A new ruling by the U.S. Supreme Court in a case involving former

Ameriprise Financial

advisor Denise Badgerow may result in future disputes over arbitration awards ending up in state, rather than federal court.

Because arbitration is often mandatory in advisor and investor disputes, the court’s decision has broader implications for anyone seeking to confirm awards or to overturn cases they believe were wrongly decided.

It’s more than just a procedural matter, says Nicole Iannarone, a law professor at Drexel University. “It’s about who gets to decide whether an arbitration [award] can be vacated.”

The Supreme Court weighed in on a procedural matter that may affect how investors and advisors can seek to overturn arbitration cases they lost.

Al Drago/Bloomberg

Investor claims as well as intra-industry disputes involving advisors and brokerages are generally required to be heard before private arbitration forums run by Finra, a self-regulatory organization. If a party to an arbitration case feels the award was improperly decided, they can ask a court to vacate the award. The question before the Supreme Court in the recent case—Badgerow v. Walters et al.—was whether federal courts have jurisdiction to confirm or vacate an arbitration award under sections of the Federal Arbitration Act.

With one dissent, the justices ruled that some disputes over arbitration awards can be heard in state court.

Justice Elena Kagan, writing for the majority, noted that the Federal Arbitration Act authorizes parties to an arbitration agreement to ask a federal court to compel arbitration, but applications to confirm, vacate or modify awards don’t necessarily fall under federal jurisdiction. 

She wrote that “Congress chose to respect the capacity of state courts to properly enforce arbitral awards. In our turn, we must respect that evident congressional choice.”

A spokesperson for Ameriprise Financial, which was not party to the Supreme Court case, declined to comment. An attorney representing Badgerow’s former employers at REJ Properties, an independent practice affiliated with Ameriprise, Eve B. Masinter of New Orleans law firm Breazeale, Sachse & Wilson, did not respond to requests for comment.

Badgerow said in a statement that she was satisfied with the court’s ruling. “Ultimately, it is my hope that this decision will help others in similar circumstances get their day in court,” she said.

Badgerow currently runs her own wealth management practice, Southern Wealth Strategies, in Thibodaux, La. She is affiliated with Woodbury Financial Services, an independent broker-dealer, 

“I bring the same perseverance and dogged determination to my own firm that my legal team brought to this case,” she said. “Prevailing at this level after fighting for so long only makes the victory all that more sweet. And now I’m ready to close this chapter and continue building Southern Wealth Strategies. The future is bright.”

Long legal saga. Before the highest court in the nation weighed, Badgerow’s legal case had dragged on for eight years. In 2016, she filed an arbitration claim of wrongful termination against her former employers, Ameriprise Financial, three financial advisors, and REJ Properties, with which she was affiliated.

In 2018, a New Orleans-based arbitration panel ruled against her and dismissed her claims, according to the arbitration award. The following year, Badgerow’s attorney filed a motion in Louisiana state court to vacate the award. 

Her former employers at REJ responded by filing to move the case to federal court in New Orleans and asked the federal court to confirm the arbitration award they won. Badgerow opposed the effort, arguing federal court did not have jurisdiction. The federal court ruled against her, as did a federal appeals court.

The matter then went to the Supreme Court, which heard arguments last year, and issued its ruling on March 31. Justice Stephen Breyer was the sole dissent.

It is generally difficult to get a court to vacate an arbitration award, but having a choice in venue may have an impact on one’s chances, attorneys say.

“Venue always matters because decision-makers matter,” says Joseph Peiffer, a New Orleans-based attorney with law firm Peiffer Wolf Carr Kane Conway & Wise. Peiffer has represented investors in arbitration disputes. “State courts may be better for certain cases.”

Tom Lewis, an attorney at law firm Stevens & Lee in Lawrenceville, N.J., says the Supreme Court’s decision will affect attorneys’ choices when seeking to vacate or confirm arbitration awards. Federal courts, Lewis says, are a better venue for confirming an award in part because they are “much quicker and an easier process.”

Write to Andrew Welsch at [email protected]

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