Summary
confirming arbitration award to which the parties stipulated
Summary of this case from LG Elecs. Mobilecomm U.S.A., Inc. v. Reliance Commc'ns, LLCOpinion
Civil Action No. 3:02-CV-2482-L
January 30, 2003
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court is May Financial Corporation's Application to Confirm Arbitration Award, filed November 14, 2002, which was referred to United States Magistrate Judge Irma Carrillo Ramirez for findings and recommendation pursuant to 28 U.S.C. § 636(b) and the District Court's Order of Reference, filed November 18, 2002. The Court recommends that the motion be GRANTED.
I. Background
May Financial Corporation ("Plaintiff') is a securities broker/dealer with its principal office in Dallas, Texas. (PL Br. at 1.) Granger Meadows, Limited, ("Defendant") is a company doing business in Ohio. Id. In late July and early August 2000, Defendant opened a margin account in Dallas, Texas, with Northstar Securities, Inc., who used Plaintiff as its clearing firm. (Pl. Br. at 2.) In connection with opening the account, Defendant executed a "Margin and Short Account Agreement" ("Agreement") in which it agreed that any dispute regarding its account would be governed by Texas law and that it would arbitrate any dispute before the American Arbitration Association. (Pl. Br. Ex. 1 at 2, ¶¶ 14, 16.)
In August 2000, Defendant began to borrow funds from Plaintiff to purchase securities and sell call options against its purchases. (PL Br. at 3.) In February 2001, due to adverse market movement against Defendant's positions, Plaintiff forwarded margin calls to Defendant requiring Defendant to meet his margins. Id. Defendant failed to do so, and Plaintiff proceeded to cause those positions to be liquidated by buying call options to cover the short option positions and selling the long positions in the underlying stocks. Id. After the liquidation ended in March 2001, Defendant's account held a deficit of $969,035.38. Id. Plaintiff requested that Defendant cover the debt, which it failed to do. Id.
Plaintiff initiated arbitration proceedings in April 2001. (Pl. Br. at 4.) On May 31, 2002, the parties stipulated to an arbitration award for Plaintiff in the amount of $750,000, plus post-judgment interest at ten percent per annum from June 1, 2002, until the judgment is paid. Id. According to Plaintiff, the entire award remains outstanding. Id. Thus, on November 14, 2002, pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq., Plaintiff filed this application to confirm the arbitration award, On November 19, 2002, the Court ordered Defendant to respond. As of the date of this Order, Defendant has failed to respond.
II. Analysis
The Court is authorized under 9 U.S.C. § 9, a provision of the Federal Arbitration Act, to confirm an arbitration award, and it must do so unless the award is vacated, modified, or corrected. AFD Fund v. Midland Management, L.L.C., 2002 WL 731813, *2 (N.D. Tex. Apr 22, 2002). Section 9 states in relevant part:
If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected . . . If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made. Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. . . . If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.9 U.S.C. § 9 (quoted in AFD Fund, 2002 WL 731813, at *2 n. 6).
The parties agreed that "judgment upon the [arbitration] award rendered may be entered in any court, state or federal, having jurisdiction." (PL Br. at 3, Ex. 1 at 2, ¶ 14.) Thus, the parties agreed that a judgment of the Court shall be entered upon the award made pursuant to the arbitration.
The Court has diversity jurisdiction under 28 U.S.C. § 1332(a)(1), because Plaintiff and Defendant are residents of different states and the amount in controversy exceeds $75,000. Further, on November 19, 2002, the District Clerk's Office issued a summons and a copy of Plaintiff's complaint to be served on Defendant's president, Gary Thomas, in Peninsula, Ohio. On December 9, 2002, a return of service was filed showing that service was personally made by a private process server on Gary Thomas' attorney. Therefore, the prerequisite to jurisdiction in § 9 — that notice of the application shall be served upon Defendant — has been established.
Although Plaintiff's application was served by a private process server, and § 9 requires that "the application shall be served by the marshal of any district within which the adverse party may be found," § 9 "cannot be taken as the proper standard for service of process . . . because it cannot account for the subsequent abandonment of United States marshals as routine process servers." Matter of Arbitration Between Trans Chemical Ltd. and China Nat. Machinery Import and Export Corp., 978 F. Supp. 266, 300 n. 138 (S.D. Tex. 1997). Thus, under Federal Rule of Civil Procedure 4(h)(1), Defendant was properly served.
Plaintiff's application was timely. Plaintiff filed it on November 14, 2002, which was within one year from the date that the arbitration award was made, May 31, 2002. (Pl. Br. Ex. 2 at 7.)
Finally, venue is proper in this district even though no particular court was specified by the parties. (Pl. Br. Ex. 1-2.) According to Plaintiff, the primary events giving rise to its cause of action occurred in Dallas, Texas, and Defendant assented to have the arbitration award confirmed by any court of competent jurisdiction. (Pl. Br. at 2.) Thus, this district is a proper venue. Cortez Byrd Chips, Inc., 529 U.S. at 198 (stating that venue is proper "in a diversity action in 'a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred.'") (quoting 28 U.S.C. § 1391(a)(2)). Consequently, because Plaintiff has satisfied the prerequisites for pursuing a confirmation of the stipulated arbitration award in this district, the Court will address Plaintiff's application.
Venue is also proper in Cleveland, Ohio, under the venue provision in § 9 because the arbitration hearing was conducted in Cleveland, Ohio, and "the stipulated award was made in Cleveland, Ohio." (Pl. Br. at 2; Ex. 2 at 1.) However, this venue provision is permissive rather than mandatory. Cortez Byrd Chips, Inc. v. Bill Harbert Const. Co., 529 U.S. 193, 203-204 (2000) ("Attention to practical consequences thus points away from the restrictive reading of §§ 9-11 and confirms . . . treating them as permitting, not limiting, venue choice today."); see also Sutter Corp. v. P P Industries, Inc., 125 F.3d 914, 919 (5th Cir. 1997) (determining that "[v]enue under § 9 is not mandatory").
Plaintiff requests that this Court confirm a stipulated arbitration award of $750,000. Defendant stipulated to the award and its amount, but has neither paid a portion of it nor responded to Plaintiff's application. Because the award is stipulated, and there is no argument from Defendant, the7 Court is of the opinion that the award should be confirmed.