Opinion
601183/08.
Decided July 28, 2008.
Barry A Cozier, Epstein Becker Green, P.C.
Tradition Asiel Securities: Richard F. Lawler, Winston Strawn, LLP.
Standard Credit Group LLP: Betty Weinberg Ellerin, Alston Bird LLP.
GFI Group Inc and Jersey Partners Inc: Lawrence F Carnevale; Carter Ledyard Milburn LLP.
Emil Assentato: Daniel J. Brooks Schnader Harrison Segal lewis LLP.
Respondant Pro Se: Chaim A Levin, Robert Johnson: Fred H. Perkins Morrison Cohen LLP.
Donald Fewer: Stephen F Harmon, Troutman Sanders LLP.
Standard Credit Securities Inc: Scott Mollen Herrick, Feinstein LLP.
Russell Wallack: Maria L Ciampi Ciampi LLC.
Michael Mc Devitt: Eric Weinstein, Feldman Weinstein Smith LLP.
Michael Farinacci: Joseph R Scholz; McCarter English LLP.
John Puckhaper: Ira Brad Matesky Ganfer Shore, LLP.
John Joyce John Fowler, Matthew Hannon, Erick Sullivan, Daniel Polidore, Alex Rivas, Zack Steiner, and Anthony Ciressi: all represented by Darrell L. Paster.
These proceedings involve the enforcement of restrictive covenants contained in various employment agreements, in connection with the alleged corporate raid of GFI Securities LLC's (GFI) broker employees and managers by the competing inter-dealer brokerage firms Tradition Asiel Securities Inc. (Tradition) and Standard Credit Securities Inc. (Standard Credit). The parties to these proceedings are involved in arbitration proceedings before the Financial Industry Regulatory Authority (FINRA) to resolve their disputes, pursuant to Statements of Claim filed by the following five parties: GFI, Lainee Steinberg (Steinberg), Michael McDevitt (McDevitt), Russell Wallack (Wallack) and Michael Babcock (Babcock).
GFI's original Statement of Claim, dated April 21, 2008, asserted causes of action for tortious interference with contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duty, unfair competition, misappropriation of confidential and proprietary information, breach of contract, and violation of FINRA Rules of Conduct. (On June 10, 2008, GFI filed a First Amended Statement of Claim, which is discussed in further detail below.)
The Statements of Claim of the individual petitioners Steinberg, McDevitt, Wallack and Babcock seek, among other things: determinations that the restrictive covenants in their employment agreements are expired and/or unenforceable; injunctions preventing the enforcement of the restrictive covenants; damages for breach of contract for non-payment of bonuses; and damages for violations of New York's Labor Law.
The parties now seek preliminary injunctions pending the resolution of the arbitration proceedings, as follows:
In GFI Securities LLC v Tradition Asiel Securities Inc., et. al. (Index No. 601183/08) (GFI Proceeding), petitioner GFI made an application, by order to show cause, for a temporary restraining order (TRO) and a preliminary injunction, enjoining respondents Tradition, Standard Credit, Emil Assentato (Assentato) and Chaim Levin (Levin) from employing the following respondents, who are former employees of GFI (together, GFI Employees): Babcock, McDevitt, Wallack, Steinberg, Donald Fewer (Fewer), John Joyce (Joyce), Robert Johnson (Johnson), John Puckhaber (Puckhaber), Michael Farinacci (Farinacci), John Fowler (Fowler), Matthew Hannon (Hannon), Eric Sullivan (Sullivan), Stephen Falletta (Falletta), Daniel Barry (Barry), Dan Polidore (Polidore), Alex Rivas (Rivas), Zack Steiner (Steiner) and Antonino Ciresi (Ciresi). GFI's application also seeks to enjoin Tradition, Standard Credit, Assentato and Levin (together, Tradition Respondents) to prevent the GFI Employees from: performing any services for the Tradition Respondents; accepting any business from GFI customers that the GFI Employees performed services for; soliciting, hiring or employing any GFI employee with a contract that prohibits employment with Tradition; and using or disclosing GFI's confidential and proprietary information. GFI also sought a TRO to prevent the GFI Employees from competing with GFI in violation of their restrictive covenants. At a hearing held on April 22, 2008, the court denied GFI's request for a TRO. At a hearing held on May 20, 2008, GFI renewed its request for a TRO, pending the court's decision on the preliminary injunction motions, which the court again denied.
In the following proceedings (Individual Proceedings), the individual petitioners, who are former GFI employees and brokers, seek to compel arbitration before FINRA of all claims relating to their employment with GFI, and to enjoin the respondents from seeking injunctive relief enforcing their individual restrictive covenants with GFI: Babcock v GFI Securities LLC, GFI Group Inc. and Jersey Partners Inc., formerly doing business as GFI Group Inc. (Index No. 105466/08) (Babcock Proceeding), Wallack v GFI Securities LLC (Index No. 105575/08) (Wallack Proceeding), Steinberg v GFI Securities LLC (Index No. 601187/08) (Steinberg Proceeding), and McDevitt v GFI Securities, LLC (Index No. 105584/08) (McDevitt Proceeding). Several of the Individual Petitioners made applications, by order to show cause, seeking TROs, which were rendered moot by the court's denial of GFI's TRO.
In each of the Individual Proceedings, the respondents cross-moved for injunctive relief consistent with the relief sought against the respondents in the GFI Proceeding. Specifically, GFI cross-moved to enjoin the individual petitioners from the following activities, with time and geographic limitations purportedly in accordance with each petitioner's employment agreement: using or disclosing GFI's confidential or proprietary information; employing or soliciting for employment any GFI employee; accepting business from or soliciting any GFI client served while the petitioner was employed by GFI; and rendering services competitive with GFI.
In the Babcock Proceeding, respondents GFI, GFI Group Inc. (GFIG) and Jersey Partners Inc. (Jersey Partners) also cross-moved for an order permanently staying or dismissing the FINRA arbitration commenced by Babcock as against GFIG and Jersey Partners.
Fewer commenced a separate action, moving (in motion sequence number 001), by order to show cause, for a TRO and a preliminary injunction that prevents GFIG and Jersey Partners from enforcing the restrictive covenants contained in his employment and stock options agreements. In that action, Fewer v GFI Group Inc. and Jersey Partners Inc. (Index No. 601099/08) (Fewer Action), the eight-count complaint asserts one cause of action for fraud and promissory estoppel, and seven causes of action for declaratory and injunctive relief in connection with the alleged enforceability of restrictive covenants contained in Fewer's employment and stock options agreements, and call rights in his stock options agreement. GFI is not named as a defendant in the Fewer Action. GFIG and Jersey Partners answered the complaint, asserting seven counterclaims: two claims for breach of contract, and claims for misappropriation of confidential information and trade secrets, fraud, breach of fiduciary duty, conversion and unfair competition. In motion sequence number 001 in the Fewer Action, GFIG and Jersey Partners cross-moved for injunctive relief against Fewer consistent with the cross motion relief sought by GFI in the Steinberg, McDevitt and Wallack Proceedings.
