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)

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,anddeclaratoryjudgment.gf#.j.OnOctober5,2023,the
FinancialIndustryRegulatoryAuthority,lnc.,servedthearbitrationawardona1lparties.gftfat!(
141. ln the award,thearbitration panelruled thatallclaimsasserted by the Claimantsagainst

Petitionersweredeniedintheirentirety. Lld.at! 15j.Thearbitrationpanelfurtherruledthatthe
Claim antswereliabletoPetitionersfor$1,800,000 in reasonableattorneys'feesand $294,024.51

inreasonablecostsincurredbyPetitionersinconnectionswiththearbitration.gf#.l.

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.