Clark v. Charles Schwab & Co. Inc.
Filing
27
ORDER GRANTING Defendant's 18 Motion to Dismiss for Lack of Jurisdiction, DISMISSING Plaintiff's 1 Motion to Vacate arbitral award, and DENYING AS MOOT Plaintiff's 22 Motion to Request Status Conference, as set forth more particularly in the Order Regarding Motion to Vacate and Motion to Dismiss.SO ORDERED by U.S. District Judge S. Kato Crews on 3/26/2024. (skclc3)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
District Judge S. Kato Crews
Civil Action No. 1:22-cv-03015-SKC-SBP
JASON RAY CLARK,
Plaintiff,
v.
CHARLES SCHWAB & CO. INC.,
Defendant.
ORDER REGARDING MOTION TO VACATE AND MOTION TO DISMISS
On November 21, 2022, Plaintiff Jason Ray Clark, proceeding pro se, began
this case by filing his “Motion for/to: Vacate FINRA Award and Judgement [sic] for
FINRA Arbitration Case #21-02439” (Motion to Vacate). In the Motion to Vacate
he asks this Court to vacate an arbitral award ordered by a FINRA 1 arbitration
panel and to hold a new trial in the District Court for the District of Colorado.
Dkt. 1, p.27. 2 But the issues here arose much earlier when Defendant Charles
Schwab & Co. Inc. terminated an Investment Advisor Services Agreement
(Services Agreement) between Plaintiff, operating as Clark Brother Investments
FINRA is short for Financial Industry Regulatory Authority, a “governmentauthorized not-for-profit organization that oversees U.S. broker-dealers.” About
FINRA, https://www.finra.org/about (Mar. 26, 2024).
1
2
The Court uses “Dkt.__” to refer to specific docket entries in CM/ECF.
1
(CBI), 3 and Defendant. CBI, through Plaintiff, then initiated a FINRA arbitration
proceeding against Defendant. Id. at pp.36-37, 68-71, 94.
This dispute started when Defendant notified Plaintiff by letter dated
April 2, 2021, that Defendant was terminating the Services Agreement between
them effective July 6, 2021. Id. at p.94. The Services Agreement required the
parties to submit any dispute to FINRA arbitration. Id. at pp.69-70. Plaintiff
invoked this provision and brought a FINRA arbitration against Defendant
claiming it improperly terminated the Services Agreement. 4 Id. at pp.36, 37.
Ultimately, the arbitral panel denied all of CBI’s claims and held that Defendant
properly terminated the Services Agreement. Id. at pp.115, 117.
Following the arbitral panel’s decision, Plaintiff filed the instant Motion to
Vacate. Dkt. 1. The Court liberally construes the Motion to Vacate as seeking
vacation of the arbitral award pursuant to Section 10 of the Federal Arbitration
Plaintiff refers to himself and CBI interchangeably. CBI appears to be an expired
trade name of Plaintiff. See Colorado Secretary of State – Summary,
https://www.coloradosos.gov/biz/TradeNameSummary.do?quitButtonDestination=B
usinessEntityResults&nameTyp=TRDNM&masterFileId=20181450606&entityId2=
20181450606&fileId=20181450606&srchTyp=TRDNM (Mar. 26, 2024). The Court
will refer to them interchangeably, unless otherwise noted.
3
As explained below, the substance of the arbitration is not relevant here. See Legal
Principles & Analysis, pp.4-9, infra. Generally, though, Plaintiff asserted Defendant
wrongfully terminated the Services Agreement with CBI, incorrectly communicated
with CBI’s clients about the termination, and attempted to steal CBI’s clients. Dkt. 1,
p.2.
4
2
Act (FAA). 5 See 9 U.S.C. § 10. After some confusion about the correct procedural
posture of the case (irrelevant here), Defendant filed its Motion to Dismiss arguing
the Court lacks subject matter jurisdiction because jurisdiction is not apparent
from the face of the Motion to Vacate. Dkt. 18. Plaintiff filed his Response (Dkt. 19),
and Defendant filed its Reply (Dkt. 20).
