Rule 206 ELECTRONIC CITATION: 2000 FED App. 0150P (6th Cir.) File Name: 00a0150p.06… v. Adam A. Spencer; Dean Witter Reynolds, Inc.; Smith Barney , Inc.

*The Honorable John R. Gibson, Circuit Judge of the United States
Court of Appeals for the Eighth Circuit, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0150P (6th Cir.)
File Name: 00a0150p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
W OODROW W. DAWAHARE ,
Plaintiff-Appellant,
v.
ADAM A. S PENCER; DEAN
W ITTER R EYNOLDS, INC.;
S MITH BARNEY , INC.,
Defendants-Appellees.
;>

1
No. 98-6356
Appeal from the United States District Court
for the Eastern District of Kentucky at Lexington.
No. 98-00027—Karl S. Forester, District Judge.
Argued: September 14, 1999
Decided and Filed: April 27, 2000
Before: SUHRHEINRICH, COLE, and GIBSON,* Circuit
Judges.

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2 Dawahare v. Spencer, et al. No. 98-6356
_________________
COUNSEL
ARGUED: J. Robert Lyons, Jr., WOODWARD, HOBSON
& FULTON, Lexington, Kentucky, for Appellant. William
E. Johnson, JOHNSON, JUDY, TRUE & GUARNIERI,
Frankfort, Kentucky, Nancy H. Baughan, PARKER,
HUDSON, RAINER & DOBBS, Atlanta, Georgia, for
Appellees. ON BRIEF: J. Robert Lyons, Jr., Glen S. Bagby,
WOODWARD, HOBSON & FULTON, Lexington,
Kentucky, for Appellant. William E. Johnson, JOHNSON,
JUDY, TRUE & GUARNIERI, Frankfort, Kentucky, Nancy
H. Baughan, David G. Russell, PARKER, HUDSON,
RAINER & DOBBS, Atlanta, Georgia, Theodore E. Cowen,
GRASCH, WALTERS & COWEN, Lexington, Kentucky, for
Appellees.
_________________
OPINION
_________________
JOHN R. GIBSON, Circuit Judge. Woodrow Dawahare
appeals from the district court's denial of his motion to vacate
the arbitration award he obtained against Adam Spencer and
Dean Witter Reynolds, Inc. Dawahare argues that because the
damages awarded were grossly inadequate and bore no
relationship to the evidence submitted, the award itself shows
evident partiality. Further, he argues that the arbitrators
manifestly disregarded the law of damages. We affirm the
district court's confirmation of the award.
In view of the limited issues presented, many of the factual
details are irrelevant to our discussion. Dawahare established
a brokerage account at Shearson Lehman Brothers, Inc. after
receiving a "cold call" from Spencer. Smith Barney, Inc.
acquired Shearson Lehman sometime after Dawahare opened
his account. In August 1994, Spencer informed Dawahare
that he planned to leave Smith Barney and go to Dean Witter,
and Dawahare agreed to transfer his account. Both before and

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No. 98-6356 Dawahare v. Spencer, et al. 3
after the transfer, Spencer engaged in short trading with the
Dawahare account. As a result of the price increase of stocks
in which Dawahare held short positions, the account declined
in value by $495,322 during the last two months of 1994.
After Dean Witter learned that Dawahare's son had
complaints about the handling of his father's account, Spencer
was fired.
Pursuant to pre-dispute arbitration agreements between the
parties, Dawahare submitted the controversy to a National
Association of Securities Dealers, Inc. arbitration panel in
1996. Dawahare claimed that Spencer had engaged in
unsuitable and excessive trading, causing him damages in
excess of $600,000. The NASD panel denied Dawahare's
claims against Smith Barney, but found in his favor against
Dean Witter, awarding $25,000 in compensatory damages and
$24,000 in punitive damages. The arbitrators also found
Spencer liable to Dawahare for $1000. In the district court,
Dawahare moved to vacate the award; the court denied his
motion and granted cross motions to confirm the award.
The district court had before it the transcript of the
arbitration hearing. At the hearing, Dawahare presented
evidence that his health was failing and that he was unable to
understand the significance of the short trading strategy
pursued by Spencer because of progressive dementia. His
wife testified that she thought Dawahare was in over his head.
The brokerage firms maintained that Dawahare was an
experienced investor, that he was happy with Spencer and
with his handling of the account while it was profitable, and
that they were unaware of any health or memory problems
Dawahare may have had.
Smith Barney's expert witness testified that Dawahare's
account increased in value while it was at Smith Barney.
Dawahare's expert witness testified that a conservative
investment strategy, assuming a reasonable return of six
percent, would have resulted in an account value of
$776,603.28 in contrast to the $258,731.97 the Dean Witter
account was worth at the end of January 1995. Dawahare's

