Opinion
02 Civ. 9415 (LAK)
December 12, 2002
ORDER
Petitioners seek to vacate an arbitration award rendered against them and in favor of respondent in a National Association of Securities Dealers ("NASD") arbitration. The petition contains no jurisdictional allegations and, indeed, does not assign any ground for vacating the award apart from an alleged violation by one of the arbitrators of the NASD Code of Arbitration Procedure. Their memorandum of law contends that the alleged violation is a basis for vacating the award under Section 10 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10, and Section 7511 of the N.Y. CPLR.
A federal court is obliged to ensure that it has subject matter jurisdiction before proceeding to the merits of a case. Here, the petition does not allege and, indeed, virtually negates the existence of diversity of citizenship. In consequence, the Court would be empowered to adjudicate this matter only if the claim arises under the Constitution or laws of the United States. See 28 U.S.C. § 1331.
Even if the Court were to assume that the petition alleged a basis for vacating the award under the FAA, that would be insufficient:
"'[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.)." Balis, Lewittes Coleman, Inc. v. Tarrson, No. 02 Civ.7838 (LAK), 2002 WL 31473852 (S.D.N.Y. Nov. 4, 2002).
By parity of reasoning, the fact that petitioners seek to vacate an award made in an NASD arbitration, which may have involved some alleged securities law violation, provides no basis of federal jurisdiction.
Accordingly, the petition to vacate the arbitration award is dismissed for lack of subject matter jurisdiction. Petitioners of course are free to seek relief in the state courts.