Opposition Brief — Piper Jaffray, Inc. v. Halligan

Supreme Court, U.S.

No. 98-1172 FlI ED

FEB 19 1999

ERK

IN THE — ——sS re

Supreme Court of the Anited States

OCTOBER TERM, 1998

>_>

IRENE HALLIGAN. as Executrix of the Es

THEODORE H. HALLIGAN

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITI

COURT OF APPEALS FOR THE SECOND CIRCl

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

KATHLEEN M. O’CONNEI

Counsel of Record

MURPHY & O’CONNELI

Attorneys for Respondent

14 Wall Street

New York, New York 10

(212) 619-0450

3)

QUESTION PRESENTED

Whether a securities industry employee who was

required to arbitrate his claim of wilful age discrimination,

is entitled to vacature of the arbitrators' award where

NASD arbitrators, in denying his claim, were shown to have

manifestly disregarded either the law or the evidence or

both.

il

TABLE OF CONTENTS

Page

QUESTION PRED SiG? os scissscnsennenemaaacmamaanaen cai

TABLE OF-CITED AU THOOIRI Eee sevsccsecsscersmsvstessesrecessssvesticees iti

STATEMENT OF ‘THES GARBie dcccesidccarctnementnonnssueeumanreniniineensees ]

MISSTATEMENTS IN PETITIONERS' BRIEF ........................... 4

REASONS FOR DENYING THE WRIT 0.oooo.......cceccccceeeceeeeeeeees 6

POINT 5 .....<<osssscsceessunsessuiaiaiiaanan anna 7

NO NEW STANDARD OF JUDICIAL REVIEW

WAS CREATED BY THE SECOND CIRCUIT

COURT OF APPEALS IN THE HALLIGAN

DECISION

581.3 et | Nm tr 12

THE SECOND CIRCUIT DID NOT INTRUDE ON

THE ARBITRATORS' ROLE AS FACT FINDER

PORT Td .......2+2::s0nssneepieensssieieleianileann nna 17

THE SECOND CIRCUIT'S DECISION DOES NOT

REPRESENT A SPLIT IN THE CIRCUITS NOR IS

IT OF NATIONAL SIGNIFICANCE

CONCLUSION ...:o+s.sucesvorssiuhec stint aanaaaeeaaaaion 19

APPENDIX A — Unpublished Opinion in Bierne v. Chisolm,

1998 U.S. App. Lexis 22385 (Second Circuit, 1998) ........... la

APPENDIX B — 29 U.S.C. See. G29 Uc lb

ill

TABLE OF CITED AUTHORITIES

Page

CASES

Baravati v. Josephthal, Lyon & Ross, 28 F.3d 704

ss slasapaisanessniesnn |

Benjamin v. United Merchants & Manufacturers,

I SE BOND vccvevesinsssseeversoerseoreconess oa

Chisolm v. Kidder Peabody Asset Management, Inc.,

5e6 F.Seen ZISC.D.N.Y. 1997) ............................. 15

Chisolm v. Kidder Peabody Asset Management, Inc.,

1998 U.S. App. Lexis 22385 ............. ce eeeeeeeeees 13, 14

Di Russa v. Dean Witter Reynolds, Inc. 121 F.3d 818,

(2d Cir., 1997), cert. denied, 118 S.Ct. 818, 1695

as ate Jl CS a 11, 12

Furnco Construction Corp. v. Waters 438 U.S. 567,

loc co sacinenrtinesdeontnervenee 8

Gilmer v. Interstate Johnson, 500 U.S. 20

ee ai 3,4, 17, 18, 19

Halligan v. Piper Jaffray, Inc., 148 F.3d

cat teichiicewicinsees 1, 6, 7, 11, 12, 13, 14, 15, 16, 17, 19

In Matter of the Arbitration between Tempe

Shain Corporation v. Bertek, Inc., 120 F.3d

ais iy eaicseninimiaesteiiiabioirts 11, 12

McDonnell Douglas v. Green, 411 US. 792 (1973) ..... 8,

10

IV

TABLE OF CITED AUTHORITIES — Continued

Page

Mitsubishi Motors Corp. v. Solar Chrysler-Plymouth, Inc.,

tk ee Li. ene 8

Price Waterhouse v. Hopkins, 490 U.S. 288, (1989) ........... 8

Shearson American Express v. McMahon 482 U.S.

Fes Se TT ccs cuit airanteciceracbihectiintedaaeaeunenrasnad teoubeniei: 19

Texas Dept. of Community Affairs v. Burdine, 450 U.S. |

SS eeidaccdaaiacan ees: 8,9

Trans Chemical Limited v. China National Machinery :

Import & Export, 161 F.3d 314, (Sth Cir. 1998) ........ 5 )

UHC Mgmt. Co. v. Computer Sciences Corp., 148 F.3d :

a, UE stcncincictus Sui nacerchinsaiatatndabsese nha aaa maaaate: 5

Wilko v. Swan, 346 U.S. 427, 436-37 (1953), overruled

on other grounds in Rodrigue. de Quijas v. i

Shearson/American Express, Inc., 490 U.S. 477

ER discinisstssvaardeaveenscencessced tadainiaoaneemcetine —s 5

Willemijn Houdstermaatschappij, BV v. Standard

Microsystems Corp., 103 F.3d 9 (2d Cir. 1997) ........ 12

STATUTES |

NUSC WEE cs eee 5,7, il, 12

BETA... 6 I esccaeneietcettcpnes cee ean ae 8

l

STATEMENT OF THE CASE

Petitioners, Piper Jaffray, Inc., and Marvin Geisness seek

a writ of certiorari, to appeal a decision of the U.S. Court of

Appeals for the Second Circuit entered July 9, 1998 in Halligan

v. Piper Jaffray, Inc., 148 F.3d 197. Petitioners’ application to

this Court was made following the Second Circuit's denial of

their motion for rehearing and suggestion of an en banc panel.

