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In a case of first impression, the state Supreme Court has granted allocatur in a case that asks whether the state or federal timeline for arbitration appeals governs an action that is brought under the Federal Arbitration Act but filed in state court. In granting allocatur in Moscatiello v. Hilliard March 13, the court limited the appeal to whether the Federal Arbitration Act’s 90-day timeline to challenge an arbitration award pre-empts the state procedural timeline of 30 days. If it does not, the court asked which timeline it should apply. The case was appealed from an unpublished three-judge Superior Court panel ruling. It’s probably not surprising the decision was unpublished given that the Superior Court had ruled on the issue just about a month before. In Joseph v. Advest, a different Superior Court panel ruled that the state procedural time frame of 30 days to file the appeal supersedes the act’s 90-day deadline. “We conclude that Pennsylvania’s procedural rule providing for a 30-day rather than a three-month time limit for challenging arbitration awards does not conflict with the FAA’s purpose of encouraging arbitration of matters to expedite litigation; rather, it reinforces that goal by more quickly rendering arbitration awards final,” Judge Mary Jane Bowes said for the court. The Moscatiello court adopted that reasoning in ruling against Franco and Antonietta Moscatiello’s appeal of the dismissal of their claims against a company that handled their investments. Both Joseph and Moscatiello were cases involving investor complaints brought before the National Association of Securities Dealers. Solo practitioner Arnold Y. Steinberg represented both plaintiffs, but he only brought Moscatiello up on appeal. “The main question,” he said, “is whether or not a state court can shorten or abrogate rights that fall under a federal statute.” Steinberg said it is often impossible to even get transcripts of cases that were before the National Association of Securities Dealers in the 30-day timeframe for filing an appeal. Richard B. Tucker III of Tucker Arensberg in Pittsburgh served as local counsel for J.J.B. Hilliard, W.L. Lyons Inc., and their employees and agents involved in the Moscatiello case. He said cases from other jurisdictions have been fairly consistent in ruling that, under the FAA, the act’s procedural provisions do not pre-empt the state’s procedural provisions. He said the act was intended to allow states to offer arbitration as a venue in interstate matters, but the act’s procedural issues should only apply when the appeal is taken up in federal court. Robert L. Byer, chairman of Duane Morris’ appellate litigation practice, represented Advest Inc. in Joseph, but has no involvement in the Moscatiello case. He said he didn’t think the Supreme Court needed to clear up the issue presented in both cases because the Superior Court panel in Joseph made clear that the procedural aspects of the FAA do not apply to state court matters. “I would be shocked if the court struck out on its own and made a decision that would be contrary to every other state court in the country that has ruled on this issue,” Byer said. Although Byer felt the Supreme Court could have let this case stand at the lower level, he did say the FAA is unique in that it provides a federal right of action without necessarily having federal jurisdiction. In Moscatiello, Franco and Antonietta Moscatiello invested $1.5 million in a mutual fund managed by the appellees. The plaintiffs lost $574,000 through their investments and initiated suit against their investment company in December 2003, according to the opinion. The National Association of Securities Dealers dismissed their claims on March 14, 2005, and the couple filed a petition for vacatur on June 3, 2005. The trial court dismissed the petition, ruling that it was filed passed the 30-day deadline, according to the opinion. On appeal to the Superior Court, Judges Joseph A. Hudock and John T. Bender and Senior Judge Patrick R. Tamilia relied on Joseph in ruling against the Moscatiellos. “Although the reach of the FAA is broad, it does not pre-empt procedural rules of state proceedings,” the three-judge panel said in its memorandum opinion. In Joseph, Richard and Candace Joseph had a dispute with their stockbrokers, Advest Inc., Nussbaum Partners and Robert E. Feldman. According to the Josephs, they had instructed the brokers to trade their securities aggressively, not conservatively. The Josephs felt the brokers did the opposite, and the matter went to arbitration in July 2002, according to the opinion. The arbitrators unanimously dismissed all of the claims brought by the Josephs on Nov. 2, 2004. The Josephs filed a motion to vacate or correct the award on Jan. 31, 2005, according to the opinion. At the end of March 2005, the brokers filed a petition to confirm the award, arguing that the Josephs’ petition was untimely. The Allegheny County Common Pleas Court denied the Josephs’ request and the case went to the Superior Court, according to the opinion. “[W]hile the FAA mandates a broad enforceability of all agreements to arbitrate even those unenforceable under state law, the FAA provides for no independent federal jurisdiction over these matters,” Bowes said in the Superior Court opinion in Joseph. Both Steinberg and Joseph said the Supreme Court’s ruling in Moscatiello would have a large impact in the commonwealth. Steinberg said he has already had a call from a Pennsylvania attorney with a similar case pending at the lower level.

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