Opinion
Civil Action 21 Civ. 8957 (PAC) (SLC)
06-06-2022
LEVANT MIGUEL BISHOP, Petitioner, v. DALTON KENT SECURITIES GROUP, INC., Respondent.
TO THE HONORABLE PAUL A. CROTTY, UNITED STATES DISTRICT JUDGE.
REPORT AND RECOMMENDATION
SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.
I. INTRODUCTION
Before the Court is the motion of Petitioner Levant Miguel Bishop (“Mr. Bishop”), seeking entry of a default judgment confirming a Financial Industry Regulatory Authority (“FINRA”) arbitration award (the “Award”) entered in his favor against Respondent Dalton Kent Securities Group, Inc. (“Dalton Kent”). (ECF No. 16 (the “Motion”)). For the reasons set forth below, I respectfully recommend that the Motion be GRANTED and that a default judgment affirming the Award against Dalton Kent be entered.
II. BACKGROUND
A. Factual Background
Mr. Bishop is a former employee of Dalton Kent. (ECF No. 1 ¶ 16). During Mr. Bishop's employment from July 1997 to July 2001, six customers lodged complaints against Mr. Bishop (the “Occurrences”). (ECF No. 1 ¶¶ 3, 16). The Occurrences concern allegations of investment-related sales practice violations, forgery, theft, misappropriation, and conversion of funds. (ECF Nos. 1 at 4-10; 1-1 at 4-10). Mr. Bishop requested that Dalton Kent expunge the Occurrences, but Dalton Kent did not respond. (ECF Nos. 1 ¶ 17; 1-3 at 6-8).
The Occurrences were numbered 1010787, 364592, 364576, 364584, 364579, and 364573. (ECF No. 11 at 3). Mr. Bishop, in what appears to be a typographical error, refers to Occurrence No. 1010787 as “1718107.” (ECF No. 1 ¶ 3).
On or about August 17, 2020, Mr. Bishop commenced a FINRA arbitration proceeding by filing a Statement of Claim against Dalton Kent, seeking expungement of the Occurrences from his record in the Central Registration Depository (“CRD”) pursuant to FINRA Rule 2080. (ECF Nos. 1 ¶ 16; 1-1 at 2-3; 1-3 at 5). Dalton Kent did not submit a Statement of Answer or sign the Submission Agreement. (ECF Nos. 1 ¶ 17; 1-1 at 2-3; 1-3 at 6-7).
CRD is a database that FINRA maintains for all firms and individuals involved in the U.S. securities industry. See Central Registration Depository, FINRA, https://www.finra.org/registration-exams-ce/classic-crd (last visited May 31, 2022).
FINRA Rule 2080 provides that “[m]embers or associated persons seeking to expunge information from the CRD system arising from disputes with customers must obtain an order from a court of competent jurisdiction directing such expungement or confirming an arbitration award containing expungement relief.” FINRA Rule 2080(a); see also Messinger v. JPMorgan Chase Bank, N.A., No. 13 Civ. 2444 (AJN), 2014 WL 904528, at *2 (S.D.N.Y. Mar. 7, 2014).
On May 21, 2021, Mr. Bishop filed an Amended Statement of Claim, and on June 8, 2021, filed a Corrected Amended Statement of Claim to correct a scrivener's error. (ECF No. 1-1 at 2-3).
On April 21, 2021, and July 23, 2021, a FINRA Arbitrator (the “Arbitrator”) held hearings, where participating parties could present oral argument and evidence on Mr. Bishop's claim. (ECF Nos. 1 ¶ 18; 1-1 at 3 (the “Hearings”)). Mr. Bishop advised the Arbitrator that the customers involved in Occurrences 1010787, 364592, and 364584 were deceased. (ECF No. 1-1 at 3). The customers involved in Occurrences 364576, 364579, and 364573 were served with the Corrected Amended Statement of Claim and notice of the July 23, 2021 hearing. (Id.) Neither Dalton Kent nor any of the customers participated in the Hearings. (Id.) The settlement documentation related to Occurrences 364592, 364576, 364584, and 364573 was unavailable for the Arbitrator's review “due to the age of the settlements.” (Id. at 4). The Arbitrator noted that Occurrences 1010787 and 364579 “were not settled and, therefore, there were no settlement documents to review.” (Id.)