On June 3, 2008, two weeks after the court heard arguments on the preliminary injunction motions, Fewer filed and served motion sequence number 002, which requests an order requiring that GFIG and Jersey Partners' counterclaims be arbitrated before FINRA. In the alternative, Fewer's motion sought dismissal of the counterclaims based upon the pending FINRA arbitrations and for failure to state a cause of action, to stay the counterclaims, and for a protective order denying discovery sought by GFIG and Jersey Partners.
GFI's original FINRA Statement of Claim asserted claims against the Tradition Respondents and the GFI Employees. However, on June 10th, one week after receiving Fewer's second motion, GFI amended its FINRA Statement of Claim, in essence splitting its claims into two proceedings. The First Amended Statement of Claim dropped Fewer as a respondent, asserting claims against only the Tradition Respondents and Babcock. GFI filed a second Statement of Claim, also dated June 10, 2008, asserting claims against 14 of the GFI Employee-brokers: Joyce, McDevitt, Wallack, Johnson, Puckhaber, Farinacci, Steinberg, Fowler, Hannon, Sullivan, Polidore, Rivas, Steiner and Ciresi. GFI's Amended Statement of Claim against the Tradition Respondents and Babcock asserts the same causes of action as its original Statement of Claim, but adds claims for unjust enrichment and conversion. GFI's Statement of Claim against the 14 GFI Employee-brokers asserts three causes of action for breach of contract, and causes of action for breach of loyalty, unjust enrichment and conversion. Thus, Fewer is not named as a respondent in GFI's First Amended Statement of Claim or its new Statement of Claim against the GFI Employee-brokers (together, FINRA Arbitration).
On June 17, 2008, Michael Gooch (Gooch), GFIG's chief executive officer, Colin Heffron (Heffron), GFI's chief executive officer, and John Piluso (Piluso), a senior GFI credit derivatives broker, among others, commenced an action against Fewer in the Superior Court of New Jersey (Monmouth County Law Division, Docket No. L-2804-08), asserting one cause of action for breach of fiduciary duty.
On April 29, 2008, GFI voluntarily discontinued the GFI Proceeding as against respondent Daniel Barry. By stipulation dated May 5, 2008, GFI also discontinued the GFI Proceeding, with prejudice, as against respondent Stephen Falletta. On May 19 and May 20, 2008, the court heard arguments on the preliminary injunction motions, which are the primary subject of this decision.
Facts
GFI is the wholly-owned subsidiary of GFIG, a public company. GFI claims that, in 2008, Tradition organized Standard Credit as a holding company to aid Tradition's raid of GFI's brokers.
The court notes that, while GFI's caption and order to show cause refer to Standard Credit Securities Inc., the GFI Petition refers to Standard Credit Group LLC, an entity not named in the caption as a respondent.
According to GFI, as inter-dealer brokerage firms, GFI and Tradition function primarily as intermediaries, matching bids and offers for financial products and their derivatives presented to them by large banks, investment banks and other financial institutions. GFI avers that inter-dealer firms are engaged to give dealers anonymity, speed of execution and access to liquidity. GFI maintains that its reputation for providing customers with "top-notch service and access to the highest level of liquidity in the industry has enabled its employees to develop long term, close relationships with customers on the strength of GFI's reputation for liquidity." Heffron Aff., ¶ 17.
GFI's speed of execution allegedly depends upon the collective efforts of the team of brokers, and the strength of the personal relationships between GFI's brokers and the individual traders employed by the financial institutions. GFI claims that it devotes substantial resources ($1.6 million in 2007) to support networking and entertainment activities between the GFI Employees and traders in order to foster these relationships. GFI also allegedly spends substantial resources on a sophisticated telecommunications platform that gives GFI an advantage over its competitors. The compensation paid to the GFI Employees (nearly $30 million in 2007) was allegedly paid, in large part, to encourage the development and maintenance of the relationships with traders.
According to GFI, Fewer and Babcock were the linchpins of Tradition's scheme, because they were senior managers of GFI capable of leading the GFI Employees to leave, taking GFI's client relationships with them. GFI allegedly entrusted Fewer and Babcock with confidential information concerning GFI's internal policies and procedures, marketing and business strategies, business operations, and development of new products and markets. Fewer and Babcock were also allegedly entrusted with confidential information regarding the specific terms and conditions of employment of the GFI Employees, including compensation and productivity numbers. Before he resigned, Fewer allegedly e-mailed to his home e-mail address a GFI spreadsheet containing all of the GFI brokers' contract terms and productivity figures.
Fewer and Babcock allegedly orchestrated the scheme by working with Assentato, Tradition's chief executive officer, and Levin, Tradition's chief legal officer. (Previously, Levin was also GFI's general counsel and chief legal officer.) GFI claims that, as early as December 2007, Fewer began soliciting Tyler Eddy, one of GFI's highest performing brokers, to resign from GFI and join Tradition.
GFI maintains that Tradition's plan publicly unfolded on April 14, 2008, when Fewer resigned from GFI without notice. Fewer allegedly gave two letters to GFI, both dated April 10, 2008: one notifying GFI of his intent not to renew his employment agreement after July 17, 2008, and the other purporting to resign by virtue of his constructive discharge. Fewer also informed GFI that he had commenced a legal action to protect his right to seek employment with another firm, but that he remained willing to negotiate a new contract with GFI. On April 14, 2008, Fewer allegedly dropped off his Blackberry at GFI, after erasing all text messages and data. GFI claims that, a few hours later, it received a call from Fewer's counsel, informing GFI that Fewer had commenced the Fewer Action.
The next day, April 15, 2008, a meeting was held in a private room at the Smith Wollensky steakhouse in Manhattan. According to GFI, the meeting was attended by Assentato, Levin, Babcock, Falletta, Joyce, Wallack, Steinberg, Johnson, Hannon, Puckhaber, Farinacci and McDevitt. GFI avers that, during this meeting, Assentato and Levin encouraged GFI's employees to leave GFI, sign contracts with Tradition and/or Standard Credit, and solicit other GFI brokers to join Tradition and/or Standard Credit.
On April 16, 2008, after learning about the meeting at Smith Wollensky, GFI allegedly questioned Babcock and other brokers. Babcock allegedly refused to cooperate and answer GFI's questions. GFI claims that, therefore, it placed Babcock on administrative leave, effective immediately, and required Babcock to surrender his Blackberry. The same day, GFI sent a letter to Assentato and Levin, advising them to cease and desist from their activities.
