Blake v. Fusco (In re Fusco)
| Decision Date | 03 September 2021 |
| Docket Number | Case No. 18-42451-ess,Adv. Pro. No. 19-01149-ess |
| Citation | 632 B.R. 92 |
| Parties | IN RE: Anthony FUSCO aka Anthony John Fusco, Debtor. Fred Blake aka Frederick Blake, Plaintiff, v. Anthony Fusco aka Anthony John Fusco, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Steven S. Newburgh, Esq., McLaughlin & Stern, LLP, 525 Okeechobee Boulevard, City Place Office Tower (Suite 1700), West Palm Beach, FL 33401, Chester R. Ostrowski, Esq., McLaughlin & Stern, LLP, 260 Madison Avenue, New York, NY 10016, Attorneys for Plaintiff, Fred Blake, aka Frederick Blake
Lawrence R. Gelber, Esq., 34 Plaza Street East (Suite 1107), Brooklyn, NY 11238, Attorneys for Defendant, Anthony Fusco, aka Anthony John Fusco
Before the Court is the motion for summary judgment of plaintiff Fred Blake, aka Frederick Blake. In his summary judgment motion, Mr. Blake seeks two forms of relief -- an order to confirm an arbitration award issued by the Financial Industry Regulatory Authority Office of Dispute Resolution, and separately, a determination that the debt arising from the arbitration award is non-dischargeable pursuant to Bankruptcy Code Section 523(a)(19). In this decision, the Court addresses the first of these matters – that is, whether the arbitration award should be confirmed. The defendant Anthony Fusco responds that the motion to confirm the arbitration award should be denied because, among other reasons, the arbitration award exhibits a manifest disregard of the law and was tainted by the malfeasance of the arbitration panel.
This Court has jurisdiction over this adversary proceeding pursuant to Judiciary Code Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the Order dated December 5, 2012, of the United States District Court for the Eastern District of New York. In addition, this Court may adjudicate these claims to final judgment to the extent that they are core proceedings pursuant to Judiciary Code Section 157(b), and to the extent that they are not core proceedings, pursuant to Judiciary Code Section 157(c) because the parties have stated their consent to this Court entering a final judgment. July 26, 2021 Hearing Tr. 101:4-9 102:5-16, ECF No. 36. See Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 671, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015) (holding that in a non-core proceeding, a bankruptcy court may enter final orders "with the consent of all the parties to the proceeding" (quoting 28 U.S.C. § 157(c)(2) ).
The following are the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Civil Procedure 52, made applicable here by Bankruptcy Rule 7052.
On April 28, 2018, Mr. Fusco filed a petition for relief under Chapter 7 of the Bankruptcy Code. On October 5, 2018, Financial Industry Regulatory Authority ("FINRA") claimant Mr. Blake filed a motion for relief from the automatic stay ("Stay Relief Motion") with respect to the arbitration pending before the FINRA Office of Dispute Resolution, Arbitration Number 15-00802, Frederick Blake v. Legend Securities, Inc., Brian Keith Decker, Daren Dorval, Anthony Fusco, Frank Fusco, et al. (the "Arbitration" or "FINRA Arbitration").
From time to time, and on December 10, 2018, the Court held hearings on the Stay Relief Motion, at which Mr. Blake, by counsel, and Mr. Fusco, pro se , appeared and were heard, and the Court granted the Stay Relief Motion. On December 20, 2018, the Court entered an order in Mr. Fusco's bankruptcy case modifying the automatic stay to permit "[t]he FINRA arbitration proceedings [to] be recommenced any time after fourteen (14) days from the entry of this Order" and to limit "[t]he relief from the automatic stay ... to the entry of a final decision and/or award by FINRA." Stay Relief Order, In re Anthony Fusco , Case No. 18-42451, ECF No. 67, at 2. And on November 20, 2019, the Court entered an order discharging Mr. Fusco.
On April 7, 2015, Mr. Blake commenced an arbitration by filing a Statement of Claim with FINRA against Mr. Fusco, certain agents of Legend Securities, Inc. ("Legend"), and Legend. Motion to Confirm Arbitration Award ("Motion to Confirm"), ECF No. 21, ¶ 1. In the Statement of Claim, Mr. Blake alleged that Mr. Fusco and others committed fraud, breach of fiduciary duty, churning, misrepresentations, non-disclosures, omission of facts, unauthorized trading, violation of state "blue sky" laws, failure to supervise, negligence, and mark-ups regarding unauthorized securities transactions performed for him by Legend brokers that were not registered in Florida. Motion to Confirm, Exh. B (the "Award") at 2. Mr. Blake requested relief in the form of compensatory damages, costs, pre-judgment interest at the statutory rate, and rescission damages. And he sought additional relief in the form of an award of punitive damages and a finding that Mr. Fusco and others were liable under the Florida Securities and Investor Protection Act.
