94 F.3d 1103 (7th Cir. 1996), 96-1180, Minor v. Prudential Securities, Inc.

Docket Nº96-1180.
Citation94 F.3d 1103
Party NameRICO Bus.Disp.Guide 9113 Jo MINOR, Plaintiff-Appellant, v. PRUDENTIAL SECURITIES, INC. and Patrice Mackie, Defendants-Appellees.
Case DateSeptember 04, 1996
CourtUnited States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 1103

94 F.3d 1103 (7th Cir. 1996)

RICO Bus.Disp.Guide 9113

Jo MINOR, Plaintiff-Appellant,

v.

PRUDENTIAL SECURITIES, INC. and Patrice Mackie, Defendants-Appellees.

No. 96-1180.

United States Court of Appeals, Seventh Circuit

September 4, 1996

Argued May 31, 1996.

Page 1104

Henry F. Field, Chicago, IL, for Plaintiff-Appellant.

Theodore J. Low, Darren B. Watts, Robert P. Bramnik, Susan J. Magar, William F. Tueting, Altheimer & Gray, Chicago, IL, for Defendants-Appellees.

Before BAUER, FLAUM, and KANNE, Circuit Judges.

FLAUM, Circuit Judge.

Plaintiff, Jo Minor, filed a motion in district court to vacate an arbitration decision pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10. The arbitrator had ruled in favor of defendants, Prudential Securities and broker Patrice Mackie (collectively "Prudential") on Minor's various claims arising from a series of stock investments. The district court dismissed her motion to vacate for lack of subject matter jurisdiction. We affirm.

I.

In November of 1991, Prudential made a series of stock investments for Minor. Minor claims that Prudential misrepresented to her that certain of these investments were "safe," when in reality they were very high risk. Minor also claims that while she was a Prudential customer, Prudential effected at least one unauthorized trade in her account and forged her signature on a customer agreement. Minor maintains that as a result of these acts, she lost $17,797.86. In order to recover her losses, Minor filed a claim in arbitration before the National Association of Securities Dealers, Inc. ("NASD"). Minor and Prudential were subject to a pre-dispute arbitration agreement, contained in Minor's securities account agreement with Prudential. Minor's complaint consisted of nine counts: 1) breach of fiduciary relations; 2) breach of contract; 3) fraud; 4) constructive fraud; 5) lack of due care in performing a contract; 6) a violation of the Illinois Securities Act; 7) a violation of the Securities Act of 1934; 8) use of racketeering income to operate an enterprise, in violation of 18 U.S.C. § 1962(a); and 9) indirect participation in the conduct of a racketeering enterprise's affairs, in violation of 18 U.S.C. § 1962(c).

Arbitration hearings were held in December of 1994 and January of 1995. In the midst of the proceedings, a discovery dispute arose concerning one of Prudential's handwriting experts. Minor alleged that Prudential was attempting to conceal a negative report by switching their handwriting expert one day prior to the hearing. The Chairman of the Arbitration Panel held a conference on the issue and determined that Minor was entitled to a copy of the previous expert's report, but not to all of the materials surrounding the hiring of the two experts, as Minor had requested. At the conclusion of the hearing, the Arbitration Panel first found that Minor had withdrawn her RICO claims and then entered an award denying each of Minor's remaining claims. Displeased with the decision, Minor requested a statement of reasons from the Panel. On April 18, 1995, the Panel provided Minor with such a statement.

Minor then proceeded to file her "Motion to Vacate Arbitration Award" in the district court, pursuant to § 10 of the FAA. 9 U.S.C. § 10. In her motion, Minor claims that the arbitration award should be vacated because 1) it was procured by "corruption, fraud, or undue means," 2) the panel refused to hear evidence pertinent and material to the controversy, 3) there was "evident partiality" in the panel, and 4) the award was imperfectly executed because the panel wrongly stated that she had withdrawn her RICO counts. The district court dismissed the motion, finding a lack of subject matter jurisdiction, as the parties are not diverse and the motion to vacate presents no federal question.

II.

It is now well established that § 10 of the FAA does not constitute a grant of subject matter jurisdiction. 1 There must be an

Page 1105

independent basis of federal jurisdiction before a district court can entertain a motion to vacate under that section. See Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 882, 883-84 (9th Cir.1993); Ford v. Hamilton Investments, Inc., 29 F.3d 255, 257 (6th Cir.1994); Harry Hoffman Printing v. Graphic Communications, Local 261, 912 F.2d 608, 611 (2d Cir.1990); Giangrande v. Shearson Lehman/E.F. Hutton, 803 F.Supp. 464, 466 (D.Mass.1992). The petitioning party must demonstrate that diversity or federal question jurisdiction exists. This follows from several Supreme Court cases, which have explained:

The Arbitration Act is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 or otherwise.... [T]here must be diversity of citizenship or some other independent basis for federal jurisdiction ... [for] enforcement of the Act is left in large part to the state courts.

Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 941-42 n. 32, 74 L.Ed.2d 765 (1983) (internal citations omitted); see also Southland Corp. v. Keating, 465 U.S. 1, 15 n. 9, 104 S.Ct. 852, 861 n. 9, 79 L.Ed.2d 1 (1984) ("While the Federal Arbitration Act creates federal substantive law requiring the parties to honor arbitration agreements, it does not create any independent federal-question jurisdiction...."). Thus the fact that Minor relies on the standards of review set forth in § 10 of the FAA to bring her motion to vacate is insufficient to establish federal court jurisdiction.

