March 12-14, 2012

Mediating and Arbitrating in the Federal and Public Secor

Cornell University Scheinman Institute on Conflict Resolution

New York, NY

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March 15-16, 2012

Cross Cultural Issues in Mediation and Negotiation

Cornell University Scheinman Institute on Conflict Resolution

New York, NY

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April 9-11, 2012

Neutral Investigation and Fact-Finding of Sexual Harassment Complaints

Cornell University Scheinman Institute on Conflict Resolution

New York, NY

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Valenti Law

 Just Appease Me (Blog)

 Chicago Mediator Daily

 Valenti Law Daily

Former Catcher for Red Sox Wins Case Against Merrill Lynch Adviser 

By: Michael J. De La Merced

Nearly five years after he earned his second World Series ring, Doug Mirabelli has another big win.

This month, an arbitration panel ruled in favor of Mr. Mirabelli, the former Boston Red Sox catcher, in his dispute with one of Bank of America Merrill Lynch's top financial advisers. The panel also awarded Mr. Mirabelli, 41, and his wife, Kristin, more than $1.2 million in damages and fees.

The decision was the second defeat for the adviser, Phil Scott, in the last 12 months. A second set of clients, John, Natalie and Harriet Baker, won $880,000 in damages against Mr. Scott in June.

Arbitrators ruled in favor of Mr. Scott in a third case in August. Another case, filed in April, is pending, according to records from the Financial Industry Regulatory Authority.

The two defeats are a blow to Mr. Scott, a 27-year veteran of Merrill and one of the most acclaimed members of its vaunted "Thundering Herd" of 15,000 brokers. Mr. Scott was ranked the 33rd top broker in the country and the top adviser in Washington State last year by Barron's, managing about $1.1 billion in client assets.

"He's had a long and distinguished career as a financial adviser," said Bill Halldin, a spokesman for Merrill.

The case pressed by Mr. Mirabelli, who was the personal catcher for the pitcher Tim Wakefield and is now a real estate agent in Michigan, is unusual in some ways. Mr. Mirabelli and his wife invested $880,219 in March of 2008 with Mr. Scott, who put the money into the Merrill Lynch Phil Scott Team Income Portfolios, a collection of 33 dividend-paying growth stocks. They took out loans that made the account worth about $1.8 million. The loans were made on the condition that the account not dip below $1 million.

By November 2008, the Mirabellis' account had fallen below that level, forcing them to sell the portfolio to cover the loans amid markets battered by the financial crisis.

In the arbitration case, lawyers for the Mirabellis argued that Mr. Scott had put his clients' money into unsuitable investments, specifically an all-growth-stock portfolio. They also argued that he had failed to properly brief the Mirabellis on the loans and their requirements.

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Short List Option to Reduce Extended List Appointments

FINRA is highlighting parties' options to select replacement arbitrators when an arbitrator withdraws after a hearing is scheduled. In an effort to increase the parties' input into selecting replacement arbitrators, FINRA allows parties to agree to review a "short list" of potential arbitrators to find a replacement, rather than accept an extended list appointment.

FINRA will first attempt to replace the arbitrator by reviewing the lists that the parties previously returned. FINRA then invites any arbitrators previously ranked by the parties to serve. 

Short List Procedure

However, where no ranked arbitrators remain from the parties' initial lists, or no remaining arbitrators are able to serve, parties may stipulate to use of the short list method to select a replacement arbitrator. If the parties proceed under the short list replacement option, FINRA staff will use the Neutral List Selection System (NLSS) to generate randomly a list of three potential replacement arbitrators. FINRA staff will prescreen the arbitrators to confirm their availability for scheduled hearing dates. FINRA then sends to all parties the list of three arbitrators along with a copy of each arbitrator's Disclosure Report. Each side may strike one name from the list and may then rank all remaining arbitrators' names in order of preference within a prescribed number of days. FINRA combines each side's list to find the highest ranked replacement arbitrator.

Stipulation to Use Short List Option

All parties must agree in order to use the short list option to select a replacement arbitrator. When a hearing is scheduled within five calendar days of an arbitrator's withdrawal, removal, or unavailability, the parties also will need to stipulate to a postponement to use the short list option to select a replacement arbitrator. Parties may incur postponement fees pursuant to existing Customer Code Rule 12601 and Industry Code Rule 13601 when hearing dates are postponed. If the parties do not stipulate to use the short list option, FINRA staff will appoint a replacement arbitrator by generating randomly a replacement arbitrator's name using NLSS. Parties may only challenge arbitrators selected by this method for cause.

FINRA will notify parties in qualifying cases by letter of the option to stipulate to the use of the short list to select a replacement arbitrator.

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No. 10-3408 (February 7, 2012) N.D. Ill., E. Div. Affirmed Dist. Ct. did not err in dismissing instant complaint alleging that defendant-employer failed to pay plaintiff-employee relocation costs as promised where parties had entered into "Dispute Resolution Process" that required both parties to arbitrate "employment-related" disputes. Ct. rejected plaintiff's claim that arbitration clause covered only issues contained in separate employment contract. Ct. also rejected defendant's request for sanctions, even though it deemed instant appeal frivolous, where defendant had not made said request in separate motion, as required under Fed. R. App. P. 38.

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Consider the following hypothetical:

You are claims counsel for a large surety company who has spent the better part of last December preparing for and participating in eight days of arbitration hearings arising from the termination of your bonded principal in late 2010.  Back then, you had made the decision to contest liability under the performance bond on several grounds, not the least of which was the owner's retention of a replacement general contractor without surety consent and otherwise in violation of the conditions precedent set forth in the AIA-A312 form of performance bond utilized on the project.  Your bonded principal is now in bankruptcy, and you were required to take a leading role in the arbitration proceeding as a result.

Your outside counsel is now on the phone, announcing that the Award of the Arbitrator has been issued.  Unfortunately, it's not pretty.  The arbitrator has awarded the owner virtually the entire completion premium it had been seeking in the arbitration proceeding, minus a few adjustments here and there.  Adding insult to injury, the award is completely devoid of any reference to your A312 conditions precedent defense, which from day one you believed to be a winner, based on your interpretation of the prevailing legal authorities.

"That can't be right," you complain to your outside counsel.  "That's clear error by the arbitrator.  Doesn't the Federal Arbitration Act give me a right to challenge his obvious failure to apply the law?"

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