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4 Dawahare v. Spencer, et al. No. 98-6356
expert then added interest to the difference between these two
figures, arriving at a total of $604,463.06 in damages. Dean
Witter argued that Dawahare had authorized the activity in his
account. Neither Dawahare nor Spencer testified at the
arbitration hearing.
The district court rejected Dawahare's argument that the
arbitration award should be vacated because of evident
partiality or manifest disregard of the law and confirmed the
award. We review the confirmation of an arbitration award
for clear error on findings of fact and de novo on questions of
law. See Glennon v. Dean Witter Reynolds, Inc., 83 F.3d 132,
135 (6th Cir. 1996); Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Jaros, 70 F.3d 418, 420 (6th Cir. 1995).
"It is well established that courts should play only a limited
role in reviewing the decisions of arbitrators." Shelby County
Health Care Corp. v. A.F.S.C.M.E., Local 1733, 967 F.2d
1091, 1094 (6th Cir. 1992). The Federal Arbitration Act
presumes that arbitration awards will be confirmed. See 9
U.S.C. § 9 (1994); Andersons, Inc. v. Horton Farms, Inc., 166
F.3d 308, 328 (6th Cir. 1998). A court may vacate an
arbitration award in the following situations: (1) where the
award was procured by fraud, (2) where the arbitrators were
evidently partial or corrupt, (3) where the arbitrators
misbehaved so that a party's rights were prejudiced, or (4)
where the arbitrators exceeded their powers or executed them
so that a final, definite award was not made. See 9 U.S.C.
§ 10(a) (1994). In addition, a reviewing court may vacate an
award where the arbitrators have manifestly disregarded the
law. See Glennon, 83 F.3d at 136.
Dawahare first argues that the award should be vacated
under 9 U.S.C. § 10(a) because the discrepancy between the
damages awarded and the damages alleged shows evident
partiality. We see no basis to sustain this argument. Only if
a reasonable person would have to conclude that the
arbitration panel was partial to a party will we find evident
partiality. See Andersons, Inc., 166 F.3d at 328. "The alleged
partiality must be direct, definite, and capable of
No. 98-6356 Dawahare v. Spencer, et al. 9
would be to disregard the fact finder's responsibility to
evaluate testimony.
We decline to adopt Dawahare's suggestion that we engage
in a more extensive review of arbitration awards. To do so
would undermine the goal of the arbitration process: to
resolve disputes efficiently while avoiding extended litigation.
See, e.g., Willemijn Houdstermaatschappij, BV v. Standard
Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997); Island
Creek Coal Sales Co. v. City of Gainesville, 764 F.2d 437,
441 (6th Cir. 1985).
Smith Barney requests attorneys' fees and double the costs
incurred in this appeal, arguing that Dawahare's appeal is
frivolous. We deny Smith Barney's motion for sanctions. For
the foregoing reasons, the judgment of the district court is
affirmed.

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8 Dawahare v. Spencer, et al. No. 98-6356
simply no evidence that the arbitrators were aware of some
relevant law on damages that they chose to ignore, and we
question whether the damages evidence presented by
Dawahare required any particular outcome.
During closing argument at the arbitration hearing,
Dawahare's attorney characterized the damages as two types:
excessive commissions paid while Spencer churned the
account at Smith Barney and the loss in value that occurred at
Dean Witter due to the short positions in the account. His
expert, however, concluded that Dawahare should recover the
amount of money that his account would have earned had it
been invested conservatively and earned 6%. Dawahare's
attorney stated: "So, I would like to give you a nice clean
theory for allocating this award among these respondents, and
I'm afraid I can't do that. I'm going to have to leave it to your
wisdom." Dawahare cannot rely upon the wisdom of the
decision makers without citing any rule of law to support his
damages claim and then later argue that the arbitrators
disregarded the law.
Dawahare's argument on manifest disregard of the law is
premised on the fact that the only damages evidence was his
expert's opinion that he had sustained damages in excess of
$600,000. In essence, he argues that the arbitrators were
compelled to accept this testimony and award that amount.
We agree with the district court's observation that "[e]xpert
testimony, even if uncontradicted, may be believed in its
entirety, in part, or not at all." See also Quinones-Pacheco v.
American Airlines, Inc., 979 F.2d 1, 5 (1st Cir. 1992) (fact
finder not ordinarily bound by uncontradicted expert opinion
testimony, particularly where testimony "lacks great
convictive force" in context of evidence as a whole); Gregg
v. U. S. Indus., Inc., 887 F.2d 1462, 1469-70 (11th Cir. 1989)
(expert testimony is not conclusive and need not be accepted).
The court also pointed out that the expert's opinion had been
impeached on cross-examination and that there was evidence
that Dawahare maintained substantial control over his
investments. For us to hold that the arbitration panel was
compelled to accept Dawahare's expert's damages evidence
No. 98-6356 Dawahare v. Spencer, et al. 5
demonstration, and 'the party asserting [it] . . . must establish
specific facts that indicate improper motives on the part of the
arbitrator.'" Id. at 329 (quoting Consolidation Coal Co. v.
Local 1643, United Mine Workers of Am., 48 F.3d 125, 129
(4th Cir. 1995)). Because Dawahare points to nothing but the
amount of the award to establish evident partiality, there is no
basis to vacate the award on this ground.
Dawahare also argues that the substantial disparity between
the damages awarded and the damages evidence presented
establishes a manifest disregard of the law of damages. He
asserts that the common law entitles him to recover all losses
proximately caused by the wrongful acts of the liable parties.
Our review for manifest disregard of the law does not open
the door to extensive review of arbitral awards. See Jaros, 70
F.3d at 421 ("This court has emphasized that manifest
disregard of the law is a very narrow standard of review.").
An arbitration decision "must fly in the face of established
legal precedent" for us to find manifest disregard of the law.
Id. An arbitration panel acts with manifest disregard if
"(1) the applicable legal principle is clearly defined and not
subject to reasonable debate; and (2) the arbitrators refused to
heed that legal principle." Id. Thus, to find manifest
disregard a court must find two things: the relevant law must
be clearly defined and the arbitrator must have consciously
chosen not to apply it. See M & C Corp. v. Erwin Behr
GmbH & Co., 87 F.3d 844, 851 n.3 (6th Cir. 1996) (noting
that if its review of an arbitral award were based on FAA
standards, there was no manifest disregard since any mistake
in applying the law was inadvertent and not based on a
conscious decision to ignore the law). Arbitrators are not
required to explain their decisions. If they choose not to do
so, it is all but impossible to determine whether they acted
with manifest disregard for the law. See Jaros, 70 F.3d at
421.
Chief Judge Martin, concurring in Federated Department
Stores, Inc. v. J.V.B. Industries, Inc., 894 F.2d 862 (6th Cir.
1990), recognized the problems inherent in reviewing an

