Opinion
Case No: 6:00-cv-1092-Orl-22DAB
February 5, 2001
ORDER
In this action, Plaintiff Investors Capital Corporation ("Investors") sues the Defendants, Carl and Louise Rimmler ("the Rimmlers"), seeking a declaratory judgment establishing "that there is no valid agreement to arbitrate between Investors and the Defendants, and for temporary and permanent injunctive relief to stay the arbitration that has been commenced by Defendants before the National Association of Securities Dealers Regulation (NASDR) in the State of Florida." Complaint (Doc. 1), § 1, at 1. Presently before the Court is the Defendants' Motion to Compel Arbitration, Motion to Stay This Action, and Supporting Memorandum of Law (Doc. 23), filed October 2, 2000. Investors opposes the motion on various grounds, principally arguing that the Rimmlers' claims are not arbitrable. See Doc. 38. In that regard, Investors asserts that the Rimmlers were not customers of Investors, that the Rimmlers' claims do not arise from Investors' business, and that Investors' representatives, Virgil A. Smith and Charlotte Tomaske, were not acting on behalf of Investors in the transactions at issue. Id However, Investors ignores the Rimmlers' joint affidavit (Doc. 20), wherein the Rimmlers state: (1) they knew and believed that Smith and Tomaske worked for and were brokers and licensed securities representatives for Investors during 1998-99; (2) they relied upon and followed their Investors' brokers' investment advice and recommendations to purchase the notes at issue in 1999; (3) before the purchases, Smith and Tomaske identified themselves as securities brokers who worked for Investors, and repeatedly represented themselves as such to the Rimmlers; (4) the Rimmlers met and spoke with Smith and Tomaske at an office location in Apopka, florida; (5) Smith and Tomaske repeatedly assured the Rimmlers in 1998 and 1999 that the note investments were safe, insured and highly-rated; (6) the Rimmlers purchased the notes in reliance upon Smith's and Tomaske's representations to them in 1998-99 that Smith and Tomaske worked for and were brokers with Investors, a reputable brokerage firm; (7) the Rimmlers believed and assumed that Investors was supervising Smith and Tomaske during 1998-99 and was reviewing and approving all of their investment advice to the Rimmlers, including the advice relating to the investments at issue; and (8) the Rimmlers believed they were customers of Investors.
Tomaske now goes by the name Ann Arthur. See Affidavit of Ann Arthur (Doc. 40).
Investors contends that the notes were initially purchased in April and June 1998, then repurchased in January and April 1999, and that Tomaske was not a registered Investors representative at the time the notes were initially purchased. Even if this is true, and the repurchase dates are somehow irrelevant, Investors ignores the fact that Smith was a registered Investors representative at the time of the initial purchase. In that regard, Smith's affidavit (Doc. 36) states that Smith has been licensed with Investors since January 1998. Further, although Smith's affidavit states that Smith has never personally done business with" the Rimmlers and he would not recognize them if they walked in his office, Tomaske's affidavit (Doc. 40) states that Tomaske and Smith sold the notes at issue to the Rimmlers in 1998.
Arguments virtually identical to those Investors now raises were rejected in the case of WMA Securities, Inc. v. Ruppert, 80 F. Supp.2d 786 (S.D. Ohio 1999). In that regard, the Ruppert court stated:
In this case, both Defendants dealt with registered representatives of Plaintiff while those representatives were associated with Plaintiff The evidence unequivocally establishes that both Defendants knew that their investment advisors were associated with Plaintiff at the time of the alleged misrepresentations that give rise to Defendants' arbitration claims. The facts that Defendant Ruppert never had an account with Plaintiff and that the FLIC promissory notes in which both Defendants invested were not approved products of Plaintiff are irrelevant. By conducting business with Plaintiffs registered representatives, Defendants conducted business with Plaintiff and became its customers.Id at 789. This Court agrees with the reasoning of Ruppert and determines that NASD Rule 10301 compels arbitration of the present dispute. Accordingly, it is ORDERED as follows:
1. The Defendants' Motion to Compel Arbitration, Motion to Stay This Action, and Supporting Memorandum of Law (Doc. 23), filed October 2, 2000, is GRANTED.
2. Plaintiff's request to conduct limited discovery on the issue of arbitrability is DENIED.
3. The parties shall arbitrate their dispute with the NASD.
4. This action is stayed pending further order of court.
5. On or before April 2, 2001, and every three months thereafter, Defendants shall file and serve a status report concerning the NASD arbitration proceedings. Defendants shall immediately notify the Court once an arbitration decision has been rendered.
6. The Clerk is directed to administratively close this case. The file and docket sheet shall remain in the active files of the Orlando Division of this Court.
DONE and ORDERED in Orlando, Florida this 5th day of February, 2001.
ANNE C. CONWAY United States District Judge