On August 26, 2021, after considering the “pleadings, exhibits, Claimant's testimony, and Claimant's BrokerCheck® Report,” the Arbitrator issued the Award, finding in favor of Mr. Bishop and recommending expungement of the Occurrences from Mr. Bishop's CRD records. (ECF Nos. 1 ¶¶ 3, 19; 1-1 at 4-12).
On October 1, 2021, FINRA granted Mr. Bishop's request for a waiver of the obligation in Rule 2080 to name FINRA as a party to any action to confirm the Award. (ECF Nos. 1 ¶ 8; 1-2 at 2).
B. Procedural Background
On November 1, 2021, Mr. Bishop filed a petition seeking an order confirming the Award pursuant to 9 U.S.C. § 9. (ECF No. 1 at 1 (the “Petition”)). On November 23, 2021, the Honorable Alison J. Nathan referred the action to the undersigned for General Pretrial Supervision. (ECF No. 7). After Dalton Kent failed to file a timely answer, the Court directed Mr. Bishop to request a Certificate of Default by January 27, 2022 and to file a motion for default Judgment by February 10, 2022. (ECF No. 9). On January 27, 2022, the Clerk of the Court entered a Certificate of Default against Dalton Kent. (ECF No. 12). On February 15, 2022, Mr. Bishop filed the Motion. (ECF No. 16). On February 17, 2022, Judge Nathan referred the Motion to the undersigned for a Report and Recommendation. (ECF No. 21). On April 11, 2022, the action was reassigned to the Honorable Paul A. Crotty. (ECF min. entry Apr. 6, 2022). On May 23, 2022, at Mr. Bishop's request, the Clerk of the Court entered a corrected Certificate of Default. (ECF No. 29).
On November 9, 2021, Mr. Bishop amended the Petition to correct a clerical error. (See ECF No. 6; see also ECF No. 3). With the Court's permission, Mr. Bishop amended his Petition a second time to correct the allegations of federal subject matter jurisdiction. (See ECF Nos. 24; 24-1 (the “Amended Petition”); 25 (the “Apr. 13 Order”)).
Mr. Bishop had timely filed a motion for default judgment on February 2, 2022, but the Clerk of the Court required him to refile it due to a clerical error. (ECF No. 13; ECF min. entry Feb. 2, 2022).
Although Mr. Bishop served Dalton Kent with the Petition, the Motion, Amended Petition, and the Apr. 13 Order on January 4, 2022, February 8, 2022, and April 15, 2022, respectively, (see ECF Nos. 8; 14; 26), Dalton Kent did not oppose the Motion or otherwise appear in this action.
III. DISCUSSION
A. Legal Standards
“The Federal Arbitration Act [the “FAA”] provides a streamlined process for a party seeking a judicial decree confirming an award, an order vacating it, or an order modifying or correcting it.” Egan v. Trower, No. 20 Civ. 6165 (NRB), 2021 WL 197085, at *2 (S.D.N.Y. Jan. 20, 2021) (quoting Doud v. Gold, No. 19 Civ. 6561 (KPF), 2019 WL 5209615, at *2 (S.D.N.Y. Oct. 16, 2019)). The FAA governs confirmation of an award rendered in a FINRA arbitration. See Ameriprise Fin. Servs., Inc. v. Silverman, No. 19 Civ. 7812 (NRB), 2019 WL 6728862, at *2 (S.D.N.Y. Dec. 11, 2019); see also Dishner v. Zachs, No. 16 Civ. 04191 (LGS), 2016 WL 7338418, at *1 (S.D.N.Y. Dec. 19, 2016) (collecting cases). The losing party has three months following the arbitration proceeding to move to vacate or modify the arbitration award. See 9 U.S.C. § 12. “When the three month limitations period has run without vacation of the arbitration award, the successful party has a right to assume the award is valid and untainted, and to obtain its confirmation in a summary proceeding.” Florasynth, Inc. v. Pickholz, 750 F.2d 171, 177 (2d Cir. 1984). A party to an arbitration has one year following the award to apply to a court for an order confirming the award. See 9 U.S.C. § 9.