The Court carefully reviewed the Motion to Vacate, the Motion to Dismiss,
associated briefing, the docket, and applicable law. No hearing is necessary.
Because the Court finds the Motion to Vacate does not plead sufficient facts to
establish this Court’s subject matter jurisdiction, the Court GRANTS the Motion
to Dismiss. Further, because the Court rules on the Motion to Dismiss, the Court
DENIES AS MOOT Plaintiff’s Motion to Request Status Conference (Status
Conference Motion). 6 Dkt. 22.
LEGAL PRINCIPLES
“Under the Federal Arbitration Act (FAA), [a court] may vacate an
arbitrator’s decision ‘only in very unusual circumstances.’” THI of N.M. at Vida
Because Plaintiff proceeds pro se, the Court must construe his Motion to Vacate and
other filings liberally. See Haines v. Kerner, 404 U.S. 519, 520-21 (1972). The Court
cannot act as his advocate, however. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th
Cir. 1991).
5
The Status Conference Motion seeks the status of the case and a hearing. Dkt. 22.
Defendant filed its Response to the Status Conference Motion, but Plaintiff did not
submit a reply brief. Dkt. 24. Defendant did not oppose the request for a status
conference but added a request for oral argument on the Motion to Vacate. Id. The
oral argument request is also denied as moot.
6
3
Encantada, LLC v. Lovato, 864 F.3d 1080, 1082 (10th Cir. 2017) (quoting Oxford
Health Plans LLC v. Sutter, 569 U.S. 564, 568 (2013)). “[J]udicial review of an
arbitration award is very narrowly limited.” ARW Expl. Corp. v. Aguirre, 45 F.3d
1455, 1463 (10th Cir. 1995) (citation omitted). Courts must afford deference to
arbitral awards because “any less deference would risk improperly substituting a
judicial determination for the arbitrator’s decision that the parties bargained for.”
THI, 864 F.3d at 1084 (citations omitted) (cleaned up).
But before a court can reach the question of whether to confirm, vacate, or
modify an arbitral award, it must first have subject matter jurisdiction over the
petition. Badgerow v. Walters, 596 U.S. 1, 4 (2022). The FAA’s “authorization of a
petition does not itself create jurisdiction.” Id. “Rather, the federal court must have
what [the Supreme Court has] called an ‘independent jurisdictional basis’ to resolve
the matter.” Id. (citing Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582
(2008)). “That means an applicant seeking, for example, to vacate an arbitral award
under Section 10 [of the FAA] must identify a grant of jurisdiction, apart from
Section 10 itself, conferring ‘access to a federal forum.’” Id. at 8 (quoting Vaden v.
Discover Bank, 556 U.S. 49, 59 (2009)). A court may not “look-through” a petition
seeking to confirm, vacate, or modify an arbitration award to the subject of the
arbitration itself to find jurisdiction. Id. at 12. Thus, “a court may look only to the
application actually submitted to it in assessing its jurisdiction.” Id. at 5.
4
ANALYSIS
Plaintiff seeks vacation of the arbitral award and a new trial in this Court.
Dkt. 1, p.27. Defendant counters in its Motion to Dismiss that the Court lacks
subject matter jurisdiction because Plaintiff has not alleged sufficient facts to
support either federal question or diversity jurisdiction, the latter because the
amount in controversy is zero dollars. 7 Dkt. 18, p.8.
