A two-judge majority of an Iowa Court of Appeals panel affirmed a Polk County District Court ruling vacating an arbitration award in a case involving financial regulation. The third member of the panel dissented, saying the majority and the trial court erred in substituting their conclusions for the reasonable conclusions of the arbitrator.

The decision in Principal Securities Inc. v. Mark A. Gelbman handed down March 27 offers insight into Iowa trial and appellate courts’ authority in reviewing arbitrators’ resolution of disputes between parties that chose this alternative to the courts.

In this case, Mark A. Gelbman sought arbitration to resolve his disagreement with statements made by Principal Securities in a filing with the Financial Industry Regulatory Authority (FINRA) after Principal terminated his employment as a financial advisor. Principal stated on a form filed with the FINRA that Gelbman was dismissed as part of investigation into a violation of trading rules by Gelbman.

Because the FINRA filing is publicly available, Gelbman sought arbitration to have certain statements expunged from the filing that he argued were misleading or defamatory. The arbitrator agreed, and issued an award recommending partial expungement of certain statements and a more detailed explanation of Gelbman’s termination that was more favorable to him.

Principal moved to vacate the award; the district court found the award was not supported by substantial evidence and vacated it.

Writing for the majority in affirming the district court, Court of Appeals Judge Tyler Buller said Principal’s statement in the filing regarding Gelbman’s termination was not untrue and thus not defamatory. Nor was there evidence that would lead a reasonable factfinder to conclude the form filed by Principal was misleading.

“The form succinctly but accurately captured the core details of Gelbman’s termination and there is no evidence — let alone substantial evidence — that the form was calculated to be misunderstood or give a wrong impression,” Judge Buller wrote. Chief Appeals Court Judge Thomas Bower joined Judge Buller’s opinion.

Writing in dissent, Court of Appeals Judge Samuel Langholz wrote that he would have reversed the district court and allowed the arbitration award to stand. Not because he necessarily agreed with the arbitrator’s award but because, he wrote, the district court “exceeded the bounds of its limited review of arbitration awards under Iowa Code section 679A.12.”

Iowa law places “extreme limitations” on judicial review of arbitration awards, Judge Langholz wrote, because, as Iowa courts have previously recognized, the goal of arbitration is not a “refined quality of justice” but speedy resolution of disputes without court participation. “Thus, a court must consider only whether the evidence supports the award actually made — not whether it could have supported a contrary award.”

In this case, Gelbman did not bring an action against Principal for the tort of defamation but instead relied on FINRA rules in seeking to expunge or modify the information recorded in the publicly accessible database about the reason for his termination.

“Based on Gelbman’s testimony, a reasonable arbitrator could conclude that the challenged statements were misleading, as the arbitrator understood that term, and that the revised statements the arbitrator crafted more accurately reflected the circumstances of Gelbman’s termination,” Langholz wrote. The district court, he added, did not give the arbitrator’s award the proper “reasonable presumption.”


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