By letter dated April 16, 2008, Babcock informed GFI, GFIG and Jersey Partners that GFI had breached his employment agreement and that his resignation was the result of his constructive discharge. He commenced the Babcock Proceeding on April 17, 2008.
GFI claims that the next day, April 18, the following GFI employees failed to report for work: Barry, Joyce, McDevitt, Wallack, Johnson, Puckhaber, Farinacci, Steinberg, Fowler, Hannon, Polidore, Steiner, Ciresi, Sullivan, Gary Comis, Michael DelVescovo, Karen O'Sullivan, Michael Gebhardt, Brendan Sheehan, and Peter Fitzpatrick. GFI claims that all of these employees are now working for Tradition and/or Standard Credit, and by April 18, 2008, many of them were registered with FINRA by Tradition and/or Standard Credit and had begun soliciting GFI clients with whom they had built relationships while at GFI.
GFI claims that, on April 18th, after it issued a press release concerning the alleged raid, GFI received calls from clients asking whether GFI was still in the business of brokering credit trades, purportedly evidencing that GFI's reputation is in jeopardy of irreparable harm. GFI maintains that it faces the loss of its client relationships, business and commissions.
The essence of GFI's petition is that Tradition misappropriated GFI's business by inducing Fewer and Babcock to breach their fiduciary and contractual obligations to GFI, in turn inducing the GFI Employees to accept employment with Tradition and taking GFI's client relationships with them, all in violation of their employment agreements with GFI. The mass resignation of the GFI Employees allegedly caused the stock value of GFIG to drop nearly 24% in one day. GFI avers that, overall, Tradition has guaranteed the payment of $100 million, and paid $30 million in up-front bonuses, to the GFI Employees to induce them to leave GFI and join Tradition.
To the extent that additional factual allegations and documentary evidence are submitted by the parties that are relevant to this decision, those facts and documents are discussed in the discussion below.
Discussion
The GFI Proceeding
GFI argues that it has satisfied the requirements of CPLR 7502 (c) and 6301, entitling it to injunctive relief. Respondents counter that, among other things, GFI has not shown that it will suffer irreparable harm or a likelihood of success on the merits, and that GFI is judicially estopped from contesting respondents' actions.Under CPLR 7502 (c), this court "may entertain an application . . . for a preliminary injunction in connection with an arbitration . . ., but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief." The party seeking the injunction must also satisfy the following traditional elements for a preliminary injunction under CPLR 6301: "(1) a likelihood of ultimate success on the merits; (2) the prospect of irreparable injury if the provisional relief is withheld; and (3) a balance of equities tipping in the moving party's favor." New York City Off-Track Betting Corp. v New York Racing Assn., Inc., 250 AD2d 437, 441 (1st Dept 1998) (citation and quotation marks omitted).
"Irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction. To prevail, the movant must establish not a mere possibility that it will be irreparably harmed, but that it is likely to suffer irreparable harm if equitable relief is denied." Natsource LLC v Paribello, 151 F Supp 2d 465, 469 (SD NY 2001) (internal citations and quotation marks omitted); see also Golden v Steam Heat, Inc., 216 AD2d 440, 442 (2d Dept 1995) ("the irreparable harm must be shown by the moving party to be imminent, not remote or speculative"). "Damages compensable in money and capable of calculation, albeit with some difficulty, are not irreparable." SportsChannel Am. Assoc. v National Hockey League, 186 AD2d 417, 418 (1st Dept 1992); see also U.S. Re Cos. v Scheerer , 41 AD3d 152 , 155 (1st Dept 2007) (denying injunction where "money damages equal to the value of the transactions lost" were a "quantifiable remedy" for defendant's alleged breach); Sterling Fifth Assoc. v Carpentille Corp. , 5 AD3d 328 , 329 (1st Dept 2004) ("[l]ost profits and tax benefits, however difficult to compute they may be, are clearly compensable with money damages").
"Preliminary injunctive relief is a drastic remedy and will only be granted if the movant establishes a clear right to it under the law and the undisputed facts found in the moving papers." Koultukis v Phillips, 285 AD2d 433, 435 (1st Dept 2001). The burden is on the party seeking the injunctive relief to make "a clear showing" that it will suffer irreparable injury. OraSure Tech., Inc. v Prestige Brands Holdings, Inc. , 42 AD3d 348 , 348 (1st Dept 2007); EdCia Corp. v McCormack , 44 AD3d 991 , 993 (2d Dept 2007) ("the movant must demonstrate by clear and convincing evidence" elements of preliminary injunction). Irreparable Harm
GFI argues that it will suffer irreparable harm as a result of lost "valuable employment and client relationships that GFI has spent an enormous amount of time and money cultivating over the years." They also argue respondents' continued solicitation of GFI employees, re-staffing of ongoing matters and providing client services effectively, and its tarnished reputation in the industry also constitute irreparable harm. 4/21/08 GFI Mem. of Law, at 25. In support of this argument, GFI submits a chart of its clients and the brokers who serviced those clients. GFI also submits the affidavits of Heffron, Piluso, and Tyler Eddy (Eddy), purportedly GFI's highest performing credit derivatives broker. Eddy states that GFI was "hardly brokering any trades" in sectors that, prior to the GFI Employees' departure, "were previously a significant part of [GFI's] credit derivatives business." 4/20/08 Eddy Aff., ¶ 26. Piluso states that he is doubtful that GFI can rebound from the mass departure of the GFI Employees if faced with direct competition from those brokers. Piluso Aff., ¶ 7.
However, as a preliminary matter, while the chart submitted by GFI shows which clients were serviced by the GFI Employees, GFI fails to identify any business or customer relationships lost as a result of respondents' conduct, but rather, assumes that customer relationships left with the brokers. Thus, GFI's argument that "customers will simply give their business to competing inter-dealer brokers" is mere speculation. 5/14/08 GFI Reply Brief, at 34. Similarly, the affidavits of Heffron, Eddy and Piluso express the possibility of irreparable harm, but fail to show its likelihood in the event that equitable relief is denied. Moreover, even if GFI had "demonstrated the loss of some business . . ., that loss alone is not sufficient to demonstrate irreparable harm." Ivy Mar Co. v C.R. Seasons Ltd., 907 F Supp 547, 566 (ED NY 1995) (" [l]oss of business, if it is not remote or speculative but actual, is a quantifiable injury' [citation omitted]").
