Lotz v. Vietor

IN THE COURT OF APPEALS OF IOWA

No. 23-1262
Filed July 24, 2024

WILLIAM LOTZ, GLORIA LOTZ, WILLIAM BRANDENBURG, WILLIAM QUINN,
JEFFREY TEMEYER, LEONARD KOBLISKA, SHEILA FANGMAN, ANGELA
QUINN, MICHAEL DECKER, CURTIS WILSON, LINDA WILSON and RICK
KAYSER,
Plaintiffs-Appellees,

vs.

DANA VIETOR,
Defendant-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Buchanan County, John J. Sullivan,

Judge.

A defendant in an arbitration proceeding appeals the district court’s denial

of his motion to vacate an arbitration award. AFFIRMED.

Marcus P. Zelzer, Andrew R. Shedlock (pro hac vice), and Victoria H. Buter

of Kutak Rock, LLP, Minneapolis, Minnesota, for appellant.

Gail E. Boliver of Boliver Law Firm, Marshalltown, and Matthew Craft of

Daniels, Hines, et al., Cedar Falls, for appellees.

Heard by Greer, P.J., and Ahlers, Badding, Chicchelly, and Langholz, JJ.
2

BADDING, Judge.

Dana Vietor, a former registered representative with the Financial Industry

Regulatory Authority (FINRA), appeals the district court’s denial of his motion to

vacate an arbitration award against him for just over $5.7 million on claims brought

by ex-clients. Vietor contends the award should have been vacated under the

Federal Arbitration Act (FAA) because (1) the arbitration panel refused to postpone

the final hearing after Vietor’s lead trial counsel withdrew; (2) one of the arbitrators

failed to disclose a conflict of interest; and (3) the panel’s decisions on attorney

fees, breach of contract, and the arbitration eligibility of several claims were in

manifest disregard of the law. The claimants request an award of appellate

attorney fees as a sanction against Vietor under Iowa Rule of Civil

Procedure 1.413(1).

Operating within the limited scope of review under the FAA, which is

extraordinarily deferential to arbitration awards, see Med. Shoppe Int’l v. Turner

Inv., Inc., 614 F.3d 485, 488 (8th Cir. 2010), we affirm the district court’s denial of

Vietor’s motion to vacate the award and entry of judgment in favor of the claimants.

The claimants’ request for appellate attorney fees is denied.

I. Background Facts and Proceedings

In June 2021, a group of clients who had invested money with Dana Vietor

filed a statement of claim with FINRA to start arbitration proceedings. Most of the

investors were in their seventies, with a historically conservative investment

objective and risk tolerance. Beginning in 2012 and continuing through 2019, they

alleged that Vietor advised them to surrender annuities and place their funds into

a “cancer treatment scheme”:
3

The investment “story” as told to the Claimants was to offer
patients cancer treatment via a “Cyberknife” and other equipment.
The story included the acquisition of a building to house the
equipment so the treatment would be offered through LLCs managed
principally by Mr. Vietor. . . . Investors were to profit from the services
provided to cancer patients.

But Vietor never provided the claimants with financial information after they

surrendered their annuities or advised them of the current financial condition of

their investments, which they asserted were “a complete loss for some time while

Vietor file[d] valuations with custodians showing untenably high values.”

The claimants sought compensatory and punitive damages against Vietor

on their causes of action for misrepresentation, fraudulent nondisclosure, negligent

misrepresentation, breach of fiduciary duty, negligence, breach of contract, and

violations of the Iowa Securities Act. They also sought attorney fees under a one-

third contingency fee agreement with their counsel. Attorneys Chris Parrington

and Andrew Shedlock with Kutak Rock, LLP entered appearances and filed an

answer with counterclaims on Vietor’s behalf. Early on in the proceedings, Vietor

moved to dismiss some of the claims against him as time-barred by FINRA

rule 12206, which states: “No claim shall be eligible for submission to arbitration

under the Code where six years have elapsed from the occurrence or event giving

rise to the claim.” The panel denied Vietor’s motion to dismiss, and a final hearing

was set for ten days, starting on September 26, 2022.

