Lubovich et al v. Byrnes, as Trustee of the Yife Tien Irrevocable Dynasty Trust et al

Filing 45

ORDER granting 22 Respondents' Motion to Dismiss Petitioners' Petition to Confirm Arbitration Award for Failure to Join an Indispensable Party and Lack of Subject Matter Jurisdiction. Signed by Judge Federico A. Moreno on 6/3/2024. See attached document for full details. (dyg)

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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA M iam iD ivision C aseN um ber:23-23813-C1V -M 0 1V N 0 JAN D RA STEPH EN LU BOV ICH ,JON CA RY CO OPER ,AA RON CH A IM LUPULOPF,and STIFEL,NICOLAUS & COM PAN Y ,lN C., Petitioners, VS. LUCY CHUA and JOI-1N BYRNES as TRU STEES ofthe YIFE TIEN IRREV O CA BLE DY N A STY TRU ST,and R OCK Y V ISTA UN IV ER SITY , Respondents. O RD ER G R AN TIN G R ESPO N D ENT S'M O TIO N TO D ISM ISS PETITIO N TO C O NFIR M A R BIT R ATIO N AW A R D Thiscaseinvolvesapetitionforentry offinaljudgmentconfirmingthearbitrationaward rendered in theirfavorand againstClaim ants and Respondents Lucy Chua and Jolm Byrnes as Tnlstees of the Yife Tien Irrevocable Dynasty Trust,and Rocky V ista U niversity,LLC by a Financiallndustry R egulatory A uthority arbitration panel. TH IS CAUSE cam ebeforetheCourtuponRespondents'M otionto DismissforFailureto JoinanlndispensablePartyandLackofSubjectM atterJurisdidion (D.E.22),filedonDecem ber 19.2023. THE COURT has considered the m otion,the response in opposition,the reply,and pertinentportionsofthe record. Forthe reasonssetforth below,the CourtgrantsRespondents' M otiontoDismissforfailuretojoin anindispensablepartyandlackofsubjectmatterjurisdiction. FA CT S On June 11,2018,Lucy Chua and Jolm Byrnes asTnzsteesofthe Yife Tien Irrevocable DynastyTrust,Rocky VistaUniversity,LLC (ticlaimants'')filedtheirstatementofclaim against Jandra S. Lubovich, Jon C. Cooper, Aaron C. Lupuloff, and Stifel,Nicolaus & Co., Inc. (tçpetitioners'). (ECF No.1at! 11q. Claimantsalleged claimsforfraudulentmisrepresentation and om issions,fraudulentinducement,conversion,civiltheft,breach offduciary duty,failtlreto supervise,breachofcommercialhonor,,2023,the FinancialIndustryRegulatoryAuthority,lnc.,servedthearbitrationawardona1lparties.gftfat!( 141. ln the award,thearbitration panelruled thatallclaimsasserted by the Claimantsagainst Petitionersweredeniedintheirentirety.! 15j.Thearbitrationpanelfurtherruledthatthe Claim antswereliabletoPetitionersfor$1,800,000 in reasonableattorneys'feesand $294,024.51 ClaimantsmovetodismissthePetitiontoConfirm thearbitrationawardforlackofsubject mat-terjurisdiction.ClaimantsarguethatPetitionersintentionallyexcludedanindispensableparty in orderto try to force this petition to be heard in federalcoul' t. Further,Claimants state that because the indispensable party INTL Fcstone Financiallnc.($1FCStone'')'s,joinder would destroy diversityjurisdiction,thepetitionmustbedismissed.TheCourtaddressesthearguments below . LE GA L STA ND A RD - FED .R .C IV .P.19 Claim ants,in theirinstantaction,m ove to dism issthePetition to Confirm arbitration aw ard pursuanttoFederalRule 12(b)(7)forfailuretojoinanindispensablepat'ty (FCStone),thejoinder ofwhichwouldhavedestroyeddiversityjurisdiction.A federaldistrictcourtinitsdiscretionmay 2 dismissan action forfailuretojoin an indispensableparty.SeeFed.R.Civ.P.12(b)(7). Rule 19(a)providesthat: A person whoissubjecttoserviceofprocessandwhosejoinderwillnotdeprive the courtofsubject-matterjurisdiction mustbejoined asa party if:(A)in that person'sabsence,the courtcannotaccord com plete reliefnm ong existing parties; or(B)thatperson claimsan interestrelatingtothesubjectoftheaction and isso situatedthatdisposing oftheaction intheperson'sabsencemay:(i)asapractical matterimpairorimpedetheperson'sabilitytoprotecttheinterestor(ii)leavean