Stifel, Nicolaus & Co. v. Stern, Civil Case No. SAG-20-0005
| Decision Date | 31 March 2020 |
| Docket Number | Civil Case No. SAG-20-0005 |
| Citation | 450 F.Supp.3d 645 |
| Parties | STIFEL, NICOLAUS & CO., Petitioner, v. Michael STERN, Wendy Stern, et al., Respondents. |
| Court | U.S. District Court — District of Maryland |
Daniel J. Donovan, Priscilla Alden Donovan, Donovan and Rainie LLC, Baltimore, MD, Andrew Mount, Pro Hac Vice, Edwin A. Zipf, Pro Hac Vice, Bressler Amery and Ross PC, Florham Park, NJ, for Petitioner.
Marc Seldin Rosen, Law Offices of Marc Seldin Rosen, LLC, Baltimore, MD, for Respondents.
THIS MATTER concerns a petition by Stifel, Nicolaus & Co. ("Petitioner") to vacate an arbitration award issued in favor of Michael Stern, Wendy Stern, Paul Levin and the Estate of Gloria Levin ("Respondents"). Petitioner filed a Complaint in this Court, seeking to vacate the arbitration award. ECF 1, ECF 1-2. Respondents filed a Motion to Dismiss the Petition, ECF 38, Petitioner filed an opposition, ECF 39, and Respondents filed a Reply, ECF 40. The Motion to Dismiss is now ripe for adjudication, and no hearing is necessary. See Loc. R. 105.6 (D. Md. 2018). For the reasons set forth below, Respondents' Motion to Dismiss will be DENIED.
The facts in this matter are largely undisputed. Respondents opened brokerage accounts with Petitioner in 2007, under Petitioner's "Horizon Program." ECF 1-2 at 4. The Horizon Program is a non-discretionary advisory program, meaning that Petitioner could not enter into a transaction absent Respondents' express direction to do so. Id. Kenneth Blumberg ("Blumberg") was the primary financial advisor assigned to Respondents' accounts. Id. From 2011 through mid-2015, Respondents' accounts experienced significant gains in value. As of June, 2015, the Sterns' accounts had increased by approximately $1,252,015 since 2011, to a total value of $1,552,784. Id. at 4–5. Similarly, the Levins' accounts increased by approximately $1,435,585 over the same time period, to a total value of $1,788,609. Id. at 5. Respondents transferred their accounts away from Petitioner's management in or about June, 2016. Id. Although the value of their accounts had decreased from the peak in 2015, Respondents still left with a combined gain of $1,593,680. Id.
In December, 2017, Respondents filed a claim for arbitration with the Financial Industry Regulatory Authority ("FINRA"). ECF 38-1 at 9. FINRA operates the largest securities dispute resolution forum in the United States, and has its own Code of Arbitration Procedure. Id. The claim was titled case number 17-03299, and the parties participated in a hearing before a panel of three arbitrators: Catherine Bocksor, John Coker, and Edward Gutman. ECF 38-6. The parties presented their closing arguments on August 19, 2019. ECF 1-2 at 9.
On October 3, 2019, FINRA delivered the panel's decision. After considering the pleadings, testimony, and evidence presented at the hearing, the panel decided:
Respondent Stifel Nicolaus & Co., Inc., is liable for and shall pay to Claimants Michael Stern, Wendy Stern, Paul Levin, and Estate of Gloria Levin, the sum of $1,524,176.00 in compensatory damages.
ECF 38-6 at 8. FINRA rules allow parties to request an "explained decision," with the claim's resolution. However, Petitioner did not ask for an explained decision, and Respondents' request for an explained decision was denied. Id. The brief panel decision stated, inter alia , that the award should be paid within 30 days. Id. at 2. Accordingly, Petitioner delivered a check to Respondents for the full award on October 29, 2019. ECF 28-9 ().
On December 11, 2019, FINRA "re-served" the award with a somewhat modified letter. ECF 38-10. Whereas the October letter included signatures from only two arbitrators, the December letter included signatures from all three arbitrators, along with a dissent from arbitrator Edward Gutman. See id. Nonetheless, FINRA explained that service of the December letter did "not modify any of the information and applicable due dates referenced in FINRA's October 3, 2019 letter." Id. at 2. Petitioner filed its Motion to Vacate the award in this Court on January 2, 2020. ECF 1.
