority for the

additional fees and costs was said to be 71 O.S. Supp. 1992

§408(a)(2)(A).

Ameritas contends the Option Agreement required

that any controversy between the parties be submitted to the

*Mastrobuono and Kelley v. Michaels are also similar to the

instant case in that the arbitration agreements provide that the NASD

Rules shall apply.

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arbitrators. Slinkard cites §408, supra. We agree with

Ameritas and hold the trial court erred in entering its July 1,

1994 order as to additional attorney’s fees and costs.

The March 11, 1994 judgment of the trial—court,

affirming the arbitration award, should be and is affirmed.

The July 1, 1994 order of the trial court awarding additional

attorney’s fees and costs should be and is vacated and

reversed. Slinkard’s motions to dismiss this appeal and for

appeal related attorney fees are denied.

AFFIRMED IN PART AND REVERSED IN PART.

JONES, P.J., concurs; JOPLILN, J., dissents.

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IN THE SUPREME COURT OF THE STATE OF

OKLAHOMA

STEVEN M. SLINKARD,

an individual,

Appellee,

Vv. No. 83,3376

AMERITAS INVESTMENT

CORP., a Nebraska

corporation, a/k/a BLN

INVESTMENT CORP.,

Appellant.

ORDER

The petition for certiorari is denied. The Court of

Appeals’ opinion is withdrawn from publication.

DONE BY ORDER OF THE SUPREME COURT IN

CONFERENCE THIS 25TH DAY OF MARCH, 1996.

s/Robert C. Lavender

ACTING CHIEF JUSTICE

VOTE ON DENIAL OF CERTIORARI:

WILSON, C.J., KAUGER, V.C.J., LAVENDER,

SIMMS, HARGRAVE, OPALA and WATT, JJ., concur.

HODGES and SUMMERS, JJ., dissent.

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V N Ww F_ OP N M

PUBLICATION:

WILSON, C.J., HODGES, LAVENDER, SIMMS,

HARGRAVE, OPALA, SUMMERS and WATT, JJ.,

concur.

KAUGER, V.C.J., dissent.

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Okla. Stat. tit. 15, §810

Unless otherwise provided in the agreement to

arbitrate, the expenses and fees of the arbitrator,

together with other expenses, not including counsel

fees incurred in the conduct of the arbitration, shall

be paid as provided in the award.

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Okla. Stat. tit. 15, §812

A. Upon application of a party, the court shall

vacate an award if:

1. The award was procured by corruption,

fraud or other illegal means;

2. There was evident partiality by an

arbitrator appointed as a neutral or corruption

in any of the arbitrators or misconduct

prejudicing the rights of any party;

3. The arbitrators exceeded their powers;

4. The arbitrators refused to postpone the

hearing upon sufficient cause being shown

therefor or refused to hear evidence material

to the controversy or otherwise so conducted

the hearing, contrary to the requirements of

this act, as to prejudice substantially the rights

of a party; or

5. There was no arbitration agreement and

the issue was not adversely determined in

proceedings under Section 3 of this act and

the party did not participate in the arbitration

hearing without raising the objection.

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B. The fact that the relief was such that it could not

or would not be granted by a court of law or equity

is not ground for vacating or refusing to confirm the

award.

C. An application under this section shall be made

within ninety (90) days after delivery of a copy of the

award to the applicant. If predicated upon

corruption, fraud or other illegal means, the

application shall be made within ninety (90) days

after such grounds are known or should have been

known.

D. When vacating the award on grounds other than

Stated in paragraph 5 of subsection A of this section,

the court may order a rehearing before new

arbitrators are chosen as provided in the agreement.

In the absence of such provision, new arbitrators

shall be chosen by the court in accordance with

Section 4 of this act. If the award is vacated on

grounds set forth in paragraphs 3 and 4 of subsection

A of this section, the court may order a rehearing

before the arbitrators who made the award or their

successors appointed in accordance with Section 4 of

this act. The time within which the agreement

requires the award to be made is applicable to the

rehearing and commences from the date of the order.

E. If the application to vacate is denied and no

motion to modify or correct the award is pending, the

court shall confirm the award.

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Okla Stat. tit. 23, §9

Jury may give exemplary damages, when

A. In any action for the breach of an obligation not

arising from contract, where the defendant has been

guilty of conduct evincing a wanton or reckless

disregard for the rights of another, oppression, fraud

or malice, actual or presumed, the jury, in addition

to the actual damages, may give damages for the sake

of example, and by way of punishing the defendant,

in an amount not exceeding the amount of actual

damages awarded. Provided, however, if at the

conclusion of the evidence and prior to the

submission of the case to the jury, the court shall

find, on the record and out of the presence of the

jury, that there is clear and convincing evidence that

the defendant is guilty of conduct evincing a wanton

or reckless disregard for the rights of another,

oppression, fraud or malice, actual or presumed, then

the jury may give damages for the sake of example,

and by way of punishing the defendant, and the

percentage limitation on such damages set forth in

this section shall not apply.

B. The provisions of this section shall be strictly

construed.

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Okla Const. art. 2, §7

No person shall be deprived of life, liberty, or

property, without due process of law.

Okla Const. art. 23, §8

Any provision of a contract, express or implied,

made by any person, by which any of the benefits of

this Constitution is sought to be waived, shall be null

and void.

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U.S. Const. amend. XTV, §1

All persons born or naturalized in the United States,

and subject to the jurisdiction thereof, are citizens of

the United States and of the State wherein they

reside. No State shall make or enforce any law

which shall abridge the privileges or immunities of

citizens of the United States; nor shall any State

deprive any person of life, liberty, or property,

without due process of law; nor deny to any person

within its jurisdiction the equal protection of the

laws.

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9 U.S.C. §2

A written provision in any maritime transaction or a

contract evidencing a transaction involving commerce

to settle by arbitration a controversy thereafter arising

out of such contract or transaction, or the refusal to

perform the whole or any part thereof, or an

agreement in writing to submit to arbitration an

existing controversy arising out of such a contract,

transaction, or refusal, shall be valid, irrevocable,

and enforceable, save upon such grounds as exist at

law or in equity for the revocation of any contract.

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9 U.S.C. §10

In either of the following cases the United States

court in and for the district wherein the award was

made may make an order vacating the award upon

the application of any party to the arbitration --

(a) Where the award was procured by corruption,

fraud, or undue means.

(b) Where there was evident partiality or corruption

in the arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct

in refusing to postpone the hearing, upon sufficient

cause shown, or in refusing to hear evidence

pertinent and material to the controversy; or of any

other misbehavior by which the rights of any party

have been prejudiced.

(d) Where the arbitrators exceeded their powers, or

so imperfectly executed them that a mutual, final,

and definite award upon the subject matter submitted

was not made.

(e) Where an award is vacated and the time within

which the agreement required the award to be made

has not expired the court may, in its discretion, direct

a rehearing by the arbitrators.

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