Section 9 provides that a “court must” confirm an arbitration award “unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. “It is well-settled that judicial review of an arbitration award is narrowly limited.” Arcadia Aviation PHF, LLC v. Aero-Smith, Inc., No. 12 Civ. 06177 (PAC), 2018 WL 3765380, at *3 (S.D.N.Y. Aug. 8, 2018) (quoting Barbier v. Shearson Lehman Hutton Inc., 948 F.2d 117, 120 (2d Cir. 1991)); see also Trustees of the N.Y.C. Dist. Council of Carpenters Pension Fund v. Premium Sys., Inc., No. 12 Civ. 1749 (LAK) (JLC), 2012 WL 3578849, at *3 (S.D.N.Y. Aug. 20, 2012) (“Notwithstanding this inquiry, courts are ‘severely limited' in their review of arbitration awards because they should not undermine the purpose of arbitration, which is to settle disputes efficiently and to avoid costly litigation.”). “Normally, confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court, and the court must grant the award unless the award is vacated, modified, or corrected.” D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 110 (2d Cir. 2006) (internal citations and quotation marks omitted). “Only ‘a barely colorable justification for the outcome reached' by the arbitrators is necessary to confirm the award.” Id. (quoting Landy Michaels Realty Corp. v. Local 32B-32J, Serv. Emp. Int'l Union, 954 F.2d 794, 797 (2d Cir. 1992)).
Where a petition to confirm an arbitration award is unopposed, the Second Circuit has instructed district courts to treat the application “‘as akin to a motion for summary judgment based on the movant's submissions' and the court ‘may not grant the motion without first examining the moving party's submission to determine' that it satisfactorily demonstrates the absence of material issues of fact.” Neshgold LP v. N.Y. Hotel & Motel Trades Counsel, AFL-CIO, No. 13 Civ. 2399 (KPF), 2013 WL 5298332, at *7 (S.D.N.Y. Sept. 19, 2013) (quoting D.H. Blair, 462 F.3d at 107). In D.H. Blair, the Second Circuit explained that Federal Rule of Civil Procedure 55, which governs motions for default judgment, “does not operate well in the context of a motion to confirm or vacate an arbitration award[,]” because such a motion “is generally accompanied by a record, such as an agreement to arbitrate and the arbitration award decision itself . . .” 462 F.3d at 107-09. Consistent with the Second Circuit's direction and the precedent of other courts in this District, the Court analyzes the Motion as an unopposed motion for summary judgment. See Trustees of the N.Y.C. Carpenters Relief & Charity Fund v. Acme Steel Shelving Corp., No. 12 Civ. 5572, 2013 WL 12109394, at *1 (S.D.N.Y. June 5, 2012) (following D.H. Blair, and construing default judgment motion seeking to confirm arbitration award as summary judgment motion); see also Local 355 United Serv. Workers Union v. LA Mech. Corp., No. 15 Civ. 4474 (MKB) (VMS), 2016 WL 4367220, at *3 (E.D.N.Y. July 14, 2016) (collecting cases treating unopposed motions to confirm arbitration awards as motions for summary judgment); see also Trustees of New York City Dist. Council of Carpenters Pension Fund v. Sky Heights Constr. Corp., No. 18 Civ. 5852 (PAC), 2019 WL 988702, at *2 (S.D.N.Y. Feb. 28, 2019).
