Kumaran v. Nat'l Futures Ass'n

Decision Date02 July 2020
Docket Number1:20-CV-3668 (GHW)
PartiesSAMANTHA SIVA KUMARAN, Other similarly situated Customers 1-100, Other similarly situated CTA's 1-100, NEFERTITI RISK CAPITAL MANAGEMENT, LLC, Plaintiffs, v. NATIONAL FUTURES ASSOCIATION; JANE DOE 1, Compliance Officer NFA; JANE DOE 2, Compliance Officer NFA; TOM KADLEC, Board Member NFA, Defendants.
CourtU.S. District Court — Southern District of New York

ORDER OF DISMISSAL

GREGORY H. WOODS, United States District Judge:

Plaintiff Samantha Siva Kumaran, who appears pro se, brings this action on her own behalf, and on behalf of "[o]ther similarly situated Customers 1-100," "[o]ther similarly situated CTA's 1-100," and Nefertiti Risk Capital Management, LLC.1 She asserts claims under the Commodity Exchange Act, the Federal Arbitration Act, and other federal and state laws, and she seeks injunctive relief and damages.2 For the reasons discussed below, the Court dismisses this action.

STANDARD OF REVIEW

The Court has the authority to dismiss a complaint, even when the plaintiff has paid the relevant fees, if it determines that the action is frivolous, see Fitzgerald v. First E. Seventh Tenants Corp., 221 F.3d 362, 363-64 (2d Cir. 2000), or that the Court lacks subject-matter jurisdiction, see Fed. R. Civ. P. 12(h)(3); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). The Court is obliged to construe pro se pleadings liberally, Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009), and interpret themto raise the "strongest [claims] that they suggest," Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (internal quotation marks and citations omitted, emphasis in original).

BACKGROUND

Kumaran makes the following allegations in her complaint: Kumaran is a citizen of New York, New York, and her business, Nefertiti Risk Capital Management, LLC ("NRCM"), is "a minority women owned small business, sole proprietor[ship]," and "CTA" (commodity trade advisor), located in New York, New York.3 (ECF 1 at 4.) She is NRCM's "legal successor and assign[ee]," as NRCM is "un-operational." (Id.) One of the defendants, the National Futures Association ("NFA"), is a "not-for profit organization" that is incorporated in Delaware and has its principal place of business in Chicago, Illinois. (Id. at 2.) The NFA "is the only self-regulatory association organized under the authority of the Commodit[y] Exchange Act" ("CEA"). (Id. at 2-3.) The other defendants are unidentified "Jane Doe" NFA Compliance Officers and Tom Kadlec, a citizen of Illinois who serves on the NFA's Board of Directors and is the Chief Executive Officer of ADM Investor Services ("ADMIS").

A. The ADMIS account

On or about January 31, 2017, Kumaran opened a commodities futures trading account with ADMIS, and immediately thereafter, ADMIS "turned [the account] over to Vision [Financial Markets, LLC ("Vision")] to unlawfully scrutinize [Kumaran's] trading strategies." (Id. at 13.) ADMIS, in exchange for millions of dollars, has "secretively distribute[d] its customer[s'] and CTA[s'] confidential and proprietary financial accounts, behind the scenes, (without the customers['] and CTA[s'] knowledge, consent or authorization) to Vision and its owners, employees and affiliates,to access their trading strategies." (Id. at 8.) 4 It has also "pass[ed] through unauthorized fees [charged to] victims[] to fund Vision's owners, employees and affiliates [that it] would materially fraudulently conceal in [an] account opening." (Id.) It has further "disseminated all its CTA[s'] competitive algorithms to Howard Rothman and [John] Fel[i]g." (Id.) Vision's affiliate, Vision Investment Advisors, Inc. ("VIA"), "directly trade[s] in competition with all the CTA[s] who[se] financial accounts it had unlawfully gained access to — while ADMIS, in direct unfair market competition, continue[s] to give Vision[] preferential rates, discounted commissions, and sell-out its competitors['] trade secrets." (Id.)

Though she was still "unaware of Vision affiliates['] access to [her ADMIS] account," Kumaran closed that account because of "gross negligence in [ADMIS's] risk department." (Id. at 14.)5 On or about September 20, 2017, Kumaran became aware of Vision's unauthorized access to her ADMIS account, and between that date and September 29, 2017, she sought explanations from her ADMIS broker. She also "reached out to the NFA hotline[] to inquire[] [about] what approvals[were issued by the] NFA[] for ADMIS to distribute customer accounts to Vision affiliates." (Id. at 15-16.) She further communicated with the NFA's Compliance Department.