On September 14, Vietor moved to postpone the hearing due to the sudden

and unexpected departure of Parrington—his lead trial counsel—from Kutak Rock

two days earlier. While Shedlock had “collaborated on strategy, filings, pleadings

and response” in the case, Vietor did not want to proceed to the hearing with
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Shedlock as his only attorney. He estimated that it would “take several weeks, if

not months,” to find a new lead attorney. The arbitration panel partially granted

Vietor’s request, ruling that because Vietor “filed a motion to postpone the hearing

and . . . that we only have two arbitrators on the Thursday before the hearing

scheduled for Monday,” the hearing would be “postponed one week to begin on

October 3, 2022 to continue through October 7, 2022.”

The case administrator appointed a third arbitrator on September 28—Peter

Hildreth. His disclosure report noted that he had retired as commissioner of the

New Hampshire Banking Department in 2011. Under the FINRA rules for

appointing arbitrators, Vietor was notified that Hildreth could only be challenged

for cause because none of the arbitrators on the parties’ ranked list were available

to serve.

Vietor did not challenge Hildreth’s appointment, and the case proceeded to

the final hearing. In an unreasoned decision filed on November 28,1 the panel

awarded the claimants $4,275,177 in compensatory damages and $1,425,058 in

attorney fees under Iowa Code section 502.509 (2021). The claimants’ request

for punitive damages was denied, as were Vietor’s counterclaims.

The claimants petitioned to confirm the arbitration award on November 30.

Vietor resisted the petition and moved to vacate the award under the FAA, 9 U.S.C.

§ 10(a). Portions of the arbitration record were attached to the parties’ filings in

the district court, with additional documents offered at the hearing on

1 FINRA rule 12904(g) allows an “explained decision,” which is “a fact-based award

stating the general reason(s) for the arbitrators’ decision,” only when all parties
jointly request such a decision.
5

January 31, 2023. Following that hearing, the district court issued a ruling denying

Vietor’s motion to vacate and granting the claimants’ petition to confirm the award.

Vietor appeals.

II. Analysis

The parties agree that their FINRA arbitration proceeding is governed by

the FAA. See, e.g., Ploetz for Laudine L. Ploetz, 1985 Tr. v. Morgan Stanley Smith

Barney, LLC, 894 F.3d 894, 898 (8th Cir. 2018) (applying the FAA in an appeal of

a district court’s denial of a motion to vacate a FINRA arbitration award). When

reviewing a district court’s order confirming an arbitration award under the FAA,

“we review de novo questions of law, but we accept the district court’s factual

findings unless clearly erroneous.” Med. Shoppe Int’l, Inc., 614 F.3d at 488

(citation omitted). “Although we review de novo the district court’s legal

conclusions, we provide ‘an extraordinary level of deference’ to the underlying

arbitration award.” Id. (citation omitted).

Within this “tightly circumscribed” review, Axia Netmedia Corp. v. Mass.

Tech. Park Corp., 973 F.3d 133, 140 (1st Cir. 2020), “[c]ourts have no authority to

reconsider the merits of an arbitration award, even when the parties allege that the

award rests on factual errors or on a misinterpretation of the underlying contract,”

Med. Shoppe Int’l, 614 F.3d at 488. Yet “arbitration awards are not invincible.”

Axia Netmedia Corp., 973 F.3d at 140 (citations omitted). “Section 9 of the FAA

provides that a reviewing court ‘must’ confirm an award unless it is ‘vacated,

modified, or corrected as prescribed in sections 10 and 11.’” 2 Brown v. Brown-

2 Section 11, which is not at issue here, sets out grounds for modifying the
arbitrator’s award. 9 U.S.C. § 11.
6

Thill, 762 F.3d 814, 818 (8th Cir. 2014). The FAA authorizes a district court to

vacate an arbitration award under section 10 “in four limited circumstances.” Med.

Shoppe Int’l, 614 F.3d at 488. But “in the absence of one of these grounds, the

award must be confirmed.” Id.

The grounds at issue here are section 10(a)(2), “where there was evident

partiality or corruption in the arbitrators, or either of them,” and section 10(a)(3),

“where the arbitrators were guilty of misconduct in refusing to postpone the

hearing, upon sufficient cause shown.” 9 U.S.C. § 10(a)(2), (3). Vietor has also

raised the judicially-created ground of “manifest disregard” for the law.

Before the Supreme Court’s decision in Hall Street Associations, L.L.C. v.

Mattel, Inc., 552 U.S. 576, 584–86 (2008), “a court could vacate arbitration awards

on grounds other than those listed in the FAA.” Med. Shoppe Int’l, 614 F.3d at 489.

