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Laws-info.com » Cases » New Hampshire » Supreme Court » 1999 » 97-553, MERRILL LYNCH FUTURES, INC. v. DAVID S. SANDS
97-553, MERRILL LYNCH FUTURES, INC. v. DAVID S. SANDS
State: New Hampshire
Court: Supreme Court
Docket No: 97-553
Case Date: 04/21/1999

NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Clerk/Reporter, Supreme Court of New Hampshire, Supreme Court Building, Concord, New Hampshire 03301, of any errors in order that corrections may be made before the opinion goes to press. Opinions are available on the Internet by 9:00 a.m. on the morning of their release.

THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Hillsborough-northern judicial district

No. 97-553

MERRILL LYNCH FUTURES, INC.

v.

DAVID S. SANDS

April 21, 1999

Sherin & Lodgen LLP, of Boston, Massachusetts (John C. La Liberte & a. on the brief, and Bryan G. Killian orally), for the plaintiff.

Devine, Millimet & Branch, P.A., of Manchester (Thomas Quarles, Jr. & a. on the brief, and Mr. Quarles orally), for the defendant.

HORTON, J. The defendant, David S. Sands, appeals the decisions of the Superior Court (Lynn, J.) denying his motion for correction, modification, or vacatur of a securities arbitration award and his motions for discovery sanctions. We affirm.

From 1981 to March 1993, the defendant maintained a commodity futures account with the plaintiff, Merrill Lynch Futures, Inc. (Merrill Lynch). On January 18, 1993, the defendant discussed with a Merrill Lynch broker the possibility of "shorting" lumber futures. See United States v. Dial, 757 F.2d 163, 164-66 (7th Cir.), cert. denied, 474 U.S. 838 (1985) (general discussion of commodity futures investing). The defendant subsequently established a short position in lumber futures. After incurring losses, the defendant asked the broker if Merrill Lynch had conducted research on the lumber market. The broker responded that Merrill Lynch did not have a lumber analyst. In fact, a senior strategist with the firm had issued commentary warning against "shorting" lumber. The broker knew of the strategist's comments but did not disclose them to the defendant. Nevertheless, the defendant had access to other information that was negative toward his investment strategy.

The defendant continued trading in the lumber market, despite suffering losses. Merrill Lynch issued margin calls on the defendant's account. In late February or early March 1993, the defendant informed his broker that he could not satisfy further margin calls. Merrill Lynch did not liquidate the defendant's account at that time, and additional losses were incurred. On March 5, Merrill Lynch issued a margin call on the defendant's account. The defendant informed his broker that day that he could not meet the call, but did not order liquidation of his lumber positions until March 8, 1993. On March 9, Merrill Lynch management learned that the defendant could not meet additional margin calls. Merrill Lynch began liquidating the account, completing the task on March 11. The defendant's liquidated account displayed a debit balance of more than $500,000.

The defendant denied liability, and Merrill Lynch brought suit against him in superior court to collect the debit balance. The court stayed the case after the parties agreed to arbitration before the National Futures Association. At arbitration, the defendant advanced counterclaims of, inter alia, fraud and negligence. Following an arbitration hearing, the arbitrators rejected the defendant's claims and awarded Merrill Lynch a total of $612,812 for the unpaid debit balance plus interest. Merrill Lynch moved to confirm the award in the superior court; the defendant objected and moved for correction, modification, or vacatur of the award. The defendant also moved for sanctions against Merrill Lynch. The superior court denied the motions and confirmed the arbitration award. This appeal followed.

An arbitration decision may be corrected or modified upon a showing that the arbitrators committed "plain mistake." RSA 542:8 (1997). A "plain mistake" is an error that "is apparent on the face of the record and which would have been corrected had it been called to the arbitrators' attention." Rand v. Aetna Life & Casualty Co., 132 N.H. 768, 771, 571 A.2d 282, 284 (1990). It must be shown that the arbitrators manifestly fell into such error concerning the facts or law, and that the error prevented their free and fair exercise of judgment on the subject. Id. When undertaking a "plain mistake" analysis, we afford great deference to the arbitrators' decision. Masse v. Commercial Union Ins. Co., 134 N.H. 523, 526, 593 A.2d 1164, 1166 (1991). We examine the face of the record to determine if there is validity to the claim of "plain mistake," and defer to the arbitrators' decision if the record reveals evidence supporting it. See id.; Masse v. Commercial Union Ins. Co., 136 N.H. 628, 632, 620 A.2d 1041, 1044 (1993) (decision may be against weight of evidence). We bear in mind that the arbitrators, as the triers of fact, were not obligated to accept any witness's testimony as true, even if the testimony was uncontradicted. Masse, 136 N.H. at 632, 620 A.2d at 1045.

The defendant contends that the arbitrators were plainly mistaken in not finding that Merrill Lynch committed commodities fraud under the Commodities Exchange Act, 7 U.S.C.

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