On June 1, 2015, Mr. Fusco and the other respondents in the FINRA Arbitration filed a joint Statement of Answer to Statement of Claim, asserting thirteen affirmative defenses and requesting dismissal of all claims as well as an award of their attorneys' fees and costs. Declaration of Debtor Anthony John Fusco ("Fusco Decl."), ECF No. 22, ¶ 37; Compl., ECF No. 1, ¶ 1. On May 13, 2019, Mr. Fusco submitted a hearing brief arguing, among other things, that he had no connection to Mr. Blake's securities accounts, and did not communicate with him in any capacity. Fusco Decl., Exh. Y at 1-2 ("Fusco Hearing Brief"). He also asserted that each Legend broker that sold a security to Mr. Blake was properly registered in Florida. Fusco Hearing Brief at 2.
On June 3, 2019, FINRA held an evidentiary hearing in the Arbitration in Boca Raton, Florida, at which Mr. Fusco appeared pro se and testified on his own behalf. Award at 1, 6. At the conclusion of the hearing, Mr. Blake requested an award of damages in the total amount of $966,708.15, comprised of $110,622.95 in compensatory damages, $141,073.76 in statutory interest, $83,890.51 in attorneys' fees, $1,879.15 in costs, and $629,241.78 in punitive damages. Motion to Confirm ¶ 10.
Just over three weeks later, on June 25, 2019, FINRA issued the Award, finding Mr. Fusco jointly and severally liable with the other respondents for damages in the total amount as requested by Mr. Blake. The Award also imposed joint and several liability on Mr. Fusco and the other respondents for certain additional fees assessed by FINRA, in the total amount of $10,725.00. Motion to Confirm ¶ 12.
In the Award, the Arbitration panel found, "based on clear and convincing evidence," that Mr. Fusco and the other respondents intentionally engaged in misconduct with respect to Mr. Blake's securities accounts and "knowingly participated, condoned, ratified and consented to the conduct of [Legend's] employees, brokers and agents." Award at 4. This misconduct included "excessively trading and churning" accounts, "improperly recording trades as unsolicited" on account statements, "fraudulently misrepresenting or failing to disclose markups and exorbitant commissions," failing to disclose that certain brokers who solicited transactions from Mr. Blake were not registered brokers in Florida, and "failing to follow [Mr. Blake's] instructions including instructions to close his accounts." Award at 4.
Following FINRA's issuance of the Award, and as of the date of this Motion, neither Mr. Fusco nor any of the other respondents has paid any portion of the Award to Mr. Blake.
On November 15, 2019, Mr. Blake commenced this adversary proceeding by filing a complaint against Mr. Fusco seeking to confirm the Award entered in the FINRA Arbitration and to determine that Mr. Fusco's debt owed to him is non-dischargeable under Bankruptcy Code Sections 523(a)(2) and 523(a)(19). On January 24, 2020, Mr. Fusco filed an answer to the Complaint. From time to time, and on August 13, 2021, the Court held pre-trial conferences, at which Mr. Blake and Mr. Fusco, each by counsel, appeared and were heard.
On March 4, 2021, Mr. Blake filed a motion for summary judgment seeking, among other relief, confirmation of the Award – this Motion to Confirm – and a determination that the Award is non-dischargeable under Bankruptcy Code Section 523(a)(19).1 On March 29, 2021, Mr. Fusco filed a declaration in opposition to the Motion to Confirm. And on March 30, 2021, Mr. Fusco filed a memorandum of law in opposition to the Motion to Confirm ("Opposition") and a cross-motion to vacate the Award ("Motion to Vacate"). Memorandum of Law in Opposition to Motion to Confirm ("Def's Mem."), ECF No. 26; Motion to Vacate, ECF No. 27.
On April 3, 2021, Mr. Blake filed a reply in further support of the Motion to Confirm. Plaintiff's Reply ("Plf's Reply"), ECF No. 28. On April 5, 2021, Mr. Fusco filed a reply in further support of the Motion to Vacate. ECF No. 29 ("Def's Reply"). On August 2, 2021, Mr. Fusco filed a supplemental declaration in opposition to the Motion to Confirm. Fusco Supplemental Declaration ("Fusco Supp. Decl."), ECF No. 38. On August 11, 2021, Mr. Blake filed a supplemental memorandum in support of the Motion to Confirm. Plaintiff's Supplemental Memorandum of Law ("Plf's Supp. Mem."), ECF No. 39. On August 11, 2021, Mr. Fusco filed a supplemental reply memorandum in opposition to the Motion. Defendant's Supplemental Memorandum of Law ("Def's Supp. Mem."), ECF No. 40.
From time to time, and on July 26, 2021, the Court held continued pre-trial conferences and hearings on the Motion to Confirm and the Motion to Vacate, at which Mr. Blake and Mr. Fusco, each by counsel, appeared and were heard,...
To continue reading
Request your trial
-
Blake v. Fusco (In re Fusco)
...among other things, that he had no connection to Mr. Blake's securities accounts, and did not communicate with him in any capacity. Fusco Decl., Exh. Y at 1-2 ("Fusco Hearing Brief"). He also asserted that each Legend broker that sold a security to Mr. Blake was properly registered in Flori......
-
Blake v. Fusco (In re Fusco)
...award is not an opportunity for a rehearing on the merits of the parties' claims and defenses." 31 Blake v. Fusco (In re Fusco), 632 B.R. 92, 113 (Bankr. E.D.N.Y. 2021). In response to Mr. Fusco's arguments that the Award was "irrational," the Court concluded: [E]ven if the asserted shortco......