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Warfield v. ICON Advisors, Inc., No. 3:20CV195-GCM (W.D.N.C. June 16, 2020) [click for opinion]

In November 2017, Defendants ICON Advisors, Inc. and ICON Distributors, Inc. (“ICON”), terminated the at-will employment of Plaintiff James Warfield, a mutual funds wholesaler and North Carolina resident. As required by FINRA rules, ICON explained the reasons for Warfield’s termination in a FINRA Uniform Termination Notice, Form U5.

On March 14, 2019, Warfield initiated arbitration proceedings against ICON with the FINRA Office of Dispute Resolution asserting claims for “wrongful termination without just cause,” defamation, and unfair and deceptive trade practices seeking, among other things, damages exceeding $5 million and expungement of the allegedly defamatory language in his Form U5.

On March 18, 2020, the arbitration panel awarded Warfield over $1 million in compensatory damages for his “wrongful termination without just cause” claim and ordered that the termination explanation on his Form U5 should be expunged and modified. Warfield then moved to confirm the award under Section 9 of the Federal Arbitration Act in the U.S. District Court for the Western District of North Carolina; ICON filed a cross-motion to vacate the award.

In considering the motion and cross-motion, the district court noted that federal courts may vacate an award if at least one of four conditions are met, including, in relevant part, “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4). The court further noted that the Fourth Circuit has recognized that an arbitrator’s “manifest disregard” of the law constitutes a ground for vacatur of an arbitral award, subject to a two-part test: “(1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrator [] refused to heed that legal principle.”

The court held that North Carolina law did not support the arbitral award on Warfield’s claim for “wrongful termination without just cause” because Warfield’s employment contract expressly provided that his employment was “at-will” and no such cause of action exists for “at-will” employees. Specifically, the court cited to a Fourth Circuit case that held that “where arbitrators imply a termination ‘for-cause’ provision into a private employment agreement that expressly provides for termination ‘at-will,’ the arbitrators do more than commit a permissible error of law, they exceed their authority by ignoring the agreement’s plain language.”

Ultimately, because ICON advised the arbitration panel of North Carolina’s well-established law regarding termination of at-will employees both prior to and during the arbitration hearing, and that Warfield’s central argument directly conflicted with these principles, the court held that the arbitration panel’s “manifest disregard” of the law justified vacating the damages awarded to Warfield for wrongful termination without just cause. With respect to the arbitration panel’s order to amend the termination explanation in Warfield’s Form U5, the court held that the arbitration panel’s Form U5 language did not exceed their power or demonstrate a manifest disregard of the law and therefore declined to vacate that portion of the award.


David Zaslowsky has been practicing international litigation and international arbitration for almost 40 years. He has been Chambers-ranked in international arbitration and also sits as an arbitrator. He specializes in technology cases and is the editor of the Firm's Blockchain Blog and its International Litigation & Arbitration Newsletter.