Respondent herein is Irene Halligan, as Executrix of the Estate

of Theodore Halligan.

In their unanimous decision, Circuit Judges Feinberg and

Kearse and Hon. Barrington Parker, of U.S. District Court

for the Southern District of New York, sitting by designation,

reversed three orders of the District Court. Those orders

which are annexed to Petitioners’ brief, had (1) denied Mrs.

Halligan's Petition to Vacate an NASD arbitrators’ award

which had dismissed her decedent's ADEA claim; (2)

confirmed the arbitrators' award, and (3) dismissed on res

judicata grounds, the Estate's ADEA action against Piper

Jaffray, Inc.

The Second Circuit's reversal was based its determina-

tion that NASD arbitrators had manifestly disregarded either the

law or the evidence or both in denying Theodore Halligan's

ADEA claim. The Court also remanded the Executrix' Federal

action to the District Court for further proceedings consistent

with its ruling, stating that there was no res judicata bar to that

proceeding. The Court noted in its decision that it had authority

to remand the case to the arbitrators for a written opinion, but

expressly declined to do so, based on the record before the

Court. (The Second Circuit Court's decision is appended to Peti-

tioners' brief as Appendix A.)

OO

2

As shown in the record on Appeal, Respondent's dece-

dent, Ted Halligan, had been employed as an institutional sales-

man in Piper's New York office for nineteen years, until his

employment was terminated on December 31, 1992. (R-399).'

Mr. Halligan was then 69 years old. During each of the years

from 1987 through 1991, Piper had ranked Mr. Halligan as its

No. 1 salesperson in commission production. In 1992, Mr.

Halligan was ranked Number 5 among some twenty-five other

institutional salespersons. (R-330-408).

In the summer of 1992, Mr. Halligan was asked to fly to

Minneapolis for an August 27, 1992 luncheon meeting at Piper

headquarters, with Tad Piper, CEO of Piper Jaffray and Bruce

Huber, Mr. Halligan's immediate superior. At the outset of this

meeting, both Bruce Huber and Tad Piper asked Mr. Halligan

repeatedly when he was going to retire. Mr. Halligan responded

that he was in great physical shape and at the top of his skills as

an institutional salesman and had no plans to retire. Tad Piper

then attempted to persuade Mr. Halligan to retire, citing the

example of his father, Harry Piper. Tad Piper told Halligan that

his father “knew when it was time to turn over the reins to a

young whippersnapper, me." After Halligan pointed out that

unlike himself, Harry Piper had $50 million dollars to retire on,

Tad Piper finally said to Halligan: "You're too old, our clients

are young and they want to deal with younger salesmen."

Shortly thereafter, Tad Piper left the meeting and Halligan said

to Huber, "/t looks like you want me out of here as quickly as

possible." Huber said "Yes." Halligan made notes of this

conversation on the trip back to New York. (R-119, R-426-427)

' References are to the record filed in the U.S. Circuit Court of

Appeals for the Second Circuit.

|

;

——————e

3

Two weeks later, on September 10, 1992, Mr. Halligan

received a phone call from Bruce Huber who said to him: "Jn

accordance with our conversation the other day, we want you

out of Piper Jaffray, by the end of the year." Halligan asked

Huber if he would be fired if he did not get out and Huber

replied that if he did not resign, both he and Tad Piper would

fire him. Halligan asked if he could stay until the end of

December and Huber agreed. Mr. Halligan made notes of this

conversation. (R-128, R-428)

During the fall of 1992, Mr. Halligan looked for

comparable employment without success. (R-428) In October,

1992, Halligan retained counsel. (R-429) In November, his

attorney wrote to Tad Piper threatening legal action if Mr.

Halligan was fired. (R-130, R-429) About this time, Halligan

approached Huber while he was attending a conference in New

York City and asked Huber if he could keep his job. Huber said

it was out of the question. (R-429)

Huber transferred Mr. Halligan's sales partner, Marvin

Geisness, then in his early forties, to Minneapolis, but did not

offer Halligan such a transfer. On December 31, 1992, Mr.

Halligan was removed from the payroll and the New York office

was shut down. (R-451) In January and February 1993, Piper

hired two institutional salesmen, Ron Reiches, 41 and

Christopher Whitcomb, 27, noting on their personnel records

that they were "replacements for Ted Halligan". (R-131, R-132Z)_

Halligan filed a claim of age discrimination with the EEOC on

January 15, 1993, two weeks after he was fired. (R-351)

In 1991, the U.S. Supreme Court had ruled in Gilmer v.

Interstate Johnson, 500 U.S. 20, that a securities industry

employee who executed a U-4 registration statement, agreeing

to arbitrate disputes with his employer, could be compelled to

arbitrate his ADEA claim at the New York Stock Exchange.

