USCA1 Opinion

September 9, 1992

[NOT FOR PUBLICATION]

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________

No. 92-1214
ELIE J. BAGHDADY,
Plaintiff, Appellant,
v.
LARRY D. SADLER, ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
___________________
____________________
Before
Cyr and Boudin, Circuit Judges,
______________
and Hornby,* District Judge.
______________
____________________
Edward F. Haber with
________________

whom Andrew A. Rainer and

_________________

Spairo, Grac
____________

Haber were on brief for appellant.

_____
Bryan G. Killian with whom David A. Guberman, Barbara O'Donn
________________
_________________ _______________
and Sherin and Lodgen were on brief for appellees.
_________________
____________________
____________________
_____________________
* Of the District of Maine, sitting by designation.

HORNBY,

District Judge.
_______________

This

appeal

challenges

decision compelling arbitration of a dispute between a securities

firm

and

arbitrator's

customer,
award.

and

the

The record

eventual

confirmation of

satisfies us that

there was an

enforceable agreement between the parties to arbitrate

We

therefore conclude

that the

lower court

arbitration under the Federal Arbitration Act,

Because

the

disputes.

properly compelled
9 U.S.C.

1-16.

the challenge to the award reveals only frustration with

the results, there

is no

basis to vacate

decision to confirm the award.

the district

We therefore affirm.

court's

Facts
_____

Elie J. Baghdady held a substantial number of shares in

a company called Teledyne, Inc.
handling of
July,
Boston

1981,

("Teledyne").

Unhappy with

the

his securities account at another brokerage firm, in

Baghdady transferred

office of

Merrill Lynch,

("Merrill Lynch").

According to

Lynch account for the

facing on certain call

his

Teledyne

Pierce,

shares to

Fenner &

the

Smith, Inc.

Baghdady, he opened the Merrill

single purpose of containing risks

options.

He expected the

he was

arrangement to

last only until he could find a broker with sufficient "expertise

in

options

situation."
1981,

to help

him

out

of

[his]

precarious

investment

When he opened the Merrill Lynch account on July 29,

Baghdady signed

Agreement."

The

an

agreement called

agreement

between [Baghdady and

provided

a "Standard

Option

that "[a]ny

controversy

Merrill Lynch] arising out of

such option

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transactions or

[the] agreement shall be

settled by arbitration

only before the National Association of Security Dealers . . . ."

In

November, 1981,

Baghdady met

Larry D.

Sadler and

John

Voll, two

Burlington,
trading.

stockbrokers

Massachusetts,

operating out
office

and perhaps find a

continued to

way to reduce the

escalate under Merrill Lynch's

1981, Baghdady directed Merrill

at

the

transferring

in

options

slightly

losses that had

watch, in December,

Lynch to open an account

Burlington location.

Merrill

Lynch

in his

did so

by

the trade balances in the Boston account to a newly

assigned account at Burlington.

still

expertise

Lynch's

Believing that the Burlington office would better serve

his needs

name

with

of Merrill

different investment

involved

options

Once at the Burlington office, a

strategy was pursued

trading

against

Baghdady's misfortunes continued at

the

although it

Teledyne

stock.

the Burlington office and by

the time he closed that account in 1982 his losses had mounted to
$1,432,248.91.
On
Merrill

August 2,
Lynch

1985,

Baghdady brought

and Sadler,

seeking

this action

against

for their

alleged

damages

mishandling of his securities account.

Merrill Lynch and Sadler

moved to compel arbitration under the Federal Arbitration

U.S.C.

1-16.

objections

and

That

motion

the case

National Association of

proceeded

NASD panel

granted
to

awarded

Baghdady's

Inc. (the

the

"NASD").

evidentiary hearing, a three-

Baghdady the
-3-

over

arbitration before

Securities Dealers,

On February 26, 1991, following an

member

was

Act, 9

amount of

$60,720.15.

Baghdady petitioned
NASD

award, but

award.

the district court to vacate

on January 14,

1992, the

or correct the

court confirmed

the

Baghdady has appealed, challenging both the initial order

to arbitrate and the final confirmation of the award.

The Decision to Compel Arbitration
__________________________________
The

document that

explicitly governed
for

put and

Baghdady signed

on July

"any transaction" executed by

call

options.

It

stated that

29, 1981,

Merrill Lynch

"any

controversy

between us arising out of such option transactions . . . shall be

settled by
terms
all

arbitration. . . ."

to a particular account.
accounts the customer might

controversy

here

involves put

Merrill Lynch on behalf

the terms of the

The

document did not

Instead, its

of Baghdady.

call

Lynch.1

options exercised

It is

agreement to arbitrate.

he did not read the

scope extended to

have with Merrill

and

limit its

The

by

thus clearly within

Baghdady

asserts that

printed text of the document when

he signed

it, did not intend to enter into an arbitration agreement and did
not intend that the

agreement would apply to any

other account.

He likewise asserts that when he opened the Burlington account in

____________________

1 Paragraph 3, for example, provided:

"Any securities and
funds held by you in any account of mine with you shall be held
by you as security for the performance by me of my obligations to

you under this Agreement."

Paragraph 8 also made clear that
Merrill Lynch contract documents applied to more than one
account:
"Any agreement by me with you, whether previously or
hereafter made applicable to any account of mine with you, shall
also apply to such option transactions except to the extent which
it conflicts with this agreement.
In the event of a conflict,
this agreement shall control, and where there is no conflict,
each provision of each agreement shall apply."
-4-

December,

1981, he did not

Although these
The

intend the July

may be disputed

document Baghdady did

matters, they are

sign was

scope was unrestricted.2

agreement to apply.

There is

clear on

not material.

its face

no suggestion that

and its

Baghdady

was prevented from reading the document before he signed it.

