L, an investor, brought a claim against T, an investment advisor with Royal Alliance, alleging that T had improperly placed her retirement funds in risky, illiquid investments. L demanded a FINRA arbitration but settled for 10% of the amount she initially demanded before the arbitration began. Then Royal Alliance asked the arbitrators to keep the arbitration open so it could move to expunge L’s allegations against T from FINRA’s Central Registration Depository on the ground that L’s allegations were false. During a telephonic hearing on that request, Royal Alliance was allowed to argue and to present T’s unsworn statements, but the arbitrators denied L’s request to present her own testimony or to cross-examine T. Held, the trial court properly denied confirmation and vacated the award. Royal Alliance had moved for confirmation under the California Arbitration Act, and CCP 1286.2(a)(5) directs a court to vacate an award due to the arbitrator’s refusal to hear evidence material to the controversy. Here, the arbitrators did so—whether or not they acted in accordance with FINRA rules of procedure, a disputed issue. Even though the arbitrators considered written submissions from both parties, they allowed only one side to present oral evidence, and that was sufficiently prejudicial to require vacatur of the award.
California Court of Appeal, Second District, Division 4 (Collins, J.); August 30, 2016; 2016 WL 4529229