The opinion of the court was delivered by: PHYLLIS HAMILTON, District Judge
ORDER GRANTING PETITION TO CONFIRM ARBITRATION AWARD
On August 31, 2005, the court heard argument in connection with
the petition of Stanley J. Katz, Edwin L. Katz, and First
Alliance Management, Inc., to confirm an arbitration award
entered in favor of petitioners and against respondents Round
Hill Securities, Inc., and First Allied Securities, Inc.
Petitioners appeared by their counsel Richard T. White and Thomas
P. Whelley II, and respondents appeared by their counsel Michael
R. Simmonds. Having read the parties' papers and carefully
considered their arguments and the relevant legal authority, and
good cause appearing, the court hereby GRANTS the petition to
confirm the arbitration award.
Petitioners Stanley J. Katz and Edwin L. Katz ("the Katz
brothers") are residents of Dayton, Ohio. Petitioner First
Alliance Management, Inc. ("First Alliance"), is an Ohio corporation owned by the Katz brothers, and is registered with
the Securities and Exchange Commission as an investment advisor.
Respondent Round Hill Securities, Inc. ("Round Hill") is a
California corporation and a registered broker-dealer of
On March 26, 1998, each of the Katz brothers executed a
National Association of Securities Dealers ("NASD") Form U-4
(Uniform Application for Securities Industry Registration or
Transfer). Round Hill filed the Form U-4s, which also stated that
each of the Katz brothers would be transferring as a broker from
Paine Webber on March 27, 1998, with the appropriate regulators.
In signing the Form U-4, the Katz brothers agreed to
arbitrate any dispute, claim, or controversy that may
arise between me and my firm, or a customer, or any
other person, that is required to be arbitrated under
the rules, constitutions, or by-laws of the
organizations indicated in item 10 as may be amended
from time to time and that any arbitration award
rendered against me may be entered as a judgment in
any court of competent jurisdiction.*fn1
On March 27, 1998, the Katz brothers and First Alliance entered
into a Registered Representative Agreement ("the Agreement") with
Round Hill, whereby Round Hill appointed petitioners independent
"Contractors" for Round Hill in the sales of securities to the
The Agreement, which was drafted by Round Hill, provided in ¶
8.3 that "any" controversy between the parties "arising out of or
relating to this Agreement or the breach thereof" would be
submitted to binding arbitration in accordance with the rules of
either NASD or the American Arbitration Association ("AAA"), "as
the Contractor [i.e., the petitioners herein] may elect." The
Agreement provided further that any court state or federal
having jurisdiction was granted power to enter a judgment on any
award resulting from arbitration because the arbitration award
resulting from arbitration was to be a final and nonappealable
decision on the controversy submitted.
In January 2003, a dispute arose between the parties concerning
the payment of commissions to the Katz brothers, and management
fees to First Alliance. This was a matter "arising out of" the
Agreement. Petitioners elected to take the matter to arbitration
with the AAA. An arbitrator was selected and confirmed in
September 2003, and the arbitrator held hearings and heard evidence. On April 4, 2005, the arbitrator
issued an award in favor of petitioners in the amount of
$306,902, plus $141,000 in attorneys' fees. On April 8, 2005,
petitioners filed the present petition for confirmation of the
On May 9, 2005, Round Hill filed an application for an order
vacating the arbitration award (in lieu of filing an opposition
to the petition). Round Hill asserted that the arbitrator had
exceeded his powers because he did not have jurisdiction to hear
the Katz brothers' claim, and because the award ordered Round
Hill to pay commissions to a non-broker-dealer and non-NASD
member (First Alliance), in violation of NASD rules.
In June 2005, Round Hill merged with respondent First Allied
Securities, Inc. ("First Allied"), a New York corporation with
its principal place of business in San Diego, with First Allied
as the surviving entity. After Round Hill and First Allied
merged, petitioners filed a supplemental petition to confirm the
award, and served First Allied. First Allied then filed a notice
of joinder in the application to vacate the award.
The Federal Arbitration Act ("FAA") "gives federal courts only
limited authority to review arbitration decisions, because broad
judicial review would diminish the benefits of arbitration."
Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010,
1012 (9th Cir. 2004) (citing Kyocera Corp. v. Prudential-Bache
Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2003) (en
banc)). Under the FAA, if a party seeks a judicial order
confirming an arbitration award, "the court must grant such an
order unless the award is vacated, modified, or corrected as
prescribed in sections 10 and 11 of this title." 9 U.S.C. § 9.
Confirmation is required "even in the face of erroneous ...