340 F.3d 386 (6th Cir. 2003), 02-3820 to 02-3826, Fazio v. Lehman Bros., Inc.

Docket Nº:02-3820 to 02-3826
Citation:340 F.3d 386
Party Name:Fazio v. Lehman Bros., Inc.
Case Date:August 13, 2003
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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340 F.3d 386 (6th Cir. 2003)

Robert FAZIO, et al., Plaintiffs-Appellees, v. LEHMAN BROTHERS, INC.; Lehman Brothers Holdings, Inc., Defendants, S.G. Cowen Securities Corporation; Societe Generale, Defendants-Appellants, Hambrecht & Quist, Inc.; J.P. Morgan Chase & Company, Defendants. Robert Fazio, et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants-Appellants, S.G. Cowen Securities Corporation; Societe Generale; Hambrecht & Quist, Inc.; J.P. Morgan Chase & Company, Defendants. Robert Fazio, et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc.; S.G. Cowen Securities Corporation; Societe Generale, Defendants, Hambrecht & Quist, Inc.; J.P. Morgan Chase & Company, Defendants-Appellants. Robert Fazio, et al., Plaintiffs, Samuel Glazer, Plaintiff-Appellee, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants, S.G. Cowen Securities Corporation; Societe Generale, Defendants-Appellants. Robert Fazio, et al., Plaintiffs, Samuel Glazer, Plaintiff-Appellee, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants-Appellants, S.G. Cowen Securities Corporation; Societe Generale; Hambrecht & Quist, Inc.; J.P. Morgan Chase & Company, Defendants. Robert Fazio, et al., Plaintiffs, Dominic A. Visconsi, Sr., et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants, S.G. Cowen Securities Corporation; Societe Generale, Defendants-Appellants. Robert Fazio, et al., Plaintiffs, Dominic A. Visconsi, Sr., et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants-Appellants, S.G. Cowen Securities Corporation; Societe Generale, Defendants. Peter A. Spitalieri, Plaintiff-Appellee, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants, S.G. Cowen Securities Corporation; Societe Generale, Defendants-Appellants. Peter A. Spitalieri, Plaintiff-Appellee, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants-Appellants, S.G. Cowen Securities Corporation; Societe Generale, Defendants. Richard Lopardo, et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants, S.G. Cowen Securities Corporation, Defendant-Appellant. Richard Lopardo, et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc., Defendant-Appellant, S.G. Cowen Securities Corporation, Defendant. Peter M. Bonutti, M.D., Plaintiff-Appellee, v. Lehman Brothers, Inc., Defendant, S.G. Cowen Securities Corporation, Defendant-Appellant. Peter M. Bonutti, M.D., Plaintiff-Appellee, v. Lehman Brothers, Inc., Defendant-Appellant, S.G. Cowen Securities Corporation, Defendant. Robert Fazio, et al., Plaintiffs-Appellees, v. Cowen & Company, Defendant-Appellant. Dominic A. Visconsi, Sr., et al., Plaintiffs-Appellees, v. Cowen & Company, Defendant-Appellant. Richard Lopardo, et al., Plaintiffs-Appellees, v. Cowen & Company, Defendant-Appellant. Peter M. Bonutti, M.D., et al., Plaintiffs-Appellees, v. Cowen & Company, Defendant-Appellant. Dominic A. Visconsi, Sr., et al., Plaintiffs-Appellees, v. Lehman Brothers, Inc.; Lehman Brothers Holdings, Inc., Defendants-Appellants. Dominic A. Visconsi, Sr., et al., Plaintiffs-Appellees, v. S.G. Cowen Securities Corporation; Societe Generale, Defendants-Appellants.

Nos. 02-3820 to 02-3826, 02-3867 to 02-3870, 02-3873, 02-3874, 03-3041 to 03-3043, 03-3045, 03-3112, 03-3113, 03-3258.

United States Court of Appeals, Sixth Circuit

August 13, 2003.

Argued June 17, 2003.

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Byron S. Krantz, Ari H. Jaffe (argued and briefed), Kohrman, Jackson & Krantz, Cleveland, OH, for Plaintiff-Appellee in 02-3820 to 02-3822.

Robert P. Duvin (argued and briefed), Suellen Oswald, Brett S. Krantz, Kenneth D. Schwartz (briefed), Duvin, Cahn & Hutton, Cleveland, OH, for Plaintiffs-Appellees in 02-3823, 02-3824.