Those extra-statutory grounds included claims that an arbitration award “is

completely irrational or evidences a manifest disregard for the law.” Hoffman v.

Cargill Inc., 236 F.3d 458, 461 (8th Cir. 2001) (citation omitted). “In 2008, however,

Hall Street, resolving a circuit split, held that ‘the text [of the FAA] compels a

reading of the §§ 10 and 11 categories as exclusive.’” Med. Shoppe Int’l, 614 F.3d

at 489 (quoting Hall Street, 552 U.S. at 586). Since Hall Street, “the Eighth Circuit

no longer recognizes the judicially created ‘manifest disregard’ basis for vacatur.”

Paisley Park Enters., Inc. v. Boxill, 371 F. Supp. 3d 578, 582 (D. Minn. 2019)

(collecting cases).

Following the Eighth Circuit’s lead, we conclude that the claims Vietor

makes under the manifest disregard ground are not cognizable. See Med.

Shoppe, Int’l, 614 F.3d at 489 (“Appellants’ claims, including the claim that the
7

arbitrator disregarded the law, are not included among those specifically

enumerated in § 10 and are therefore not cognizable.”). Those claims include

Vietor’s challenge to the attorney fee award, his liability for breach of contract, and

the arbitration eligibility of several claims under FINRA rule 12206. Because Vietor

has not asserted any grounds under section 10 to vacate the panel’s decision on

those issues, we decline to review their merits. See id. This leaves Vietor with his

claims that the award should be vacated under section 10(a)(3) because the

arbitration panel refused to postpone the final hearing and under section 10(a)(2)

because one of the arbitrators failed to disclose a conflict of interest.

A. Postponement of Hearing

Vietor first claims that the arbitration panel’s decision should be vacated

under section 10(a)(3) because the panel refused to “meaningfully postpone” the

final hearing after his lead counsel abandoned his case at the eleventh hour,

thereby depriving him of his right to select counsel of his choice. We disagree.

Section 10(a)(3) of the FAA provides that a court may vacate an arbitration

award when “the arbitrators were guilty of misconduct in refusing to postpone the

hearing, upon sufficient cause shown.” 9 U.S.C. § 10(a)(3). Arbitration panels are

given “wide discretion” to grant or deny a postponement request. Card v. Stratton

Oakmont, Inc., 933 F. Supp. 806, 811 (D. Minn. 1996). “Courts will not intervene

in an arbitrator’s decision not to postpone a hearing if any reasonable basis for it

exists.” El Dorado Sch. Dist. No. 15 v. Cont’l Cas. Co., 247 F.3d 843, 848 (8th

Cir. 2001). To constitute misconduct requiring vacation of an award on this

ground, the arbitrator’s decision must be shown to have so affected the rights of

the party that it may be said the party was deprived of a fair hearing. Id.; see also
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Brown, 762 F.3d at 820 (“A party seeking to vacate an award for misconduct under

§ 10(a)(3) must show that he was ‘deprived of a fair hearing.’” (citation omitted)).

Vietor did not meet that burden for three reasons.

First, as the claimants point out, the hearing was postponed. While the

delay was not as long as Vietor hoped—“several weeks, if not months”—he was

given extra time to prepare for the hearing after his lead counsel’s departure. See

Sheet Metal Workers Int’l Ass’n, Loc. No. 162 v. Jason Mfg., Inc., 900

F.2d 1392, 1398 (9th Cir. 1990) (noting a party to an arbitration proceeding “is not

entitled to a postponement merely by requesting one” (citation omitted)).

Second, Vietor was not left without an attorney. He still had Shedlock who,

according to a declaration attached to the postponement motion, had “collaborated

on strategy, filings, pleadings, and responses of all aspects of this case” and was

an experienced litigator with “qualified experience in FINRA arbitrations in

securities matters.” Cf. Efron v. UBS Fin. Servs. Inc. of P.R., 300 So. 3d 733, 737

(Fla. Dist. Ct. App. 2020) (vacating arbitration award where a party was left without

counsel “at the eleventh hour before a scheduled arbitration”). Although Vietor

contends that he was “denied the right to select his counsel of choice,” he does

not provide us with any authority applying that right in the arbitration context. See

Martik Bros., Inc. v. Kiebler Slippery Rock, LLC, No. 8cv1756, 2009 WL 1065893,

at *3 (W.D. Pa. Apr. 20, 2009) (finding no abuse of discretion where arbitration

panel denied a requested continuance based on counsel’s withdrawal the day

before the hearing); see also Alexander v. Gardner-Denver Co., 415 U.S. 36, 57–

58 (1974) (noting “rights and procedures common to civil trials, such as discovery,
9

compulsory process, cross-examination, and testimony under oath, are often

severely limited or unavailable” in arbitration).