Baghdady argues that
document,

new account

Australia, would

still

under this interpretation

opened
be

30 years

subject

to

later

of the

in Melbourne,

arbitration.

If

the

customer's relationship with Merrill Lynch was ongoing during the

30
the

years (as it was here during

case.

situation
such

that

agreement

Neither

six months), that might well be

in that case nor

in this case

where the contractual relationship has

the
to

parties
have

Baghdady transferred

lost

might
any

reasonably
continuing

do we have a

come to an end

expect
vitality.

his stock directly from

their

legal

Instead,

the Boston account

to the Burlington account.

Baghdady also points to the language in Par-Knit Mills,

_______________

Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3rd Cir.
______________________________________
1980),

that "[i]f

there

unequivocal arbitration
proper and timely
"doubt"

as

to whether

agreement] exists,

the

demand, should be submitted

in Par-Knit,
________

material fact -- was

authority

is doubt

however -- and thus

[an

matter, upon
to a jury."

the genuine

whether a company's production

to bind the corporation for which

express

The

issue of

manager had

he spoke.

There is

____________________

2 Baghdady is bound by his "external expression of intention

as distinguished from [any] undisclosed intention."
Restatement
___________
(Second) of Contracts
2 cmt. b (1981).
_____________________
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no dispute

here that

Baghdady

had authority

to bind

himself.

Since we find the language clear in the contract he signed, there

is no

issue

for a

trial, jury

Arbitration Act, 9 U.S.C.

or nonjury,

under the

Federal

4.

We conclude therefore that the district court

properly

ordered arbitration under the Federal Arbitration Act.

The Arbitration Award
_____________________

The Federal Arbitration Act permits a district court to

vacate an arbitration award where it finds certain wrongdoing
abuses in the arbitration process.
not

asserted that any such statutory

contends that

the

U.S.C.

10.

or

Baghdady has

abuses have occurred here.

Rather,

he

because

there was evidence of a "manifest disregard of the law,"

citing Wilko v. Swan, 346

______________
judicial standard

award should

U.S. 427, 436-37

for reviewing

have

been vacated

(1953) (creating

arbitration awards

outside the

Federal Arbitration Act), overruled on other grounds by Rodriquez

_____________________________ _________
de Quijas v. Shearson/American Express, Inc.,
________________________________________________

490

U.S.

477

is

that

the

legal principles

for

(1989).
Cut
arbitrators

to

its

essence,

fully understood

Baghdady's claim

established

calculating damages, but disregarded

those principles.

Baghdady

insists that such disregard of the law is proven by the amount of

damages

actually

awarded

was

transactions

awarded.

the
in the

"sum

of

He

maintains

[his]

account."

losses

If that was
-6-

that the
on

$60,720.15

precisely

the basis

two

for the

award,

he argues, then there must have been a manifest disregard

of the

law because the

have

distinguished

demonstrated

on

those

vacating

disregard of

two

"the 25

Baghdady's displeasure
basis for

arbitration panel could

transactions

other

the

award.

from

transactions

with his recovery,

For

not justifiably
the

in his

losses

account."

however, provides

us

to

find

no

manifest

the law, "there must be some showing in the record,

other than the result obtained, that the arbitrators knew the law
______________________________
and expressly
F.2d

6,

10

omitted).3
result

disregarded it."
(1st

Cir.

Here,

1990)

Baghdady

to buttress

Advest, Inc. v. McCarthy, 914

__________________________
(emphasis

supplied)

has nothing

his claim

but

of manifest

the

(citations

arbitration

disregard.

That is

simply insufficient.
Advest
______

left open

one

other additional

possibility:

"In

certain circumstances, the governing law may have such widespread

familiarity, pristine clarity, and irrefutable applicability that

a

court

could

assume

the

notwithstanding, swept it
Advest,
______

this

"arbitrators
that

is

not

arbitrators

knew

under the rug."

such

possess latitude

case.

the

Id. at
__
As

in crafting

rule

10.

Advest
______

But like

recognized,

remedies as

which they possess in deciding cases. . . .

and,

wide as

That leeway is

at

its zenith when, as

limitations on

here, the arbitration

choice

of remedies."

Id.
__

clause imposes no

at 10-11

(citations

____________________
3 Baghdady also

seeks to have

us modify Advest to include

______
"consideration of how the law was applied to the facts or
otherwise to avoid a miscarriage of justice."
We see no reason
to do so.
Such a modification would cut against decades of
judicial treatment of arbitrators' decisions.
-7-

omitted).

Even

if the

award

here was

transactions as Baghdady suggests, the

the

defendants

transactions.
erroneous.
review.

had

breached

Baghdady

based on

two specific

panel may have found that

promise

to

rescind

those

argues that this finding would have been

That, however, is a

matter beyond the scope

of our

As we have said before, we "do not sit to hear claims of

factual or legal

error by

does in reviewing decisions

an arbitrator as
of lower courts."

an appellate
Advest,
______

court

914 F.2d

at 8 (quoting United Paperworkers Int'l Union v. Misco, Inc., 484

_______ ______________________________________________
U.S.

29, 38

(1987)).

arguably construing

"[As]

or applying

long as

the

arbitrator is

the contract and

even

acting within

the scope
arbitrator

of

his

made a

authority,'

a court's

serious mistake

or committed

will not furnish a satisfactory basis for

Advest, 914 F.2d at 9 (quoting
______
_______
its reasoning, the

conviction

the

grievous error

undoing the decision."

Misco, 484 U.S. at 38).

_____

panel's award

that

here was at

Whatever

least within

the

realm of possible remedies that could have been fashioned in this

case.

The district court properly confirmed the award.

Judgment AFFIRMED.
________

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