Daniel P. Mascaro, Baker & Hostetler, Cleveland, OH, Hugh E. McKay (briefed), Porter, Wright, Morris & Arthur, Cleveland, OH, David E. Ross (briefed), Antonia Apps (briefed), K. Chris Todd (briefed), David Charles Frederick (argued), Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, for Plaintiffs-Appellees in 02-3825, 02-3826.

Donald S. Scherzer (briefed), Robert B. Casarona (argued and briefed), Roetzel & Andress, Cleveland, OH, for Plaintiff-Appellee in 02-3867, 02-3868.

John T. Murray (argued and briefed), Barbara Quinn Smith (briefed), Murray & Murray, Sandusky, OH, for Plaintiff--Appellee in 02-3869, 02-3870 and 03-3043.

Daniel R. Warren (argued and briefed), Melissa M. Eckhause (briefed), Baker & Hostetler, for Plaintiff-Appellee in 02-3873, 02-3874 and 03-3045.

Ari H. Jaffe (argued and briefed), Kohrman, Jackson & Krantz, Cleveland, OH, for Plaintiff-Appellee in 03-3041.

David E. Ross (briefed), Antonia Apps (briefed), K. Chris Todd (briefed), David Charles Frederick (argued and briefed), Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, Hugh E. McKay (briefed), Porter, Wright, Morris & Arthur, Cleveland, OH, for Plaintiff-Appellee in 03-3042, 03-3112, 03-3113 and 03-3258.

Mark O'Neill (briefed), Daniel A. Richards (briefed), Weston, Hurd, Fallon, Paisley & Howley, Cleveland, OH, Laurence A. Silverman (briefed), Aaron R. Marcu (argued), Covington & Burling, New York, NY, for Defendants-Appellants in 02-3820, 02-3823, 02-3825, 02-3867, 02-3869, 02-3873 and 03-3113.

P. Benjamin Duke, Covington & Burling, New York, NY, for Defendants-Appellants in 03-3113.

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James Joseph Bartolozzi (briefed), Kahn, Kleinman, Yanowitz & Arnson, Cleveland, OH, H. Nicholas Berberian, Neal, Gerber & Eisenberg, Chicago, IL, for Defendants-Appellants in 02-3821, 02-3824, 02-3826, 02-3868, 02-3870, 02-3874, 03-3112.

Marvin L. Karp (briefed), Michael N. Ungar (briefed), Elin B. Young (briefed), Christopher P. Fisher (briefed), Ulmer & Berne, Cleveland, OH, for Defendants-Appellants in 02-3822.

David C. Weiner (briefed), Charna E. Sherman (briefed), Squire, Sanders & Dempsey, Cleveland, OH, Pierre H. Bergeron (briefed), Squire, Sanders & Dempsey, Cincinnati, OH, for Defendant-Appellant in 03-3041, 03-3042, 03-3043, 03-3045 and 03-3258.

Mark E. Staib, Elizabeth W. Andrews, Hahn, Loeser & Parks, Cleveland, OH, for Defendant-Appellant in 03-3258.

Before: NORRIS, DAUGHTREY, and ROGERS, Circuit Judges.

OPINION

ALAN E. NORRIS, Circuit Judge.

This dispute arises from a massive fraud in which Frank Gruttadauria, a Cleveland stockbroker, misappropriated at least $54 million of his clients' money. The plaintiffs, all clients of Gruttadauria, brought this action against the brokerage houses for which he worked over the course of his career. The defendants moved to stay the proceedings and compel arbitration pursuant to arbitration clauses in the account agreements. The district court, relying largely on the gross nature of the fraud, ruled that the arbitration clauses in the agreements did not apply to the dispute and set the case for trial. The defendants appeal this decision. Thus, the only question of law in this interlocutory appeal is whether similarly worded arbitration clauses in the plaintiffs' brokerage account agreements mandate arbitration of their claims.

I

Frank Gruttadauria was a stockbroker for the defendant brokerage houses or firms that were purchased by them. As early as 1987, Gruttadauria began to send falsified statements to his clients that significantly overstated the value of their accounts. Gruttadauria had incurred significant losses in some of these accounts, and he falsified statements to cover this up.

To make good when clients requested withdrawals from their inflated accounts, Gruttaduaria either used new deposits by other clients or withdrew funds from other clients' accounts to make payments. In a separate criminal proceeding against him...

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