Furthermore, among the voluminous motion papers, it appears to the court that the only submitted evidence relating to a GFI customer is a research report from Wachovia, dated May 5, 2008 (Wachovia Report), stating that Wachovia had:
spoken with several of [its] single name credit default swap (CDS) traders in Charlotte. They are reporting that their interaction with [GFIG] has not changed over the past several weeks (since GFIG lost 22 of 80 credit brokers in New York to a competitor on the week of April 18th). Our trader believes that the company overnight after the personnel losses filled 10-11 brokerage spots with experienced brokers. He mentioned his interaction with the firm has been business as usual with the same amount of inbound phone calls and trade inquiries from the brokerage.
Lawler Aff., Ex. P; 5/14/08 Heffron Reply Aff., Ex. 13. Thus, the only GFI customer report in the record undermines GFI's claim of irreparable harm.
Additionally, GFIG's Securities and Exchange Commission (SEC) Form 10-K, for the year ending December 31, 2007 (Form 10-K), states that the loss of brokers in a particular market may cause its "revenues" to decrease. Lawler Aff., Ex. C, at 23. The 10-K states: "[w]e may not be successful in our efforts to recruit and retain brokerage personnel. If we fail to attract new personnel or to retain and motivate our current personnel . . ., our business, financial condition and results of operations may suffer." Id. at 24. The 10-K also states:
We are currently involved in several litigations and arbitrations with our competitors relating to new employee hires or departures. We believe such proceedings are common in our industry due to its highly competitive nature. An adverse settlement or judgment related to these or similar types of claims could have a material adverse effect on our financial condition or results of operations. Regardless of the outcome of these claims, we generally incur significant expense and management time dealing with these claims.
Id. The 10-K states that "recruitment and retention of qualified staff could result in substantial additional costs." Id. Thus, according to GFI, litigation such as the instant proceedings are common in GFI's industry, and results in costs, expenses and lost revenues; it is an anticipated, and presumably quantifiable, cost of doing business. U.S. Re Cos., 41 AD3d at 155; Sterling Fifth Assoc., 5 AD3d at 329.
In addition, GFIG held its first quarter "Earnings Conference Call" on April 29, 2008 (4/29/08 GFIG Earnings Call), 11 days after the purported raid. Lawler Aff., Ex. H. On that call, Gooch responded to questions from analysts, many of whom represented banks that are GFI customers: Banc of America Securities, Citigroup, Deutsche Bank, Goldman Sachs, Jeffries, KBW, Sandler O'Neill and Wachovia Securities. Gooch stated that, after the GFI Employees left, GFI "never fully stopped doing credit derivative business in New York." Id. at 3. In response to an analyst's question about broker replacement and retention, Gooch stated that GFI had "hired a few" and "kept a few" ( id. at 5), including Eddy, GFI's highest performing credit derivatives broker. GFI admits in its reply brief that it "has physically filled some of the seats." 5/14/08 GFI Reply Brief, at 35.
In fact, although GFI claims that 22 of its purported 80 credit brokers were recruited by Tradition and/or Standard Credit, of the 22 respondents in the GFI Proceeding, only 18 are former GFI employees; respondents represent that Fewer is not currently employed, either for or in competition with, GFI; and the action has been discontinued as against respondents Barry and Falletta. Of the remaining 15 respondents, Steiner and Sullivan were junior brokers at GFI, and Ciresi and Rivas were merely trainees. The remaining 11 respondents are reconcilable vis-À-vis GFI's admission that it retained Eddy, GFI's highest performing broker, GFI's admission that it had "hired a few" new brokers and "physically filled some of the seats" (4/29/08 GFIG Earnings Call, at 5; 5/14/08 GFI Reply Brief, at 35), and the Wachovia Report, which, as discussed above, states Wachovia's belief that GFI "overnight after the personnel losses filled 10-11 brokerage spots with experienced brokers." Lawler Aff., Ex. P.
Tellingly, while GFI argues that it suffered irreparable harm as a result of lost employment and customer relationships, good will and damage to its reputation, GFI fails to identify any lost customers between the date of the GFI Employees' departure and the May 20th hearing on these motions, a time period of over one month. Nor has GFI responded to the Wachovia Report. And while GFI concedes that some broker positions have been filled, it studiously fails to specify how many.
Moreover, GFI's Statement of Claim filed with FINRA seeks compensatory damages and the imposition of a constructive trust on profits and compensation paid to respondents. In addition, the employment agreements of Fewer, Farinacci, Hannon, Johnson, McDevitt, Polidore, Steinberg and Wallack all contain liquidated damages clauses. These clauses are "addressed precisely to the damages that [GFI] might suffer as a result of a violation of the non-competition and non-solicitation provisions" of those contracts, which "indicates that such damages as [plaintiff] may suffer could be redressed by the payment of a sum of money." Prebon Fin. Prods., Inc. v GFI Group, Inc. (Sup Ct, NY County, June 7, 2007, Ramos, J., Index Nos. 603085/2000 and 115749/2000); see also Tullett Liberty Securities, Inc. v Smith and GFI Securities LLC (Sup Ct, NY County, Nov. 17, 2004, Lowe, J., Index No. 601858/04) (no irreparable harm where employment agreement provided for monetary compensation for employee's breach, thereby providing adequate remedy at law).
Furthermore, SEC Rule 10b-10 requires brokers to disclose the date and time of each transaction made, and the identity, price and number of shares purchased or sold. 17 CFR § 240.10b-10 (a) (1). This rule also requires disclosure of "[t]he amount of any remuneration received or to be received by the broker from such customer in connection with the transaction." Id., § 240.10b-10(a)(2)(i)(B). GFI fails to explain why any lost revenues are not calculable; if anything, the papers before the court evidence the quantifiable nature of any injury. See e.g. GFIC Form 10-K, Lawler Aff., Ex. C, at 23-24; id., Ex. G (April 18, 2008 MarketWatch article states that, according to GFI, 24 of its defecting brokers generate "about $50 million of the company's $970 million revenue"); id., Ex. AA (April 18, 2008 Wachovia report estimating GFI's lost revenue as $35 million).
In Kanan, Corbin, Schupak Aronow, Inc. v FD Intl., Ltd. ( 8 Misc 3d 412 [Sup Ct, NY County 2005]), the court denied a preliminary injunction where the employees of a public relations firm were alleged to have violated their restrictive covenants. The court determined that "the injury alleged here [was] easily calculable as a measure of lost fees. [The employee's] restrictive covenant has a duration of 12 months, making it unnecessary to attempt quantifying an indeterminate amount of business in years to come' [citation omitted]." Id. at 421. Similarly, here, the length of the GFI Employees' restrictive covenants are known and the amount of commissions are calculable. OraSure Tech., Inc., 42 AD3d at 348 (plaintiff "failed to demonstrate irreparable harm because any damages it has sustained are calculable and can be determined at the arbitration proceeding"); see also Ivy Mar. Co., 907 F Supp at 566 (" [l]oss of business, if it is not remote or speculative but actual, is a quantifiable injury' [citation omitted]").