Third, even though the claimants had requested an expedited hearing

because of their ages and health concerns, the proceedings had been pending for

more than one year. See El Dorado Sch. Dist. No. 15, 247 F.3d at 848 (finding a

reasonable basis for the decision to not postpone where the “arbitrator may have

determined that postponement was inappropriate because the parties had

expended considerable time, effort and money based on the hearing dates”); see

also Schmidt v. Finberg, 942 F.3d 1571, 1574 (11th Cir. 1991) (denying vacatur

under section 10(a)(3) where the “panel may have decided that the proceeding

had already been protracted so long as to violate the policy of expeditious handling

of such disputes”). “In applying the statutory grounds for the granting of a motion

to vacate an award, we must always bear in mind that the basic policy of

conducting arbitration proceedings is to offer a means of deciding disputes

expeditiously and with lower costs than in ordinary litigation.” Schmidt, 942 F.2d

at 1573.

Any of the above reasons would provide a reasonable basis for the panel’s

decision to deny Vietor’s open-ended request to delay the hearing for “several

weeks, if not months.” See El Dorado Sch. Dist. No. 15, 247 F.3d at 848 (stating

an arbitrator “is not required to elaborate on the reasoning supporting his

decision”). Under these circumstances—where Vietor was granted a short

continuance and fully participated in the hearing while being represented by an

experienced attorney who had been involved in the case from the beginning—we

cannot say Vietor was deprived of a fair hearing.
10

Still, Vietor argues the district court erred by not considering “evidence that

Vietor presented to the panel in support of vacating the award.” In support of this

argument, Vietor points to the court’s statement that “[t]here is no record evidence

that [Vietor] objected to proceeding at hearing without Chris Parrington as part of

his legal team. Nor is there record evidence that counsel argued that it had

inadequate time to prepare for hearing.” Vietor contends that is “provably false”

because he provided the postponement motion and supporting brief from the

arbitration proceedings to the district court, which we have considered in our

review. But, as the claimants pointed out to the court and on appeal, there was no

evidence that Vietor renewed his postponement request at the final hearing or after

in his oral and written closing arguments. See, e.g., Storey v. Searle Blatt Ltd.,

685 F. Supp. 80, 83 (S.D.N.Y. 1988) (finding a party who “fully participated at the

hearing after the arbitrators determined to proceed” and did not “seek judicial relief

until after it had received an adverse decision” did not preserve its objections to an

adjournment denial). We find that silence further supports the conclusion that

Vietor was afforded a fair hearing.

For these reasons, we affirm the district court’s denial of Vietor’s motion to

vacate the award under section 10(a)(3).

B. Conflict of Interest

Vietor next claims the arbitration award should be vacated under

section 10(a)(2) because Hildreth, the third arbitrator appointed by the case

administrator, did not disclose “that he was permitted to resign and retire from his

position as New Hampshire Banking Commissioner over allegations that he and

his office failed to detect a Ponzi scheme by an entity that defrauded individuals
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who lent the company a total of at least $20 million.” Because the claimants “were

essentially arguing that Vietor engaged in a Ponzi scheme,” Vietor contends that

he was prejudiced by Hildreth’s failure to disclose this information.

Section 10(a)(2) allows vacatur “where there was evident partiality” in the

arbitrators. 9 U.S.C. § 10(a)(2). Evident partiality may exist “wherever an

undisclosed relationship ‘creates an impression of possible bias,’” “casts

significant doubt on the arbitrator’s impartiality,” or objectively demonstrates “such

a degree of partiality that a reasonable person could assume that the arbitrator

had improper motives.” Ploetz, 894 F.3d at 898 (citations omitted) (noting the

“absence of a consensus on the meaning of ‘evident partiality’ amongst federal

courts” (citation omitted)). This is a heavy burden for a party to meet. Choice

Hotels Int’l v. SM Prop. Mgmt., LLC, 519 F.3d 200, 207 (4th Cir. 2008). And it has

not been met here.