In this case, Minor attempts to invoke federal question jurisdiction, as it is undisputed that no diversity of citizenship exists between the parties. It is standard learning that federal question jurisdiction arises only when the complaint standing alone "establishes either that federal law creates the cause of action or that the plaintiff's right to relief...

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  • Sonic Automotive, Inc. v. Price, 081211 NCWDC, 3:10-CV-382
    • United States
    • Federal Cases United States District Courts 4th Circuit Western District of North Carolina
    • August 12, 2011
    ...for the exercise of federal question subject matter jurisdiction, and dismissed the petition. In Minor v. Prudential Securities, Inc. 94 F.3d 1103 (7th Cir. 1996), the Seventh Circuit Court of Appeals made a similar conclusion of law, noting that, "[a] strong body of caselaw has develo......
  • 975 F.Supp. 1305 (M.D.Ala. 1997), C. A. 96-T-1747, Transouth Financial Corp. v. Bell
    • United States
    • Federal Cases United States District Courts 11th Circuit Middle District of Alabama
    • August 25, 1997
    ...100 F.3d 263 (2d Cir. 1996); Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981 (5th Cir. 1993); Page 1313 Minor v. Prudential Sec., Inc., 94 F.3d 1103 (7th Cir. 1996); Drexel Burnham Lambert, Inc. v. Valenzuela Bock, 696 F.Supp. 957 (S.D.N.Y.1988) (literal reading of § 4 as jurisdictional ......
  • 102 F.Supp.2d 1029 (S.D.Ind. 2000), IP98-1273, Kittle v. Prudential Ins. Co. of America
    • United States
    • Federal Cases United States District Courts 7th Circuit United States District Court (Southern District of Indiana)
    • January 19, 2000
    ...arbitration] can issue.... [E]nforcement of the Act is left in large part to the state courts." Minor v. Prudential Sec., Inc., 94 F.3d 1103, 1104-05 (7th Cir.1996) (internal citations and quotations omitted) ( quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 ......
  • 388 F.Supp.2d 644 (D.S.C. 2005), C. A. 6 05-1029, Cole v. Long John Silver's Restaurants, Inc.
    • United States
    • Federal Cases United States District Courts 4th Circuit United States District Court of South Carolina
    • September 15, 2005
    ...1247 (D.C.Cir.1999) (same); Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472 (11th Cir.1997) (same); Minor v. Prudential Sec., Inc., 94 F.3d 1103, 1105-06 (7th Cir.1996) (same); Ford v. Hamilton Invests., Inc., 29 F.3d 255, 257-58 (6th Cir.1994) (same). The Court finds the reasoning empl......
  • Request a trial to view additional results
51 cases
  • Sonic Automotive, Inc. v. Price, 081211 NCWDC, 3:10-CV-382
    • United States
    • Federal Cases United States District Courts 4th Circuit Western District of North Carolina
    • August 12, 2011
    ...for the exercise of federal question subject matter jurisdiction, and dismissed the petition. In Minor v. Prudential Securities, Inc. 94 F.3d 1103 (7th Cir. 1996), the Seventh Circuit Court of Appeals made a similar conclusion of law, noting that, "[a] strong body of caselaw has develo......
  • 975 F.Supp. 1305 (M.D.Ala. 1997), C. A. 96-T-1747, Transouth Financial Corp. v. Bell
    • United States
    • Federal Cases United States District Courts 11th Circuit Middle District of Alabama
    • August 25, 1997
    ...100 F.3d 263 (2d Cir. 1996); Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981 (5th Cir. 1993); Page 1313 Minor v. Prudential Sec., Inc., 94 F.3d 1103 (7th Cir. 1996); Drexel Burnham Lambert, Inc. v. Valenzuela Bock, 696 F.Supp. 957 (S.D.N.Y.1988) (literal reading of § 4 as jurisdictional ......
  • 102 F.Supp.2d 1029 (S.D.Ind. 2000), IP98-1273, Kittle v. Prudential Ins. Co. of America
    • United States
    • Federal Cases United States District Courts 7th Circuit United States District Court (Southern District of Indiana)
    • January 19, 2000
    ...arbitration] can issue.... [E]nforcement of the Act is left in large part to the state courts." Minor v. Prudential Sec., Inc., 94 F.3d 1103, 1104-05 (7th Cir.1996) (internal citations and quotations omitted) ( quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 ......
  • 388 F.Supp.2d 644 (D.S.C. 2005), C. A. 6 05-1029, Cole v. Long John Silver's Restaurants, Inc.
    • United States
    • Federal Cases United States District Courts 4th Circuit United States District Court of South Carolina
    • September 15, 2005
    ...1247 (D.C.Cir.1999) (same); Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472 (11th Cir.1997) (same); Minor v. Prudential Sec., Inc., 94 F.3d 1103, 1105-06 (7th Cir.1996) (same); Ford v. Hamilton Invests., Inc., 29 F.3d 255, 257-58 (6th Cir.1994) (same). The Court finds the reasoning empl......
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