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6 Dawahare v. Spencer, et al. No. 98-6356
arbitration award for manifest disregard of the law where the
arbitrators fail to state a reason for their decision. He stated
that courts are forced to participate in a "judicial snipe hunt"
with the parties arguing about law that may or may not have
been disregarded by the arbitrators. See id. at 871. He would
allow reversal when there are no reasons given for an
arbitration decision and the record is insufficient to show that
the arbitrators did not manifestly disregard the law. See id.
No panel of this court has adopted this reasoning.
The arbitrators' decision in this case outlined the parties'
contentions and discussed the claims and evidence in some
detail for some three-and-a-half, single-spaced pages. The
monetary award simply designated the amount of damages
without detailed explanation. It is difficult to say that the
arbitrators refused to heed a clearly defined legal principle.
Dawahare points to nothing in the record that shows the
arbitrators' awareness of the common law that he alleges to be
applicable. This is not a case where one of the parties clearly
stated the law and the arbitrators expressly chose not to
follow it.
Since Supreme Court dictum established the manifest
disregard of the law standard forty-seven years ago, see Wilko
v. Swan, 346 U.S. 427, 436 (1953), overruled on other
grounds, Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477 (1989), only two federal courts of appeals
have used it to vacate arbitration decisions. Dawahare
understandably cites to these cases, but to no avail, as both
cases are easily distinguished from the case before us.
The Second Circuit held that an arbitration panel that
denied relief on an ADEA claim showed manifest disregard
by ignoring "the law or the evidence or both" where the
plaintiff presented strong evidence that he was fired because
of his age. Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 204
(2d Cir. 1998), cert. denied, 119 S.Ct. 1286 (1999). The court
pointed out that the parties explained the applicable law to the
arbitrators. See id. at 204. This is important because manifest
disregard requires awareness of the relevant law. See Jaros,
No. 98-6356 Dawahare v. Spencer, et al. 7
70 F.3d at 421 (stating that an arbitrator must refuse to heed
a clearly defined legal principle in order to manifestly
disregard the law). Here, Dawahare points to nothing in the
record that indicates the arbitration panel was aware of the
law he alleges it ignored. Also, the Halligan court
particularly emphasized the importance of assuring plaintiffs
with employment discrimination claims a forum in which to
effectively vindicate their statutory rights. See 148 F.3d at
201-03.
In Montes v. Shearson Lehman Brothers, Inc., 128 F.3d
1456 (11th Cir. 1997), the Eleventh Circuit reversed the
district court's confirmation of an arbitration award because
the arbitration panel acted in manifest disregard of the law.
An employee sued her former employer for overtime pay
pursuant to the Fair Labor Standards Act, and the dispute
went to arbitration. See id. at 1458. The employer's attorney
repeatedly urged the arbitration panel to disregard the FLSA
when making its decision and the panel denied the employee's
claim. See id. at 1458-59. Because there was no evidence the
arbitrators rejected the urging and because there was a lack of
factual support for the ruling, the court remanded with
instructions to refer the case to a new arbitration panel. See
id. at 1464. The concurrence emphasized that the decision
was narrowly limited to the unusual facts of the case. See id.
Here, there is no evidence that Spencer, Smith Barney, or
Dean Witter urged the arbitrators to disregard the applicable
law.
Dawahare's vague assertion that the arbitrators manifestly
disregarded the common law of damages falls far short of the
necessary showing of the law that clearly applied in the case
and of conscious disregard of that law by the arbitrators. It is
possible to argue that the arbitrators misapplied the law of
damages, that is, punitive damages would only be warranted
for egregious conduct by Dean Witter and, in that case, a
compensatory award of less than 5% of the damages alleged
is likely too low. To show manifest disregard, however, a
party must show more than "[a] mere error in interpretation or
application of the law." Jaros, 70 F.3d at 421. There is

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