To the extent that GFI's irreparable harm argument is based upon a diminution of the stock value of GFIG, that argument is unpersuasive. GFI concedes that the decline in GFIG's stock price is not the subject of an affirmative claim, but rather, GFI claims that it is evidence of harm to GFI's reputation. However, GFI fails to show how the fluctuation in stock value of GFI's parent company constitutes irreparable harm to GFI. Any such harm is mere speculation.
Indeed, respondents submit a chart of GFIG's stock price fluctuations, showing that the stock has been steadily declining since November 2007, including a 55% decline in March 2008 due to GFI's position with non-party MF Global, Inc. Lawler Aff., Ex. U. The same chart shows that GFIG's stock price increased after this court denied GFI's application for a TRO on April 22, 2008 ( id.), and on April 27, 2008, one analyst from Deutsche Bank was cited as attributing a target price of $22 for GFIG stock, stating that "enough key personal have remained [at GFI] that its stock could be undervalued" ( id., Ex. V). In addition, GFIG stated that it currently estimates that its brokerage revenues in the second quarter of 2008 "will increase between 18% and 23% over the second quarter of 2007." 4/29/08 GFIG Earnings Call, Lawler Aff., Ex. H, at 3; id., Ex. DD (April 28, 2008 Reuter's article also stating GFIG's expected 2008 second quarter increases between 18% and 23% over 2007). For the foregoing reasons, GFI has not made a clear showing that irreparable harm is imminent, or that it has no adequate remedy at law.
Likelihood of Success on Contract-Based Claims
GFI's underlying contract claims are based upon restrictive covenants contained in the GFI Employees' employment agreements, and seek to protect GFI's client relationships. GFI claims that "no less than 22 . . . GFI employees, most in breach of their employment agreements with GFI, accept[ed] employment with Tradition and [took] GFI's valuable client relationships with them." 4/21/08 GFI Mem. of Law, at 3. Respondents argue that GFI has not satisfied its burden of showing that it has a protectable interest in its client relationships.
A restrictive covenant is enforceable only if it: "(1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public. A violation of any prong renders the covenant invalid." BDO Seidman v Hirshberg, 93 NY2d 382, 388-89 (1999) (internal citations omitted). The Court of Appeals has limited the legitimate interests of the employer "to the protection against misappropriation of the employer's trade secrets or of confidential customer lists, or protection from competition by a former employee whose services are unique or extraordinary." Id. at 389, citing Reed, Roberts Assocs. v Strauman, 40 NY2d 303, 308 (1976).
Here, GFI does not claim that there are any trade secrets. Nor is the misappropriation of customer lists at issue. Rather, GFI's argument is based upon customer relationships. Specifically, citing BDO Seidman ( 93 NY2d at 392), GFI argues that, as an employer, it has a legitimate interest "in preventing former employees from exploiting or appropriating the goodwill of a client or customer, which had been created and maintained at [GFI's] expense, to [GFI's] competitive detriment."
The court notes that, in a prior action before this court, GFI affirmatively argued that "the identity of customers in the inter-dealer market is not a trade secret because the information is publicly available." 6/22/04 Opp. Mem. of Law, at 12 in Tullett Liberty Securities, Inc. v Smith and GFI Securities LLC (Sup Ct, NY County, Nov. 17, 2004, Lowe, J., Index No. 601858/04).
However, Puckhaber, Fowler, Babcock, Wallack, Hannon and Polidore submit affidavits stating that their customer relationships pre-date their employment with GFI. For example, Wallack states that his relationships with Deutsche Bank, Goldman Sachs and Citibank were all initiated and developed in 1997 and 1998, while Wallack was a broker at Tradition, prior to joining GFI. Hannon states that his client relationships were built while he was employed by GFI's competitor, Chapdelaine Corporate Securities, through his personal contacts, primarily with his brother and friends, and through the advice of his father, who is also in the securities business. Indeed, several of these individuals (some of whom were previously employed by Tradition) claim that GFI recruited them because of those relationships.
Heffron's affidavit states that Puckhaber, Hannon, Polidore, Fowler, Sullivan, and Steinberg had little or no experience brokering credit derivatives upon joining GFI. However, Heffron's affidavit does not refute respondents' assertion that the customer relationships of Puckhaber, Fowler, Babcock, Wallack, Hannon and Polidore pre-date their employment with GFI, which undermines GFI's claim of a protectable interest in those relationships. BDO Seidman, 93 NY2d at 393 ("the goodwill of those clients was not acquired through the expenditure of BDO's resources, the firm has no legitimate interest in preventing defendant from competing for their patronage"). Nor does GFI identify which customer relationships were developed at its expense. Therefore, GFI has not made a clear showing that it is likely to succeed on the merits of this claim.
With respect to GFI's argument that the GFI Employees were unique or extraordinary, the employer must show more "than that the employee excels at his work or that his performance is of high value to his employer. It must also appear that his services are of such character as to make his replacement impossible or that the loss of such services would cause the employer irreparable injury." Purchasing Assoc., Inc. v Weitz, 13 NY2d 267, 274 (1963).
Here, on the 4/29/08 GFIG Earnings Call, Gooch stated that GFI had "hired a few" new brokers and "kept a few." Lawler Aff., Ex. H, at 5. Gooch stated:
There is currently a game of musical chairs taking place. Other brokers are scrambling to replace lost brokers and to secure their remaining brokers from rivals. So for example, if GFI picks up two or three credit brokers from one or more of our direct competitors as we rebuild, then those competitors will have to look to replace them. . . .
Lawler Aff., Ex. H, at 5. Tellingly, Gooch discusses the replaceability of the brokers, not their irreplaceability. Furthermore, as discussed above, of the 22 allegedly poached broker-respondents in the GFI Proceeding, only 18 are former GFI employees, Fewer is not currently employed, either for or against GFI, and the action has been discontinued as against respondents Barry and Falletta. Of the remaining 15 respondents, four were either junior brokers or trainees, leaving 11 broker-respondents. With respect to these 11 individuals, GFI does not respond to the Wachovia Report, which states that GFI filled 10 to 11 brokerage spots overnight with experienced brokers. Lawler Aff., Ex. P. Moreover, GFI concedes that it has filled some brokerage positions, but fails to identify specifically how many of the lost brokerage positions remain unfilled. The fact that some (if not all) brokerage positions have been filled undermines GFI's argument that the brokers are irreplaceable. Accordingly, GFI has not made a clear showing that the GFI Employees are irreplaceable. For the foregoing reasons, GFI has not satisfied its burden of showing that it is likely to succeed on its underlying contract claims enforcing the restrictive covenants.