“Under the familiar summary judgment standard, a ‘court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Doud, 2019 WL 5209615, at *3 (quoting Fed.R.Civ.P. 56(a)). When evaluating an unopposed confirmation of an arbitration award, “the court cannot base the entry of summary judgment on the mere fact that the motion was unopposed, but, rather, must consider the merits of the motion.” Dishner, 2016 WL 7338418, at *2 (quoting Trustees of the UNITE HERE Nat'l Health Fund v. JY Apparels, Inc., 535 F.Supp.2d 426, 428-29 (S.D.N.Y. 2008)).
B. Application
Applying these standards, the Court finds that Mr. Bishop has adequately demonstrated that he is entitled to relief on the Motion. First, there are no material facts in dispute: Dalton Kent has not appeared or contested any of the material facts on which Mr. Bishop bases his Motion, nor does the record disclose any dispute concerning those facts. See Doud, 2019 WL 5209615, at *3.
Second, the Court finds that the Award itself demonstrates the grounds for the Arbitrator's decision. The Award reflects that the Arbitrator assessed the merits of the available evidence and determined that Mr. Bishop “was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds[,]” and that the customers' claims were “false.” (ECF No. 1-1 at 4). The Arbitrator analyzed each of the Occurrences and concluded as to each:
Occurrence No.
Arbitrator's Conclusion
1010787
The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; and the claim, allegation, or information is false.
364592
The claim, allegation, or information is factually impossible or clearly erroneous; and the claim, allegation, or information is false.
364576
The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; and the claim, allegation, or information is false.
(Id. at 4-10). These findings meet or “surpass the degree of reasoning courts require to confirm an arbitration award.” Doud, 2019 WL 5209615, at *3; see D.H. Blair, 462 F.3d at 110 (“The arbitrator's rationale for an award need not be explained, and the award should be confirmed ‘if a ground for the arbitrator's decision can be inferred from the facts of the case.'” (quoting Barbier, 948 F.2d at 121)). Thus, the Court concludes that the arbitration award provides more than a “barely colorable justification for the outcome reached.” Landy Michaels, 954 F.2d at 797; see Manor House Cap., LLC v. Pritsker, No. 14 Civ. 7922 (GBD), 2015 WL 273684, at *3 (S.D.N.Y. Jan. 15, 2015) (confirming arbitration award recommending expungement of a petitioner's CRD record because it provided a “colorable justification for the outcome reached”).
364584
The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; and the claim, allegation, or information is false.
364579
The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; and the claim, allegation, or information is false.
364573
The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; and the claim, allegation, or information is false.
Third and finally, there are no grounds to set aside the Award. See D.H. Blair, 462 F.3d at 110 (explaining that “[t]he court must grant the award unless the award is vacated, modified, or corrected” (quoting 9 U.S.C. § 9)). It is undisputed that FINRA's rules required Mr. Bishop to arbitrate the issue of Dalton Kent's refusal to respond to his requests to remove the Occurrences, the parties had the opportunity to participate fully in the arbitration proceeding, the Arbitrator issued the Award, and Dalton Kent has not challenged it. (ECF Nos. 1 ¶¶ 11, 18-19; 1-1 at 3-4). The record does not reflect that the Award has been vacated or modified on any grounds in 9 U.S.C. §§ 10 or 11, nor has Dalton Kent made any effort to vacate, modify, or correct the Award, and the Court sees “no basis to do so sua sponte.” Doud, 2019 WL 5209615, at *3.
Accordingly, the undisputed evidence demonstrates that “no material issue of fact remains,” and Mr. Bishop has therefore met his burden to establish that the Award must be confirmed. D.H. Blair, 462 F.3d at 110 (quoting Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004)).
IV. CONCLUSION
For the reasons set forth above, the Court respectfully recommends that Mr. Bishop's Motion be GRANTED and that all references to the Occurrences be expunged from the CRD record of Mr. Bishop.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Crotty.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).