9th Circuit Court of Appeals
Herbert Coutee is a retired factory worker with a second-grade education. His grandson-in-law Jason Wirtzer arranged to have Coutee’s individual retirement account transferred to Barington Capital Group LP. The transfer agreement provided that New York law would apply to any disputes arising from the agreement. Wirtzer arranged for Barington to sell the assets in the account to purchase penny stocks. As a result, the value of the account fell from $55,000 to $600. Coutee filed a complaint against Barington with the National Association of Securities Dealers. An arbitrator applied California law to award Coutee more than $200,000, including punitive damages and attorneys fees. On review, the district court vacated the award of attorneys fees.
Affirmed in part, reversed in part and remanded. An arbitration award may be vacated if it manifestly disregards the law. The arbitrator chose to credit Coutee’s evidence that his account was nearly worthless, rather than Barington’s evidence that it had increased in value. This decision was not irrational and, thus, the award of compensatory damages is affirmed. That the arbitrator applied California law rather than New York Law was harmless error. Coutee could have recovered punitive damages under New York law because of his vulnerable status as an uneducated retiree. He was also eligible for attorneys fees under New York law. Thus, the arbitrator’s award, including attorneys fees is affirmed in its entirety.
Coutee v. Barington Capital Group LP, U.S.C.A. 9th No. 02-56016, July 28, 2003, by Hall