By that time, Kadlec, ADMIS's Chief Executive Officer and an NFA board member, as well as "other [NFA] compliance staff, already knew of the marketplace fraud." (Id. at 16.)6 But despite the NFA's previous removal of Vision from its membership, the NFA "omitted a reference or link to [ADMIS's] arrangement [with Vision] on [its] Basic Website, so any Customer, CTA or Member, inquiring about ADMIS or Vision['s] [Introducing Brokers could not gain any] knowledge or history of th[at] relationship [or of the] transfer of customer accounts to Vision affiliates, owners and employees." (Id.) NFA officials also failed to respond to Kumaran's questions, or enforce its own rules.7 Kumaran continued to seek the assistance of NFA officials to investigate, but they "never followed up with [her about] how [her] CTA strategies had ended up in the hands of [her] competitors." (Id. at 18.)

B. Arbitration

Kumaran sought NFA arbitration to resolve her dispute with ADMIS. But beginning on September 21, 2018, "ADMIS and [the] NFA began a process of flagrant disregard for the NFAArbitration rules, a process that lasted months, to deny [Kumaran's] due process rights and to obstruct fair and equitable justice in an NFA controlled Arbitration Forum." (Id. at 27.) NFA officials involved with the arbitration

failed to respond to procedural emails, failed to provide a transparent record of service-of-process, maintained repeated ex-parte telephonic communications with ADMIS and its counsel, and went so far as to leak information to ADMIS (advance of any announcements) of NFA Arbitration locations and venue, in advance of Kumaran being notified.

(Id. at 27-28.) On or about November 18, 2019, the NFA granted a motion to stay the arbitration. (Id. at 47-48.)

DISCUSSION
A. Kumaran's claims on behalf of other individuals and NRCM

Kumaran seeks to bring this action as a class action and asserts claims on behalf of other individuals and NRCM. But this action cannot proceed as a class action, and Kumaran cannot assert claims on behalf of any other individual or other entity. This includes NRCM, which appears to be a sole-member or solely owned limited liability company (LLC), though Kumaran alleges that it is a sole proprietorship. (See ECF 1 at 4.)

The statute governing appearances in federal court, 28 U.S.C. § 1654, "allow[s] two types of representation: 'that by an attorney admitted to the practice of law by a governmental regulatory body, and that by a person representing himself.'" Lattanzio v. COMTA, 481 F.3d 137, 139 (2d Cir. 2007) (quoting Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991)). Because a nonlawyer cannot bring suit on behalf of other individuals, a nonlawyer plaintiff appearing pro se cannot act as a class representative. Rodriguez v. Eastman Kodak Co., 88 F. App'x 470, 471 (2d Cir. 2004) (summary order) (citing Iannaccone v. Law, 142 F.3d 553, 558 (2d Cir. 1998)); Phillips v. Tobin, 548 F.2d 408, 412-15 (2d Cir. 1976). And while "some courts allow sole proprietorships to proceed pro se [because] a sole proprietorship has no legal existence apart from its owner[,] [u]nlike a soleproprietorship, a sole member limited liability company is a distinct legal entity that is separate from its owner." Lattanzio, 926 F.2d at 140. Thus, a limited liability company, including a sole-member or solely owned limited liability company, cannot appear in federal court without an attorney. See id. ("Because both a partnership and a corporation must appear through licensed counsel, and because a limited liability company is a hybrid of the partnership and corporate forms, a limited liability company also may appear in federal court only through a licensed attorney.") (internal citation omitted); see also Rowland v. Cal. Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 202-03 (1993) (noting that courts do not allow corporations, partnerships, associations, and other "artificial entities" to appear in court without an attorney). And a pro se litigant who is not an attorney cannot assert claims in federal court that an artificial entity, such as a corporation or a limited liability company, has assigned to her. See, e.g., United States ex rel. Mergent Servs. v. Flaherty, 540 F.3d 89, 92 (2d Cir. 2008).

Kumaran does not allege that she is an attorney. Accordingly, because Kumaran may only represent herself, the Court denies her request to proceed with this action as a class action, and the Court dismisses without prejudice any claims she asserts on behalf of any individual other than herself. In addition, the Court dismisses without prejudice any claims Kumaran asserts on behalf of NRCM — a limited liability company — and any that NRCM has assigned to her.

B. Kumaran's claims for damages

The Court must dismiss Kumaran's claims for damages against the NFA, and against Kadlec (in his capacity as an NFA board member) and the "Jane Doe" NFA Compliance Officers, because they are immune from suit for such claims. "The NFA is a[] [self-regulatory organization (SRO)] that is registered under the [CEA]." Effex Capital, LLC v. Nat'l Futures Ass'n, 933 F.3d 882, 888 (7th Cir. 2019), cert. denied, 140 S. Ct. 1122 (2020); McCrudden v. Nat'l Futures Ass'n, No. 13-CV-6930, 2014 WL 4412470, *1 (S.D.N.Y. Sept. 8, 2014) (the NFA is "a congressionally authorized self-regulatoryorganization for the futures industry"). "[A]n SRO and its officers are entitled...

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