Looking solely at the Motion to Vacate, the Court fails to find any claim
asserting federal question jurisdiction. As the Supreme Court noted in Badgerow,
an arbitration “award is no more than a contractual resolution of the parties’
dispute—a way of settling legal claims. And quarrels about legal settlements—even
settlements of federal claims—typically involve only state law, like disagreements
about other contracts.” Badgerow, 596 U.S. at 9. Plaintiff argues in his Response
that, if the Court were to vacate the award, at the new trial or arbitration he has
federal law issues to resolve. Dkt. 19, p.2. The Court cannot consider those
arguments, however, because to do so, the Court would have to look through the
Motion to Vacate to the underlying dispute. See Badgerow, 596 U.S. at 5. Rather,
the issue raised by the Motion to Vacate concerns simply whether to enforce the
The Motion to Vacate is also prolix. While Defendant has not raised Rule 8, the
Court finds that Plaintiff’s Motion to Vacate violates Rule 8’s requirement for “a short
and plain statement” of the basis for the Court’s jurisdiction and Plaintiff’s claims for
relief. See Fed. R. Civ. P. 8(a). The Complaint is 27 pages of single-spaced text that,
at times, reads more like a stream of consciousness. For this alternative reason alone,
the Court finds that the Motion to Vacate should be dismissed.
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parties’ contractual resolution of their dispute—a state law matter. Thus, no
federal question jurisdiction under 28 U.S.C. § 1331 exists here.
To demonstrate diversity jurisdiction exists, Plaintiff must allege complete
diversity of citizenship between Plaintiff and Defendant, and that the amount in
controversy exceeds $75,000, exclusive of interest and costs. See Grynberg v. Kinder
Morgan Energy Partners, L.P., 805 F.3d 901, 905 (10th Cir. 2015); 28 U.S.C. § 1332.
Defendant does not contest that the parties have diverse citizenship. Dkt. 18, p.13.
But Defendant contends the Motion to Vacate fails to plead an amount sufficient
to establish diversity jurisdiction exists because the amount of the arbitral award
was zero dollars. Id. at 14. The Court agrees with Defendant.
Prior to Badgerow, the Tenth Circuit stated that when considering whether
to confirm an arbitral award, “[t]o determine the amount in controversy [the court]
must look to ‘the pecuniary effect an adverse declaration will have on either party
to the lawsuit.’” Bad Ass Coffee Co. of Haw. v. Bad Ass Coffee Ltd. P’ship, 25 F.
App’x 738, 743 (10th Cir. 2001) (quoting City of Moore v. Atchison, Topeka & Santa
Fe Ry. Co., 699 F.2d 507, 509 (10th Cir. 1983)). Effectively, Bad Ass Coffee
instructed courts to look through the petition to the amount in controversy in the
underlying arbitration when determining whether to confirm an arbitration award.
Id. The Tenth Circuit has not yet, however, opined on how Badgerow impacts the
analysis of the amount in controversy to establish diversity jurisdiction for
purposes of actions brought under Section 10 of the FAA.
6
Nevertheless, the Tenth Circuit has cited Badgerow’s change to
jurisdictional analyses, noting, “[t]he process for determining whether there is an
independent basis for federal jurisdiction varies for different types of petitions
brought under the FAA.” Matios v. City of Loveland, No. 22-1047, 2022 WL
2734270, at *2 (10th Cir. July 14, 2022) (quoting Badgerow, 596 U.S. at 7-12). “For
a petition to confirm an arbitration award under Section 9 of the FAA, . . . courts
do not ‘look through the . . . applications’ to determine whether it would have
jurisdiction over the underlying dispute.” Id. (quoting Badgerow, 596 U.S. at 9).
Cognizant of the Tenth Circuit’s limited pronouncements on Badgerow, this
Court finds it “cannot look back or ‘look through’ to Plaintiff's Complaint in this
case to assess its jurisdiction. Rather, the undersigned must determine whether
subject matter jurisdiction is present when looking at the face of Plaintiff's Motion
to Vacate.” See Graulau v. Credit One Bank, N.A., No. 6:19-CV-1723-WWB-EJK,
2023 WL 2930957, at *3 (M.D. Fla. Mar. 27, 2023), appeal dismissed, No. 23-11227,
2023 WL 4476163 (11th Cir. May 15, 2023) (motion failed to plead parties’
citizenship or amount in controversy); see also Dunbar v. Airbnb, Inc. No. CV 2100451 JMS-WRP, 2022 WL 17067455, at *2 (D. Haw. Nov. 17, 2022) (same). If a
motion (or petition or complaint, however styled) to vacate or confirm an arbitral
award does not plead facts that the arbitral award exceeded $75,000, then the
Court cannot find that diversity jurisdiction exists. See, e.g., Mitchell v. Frattini,
No. 22-CV-2352 (JGK), 2022 WL 17157027, at *3 (S.D.N.Y. Nov. 22, 2022) (amount
7
in controversy requirement not satisfied where arbitration award was $25,450);
JPay LLC v. Burton, No. 3:22-CV-1492-E, 2023 WL 5253041, at *4 (N.D. Tex. Aug.