In Tullett Liberty Securities, Inc., GFI argued before this court that the services of a junior inter-dealer broker were not unique or extraordinary. As discussed in further detail below, GFI is judicially estopped from arguing that the services of these junior brokers is unique or extraordinary.
Judicial Estoppel
GFI's request for a preliminary injunction enforcing the restrictive covenants is also barred under the doctrine of judicial estoppel, which "precludes a party who assumed a certain position in a prior legal proceeding and who secured a judgment in his or her favor from assuming a contrary position in another action simply because his or her interests have changed." Gale P. Elston, P.C. v Dubois , 18 AD3d 301 , 303 (1st Dept 2005) (citation and internal quotation marks omitted); see also Nestor v Britt, 270 AD2d 192, 193 (1st Dept 2000) (" [u]nder the doctrine of judicial estoppel, or estoppel against inconsistent positions, a party is precluded from inequitably adopting a position directly contrary to or inconsistent with an earlier assumed position in the same proceeding'" [citation omitted]). "[T]his rule has, properly, been applied as well to court rulings that are not denominated as judgments'." D L Holdings, LLC v RCG Goldman Co., LLC, 287 AD2d 65, 71 (1st Dept 2001).
In Tullett Liberty Securities, Inc., discussed above, GFI argued to this court that the parties' agreement had "quantified the amount by which it would be damaged if [the employee] terminated his employment." 6/22/04 GFI Mem. of Law, at 23. In denying Tullett's motion for a preliminary injunction against GFI, this court found that monetary compensation was "an adequate remedy for any injury to Tullett's business as a result of the alleged wrongful actions of GFI." Tullett Liberty Securities, Inc., Sup Ct, NY County, Nov. 17, 2004, Lowe, J., Index No. 601858/04, at 7.
In Prebon Fin. Prods., Inc., also discussed above, GFI solicited and hired a derivatives broker from the plaintiff, notwithstanding a restrictive covenant in the broker's employment contract with the plaintiff. The court denied the plaintiff's request for a preliminary injunction enforcing the restrictive covenant, determining that there was no irreparable harm, based upon "the presence of a liquidated damages clause in the Employment Contract." Prebon Fin. Prods., Inc., Sup Ct, NY County, June 7, 2007, Ramos, J., Index Nos. 603085/2000 and 115749/2000, at 3-4. The court also ruled in favor of GFI in determining that "an employee's knowledge of the business habits of particular customers does not constitute a trade secret." Id. at 6.
Moreover, GFI cites Ticor Title Ins. Co. v Cohen ( 173 F3d 63 [2nd Cir 1999]) and Contempo Communications v MJM Creative Serv., Inc. ( 182 AD2d 351, 352 [1st Dept 1992]), arguing that GFI has a legitimate interest "in retaining present clients to support an employee covenant not to compete when . . . the employee's relationship with clients is such that there is a substantial risk that the employee may be able to divert all or part of the business" (4/21/08 GFI Mem. of Law, at 23). The essence of the legal principle relied upon by GFI is that "[a]n employee's use or disclosure of trade secrets or confidential customer lists will be enjoined as will competition from an employee whose services were special, unique or extraordinary." Contempo Communications Inc., 182 AD2d at 353-54. While this legal principle is well developed in the case law, in Tullett Liberty Securities, Inc., GFI argued that the services of a junior inter-dealer broker were not unique or extraordinary. 6/22/04 GFI Opp. Mem. of Law, at 13. The court ruled in GFI's favor, determining that, "despite the language in the employment agreement," which stated that the employee's skills as a broker were "unique and difficult to replace," the employee's "services as a broker, while possibly of high value to Tullett, are neither unique nor extraordinary." Tullett Liberty Securities, Inc., Sup Ct, NY County, Nov. 17, 2004, Lowe, J., Index No. 601858/04, at 7.
The court notes that with alarming frequency, these competing parties are asserting alternative and contrary positions depending on which side of a particular suit they are on.Their interpretation of the relevant case law seems to depend, not on the individual facts of the matters, but rather whether, in each particular instance, they are the party seeking to prevent the alleged misconduct or whether they are defending against the conduct. This type of self-serving litigation unfortunately appears to have become routinely practiced.
For the foregoing reasons, GFI is judicially estopped from asserting these arguments, which are contrary to positions successfully advanced by GFI in other actions.
Individual Proceedings
Steinberg, McDevitt, Wallack and Babcock
GFI does not dispute that the claims of McDevitt, Wallack, Steinberg and Babcock are subject to arbitration before FINRA (GFI's 5/8/08 Opp. Mem. of Law, at 44; see generally GFI's 5/8/08 Mem. of Law in Opp. to Babcock's Application and in Support of Cross Motion Against Babcock), and GFI affirmatively argues that "the parties are all subject to mandatory arbitration before [FINRA]" (GFI's 4/21/08 Mem. of Law, at 2). Therefore, the petitioners' applications to compel arbitration in the McDevitt, Wallack, Steinberg and Babcock Proceedings are denied as moot. These petitioners' applications for injunctive relief are also denied as moot as a result of the court's denial of GFI's application for injunctive relief.
Babcock Proceeding
In the Babcock Proceeding, Babcock seeks to compel GFIG and Jersey Partners to arbitrate their dispute, pursuant to a Uniform Application for Securities Industry Registration or Transfer (Form U-4). According to Babcock, the Form U-4 is a standard, industry-wide document that contains a mandatory arbitration provision, requiring arbitration before FINRA of any dispute relating to his employment.
Babcock argues that, although GFIG and Jersey Partners are not parties to Babcock's Form U-4, the Form U-4 is incorporated by reference into Babcock's employment agreement and GFIG and Jersey Partners should be equitably estopped from avoiding the agreement's obligation to arbitrate. In opposition, and in support of its cross motion to stay or dismiss arbitration, GFIG and Jersey Partners argue that Babcock fails to show that these respondents are subject to arbitration.
"It is settled that a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes." Waldron v Goddess, 61 NY2d 181, 183 (1984) (citation and internal quotation marks omitted). Courts "have recognized five theories for binding nonsignatories to arbitration agreements: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel." Thomson-CSF, S.A. v American Arbitration Assn., 64 F3d 773, 776 (2d Cir 1995). Under incorporation by reference, "[a] nonsignatory may compel arbitration against a party to an arbitration agreement when that party has entered into a separate contractual relationship with the nonsignatory which incorporates the existing arbitration clause." Id. at 777; see also Matter of Arbitration Between Keystone Shipping Co. and Texport Oil Co., 782 F Supp 28, 31 (SD NY 1992) ("non-signatory may enforce an arbitration agreement if it and a signatory to the agreement are both parties to a common bill of lading that expressly incorporates another contract's arbitration clause").