Mr. Halligan had signed an identical U-4 and was, like Gilmer,

registered at both the New York Stock Exchange and the

NASD. Moreover, Piper's House Counsel advised Mr.

Halligan's counsel in December of 1992 that if Halligan filed an

action, Piper would move to compel arbitration. Having no

other choice, Mr. Halligan filed his ADEA claim in arbitration

at the NASD in October, 1993.

Hearings began at the NASD in September of 1994 and

ended in October, 1995. In March, 1996 the arbitrators denied

Mr. Halligan's claims without opinion. In or about June of 1996,

Respondent Irene Halligan, as Executrix of the late Theodore

Halligan, filed a Petition to Vacate the award in arbitration in

the U.S. District Court for the Southern District of New York.

On October 1, 1996, the Estate filed an ADEA action in the

Federal District Court. As stated supra, the District Court

confirmed the award and dismissed the lawsuit. Mrs. Halligan

then appealed to the Second Circuit.

MISSTATEMENTS IN PETITIONER'S BRIEF

1. Petitioners repeatedly allude in their brief to the

"efficiency" of arbitration and its usefulness in allowing parties

"to avoid the costliness and delays of litigation". In this case,

however, arbitration was neither efficient nor inexpensive. Mr.

Halligan was required to pay the NASD $2,000.00 in order to

file his claim in arbitration.

Moreover, while the proceedings were conducted on 26

different dates, the average "day" at the NASD consisted of

two "sessions" totaling about 5 hours of testimony, the balance

of the time being consumed by morning and afternoon breaks

and the luncheon recess. Moreover, the arbitrators did not work

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5

beyond 4:00 p.m. and sessions could only be scheduled when

the arbitrators’ personal schedules permitted. As a result, the

case was regularly adjourned for one, two or three month

intervals. In July, 1995, the arbitrators adjourned the case for

three months, to October 18, 1995. On October 9, 1995, Mr.

Halligan died. His widow, Irene Halligan, continued the

arbitration which concluded at the end of October, 1995.

Doubtless, in a Courtroom, this trial would have taken two

weeks.

2. Petitioners’ description of the proceedings as "hotly

contested" is misleading, as is the term "experienced attorney

arbitrators". The proceedings were conducted with great civility

at all times. Moreover, according to their resumes, none of the

arbitrators had any experience with employment discrimination

cases.

3. At page 5 of their brief, Petitioners cite several cases

as examples of the similar approach in other Circuits to the

Second Circuit's application of the doctrine of manifest

disregard of the law. However, not all of these cases concern

that doctrine, including UHC Mgmt. Co. v. Computer Sciences

Corp., 148 F.3d 992, 998 [concerning modification of an

award]; Trans Chemical Limited v. China National Machinery

Import & Export, 161 F.3d 314, (Sth Cir. 1998) [concerning

vacature under 9 U.S.C. 10(a)1]; Baravati v. Josephthal,Lyon

& Ross, 28 F.3d 704, 706 (7th Cir. 1994) [soundly rejecting

manifest disregard doctrine].

4. Petitioners also state at ftnt. 4, at page 18 of their

brief that the Second Circuit ultimately concluded that Mr.

Halligan's claim "would have been subject to a valid motion to

compel arbitration had he attempted to litigate it." Petitioners

have misstated the Court of Appeals’ ruling. At ftnt. 2 of its

6

opinion, (Petitioners’ Appendix A, p. 9a) the Court of Appeals

ruled that "Jn light of our current caselaw, Halligan was correct

in considering himself bound to arbitrate."

REASONS FOR DENYING THE WRIT

The Wnit should be denied for three reasons:

(1) The U.S. Court of Appeals for the Second Circuit

has not created a new standard of review for vacating awards in

arbitration in deciding the Halligan case since the Court's

decision was based on well recognized standards for judicial

review of arbitration awards.

(2) The Second Circuit Court of Appeals did not create

a split in the Circuits by its decision in Halligan v. Piper Jaffray,

Inc. Manifest disregard of the evidence is not the equivalent of

erroneous factual findings by arbitrators. No other circuit court

has confirmed an arbitrators’ award where arbitrators were

found to have manifestly disregarded either the law or the

evidence presented to them, or both.

(3) For the reasons stated above, the vacature of this

arbitration award on the standards utilized by the Second Circuit

in this case does not call into question any well settled area

relating to judicial review of arbitration awards, nor is it of

national significance.

ee ee

POINT I

NO NEW STANDARD OF JUDICIAL

REVIEW WAS CREATED BY THE

SECOND CIRCUIT COURT OF APPEALS

IN THE HALLIGAN DECISION

The Second Circuit's decision does not, as Petitioners

contend, "expand the focus of the "manifest disregard" standard

beyond arbitrators’ conclusions of law and into their findings of

fact". To begin with, the NASD arbitrators who heard Mr.

Halligan's ADEA claim, made neither findings of fact, nor

conclusions of law.

Moreover, the Second Circuit's decision is based on well

recognized standards of judicial review. An award in arbitration

may be vacated by a Federal Court for any of the reasons

contained in the Federal Arbitration Act, 9 U.S.C. 10(a) or

where arbitrators manifestly disregard the law in rendering their

award. Wilko v. Swan, 346 U.S. 427, 436-37 (1953), overruled

on other grounds in Rodriguez de Quijas v. Shearson/American

Express, Inc., 490 U.S. 477 (1989).