15, 2023) (“the value of Defendants’ individual state law claims in arbitration is
irrelevant for the purpose of assessing the amount in controversy”); and see
Rabinowitz v. Kelman, 75 F.4th 73, 79 (2d Cir. 2023) (finding diversity jurisdiction
where petition sought to confirm a $4M arbitration award, exceeding the $75,000
amount in controversy requirement); New Frontier Inv. AG v. BitCenter, Inc., No.
23-MC-80154-PHK, 2024 WL 459070, at *4 (N.D. Cal. Feb. 6, 2024) (“the amount
in controversy requirement is based on the face of the well-pleaded complaint”);
Prospect Funding Holdings (NY), LLC v. Ronald J. Palagi, P.C., L.L.C., 76 F.4th
785, 788 (8th Cir. 2023), reh’g denied, No. 22-1871, 2023 WL 5920138 (8th Cir. Sept.
12, 2023) (application to vacate arbitration award failed to plead the parties’
citizenship, thus failing to plead diversity jurisdiction).
Here, the Court finds the amount in controversy is zero dollars. The Motion
to Vacate makes no allegations about the amount of the arbitration award. See,
generally, Dkt. 1, pp.1-27. Although it does contain a calculation of Plaintiff’s
alleged damages (see id. at pp.25-26), considering those damages to determine the
amount in controversy would require the Court to look through the Motion to
Vacate to the underlying dispute that the parties submitted to arbitration. See
JPay, 2023 WL 5253041, at *4 (amount of underlying dispute is irrelevant to
determining amount in controversy for petition to vacate arbitration award). To be
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sure, Plaintiff included the FINRA arbitration award as an exhibit to the Motion
to Vacate. 8 Dkt. 1, pp.115-121. The arbitral panel denied Plaintiff’s claims in their
entirety and awarded no money to any party. 9 Id. at p.119. Thus, the amount in
controversy, looking solely to the petition to vacate the arbitral award, is zero. See
Mitchell, 2022 WL 17157027, at *3 ($25,450 arbitral award insufficient to meet
amount in controversy threshold). And because the amount in controversy
threshold has not been met, this Court does not have diversity jurisdiction. See 28
U.S.C. § 1332.
*
*
*
Because the Court finds the Motion to Vacate fails to plead sufficient facts
to allege the Court has either federal question jurisdiction under 28 U.S.C. § 1331,
or diversity jurisdiction under § 1332, the Court GRANTS Defendant’s Motion to
Dismiss and DISMISSES, without prejudice, the Motion to Vacate. And having
resolved the Motion to Vacate and the Motion to Dismiss, the Court FURTHER
DENIES AS MOOT the Settlement Conference Motion.
The Court considers the arbitral award without converting the Motion to Vacate to
a motion for summary judgment because Plaintiff filed the arbitral award as an
exhibit to the Motion to Vacate and the award is central to the claims raised in the
Motion to Vacate and no party has disputed its authenticity. See U.S. Olympic Comm.
v. Am. Media, Inc., 156 F. Supp. 2d 1200, 1204 (D. Colo. 2001).
8
The arbitration panel did assess fees for the arbitration totaling $22,650. Without
deciding whether arbitration fees should be considered when evaluating the amount
in controversy, even this amount fails to meet the $75,000 threshold.
9
9
DATED: March 26, 2024.
BY THE COURT
_____________________________
S. Kato Crews
United States District Judge
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