existingpartysubjecttosubstantialriskofincurringdouble,multiple,orotherwise inconsistentobligationsbecause oftheinterest. Fed.R.Civ.P.19(a)(1).lfaperson hasnotbeenjoinedasrequired,thecourtmustorderthatthe personbemadeaparty.Fed.R.Civ.P.19(a)(2). The Court'sinquiry doesnotend atRule 19(a). TheEleventh CircuitinFoçus on the Familyv.PinellasSuncoastTransitAuthority,344F.3d 1263,1279-80(11thCir.2003)wrotethat ifthecourtfindsthatthepersonshouldbejoined(underRule19(a)),butcannotbe(because,for examplejoinderwould divestthe courtofjurisdiction)then the coul' tmustinquire whether, applyingthefactorsenumeratedin Rule 19(b),thelitigationmaycontinue.TheEleventh Circuit * . . reiterated thisin Challenge Homes,Inc.v.GreaterNaples Care Center,Inc.,669 F.2d 667,669 (11thCir.1982),m itingthatGsinmakingthefrstdetermination i.e.,whetherthepartyinquestion çshould bejoined,'(-)pragmaticconcerns,especiallytheeffecton thepartiesandthelitigation, control.''(citationsandsomeinternalquotationmarksomitted). Rule19(b)instructscourtstodeterminewhether,in equityandgoodconscience,theaction should proceed am ong the existing partiesor should be dismissed. The factors forthe cotu'tto considerinclude' . theextentto which ajudgmentrendered in theperson'sabsencemightprejudice thatperson ortheexistingparties;(2)theextenttowhich any prejudicecould be lessened oravoidedby:(A)protectiveprovisionsinthejudgment;(B)shapingthe relief;or (C) othermeasures;(3)whetherajudgmentrendered in the person's 3 absencewouldbeadequate;and (4)whethertheplaintiffwouldhavean adequate remedy iftheactionweredismissedfornonjoinder. Fed.R.Civ.P.19(b). LEGAL ANALYSIS -FED.R.ClV.P.19 First,the CourtaddressesPetitioners'argumentthatRule 19 doesnotapply tothisaction as it was broughtpursuantto the FederalArbitration Actwhich sets forth its own procedural requirements for a m otion to confinn arbitration award. Petitionersconclude thatbecause the FederalArbitration Actdoesnotrequire evcry party to the arbitration to be nnm ed,Rule 19 is inapplicabletotheCourt'sanalysis.(emphasisadded).See9U.S.C.j9.Petitionersaremistaken. W hile itisundisputed thatthetextoftheFederalArbitration Actdoesnotrequire every party to thearbitration to benamed,the Actdoesnotconfersubjectmatterjurisdiction. TheEleventh CircuitaddressedasimilarquestioninBaltinv.AlaronTrading Corp.,128F.3d1466,1469(11th Cir.1997)andheldthattheFederalArbitrationActisnotastatutoly grantoffederalsubjectmatter jurisdiction. lnstructively,the Baltin panelwrotethatfederalcourtsmusthave an independent jurisdictionalbasisto entertain casesarisingoutoftheFederalArbitration Act.Id Here,while subjectmatterjurisdictionintheinitialM otiontoCompelisunquestionablymet,iftheCourtfinds thatFcstoneisanindispensableparty underRule 19,theFederalArbitrationActdoesnotsupplant the lack of diversity. N ow ,to the Rule 19 analysis. Rule 19(a)requiresthe Courtto inquirewhethertheperson shouldbejoined. Here,the arbitration paneldenied allclaimsassertedby Lucy ChuaandJolm ByrnesasTrusteesoftheYife Irrevocable Dynasty Trust,Rocky V ista U niversity. Jandra S.Lubovich,Jon C.Cooper,A aron C. Lupuloff, and Stifel,N icolaus & Co., Inc. as Petitioners brought the petition to confirm the arbitration aw ard in federal court. H ow ever,as Claim antspointout,Petitioners,in bringing the 4 instantaction to thisCoul' t,leftoffthe party IN TL FcstoneFinancial,Inc. The arbitration panel ruled thatClaimantswere liable to Petitionersfor$1,800,000 in atlorneys'feesand $294,024.51 incosts. Becausethisisajointawardin favorofal1Petitioners(including Fcstonewhich was lef4outofthisaction),Fcstonehasan interestregardingthisaction. W hiletheremay notbea risk ofan existing party incuning inconsistentobligationsbecause oftheinterest,therem ay bea risk of im peding or im pairing the Fcstone's interestif the issues in this case