Notably, Petitioners do not contend that the Second

Circuit Court of Appeals erred in ruling that NASD arbitrators

"manifestly disregarded the law" in the Halligan case. Instead,

they complain that the Court of Appeals created and utilized an

impermissible standard of review called "manifest disregard of

the evidence." However, as seen infra, this argument is a

wholly meritless attempt to wring substance out of form.

As noted by Petitioners, the "manifest disregard of the

law" standard is a creature of Federal caselaw and traces its

origins to Wilko v. Swan, id. In the Halligan case, the "law"

8

which the arbitrators were obligated to enforce was the Age

Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 ef

seq., together with those Supreme Court and other Federal

Court precedents which have interpreted that statute.

That law has established specific standards of proof for

Plaintiffs and Defendants in all employment discrimination cases.

McDonnell Douglas v. Green, 411 US. 792 (1973); Texas

Dept. Community Affairs v. Burdine, 450 U.S. 288 (1981);

Price Waterhouse v. Hopkins, 490 U.S. 288, (1989).

Moreover, these evidentiary standards of proof may not be

disregarded by arbitrators charged with enforcing Federal

statutes. Mitsubishi Motors Corp. v. Solar Chrysler-Plymouth,

Inc., 473 U.S. 614, 628 (1985) ["By agreeing to arbitrate a

Statutory claim, a party does not forego the substantive rights

afforded by the statute; it only submits their resolution to an

arbitral, rather than a judicial forum."}

The substantive nghts afforded by the ADEA include the

Plaintiffs mght to establish his prima facie case of age dis-

crimination either by direct evidence of age discrimination or by

offering a minimum quantum of proof, i.e. by establishing that

he was over 40 years of age and thus a member of the class pro-

tected under the ADEA, that he was qualified for his job, that he

was discharged, and that he was replaced in his job by a signifi-

cantly younger person. Benjamin v. United Merchants &

Manufacturers, 873 F.2d 41 (2nd Cir., 1989). When this prima

facie case is established, a presumption of discriminatory intent

arises because the Court presumes that the act of discharge, if

unexplained, is more likely than not to be based on the

consideration of impermissible factors. Furnco Construction

Corp. v. Waters 438 U.S. 567, 577 (1978).

eS: RD n A Red tah Ae

9

Once a prima facie case of discrimination is created,

the law imposes upon the Defendant the burden of rebutting

that presumption by producing evidence that it acted for a

non-discriminatory reason. Moreover, Defendant's evidence

must be sufficient to raise a genuine issue of fact as to whether

it discriminated. Texas Dept. of Community Affairs v. Burdine

450 U.S. 248 (1981).

As may be seen, the law requires close analysis of the

evidence at every stage of the proceeding, since Plaintiff's failure

to establish his prima facie case requires dismissal of the claim

and Defendant's failure to rebut the presumption of

discrimination requires a directed verdict for the Plaintiff. 7exas

Dept. of Community Affairs v. Burdine, 450 U.S. 248 (1981).

As a consequence, arbitrators who ignore the evidence

in an ADEA case perforce ignore the law. The Second Circuit's

statement that the arbitrators "either manifestly disregarded the

law, or the evidence, or both" is thus not a new standard of

review. It is patent that whether an arbitrator who is well aware

of the law, refuses to apply the law to the evidence or simply

disregards evidence that the law was violated, the result is

exactly the same: the arbitrators have manifestly disregarded the

law.

Petitioners’ brief states at page 11 that "there was intense

factual disagreement on virtually every material point, including

matters as rudimentary as whether Mr. Halligan was fired or

voluntarily resigned." This is not so. In addition to the faci that

Mr. Halligan provided overwhelming direct evidence of age

discrimination, there was no factual disagreement between the

parties as to any of the material elements of Mr. Halligan's

prima facie case. The record adduced by both sides

demonstrated that Halligan established his prima facie case

10

under the McDonnell Douglas paradigm, but that Piper

nonetheless failed to rebut the presumption of discrimination

created by that prima facie case, or even to articulate, much

less establish, a non-discriminatory reason for Halligan's

discharge.

Halligan, at age 69, was clearly in the protected class of

ADEA plaintiffs. Also, Piper did not deny that within weeks of

Halligan's discharge it hired two younger institutional salesmen

(ages 27 and 41) as "replacement(s) for Ted Halligan”. (R-131,

132) Moreover, even Piper agreed that Halligan was qualified

for his job:

"Piper has never tried to show in any way that

Mr. Halligan was incompetent or unsatis-

factory." (From summation argument by Piper

Jaffray at NASD, (R-700).

As to whether he was "fired" on September 10, 1992, as

Halligan testified, or had opted to "retire" on that date, as Piper

claimed, as seen infra, even the testimony of Piper witness,

Bruce Huber, established that Halligan was fired.

Thus, Petitioners’ contention that the only possible

reading of the Second Circuit's opinion is that "it created and

applied a heightened inquiry into the factual underpinnings of

arbitral awards" is meritless. The Second Circuit was required

to review this case to assure that the arbitrators complied with

the requirements of the statute. Faced with overwhelming evi-

dence of age discrimination including direct evidence of age

discrimination from at least four witnesses, it hardly required

"heightened scrutiny" for the Court to ascertain that justifica-

tion for the denying relief under the ADEA could not be found

in this record.