Respondents move for dismissal of Petitioner's Motion to Vacate based on Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). ECF 38. When a Rule 12(b)(1) motion contests the factual basis for subject matter jurisdiction, the burden of proving subject matter jurisdiction rests with the plaintiff. Richmond, Fredericksburg & Potomac R. Co. v. United States , 945 F.2d 765, 768 (4th Cir. 1991). In determining whether jurisdiction exists, the district court is to regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment. Id. A district court should grant a motion to dismiss for lack of subject matter jurisdiction "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Morgan Stanley v. NIRAV BABU , 448 F.Supp.3d 497, 503-04 (D. Md. Mar. 23, 2020) (quoting Upstate Forever v. Kinder Morgan Energy Partners, L.P. , 887 F.3d 637, 645 (4th Cir. 2018) ).
Under Rule 12(b)(6), a defendant may test the legal sufficiency of a complaint by way of a motion to dismiss. See In re Birmingham , 846 F.3d 88, 92 (4th Cir. 2017) ; Goines v. Valley Cmty. Servs. Bd. , 822 F.3d 159, 165–66 (4th Cir. 2016) ; McBurney v. Cuccinelli , 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom. , McBurney v. Young , 569 U.S. 221, 133 S.Ct. 1709, 185 L.Ed.2d 758 (2013) ; Edwards v. City of Goldsboro , 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted."
Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed. R. Civ. P. 8(a)(2). That rule provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of the rule is to provide the defendants with "fair notice" of the claims and the "grounds" for entitlement to relief. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
To survive a motion under Fed. R. Civ. P. 12(b)(6), a complaint must contain facts sufficient to "state a claim to relief that is plausible on its face." Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ; see Ashcroft v. Iqbal , 556 U.S. 662, 684, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted) ("Our decision in Twombly expounded the pleading standard for ‘all civil actions’ ..."); see also Willner v. Dimon , 849 F.3d 93, 112 (4th Cir. 2017). However, a plaintiff need not include "detailed factual allegations" in order to satisfy Rule 8(a)(2). Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Further, federal pleading rules "do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted." Johnson v. City of Shelby, Miss. , 574 U.S. 10, 135 S. Ct. 346, 346, 190 L.Ed.2d 309 (2014) (per curiam).
Nevertheless, the rule demands more than bald accusations or mere speculation. Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; see Painter's Mill Grille, LLC v. Brown , 716 F.3d 342, 350 (4th Cir. 2013). If a complaint provides no more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action," it is insufficient. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Rather, to satisfy the minimal requirements of Rule 8(a)(2), the complaint must set forth "enough factual matter (taken as true) to suggest" a cognizable cause of action, "even if ... [the] actual proof of those facts is improbable and ... recovery is very remote and unlikely." Twombly , 550 U.S. at 556, 127 S.Ct. 1955.
In reviewing a Rule 12(b)(6) motion, a court "must accept as true all of the factual allegations contained in the complaint" and must "draw all reasonable inferences [from those facts] in favor of the plaintiff." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc. , 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted); see Semenova v. MTA , 845 F.3d 564, 567 (4th Cir. 2017) ; Houck v. Substitute Tr. Servs., Inc. , 791 F.3d 473, 484 (4th Cir. 2015) ; Kendall v. Balcerzak , 650 F.3d 515, 522 (4th Cir. 2011), cert. denied , 565 U.S. 943, 132 S.Ct. 402, 181 L.Ed.2d 257 (2011). However, a court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). "A court decides whether [the pleading] standard is met by separating the legal conclusions from the factual allegations, assuming the truth of only the factual allegations, and then determining whether those allegations allow the court to reasonably infer" that the plaintiff is entitled to the legal remedy sought. A Soc'y Without a Name v. Virginia , 655 F.3d 342, 346 (4th. Cir. 2011), cert. denied , 566 U.S. 937, 132 S.Ct. 1960, 182 L.Ed.2d 772 (2012).
Instead of filing a Motion to Confirm the arbitration award, Respondents have moved to Dismiss Petitioner's Complaint on three grounds. ECF 38-1. Each is addressed in turn.
Respondents first contend that Maryland law governs the deadline for Petitioner to file its Motion to Vacate. ECF 38-1 at 12–14. In a federal diversity case, courts generally apply the choice of law rules of the forum state, which, in this case, is Maryland. UBS Fin. Servs., Inc. v. Padussis , 127 F. Supp. 3d 483, 492 (D. Md. 2015) (quoting Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). Under the Uniform Arbitration Act of Maryland, a Motion to Vacate must be filed within thirty days...
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