Biscanin v. Merrill Lynch & Co., Inc.

• Decision Date: 06 May 2005
• Docket Number: No. 03-1659.,03-1659.
• Parties: John P. BISCANIN, as Successor Conservator of Dolores W. O'Keefe; as Co-administrator of the Estate of Dolores W. O'Keefe; as Trustee of the Dolores W. O'Keefe Living Trust dated September 20, 1990, and as Trustee of the Michael A. O'Keefe Sub-trust of the Dolores W. O'Keefe Irrevocable Trust dated July 12, 1996, Appellant, v. MERRILL LYNCH & CO., INC.; Merrill Lynch & Co. International, Ltd.; Thomas M. Friedman; Richard J. Paradise; Bradley Stratton; Chad G. Bushaw, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 905

407 F.3d 905

John P. BISCANIN, as Successor Conservator of Dolores W. O'Keefe; as Co-administrator of the Estate of Dolores W. O'Keefe; as Trustee of the Dolores W. O'Keefe Living Trust dated September 20, 1990, and as Trustee of the Michael A. O'Keefe Sub-trust of the Dolores W. O'Keefe Irrevocable Trust dated July 12, 1996, Appellant, v. MERRILL LYNCH & CO., INC.; Merrill Lynch & Co. International, Ltd.; Thomas M. Friedman; Richard J. Paradise; Bradley Stratton; Chad G. Bushaw, Appellees.

No. 03-1659.

United States Court of Appeals, Eighth Circuit.

Submitted: January 14, 2005.

Filed: May 6, 2005.

Gregory Mark Dennis, argued, Overland Park, Kansas (Kent T. Perry and Kenneth J. Catanzarite, on the brief), for appellant.

Allison M. Murdock, argued, Kansas City, Missouri (Daniel Bukovac and Sean W. Colligan, on the biref), for appellee.

Before LOKEN, Chief Judge, and MORRIS SHEPPARD ARNOLD and HANSEN, Circuit Judges.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

John Biscanin appeals from the district court's dismissal of his complaint, which asks that an arbitration award be vacated. The complaint's theory is that the award reflects a manifest disregard of applicable federal law. We conclude that the complaint should be dismissed for lack of subject-matter jurisdiction because the claim of manifest disregard is patently meritless.

Mr. Biscanin is one of the administrators of the estate of Dolores O'Keefe. Ms. O'Keefe was a wealthy woman; she had tens of millions of dollars' worth of corporate stock in a trust. In the mid-1990s, her children and her conservator met with financial advisors from Merrill Lynch to determine the best way to move the stock from her trust into trusts for her children — a move that had been approved by a state court. The details of Merrill Lynch's advice are unimportant; it suffices to say that for several years Merrill Lynch advised the conservator and the children on the best way to effect the wealth transfer.

Following Ms. O'Keefe's death, Mr. Biscanin filed a claim with the National Association of Securities Dealers (apparently pursuant to an arbitration agreement that the conservator had entered into with Merrill Lynch). The NASD appointed an arbitration panel. At the arbitration hearing, Mr. Biscanin requested millions of dollars in relief for Merrill Lynch's supposedly actionable advice. The panel awarded Mr. Biscanin "$100,000 as compensatory damages" and denied "all other claims and requests of relief ... with prejudice."

Mr. Biscanin then filed the complaint in this case, asking the court to vacate the arbitration award pursuant to Section 10 of the Federal Arbitration Act, 9 U.S.C. § 10. The defendants moved to dismiss the complaint for lack of subject-matter jurisdiction, see Fed.R.Civ.P. 12(b)(1), and failure to state a claim upon which relief may be granted, see Fed.R.Civ.P. 12(b)(6). While the complaint was pending before the district court, a Kansas state court confirmed the arbitration award. The district court concluded that the res judicata effect of the Kansas decision precluded it from finding in Mr. Biscanin's favor and dismissed the complaint. It did not, however, decide whether it had subject-matter jurisdiction, as it concluded that questions regarding res judicata belong to a small group of issues that can be decided before subject-matter jurisdiction, cf. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583-88, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). We affirm the judgment of the district court because we conclude that there is no jurisdiction over the subject matter of this case.

The parties agree that the only possible basis for jurisdiction in this case is federal-question jurisdiction. Federal-question jurisdiction exists when "the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).

Mr. Biscanin argues that subject-matter jurisdiction exists because his claim that the arbitrators manifestly disregarded federal law when making their award requires the court to resolve a substantial federal question. He cites two cases in support of the proposition that a claim of manifest disregard of federal law triggers federal-question jurisdiction, Greenberg v. Bear, Stearns & Co., 220 F.3d 22, 27 (2d Cir. 2000), and Luong v. Circuit City Stores Inc., 368 F.3d 1109, 1112 (9th Cir.2004). In Greenberg, 220 F.3d at 27, the Second Circuit concluded that "review for manifest disregard of federal law necessarily requires the reviewing court to ... determine what the federal law is ... [and] whether the arbitrator's decision manifestly disregarded that law. This process so immerses the federal court in questions of federal law and their proper application that federal question subject matter jurisdiction is present." The Luong court adopted this reasoning. 368 F.3d at 1112.

We assume for the sake of argument that a claim of manifest disregard of federal law could endow the court with subject-matter jurisdiction. Though we are not certain that we agree with Greenberg, we need not press the matter because we can "choose among threshold grounds for denying audience to a case on the merits," Ruhrgas AG, 526 U.S. at 585, 119 S.Ct. 1563.

A court does not obtain subject-matter jurisdiction just because a plaintiff raises a federal question in his or her complaint. Hagans v. Lavine, 415 U.S. 528, 537-38, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 90 L.Ed. 939 (1946). If the asserted basis of federal jurisdiction is patently meritless, then dismissal for lack of jurisdiction is appropriate. Hagans, 415 U.S. at 537-38, 94 S.Ct. 1372; Perpetual Securities, Inc. v. Tang, 290 F.3d 132, 137 (2d Cir.2002). Because this is a facial rather than a factual challenge to jurisdiction, we determine whether the asserted jurisdictional basis is patently meritless by looking to the face of the complaint, see McKenzie v. City of White Hall, 112 F.3d 313, 316 (8th Cir.1997), and drawing all reasonable inferences in favor of the plaintiff, see Mattes v. ABC Plastics, Inc., 323 F.3d 695, 698 (8th Cir.2003); Crumpley-Patterson v. Trinity Lutheran Hosp., 388 F.3d 588, 590 (8th Cir.2004). Mr. Biscanin's complaint recites the following as the basis of his allegation that the arbitrators manifestly disregarded the law: "The [arbitration] Panel blatantly and willfully ignored clearly applicable and well-settled [federal] law ... Proper application of the law required the...