1]

Moreover, it is clear from the Second Circuit's opinion

that it intended to and did apply the manifest disregard of the

law standard, in vacating the arbitrators' award. As the Court

stated in its opinion: ”

"Mrs. Halligan argued in the district court and

repeats to us that the arbitration award re-

flected manifest disregard of the law. Mrs.

Halligan makes a strong case for that proposi-

tion. Quite simply, Halligan presented over-

whelming evidence that Piper's conduct after

Tad Piper became CEO was motivated by age

discrimination.

* * *

"Moreover, this is not a case like DiRussa where

we refused to find "manifest disregard" because

DiRussa had not sufficiently brought the

governing law to the attention of the arbitrators.

There is no such problem here." (Petitioners'

Appendix A, p. 16b)

It should also be noted that arbitrators who "manifestly

disregard evidence" risk vacature of their award for that reason

alone, under the Federal Arbitration Act (FAA) 9 U.S.C. Sec.

10(a)3. FAA Sec. 10(a)3 provides that an arbitrator's award

may be vacated whenever arbitrators are guilty of any

misconduct which is prejudicial to the nghts of a party,

including refusing to hear evidence which is pertinent and

material to the controversy. See Jn Matter of the Arbitration

2 The full text of the Second Circuit Court's opinion in Halligan v.

Piper Jaffray, Inc., is annexed to Piper Jaffray's Petition as Appendix A

12

between Tempo Shain Corporation v. Bertek, Inc., 120 F.3d 16

(2d Cir., 1997). [Arbitrators' award vacated because arbitrators

had no reasonable basis for refusing to permit witness to testify. ]

Clearly, for arbitrators to manifestly disregard evidence is the

equivalent of refusing to hear evidence and would doubtless

constitute arbitrator misconduct of equal gravity, warranting

vacature under 9 U.S.C. 10(a)3.

POINT

THE SECOND CIRCUIT DID NOT

INTRUDE ON THE ARBITRATORS'

ROLE AS FACT FINDER.

Second Circuit precedents demonstrate full support for

the longstanding Federal policy favoring arbitration of disputes.

Indeed, no other Circuit Court has more narrowly applied the

manifest disregard of the law standard. See Willemijn

Houdstermaatschappij, BV v. Standard Microsystems Corp.,

103 F.3d 9 (2d Cir. 1997); [If there is even a barely colorable

justification for the outcome reached, reviewing Court must

confirm the award.] Di Russa v. Dean Witter Reynolds, Inc.

121 F.3d 818, (2d Cir., 1997), cert. denied, 118 S.Ct. 1695

(1998). [Although the ADEA mandates an award of reascnable

attorneys’ fees in addition to judgment, arbitrators held not to

have manifestly disregarded the law in denying such fees, since

it was plausible that arbitrators understood the phrase "entitled

to", as meaning they should exercise their discretion to award

attorneys’ fees. ]

Following its decision in the Halligan case, the Second

Circuit has continued to adhere to its narrow interpretation of

the "inanifest disregard of the law" standard and has, moreover,

specifically declined to apply a heightened standard of review in

13

cases of statutory claims submitted to arbitration. In an

unpublished opinion in Chisolm v. Kidder, Peabody Asset

Management, Inc., 1998 U.S. App. Lexis 22385, (Respondent's

Appendix A), filed two weeks after the Halligan decision, the

Second Circuit refused to vacate an NASD arbitrators’ award

which denied Plaintiff's claim of age discrimination.

The Plaintiff in Chisolm contended that the District

Court had erroneously rejected his argument that the "manifest

disregard of the law standard" should not be applied to cases

where arbitrators construed Federal statutes, but instead there

should be heightened scrutiny of such awards. In Chisolm v.

Kidder Peabody Asset Mgmt., 966 F. Supp. 218 (SDNY 1997)

Judge Constance Baker Motley had, in a lengthy opinion,

confirmed the arbitrators’ award on the manifest disregard

standard, and declined to apply a heightened standard of review.

The Court of Appeals for Second Circuit affirmed, stating:

"It is well settled in this Court that a District

Court may vacate an award in arbitration if it is

in manifest disregard of the law; however the

reach of that doctrine is severely limited.

(citing) Halligan v. Piper Jaffray, Inc. ... 1998

WL 38559 at *5 (2d Cir., 1998). (Respondent's

Appendix A)

The Court further stated that, unlike the Halligan

case, the NASD arbitrators in Chisolm were not shown to

have manifestly disregarded the law in denying Plaintiff's

ADEA claim, because the record contained ample evidence

from which they could have concluded that the Defendant had

a legitimate, non-discriminatory motive for discharging

Plaintiff.

14

The Chisolm case, which was not cited by Petitioner

in its brief, clearly demonstrates that the Second Circuit

continues to apply the narrow manifest disregard of the law

standard of judicial review for statutory claims submitted to

arbitration. It also demonstrates that the Second Circuit

decided Halligan under that narrow standard and did not,

despite Petitioners’ contention, “alter the existing standard of

review" for such awards.

While the manifest disregard standard is quite narrow,

it is not, as Petitioners seem to think, merely an illusion. As the

Second Circuit noted in Chisolm: "We have recently demon-

strated in Halligan that the manifest disregard standard is not

without teeth".

