Opinion
02 Civ. 7838 (LAK)
November 4, 2002
ORDER
Respondent commenced an action against petitioners and others in the United States District Court for the Northern District of Illinois seeking damages for alleged violation of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (the "Exchange Act"), and on other theories. Petitioners bring this proceeding pursuant to Section 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, compelling respondent to arbitrate her claims against them before the National Association of Securities Dealers, Inc. The alleged bases of jurisdiction are the federal question statute, 28 U.S.C. § 1331, and Section 4 of the FAA. The petition fails to explain the basis for the assertion that jurisdiction exists under Section 1331.
"[I]t is well-settled that the FAA does not confer subject matter jurisdiction on the federal courts even though it creates federal substantive law." Greenberg v. Bear, Stearns Co., 220 F.3d 22, 25 (2d Cir. 2000) (citing Southland Corp. v. Keating, 465 U.S. 1, 16 n. 9 (1984)), cert. denied, 531 U.S. 1075 (2001). "[T]here must be `an independent basis of jurisdiction' before district courts may entertain" proceedings under the FAA. Greenberg, 220 F.3d at 25 (quoting Harry Hoffman Printing, Inc. v. Graphic Communications, Int'l Union, Local 261, 912 F.2d 608, 611 (2d Cir. 1990)). The fact that the claim which petitioners seek to force respondent to arbitrate itself arises under the Exchange Act does not create a basis of jurisdiction over their proceeding under the FAA. E.g., Westmoreland Capital Corp. v. Findlay, 100 F.3d 263, 267-68 (2d Cir. 1996); Drexel Burnham Lambert, Inc. v. Valenzuela Bock, 696 F. Supp. 957 (S.D.N.Y. 1988) (Leval, J.). As there is no other alleged basis of federal subject matter jurisdiction, the application is denied and the petition dismissed. Petitioners of course are free to proceed in the New York State courts.
The complaint in respondent's Illinois action alleges that both she and defendant Doerge are residents of Illinois. While citizenship rather than residence controls for diversity purposes, petitioners' failure to allege the existence of diversity of citizenship appears to have been quite deliberate. In any case, the record does not contain allegations which, if true, would demonstrate the existence of complete diversity.
SO ORDERED.