Weber v. Merrill Lynch Pierce Fenner & Smith, Inc.

Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) (defendant) made investment recommendations for several members of the Weber family or their trusts (collectively, Weber) (plaintiffs). Any investment dispute between the parties was subject to mandatory, binding arbitration. At one point, Weber initiated arbitration against Merrill Lynch with the New York Stock Exchange (NYSE), alleging unsound investment recommendations. NYSE appointed Dean Guerin as one of the arbitrators and disclosed that Guerin belonged to the Dallas Country Club. A Merrill Lynch broker who had managed Weber’s accounts, Robert Cecil, and Cecil’s son also belonged to the Dallas Country Club. Weber objected to Guerin as an arbitrator based on his “friendship” with the Cecil family. In response, Merrill Lynch explained that Cecil knew Guerin based on Guerin’s reputation and that the two men had met several years prior at a non-country-club function, but Cecil did not know Guerin personally. The arbitration panel denied Weber’s challenge to Guerin. During the rest of the proceedings, including a five-day arbitration hearing, the panel denied several of Weber’s requests, including a request to add the Cecils as individual parties to the arbitration or to require certain discovery. In its final award, the panel found against Weber in all respects. Weber moved to vacate the arbitration award under 9 U.S.C. § 10 on the ground of evident partiality. In connection with the motion, Weber argued for the first time that Guerin had failed to disclose his wife’s membership in six of the same civil and social organizations as Cecil’s wife.