It is also clear from the Second Circuit decisions cited

above, that justification for an award, even if barely colorable,

must be sourced in the record, and not in speculatior as to

why the arbitrators might have made the award.

Petitioners’ contention that the arbitrators’ denial of Mr.

Halligan's ADEA claim was based on witness credibility is just

such speculation, because nothing in the record supports that

conclusion.

Indeed, the record shows that the only significant

conflict in the case, i.e., as to whether Halligan had voluntarily

resigned or was fired was more apparent than real.

Piper witness Bruce Huber initially testified that

Halligan told him on September 10, 1992, that he would retire

at the end of December, during a phone conversation. (R-483)

Huber also testified, however, that Hailigan had changed his

mind about retiring by mid-November, 1992 when he met

Halligan in New York at a business conference. Huber testified

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15

that Halligan asked if he could keep his job at this time and

that he told Halligan that he could not stay because it was too

late to reconsider, since plans had already been made to close

the New York office. (R-492, p. 2468)

These "plans" consisted of giving notice to Halligan's

secretary and the receptionist. Huber also admitted that he did

not offer Halligan an opportunity to work out of the

Minneapolis office, although Huber transferred Halligan's

partner, Marvin Geisness, to Minneapolis where he continued

to cover New York accounts. (R-492, p. 2467). Huber closed

down the New York -office on December 31, 1992 and

removed Halligan from the payroll. (R-492, p. 2471).

Thus, Huber's own evidence, even if believed, also

proved that Halligan was fired and did not resign. Huber testi-

fied that Halligan said he would resign in December 1992, but

had changed his mind about resigning by November, 1992.

Piper does not dispute that Halligan was still employed in

November of 1992 when Huber told him he could not keep his

job. Thus even Huber confirmed that Halligan did not resign,

but was discharged as of December 31, 1992, the only issue

being whether Halligan was fired on September 10, 1992 as

Halligan testified, or if Huber's testimony were credited, in

November of 1992 when Huber told Halligan he had to leave.

Moreover, Petitioner points to nothing in the record

which would support its conclusion that the arbitrators did not

believe Halligan's witnesses. Nor can such a conclusion be

reasonably inferred from this record. As may be seen from the

Court of Appeals’ opinion in Halligan there was nothing in the

record to support such an inference:

"Piper argues that the arbitration panel resolved

the case in accordance with the substantive

16

ADEA statute, for example, it credited Piper's

witnesses instead of Halligan's. Had the arbi-

trators offered that explanation of the award,

on this record it would be hard to accept—

but they did not even do that." (Patitioner's

Appendix A, 17a)

As stated in the Court's opinion, Huber was contradicted

by other Piper witnesses on key elements of his testimony. The

Court noted that while Bruce Huber testified that Halligan's

partner, Marvin Geisness, was not informed of the August 27,

1992 meeting among Tad Piper, Bruce Huber and Ted Halligan

before it took place, Geisness testified that he had discussed the

August 27th meeting with Huber beforehand and had asked him

not to close the New York office.

While the Court of Appeals cited only one example of

such contradictory testimony, the record before the Court dis-

closed several other instances in which Huber's testimony was

contradicted by Piper witnesses.

In sharp contrast to Piper's witnesses, none of Halligan's

witnesses contradicted one another. Moreover, as Mrs. Halligan

pointed out to the District Court and the Court of Appeals,

Piper's main witnesses, Tad Piper and Bruce Huber confirmed

the accuracy of major portions of Halligan's testimony regarding

their conversations at the luncheon meeting of August 27, 1992.

(R-68 1-683) Thus, a reviewing Court looking for justification

based on "credibility" of witnesses could not find "even a barely

colorable justification" for the award on this ground in the

record of the Halligan case.

ee ee eae

radi

17

POINT Ill

THE SECOND CIRCUIT'S DECISION DOES

NOT REPRESENT A SPLIT IN THE CIRCUITS

NORIS IT OF NATIONAL SIGNIFICANCE.

Petitioners’ claim that the Second Circuit's opinion in

Halligan v. Piper Jaffray, Inc., creates a split in the Circuits is

wholly erroneous. No other Circuit Court has permitted an

arbitration award to stand where arbitrators have either mani-

festly disregarded the law or the evidence or both in deciding a

claim in arbitration. Moreover, Petitioners cite no case in which

errors in fact made by arbitrators have been deemed to be the

equivalent of a manifest disregard of the evidence by any Court.

The Second Circuit's vacature of the arbitrators’ award

in Halligan is clearly based upon precepts set out in the

Supreme Court's decision in Gilmer v. Interstate Johnson, 500

U.S. 20 (1991):

"in Gilmer, when the Supreme Court ruled

that an employee could be forced to assert an

ADEA claim in an arbitral forum, the Court did

so on the assumptions that claimant would not

forego the substantive rights afforded by the

statute, that the arbitration agreement simply

changed the forum for enforcement of those

rights and that a claimant could effectively

vindicate his or her statutory nghts in

arbitration. 500 U.S. 26,28. This case puts those

assumptions to the test. The Court also stated in

Gilmer that "claimed procedural inadequacies"

in arbitration “are best left for resolution in

specific cases." 500 U.S. at 33. At least in the

18

circumstances here, we believe that when a

reviewing Court is inclined to hold that an

arbitration panel manifestly disregarded the law,

the failure of the arbitrators to explain the award

can be taken into account. Having done so we

are left with the firm belief that the arbitrators

here manifestly disregarded the law, or the

evidence or both." (Petitioners' Appendix A,

16a, 17a.).