Here, Babcock argues that paragraph 4 (B) (vi) of his employment agreement required him to "obtain all licenses and approvals mandated or recommended by any ordinance or regulation of any governmental, regulatory, self-regulatory, or private body or organization having jurisdiction or supervisory authority of [his] conduct, GFI's business or otherwise over any of Babcock's undertakings required under this Agreement." Babcock claims that this provision required him to execute Form U-4, which contained an arbitration clause, and that, therefore, his employment agreement "essentially incorporated by reference" the arbitration clause contained in the Form U-4. Babcock Mem. of Law, at 5.
However, while the Form U-4 may have been required as part of Babcock's employment, the Form U-4 is not identified in Babcock's employment agreement, nor did GFIG or Jersey Partners purport to incorporate its terms by reference in Babcock's employment agreement. Therefore, Babcock has not shown that the Form U-4 "was incorporated into any document which [GFIG or Jersey Partners] adopted. Thus, [these defendants] cannot be bound under an incorporation theory." Thomson-CSF, S.A., 64 F3d at 777.
Furthermore, while Babcock initially entered into his employment agreement with GFIG, pursuant to a February 5, 2003 amendment, "GFI Securities LLC replace[d] Jersey Partners, Inc. formerly d/b/a GFI Group Inc. in all respects as the employing party in the Agreement." Babcock Aff., Ex. C, ¶ 8; Babcock Petition, ¶ 19. Therefore, the agreement at issue is between Babcock and GFI.
Citing HRH Constr. LLC v Metropolitan Transp. Auth. ( 33 AD3d 568 , 569 [1st Dept 2006]), Babcock also argues, under an estoppel theory, that "[a] nonsignatory to an agreement containing an arbitration clause that has knowingly received direct benefits under the agreement will be equitably estopped from avoiding the agreement's obligation to arbitrate." Here, Babcock argues that GFIG and Jersey Partners directly benefitted from his execution of the Form U-4, by his trading activities and his conduct under the Form U-4. However, other than this conclusory assertion, Babcock fails to explain how GFIG and Jersey Partners have directly benefitted. Therefore, Babcock's argument is unpersuasive. MAG Portfolio Consultant, GMBH v Merlin Biomed Group LLC, 268 F3d 58, 61 (2d Cir 2001) ("the benefit derived from an agreement is indirect where the nonsignatory exploits the contractual relation of parties to an agreement, but does not exploit [and thereby assume] the agreement itself").
Babcock's final argument is that GFIG and Jersey Partners should not be permitted to seek a judicial ruling that could conflict with the award that will be rendered by the FINRA arbitration panel. Here, in their answer to Babcock's petition, GFIG and Jersey Partners denied Babcock's claim that they lack standing to enforce the restrictive covenants at issue in Babcock's employment agreement. However, as GFIG and Jersey Partners concede in their opposition brief, they have not asserted any claims against Babcock. Therefore, Babcock's concern over potential inconsistent results is speculative and, at this juncture, premature. In addition, Babcock submits no legal authority in support of this argument. For the foregoing reasons, Babcock's application to compel GFIG and Jersey Partners to arbitrate before FINRA is denied, and GFI's cross motion to dismiss the FINRA arbitration against these defendants is granted.
Fewer Action
For the same reasons already discussed above with respect to the GFI Proceeding, GFIG and Jersey Partners' cross motion for a preliminary injunction (in motion sequence number 001) is denied, and Fewer's motion for a preliminary injunction is denied as moot.
In motion sequence number 002, Fewer seeks, among other things, to stay respondents' counterclaims, pending the resolution of the FINRA Arbitrations, in order to avoid multiplicity of litigation, to conserve judicial resources, and based upon collateral estoppel. Defendants GFIG and Jersey Partners counter that the FINRA Arbitration will not resolve the claims at issue in the instant action. They also argue that neither they, nor Fewer, are parties to the FINRA Arbitration, and that GFIG and Jersey Partners are not members of, or associated with, FINRA. In essence, GFIG and Jersey Partners concede that "the FINRA Arbitration and the Counterclaims arise out of related occurrences" (Defs. Opp. Mem. of Law, at 11) and that "some testimony or evidence may have relevance to both proceedings" ( id. at 15), but argue that the relief sought in the instant action is not dependent upon the outcome of the FINRA Arbitration.
Pursuant to CPLR 2201, "[e]xcept where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just." The court may stay an action pending resolution of a New York arbitration if: (1) "plaintiff is closely related to the signatories of the agreement containing a broad arbitration clause"; (2) "the issues raised in the . . . litigation . . . are closely related to the issues raised in the arbitration"; and (3) "the issues in the overall dispute between the contracting parties are inextricably interwoven' with the claims raised by the non-signing plaintiff." Pacer/Cats/CCS v MovieFone, Inc., 226 AD2d 127, 128 (1st Dept 1996) (internal citation omitted).
In addition, the First Department has recognized that the prospect of a later collateral estoppel due to a judgment in another pending action is a valid ground for ordering a stay pursuant to CPLR 2201. Schneider v Lazard Freres Co., 159 AD2d 291, 293-94 (1st Dept 1990) ("[w]e stay the New York action because the Delaware action raises numerous possibilities for the application of collateral estoppel"). For example, in Belopolsky v Renew Data Corp. ( 41 AD3d 322 , 322-23 [1st Dept 2007]), the First Department held that the trial court
did not exercise its discretion improvidently by staying this action pending resolution of the previously commenced related action. Even though there was not a complete identity of parties, there were overlapping issues and common questions of law and fact, and "the determination of the prior action may dispose of or limit issues which are involved in the subsequent action."
(Internal citations omitted.)
Here, according to GFIG's Form 10-K, GFIG's "sole wholly-owned subsidiary" is GFInet Inc. (Form 10-K, Harmon Aff., Ex. 4, at 76), and GFI is a direct subsidiary of GFInet Inc. ( id; see also Harmon Aff., Ex. 9, at 3). Jersey Partners owns 43% of GFIG's stock, rendering it the 43% owner of GFI. In addition, Gooch is the chairman and chief executive officer of GFIG, the chairman of GFI, and the president and majority owner of Jersey Partners. Form 10-K, at 9 and 34; see also Harmon Aff., Ex. 10. Heffron is GFIG's president and a director, and he is the chief executive officer of GFI. Form 10-K, at 9; see also Harmon Aff., Ex. 9, at 4 and Ex. 10. Ronald Levi is the chief operating officer of both GFIG and GFI. Harmon Aff., Ex. 9, at 4 and Ex. 10. Thus, the same individuals and entities own and control GFI, GFIG and Jersey Partners, rendering GFIG and Jersey Partners closely related to GFI, the signatory to the arbitration agreement in the FINRA Arbitration.