We first observe that Vietor “makes no showing that he raised this

contention to the arbitrator, meaning it was waived.” Brown, 762 F.3d at 819–20;

accord Técnicas Reunidas de Talara S.A.C. v. SSK Ingeniería y Construcción

S.A.C., 40 F.4th 1339, 1345 (11th Cir. 2022) (noting party with knowledge of

possible bias of an arbitrator cannot remain silent on the issue and later object to

the award on this ground); AAOT Foreign Econ. Ass’n (VO) Technostroyexport v.

Int’l Dev. and Trade Servs., Inc., 139 F.3d 980, 982 (2nd Cir. 1998) (“The settled

law of this circuit precludes attacks on the qualifications of arbitrators on grounds

previously known but not raised until after an award has been rendered.”). Hildreth

disclosed his position as the banking commissioner for New Hampshire and the

date of his retirement in his disclosure report. Vietor does not explain when he
12

learned about the circumstances of Hildreth’s departure that, according to the

exhibits filed by Vietor, was publicly available information. While Vietor argues

that he “was not afforded sufficient time to submit a motion to strike” Hildreth for

cause, the evidentiary portion of the hearing concluded on October 7, 2022, with

a closing argument hearing on October 26, and written closing briefs the beginning

of November.

Beyond waiver concerns, we fail to see how Hildreth’s nondisclosure of the

removal proceeding over a decade ago “creates even an impression of possible

bias.” Ploetz, 894 F.3d at 899 (“We see nothing in [an arbitrator’s] undisclosed

mediation of a years-old, unrelated case that could create an appearance of bias”).

The investigation into Hildreth while he was serving as banking commissioner had

nothing to do with the parties to this dispute. Vietor does not cite any FINRA rule

that would require disclosure of this investigation, nor are we aware of any.3 And

he offers nothing more than conclusory statements and speculation about how

Hildreth’s nondisclosure created “evident partiality.” See Peoples Sec. Life Ins.

3 FINRA rule 12405 does require arbitrators to disclose “any circumstances which

might preclude the arbitrator from rendering an objective and impartial
determination in the proceeding.” But the circumstances listed in the rule are not
present here. Those are:
(1) Any direct or indirect financial or personal interest in the
outcome of the arbitration;
(2) Any existing or past financial, business, professional,
family, social, or other relationships or circumstances with any party,
any party’s representative, or anyone who the arbitrator is told may
be a witness in the proceeding, that are likely to affect impartiality or
might reasonably cause an appearance of partiality or bias;
(3) Any such relationship or circumstances involving
members of the arbitrator’s family or the arbitrator’s current
employers, partners, or business associates; and
(4) Any existing or past service as a mediator for any of the
parties in the case for which the arbitrator has been selected.
13

Co. v. Monumental Life Ins. Co., 991 F.2d 141, 146 (4th Cir. 1993) (noting that the

alleged partiality must be direct, definite, and capable of demonstration, rather than

remote, uncertain, or speculative). Because that is not enough to meet Vietor’s

heavy burden, we affirm the district court’s rejection of this ground for vacating the

arbitration award. See Williams v. NFL, 582 F.3d 863, 885 (8th Cir. 2009) (stating

the burden is not met by even “the mere appearance of bias” (citation omitted)).

C. Appellate Attorney Fees

The claimants request an award of appellate attorney fees as a sanction

against Vietor under Iowa Rule of Civil Procedure 1.413(1). But they failed to cite

any authority in support of that request. And this court has previously held that

appellate attorney fees are not available as a sanction under rule 1.413(1). See

In re Marriage of Whiteside, No. 07-0739, 2007 WL 3376902, at *3 (Iowa Ct. App.

Nov. 15, 2007) (reasoning that rule 1.413 “does not expressly apply to appellate

proceedings” and our rules of appellate procedure “do not refer to or incorporate

by reference rule 1.413”). We accordingly deny the claimants’ request.

III. Conclusion

The district court’s ruling denying Vietor’s motion to vacate the arbitration

award, confirming the award, and entering judgment against him is affirmed. The

claimants’ request for appellate attorney fees under Iowa Rule of Civil

Procedure 1.413(1) is denied.

AFFIRMED.