As seen supra, the Court's decision to take the absence

of an arbitrators’ opinion into consideration in determining

whether the arbitrators manifestly disregarded the law, is

tailored to the unique circumstances presented by the Halligan

case and based on the clear teaching of Gilmer that claimed

procedural inadequacies are best left for resolution in specific

cases.

Thus, Petitioners’ contention that after Halligan v. Piper

Jaffray, arbitrators who decline to issue opinions in close cases

will "do so at their peril," is totally unfounded. The Second

Circuit specifically stated in Halligan, that its ruling was not

intended to require that arbitrators write opinions:

"We want to make clear that we are not holding

that arbitrators should write opinions in every

case or even in most cases. We merely observe

that where a reviewing Court is inclined to find

that arbitrators manifestly disregarded the law or

the evidence and that an explanation if given,

would have strained credulity, the absence of

explanation may reinforce the reviewing Court's

confidence that the arbitrators engaged in

19

manifest disregard of the law. (Petitioners'

Appendix A, p. 17a)

As can be seen, the Second Circuit's opinion neither

requires arbitrators to write opinions, nor does it pose a threat

to the finality of arbitration in the United States. Moreover, its

opinion is wholly consistent with the Supreme Court's decision

in Shearson American Express v. McMahon 482 U.S. 220, 232

(1987) which assures a judicial review of statutory claims sub-

mitted to arbitration which is sufficient to assure that the statute

was enforced in arbitration. The Second Circuit's ruling in

Halligan is also consistent with the Supreme Court's earlier

ruling in Wilko v. Swan, 346 U.S. 427, (1953) overruled on

other grounds in Rodriguez de Quijas v. Shearson/American

Express, 490 U.S. 477 (1989), which permits vacature of

awards which are made in manifest disregard of the law.

CONCLUSION

Ted Halligan submitted his ADEA claim to arbitration in

1993, because he believed himself compelled to do so by the

Supreme Court's decision in Gilmer v. Interstate Johnson, 500

U.S. 20 (1991). In so doing, he relied on the Supreme Court's

assurances that he was entitled to a judicial review of the

arbitrators’ decision on that claim which would be sufficient to

ensure that his statutory rights were vindicated in arbitration.

Petitioners now seek to nullify Mr. Hatligan'’s right to

such judicial review, but not on the grounds that NASD arbitra-

tors properly denied Halligan's ADEA claim. Rather, Petitioners’

concern is that some other litigant who was compelled to arbi-

trate a statutory claim of employment discrimination may be

emboldened by Halligan to seek review of an arbitrators' award.

In Respondent's view, that motive is not worthy of consideration

20

by this Court in determining whether a writ of certiorari should

issue in this case. Wherefore, Respondent, Irene Halligan, as

Executrix of the late Theodore Halligan, respectfully requests

that this petition ior a writ of certiorari be denied in all respects.

Respectfully submitted,

Kathleen M. O'Connell

Counsel of Record

Murphy & O'Connell

Attorneys for Respondent

14 Wall Street

New York, NY 10005

(212) 619-0450

la

Appendix A

APPENDIX A—OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

CHISOLM v. KIDDER PEABODY ASSET MGMT.,

DATED AND DECIDED JULY 28, 1998

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

THIS SUMMARY ORDER WILL NOT BE PUBLISHED IN THE

FEDERAL REPORTER AND MAY NOT BE CITED AS

PRECEDENTIAL AUTHORITY TO THIS OR ANY OTHER

COURT BUT MAY BE CALLED TO THE ATTENTION OF THIS

OR ANY OTHER COURT IN A SUBSEQUENT STAGE OF THIS

CASE, IN A RELATED CASE, OR IN ANY CASE FOR PURPOSES

OF COLLATERAL ESTOPPEL OR RES JUDICATA

At a stated term of the United States Court of Appeals for the

Second Circuit, held at the United States Courthouse, Foley Square, in

the City of New York, on the 28 day of July one thousand nine hundred

and ninety eight

PRESENT: RICHARD J. CARDAMONE,

JOSE A. CABRANES.

GERALD W. HEANEY.*

Circuit Judges,

* Of the United States Court of Appeals for the Eighth Circuit, sitting by

designation

2a

Appendix A

O. BIERNE CHISOLM

Plaintiff-Appellant,

v. No. 97-7828

KIDDER, PEABODY ASSET MANAGEMENT,

INC. and KIDDER, PEABODY & CO.INC.,

Defendants-Appellees,

APPEARING FOR APPELLANT:

JEFFREY L. LIDDLE, Liddle & Robinson

LLP, New York, New York

APPEARING FOR APPELLEES:

MARK S. DICHTER, Morgan, Lewis & Bockius

LLP, Philadelphia, Pennsylvania

This cause came on to be heard on January 26, 1998 on the

transcript of record from the United States District Court for the

Southern District of New York (Constance Baker Motley, Judge)

and was argued.

ON CONSIDERATION WHEREOF, IT IS HEREBY

ORDERED, ADJUDGED AND DECREED that the judgment of

the District Court be and it hereby is AFFIRMED.

Plaintiff, a former employee of Kidder, Peabody & Co.. Inc.