Defendants do not seriously dispute that GFIG and Jersey Partners are closely related to GFI. Rather, defendants argue that they are not parties to the arbitration agreement with Fewer, or parties to the FINRA Arbitration. However, this argument is unpersuasive, because it fails to address Fewer's showing that GFIG and Jersey Partners are closely related to GFI. For the foregoing reasons, and for the reasons discussed below, the facts and issues underlying the claims asserted in the FINRA Arbitration are inextricably interwoven with the facts and issues underlying defendants' counterclaims. See Berg v Dimson, 151 AD2d 362, 363 (1st Dept 1989) ("entire action was properly stayed pending arbitration, because although some of the defendants are not signatories to arbitration agreements, and some of the partnership agreements do not contain arbitration clauses, the issues to be determined in arbitration are inextricably interwoven with the remaining issues").
With respect to the identity of issues, at the center of defendants' counterclaims is the alleged conspiracy among Fewer, Tradition, Standard Credit and the Tradition Respondents to misappropriate GFI's confidential information and hire away GFI's brokers. See generally Counterclaims, ¶¶ 37-103 (specifically ¶¶ 37-38, 44, 61-64, 69, 78, 83-85, 96-101). The claims asserted by GFI in the FINRA Arbitration contain numerous references to Fewer's allegedly wrongful conduct in connection with the purported conspiracy. These claims are virtually identical to the counterclaims in the Fewer Action, and involve the same facts and issues. See generally GFI's First Amended Statement of Claim (specifically ¶¶ 1-8, 31-33, 45, 48, 50, 52-54, 61, 66, 77-80, 84, 89-93, 95-101, 108-111 and 114-115).
Thus, while the parties in the instant action are nominally different from the parties in the FINRA Arbitration, there are "overlapping issues and common questions of law and fact," and the final determination in the FINRA Arbitration "may dispose of or limit issues which are involved in the [instant] action." Belopolsky, 41 AD3d at 323. At most, a resolution of factual issues and claims against GFI in the FINRA Arbitration could collaterally estop GFIG and Jersey Partners from prosecuting the conspiracy-related counterclaims in this action. At a minimum, resolution of factual and legal issues in the FINRA Arbitration may dispose of or limit issues involved in the instant action.
In analyzing the practical considerations (which, the court notes, are the result of the parties' procedural maneuvering and tortured motion practice), the court may either allow the FINRA Arbitration and the Fewer Action to proceed simultaneously, or stay the Fewer Action. It appears to the court to strain common sense that Fewer — whose conduct, together with the conduct of Babcock and the Tradition Respondents, is allegedly at the heart of these proceedings — will sit on the sidelines while the claims involving GFI, the Tradition Respondents and the additional GFI Employees will proceed in arbitration. However, here, "the possibility of conflicting rulings on identical issues," and the potential for "duplicative litigation, especially where the potential for conflict exists between a court and an arbitral forum," support the court's conclusion to grant Fewer's motion for a stay. Bank of Tokyo-Mitsubishi, Ltd., New York Branch v Kvaerner a.s., 243 AD2d 1, 9 (1st Dept 1998).
Furthermore, "a stay of this action will promote judicial economy by permitting the arbitration panel to resolve" common factual and legal issues "before the parties and the court commit additional time and resources to the resolution of this matter." Zodkevitch v Feibush, 17 Misc 3d 1106(A), 2007 NY Slip Op 51856(U), *10 (Sup Ct, NY County 2007); see also Schneider, 159 AD2d at 295 ("[i]t makes little sense to go full steam ahead with an action when the plaintiff stands to be made whole in another action, and this is so even when the other action is against a different defendant").
In his opening brief, Fewer agreed to voluntarily consent to a stay of his claims, pending the resolution of the FINRA arbitrations commenced by GFI, in the event that the court stays defendants' counterclaims. Therefore, Fewer's claims, and the Fewer Action in its entirety, are stayed. Defendants concede that discovery will not proceed in this action as a result of this court granting Fewer's request for a stay, rendering Fewer's motion for a protective order moot. Defs. Opp. Mem. of Law, at 22.
Accordingly, it is hereby
ORDERED that GFI Securities LLC's application for a preliminary injunction in GFI Securities LLC v Tradition Asiel Securities Inc., et al. (Index No. 601183/08) is denied; and it is further
ORDERED that Michael McDevitt's application for an order to compel arbitration and for injunctive relief in McDevitt v GFI Securities, LLC (Index No. 105584/08) is denied as moot, and the cross motion of GFI Securities LLC is denied; and it is further
ORDERED that Lainee Steinberg's application for an order to compel arbitration and for injunctive relief in Steinberg v GFI Securities LLC (Index No. 601187/08) is denied as moot, and the cross motion of GFI Securities LLC is denied; and it is further
ORDERED that Russell Wallack's application for an order to compel arbitration and for injunctive relief in Wallack v GFI Securities, LLC (Index No. 105575/08) is denied as moot, and the cross motion of GFI Securities LLC is denied; and it is further
ORDERED that Michael Babcock's application for an order to compel arbitration against respondent GFI Securities LLC and for injunctive relief in Babcock v GFI Securities, LLC (Index No. 105466/08) is denied as moot, his motion to compel arbitration against respondents GFI Group Inc. and Jersey Partners Inc. is denied, and the cross motion of the respondents is granted to the extent that the arbitration commenced by petitioner against respondents GFI Group Inc. and Jersey Partners Inc. is dismissed, and the cross motion is otherwise denied; and it is further
ORDERED that Donald Fewer's application for injunctive relief (motion sequence number 001) in Fewer v GFI Group Inc. and Jersey Partners Inc. (Index No. 601099/08) is denied as moot, and the cross motion of GFI Group Inc. and Jersey Partners Inc. is denied; and it is further
ORDERED that Donald Fewer's motion (motion sequence number 002) in Fewer v GFI Group Inc. and Jersey Partners Inc. (Index No. 601099/08) is granted to the extent that the action is stayed until the conclusion of the arbitration commenced by GFI Securities LLC against Tradition Asiel Securities Inc., Standard Credit Securities Inc., Emil Assentato, Chaim Levin and Michael Babcock (FINRA No. 08-01220), which is presently before the Financial Industry Regulatory Authority, and the motion is otherwise denied.