are disposed. See Fed.R.Civ.P.19(a)(1)(B)(i)-(ii). Further,whethertheawardisconfirmedordenied,theCourt camlotaccordcompletereliefamong a1ltheparties.SeeFed.R.Civ.P.19(a)(1)(A). Thus,the CourtfindsthatunderRule 19(a),Fcstoneisan indispensableparty which shouldbejoined if feasible. Ifthepartyshouldbejoinedbutcalmotbe(becauseforexample,joinderwoulddivestthe courtofjurisdiction)then thecourtmustinquirewhether,applyingthefactorsenumeratedinRule 19(b),thelitigationmaycontinue.SeeChallengeHomes,Inc.,669F.2d at669.Here,joinderof FcstonewoulddivesttheCou?tofjurisdiction.Thus,theCourtmustlook atthefactorsin Rule 19(b). Here,the Courtfnds thatFcstone is an indispensable party and in equity and good consciencethattheaction cannotcontinuewithouttheparty.Fcstonewasajointly prevailing party in the underlying arbitration. Claimants face actualprejudice ifforced to litigate tvvo competing actionsin two courts.Further,therisk ofprejudiceishigh.AsClaimantspointout, theabsenceguaranteesarisk ofinadequatejudgmentsbecauseitwouldbeinherently incomplete withoutFcstone as a party. There seem sto be no otherreason forthe om ission ofFcstone as a party other than the creation of diversity jurisdiction. The Cottt'tcamlotsimply cal' ve out Fcstone's entitlem ents,and any ruling on the arbitration aw ard w illaffectFc stone'srights. On 5 Rule19(b)(2),prejudicecanbelessenedbytheFloridastatecourtsthatcanhandlethearbitration aw ard as a whole,ratherthan this Courthandling itpiecem eal. OnRule19(b)(3),theCourthasalready touchedonthefactthatthejudgmentrenderedin Fcstone'sabsence willnotbeadequate. lftheCourtwereto find in Fcstone'sfavorandvacate the award,Fcstone stillwould nothave achieved com plete relief,as f'urtheraction in the state courtwouldbenecessaly tovacatethejointawardtoPetitioners.JustbecausethePetitionershad a joint defense does notchange the fact thatFcstone is a severalbeneficiary of a single undifferentiated arbitralaward. Finally on Rule19(b)(4),theCourtbelievesthatFloridastatecourtistheadequateforum forthis action. Claimants state thatthey have already filed theirM otion to Vacate the arbitral aw ard in the 11th JudicialCircuitforM iam i-D ade County. Failureto dism issthis casehere w ould allow the state action to proceed sim ultaneously and resultin duplicative efforts and potentially inconsistentresults. The Courtfindsunpersuasive Petitioners'last-ditch argum entthatthe Courtsim ply needs toexercisesupplementaljurisdictionunder28USC j1367.G$Aswithanyfederalaction,diversi' ty ofcitizenship isdetermined by referencetothepartiesnamedintheproceeding beforethedistrict coul't,aswellasany indispensablepartieswhomustbejoinedpursuantto Rule 19oftheFederal RulesofCivilProcedure.'' M organ Keegan (jrCo.v.M un.Workers Comp.Fund,N o.2:12-CV- 2612-10 17,2012 U.S.Dist.LEM S 204675(N.D.Ala.Sep.7,2012). çsW herejoinderofaparty would destroy subjectmatterjurisdiction,the courtmustdismiss the action ifthatparty is indispensabletothelitigation.'' Id (citing PrivateBusiness,Inc.v.AlabamaExteriorSupply, Inc.,2000 U.S.Dist.LEXIS 19838,2000W L 33156437,*3 (S.D.Ala.2000)(quoting Doctor% Associates,Inc.v.Distajo,66F.3d438,445(2ndCir.1995))(citationsomittedltemphasisaddedl); seealso Diamondback Timberlands,lnc.v.M orrison,2007 U .S.Dist.LEXIS 42575,2007 W L 1705684 (M .D.Ga.2007). Accordingly,the Courtdism issesthe Petition to Confinn Arbitration Award forfailure to joinanindispensablepartyandlackofsubjectmatterjurisdiction. C O N CLU SIO N Accordingly,itisORDERED AND ADJUDGED thattheM otion to DismissforFailure toJoinanIndispensablePartyandLack ofSubjectM atterJurisdictionisGRANTED DONEAND OIIDERED in Cham bersatM iami,Florida,this f of A' ..... FED A .M OR EN O UN ITE STA TES D ISTR ICT JUD G E Copiesfurnished to: CounselofR ecord 2024.

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