("Kidder, Peabody"), commenced this action to redress alleged age

discrimination by defendants, seeking relief under the Age

Discrimination in Employment Act of 1967, § 2 ef seq., as

amended, 29 U.S.C. § 621 et seq., {the "ADEA"). Plaintiff claims

that, after a career that spanned several decades at Kidder, Peabody,

he was constructively discharged due to the actions of George

Grune, the 35-year-old director of Kidder, Peabody Asset

Management, Inc., who allegedly demonstrated favoritism toward

a

3a

Appendix A

younger executives, significantly diminished plaintiffs job

responsibilities, and denied him a bonus in 1991 (which, in the

previous years, had constituted approximately 40-50% of plaintiff's

salary). In response, plaintiff resigned, later claiming constructive

discharge.

In 1991, plaintiff filed an action in New York Supreme

Court alleging state law claims, and defendants moved to stay the

action and compel arbitration.’ The court granted defendants’

motion and compelled arbitration, whereupon plaintiff filed the

instant action, alleging violation of the ADEA in district court in

January 1992. Once again, defendants moved for a stay, and the

district court granted the motion and compelled arbitration. After

43 hearing sessions before an arbitration panel of the National

Association of Securities Dealers, the panel dismissed plaintiff's

claims in their entirety without issuing findings of fact, conclusions

of law, or the rationale behind its decision. On May 29, 1997, the

district court affirmed the decision of the arbitration panel. See

Chisolm v. Kidder, Peabody Asset Management, Inc., 966 F. Supp.

218 (S.D.N-Y. 1997). From this judgment, plaintiff appeals,

arguing that the district court erroneously rejected his argument that

the "manifest disregard of the law" standard for vacating an

arbitration award should not apply in cases where arbitrators

construe federal statutes rather than decide issues typical of

commercial or labor disputes.

"In reviewing a district court decision confirming an

arbitration award, we review legal conclusions de novo and findings

of fact for clear error." DiRussa v. Dean Witter Reynolds Inc., 121

F.3d 818, 821 (2d Cir. 1997), cert. denied, 118 S. Ct. 695 (1998).

' In order to be registered with various securities exchanges as a securities

representative, plaintiff was required to sign the Uniform Application for

Securities Industry Registration Form, which contained an arbitration

agreement.

4a

Appendix A

Accordingly, we review de novo the legal issue of whether the

district court applied the correct standard of review to the

arbitration panel's decision. See First Options v. Kaplan, 514 U.S.

938, 948 (1995). It is well settled in this Circuit that a district court

may vacate an arbitration award if it is in "manifest disregard of the

law"; however, the "reach of the doctrine is "severely limited."

Halligan v. Piper Jaffray, Inc., No. 97-7801, 97-7839, 1998 WL

385539, at *5 (2d Cir. July 9, 1998) (quoting Government of India

v. Cargill, Inc., 867 F.2d 130, 133 (2d Cir. 1989).? Such manifest

disregard "clearly means more than error or misunderstanding with

respect to the law." Jd. (quoting Merrill Lynch, Pierce, Fenner &

Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986).

Specifically, a court should not vacate an award unless it finds "both

that (1) the arbitrators knew of a governing legal principle yet

refused to apply it or ignored it altogether, and (2) the law ignored

* In addition, the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1

et seq., provides that an arbitration award may be vacated.

(1) Where the award was procured by corruption, fraud or

other undue means.

(2) Where there was evident partiality or corruption in the

arbitrators...

(3) Where the arbitrators were guilty of misconduct in refus-

ing 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 preju-

diced.

(4) 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.9 U.S.C. § 10(a)(1)-(4).

These statutory provisions do not pertain to the circumstances of this.

appeal.

Sa

Appendix A

by the arbitrators was well defined, explicit and clearly applicable

to the case." Jd.

We have recently demonstrated in Halligan that the

"manifest disregard" standard is not without teeth. See 1998 WL

385539. However, in the circumstances here presented, we do not

find a basis for concluding that the arbitration panel "ignored the

law or the evidence or both." Jd. at *7. Unlike Halligan, where

there was "strong evidence that Halligan was fired because of his

age, Jd., there was “ample basis [in the instant case] from which to

conclude that...plaintiff was not constructively discharged," and

even assuming, arguendo, that he was, "there [was] also evidence

from which the arbitrators could have concluded that defendants

had legitimate, nondiscriminatory reasons for doing so." See

Chisolm, 966 F. Supp.at 228-29.

Having carefully considered all of plaintiff's arguments on

appeal, we AFFIRM the judgment of the district court in its entirety.

substantially for the reasons stated by Judge Motley in her opinion.

See Chisolm, 966 F. Supp. at 218.

FOR THE COURT

Carolyn Clark Campbell, Clerk

By Lucille Carr /s/

lb

Appendix B

Appendix B - Relevant Statutes

Sec. 623. Prohibition of age discrimination

(a) Employer practices

It shall be unlawful for an employer--

(1) to fail or refuse to hire or discharge any

individual or otherwise discriminate against any individual with

respect to his compensation, terms, conditions or privileges of

employment, because of such individual's age;

(2) to limit, segregate, or classify his employees in

any way which would deprive, or tend to deprive any individual

of employment opportunities or otherwise adversely affect his

status as an employee because of such individual's age; or

(3) ——to reduce the wage rate of any employee in order

to comply with this chapter.