Branch et al v. Sickert et al

Filing 82

ORDER denying 67 Motion to Stay; denying 73 Motion for Oral Argument. The Plaintiffs are ORDERED to amend their complaint consistent with the Courts February 28, 2011 53 Order within fourteen (14) days of this order. Plaintiffs should note that the filing of any additional motions will not stay the obligation to amend their complaint. Signed by Judge Richard W. Story on 05/09/12. (sk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
K. CRAIG BRANCH, et al.,
Plaintiffs,
v.
JOHN T. OTTINGER, JR.,
Defendant.

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CIVIL ACTION NO.
2:10-CV-128-RWS

ORDER
This case comes before the Court on Plaintiffs’ Motion to Stay Pending
Appeal [67] and Defendants’ Motion for Oral Argument [73]. After a review of
the record, the Court enters the following order.
1. Brief Factual Background
This case arises out of securities transactions between the Plaintiffs and
the original Defendants’1 organizations. Plaintiffs K. Craig Branch, Mary W.
Branch, and H. Brian Haney all purchased securities in Cornerstone Ministries
Investments, Inc. (“Cornerstone”) and Wellstone Retirement Communities I,
LLC. Cmpl., Dkt. No. [1] at ¶¶ 26, 31. Additionally, Plaintiffs Craig and Mary
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Plaintiffs originally sued Jayme B. Sickert, John T. Ottinger, Jr., Jack R.
Wehmiller, and George B. Dixon - as administrator of the estate of Cecil Brooks.

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Branch purchased the same type of securities on behalf of their children,
Plaintiffs Catherine Branch Chestnut, Ladye Kimberly Branch, and Christopher
Craig Branch. Id. at ¶ 28. Cornerstone and WRC were “created and controlled”
by the original Defendants along with Wellstone Securities, Inc. Id. at ¶ 22.
Cecil A. Brooks, who was represented in this suit by his estate’s
administrator–George Dixon, was the Chairman and Chief Executive Officer of
Cornerstone and Defendant John T. Ottinger, Jr. was the Chief Financial
Officer. Additionally, former Defendant Jayme Sickert actually sold the
Plaintiffs securities through the Wellstone Securities arm of the original
Defendants’ organization. Id. at ¶¶ 26, 29.
Eventually in 2008, approximately eleven years after the Branches’ initial
investment, Cornerstone filed for bankruptcy. Id. at ¶¶ 26, 72. This bankruptcy
was due to the “for-profit, high-risk business deals” which the companies were
making, contrary to the original Defendants’ assertion that the investments
would be “safe and stable.” Id. at ¶¶ 26, 74. Plaintiffs, upon learning of this
information, filed this suit, alleging: (1) Georgia and Alabama securities law
violations; (2) common law fraud; (3) breach of fiduciary duty; (4) promissory

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fraud; (5) breach of fiduciary duty; and, (5) violations of the 1934 Act and Rule
10b-5.
Plaintiffs voluntarily dismissed all claims against Defendant Jack
Wehmiller. Soon after, Defendants Sickert and Dixon successfully moved to
dismiss for improper venue, citing an arbitration clause. The Court found that
the Plaintiffs and Sickert were signatories to the arbitration agreement, and that
Dixon was able to enforce the arbitration agreement against the Plaintiffs
through equitable estoppel. Additionally, the Court found that Plaintiffs had not
properly pled their claims against Ottinger and ordered them to replead those
claim within twenty-one days.
Soon after, Plaintiffs moved to compel Ottinger, a non-signatory to the
arbitration clause, into arbitration. The Court denied that request, and again
directed the Plaintiffs to amend their complaint. The Plaintiffs have now
appealed that order under § 16(a) of the Federal Arbitration Act (“FAA”) and
have also filed a motion in this Court seeking to stay the district court until the
appeal is resolved.

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II. Discussion
A. Motion for Oral Argument
Because the Court finds that the briefing is sufficient in this matter,
Defendant’s Motion for Oral Argument [73] is DENIED.
B. Motion to Stay
Plaintiffs seek to stay this matter until the Eleventh Circuit Court of
Appeals decides whether Plaintiffs’ claims against Ottinger are arbitrable. In
fact, they argue that, after Arthur Anderson v. Carlisle, 556 U.S. 624 (2009), the
district court no longer has the authority to deny the stay without the Eleventh
Circuit’s expressed authorization. Dkt. No. [72] at 2-3. Thus, regardless of the
appeal’s merits, Plaintiffs argue that the district court must grant their stay
request.
In response, the Defendants argue that because Plaintiffs claims are
frivolous, the district court is not automatically divested of jurisdiction. Rather,
under Blinco v. Green Tree Servicing, Inc., 366 F.3d 1249, 1253 (11th Cir.
2004), the district court is directed to employ the following course in deciding
whether to stay cases during a § 16(a) appeal:

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When a litigant files a motion to stay litigation in the district court
pending an appeal from the denial of a motion to compel
arbitration, the district court should stay the litigation so long as
the appeal is non-frivolous. If the district court denies the motion
to stay, then the appellant may file a motion to stay in this Court. If
this Court determines that the appeal is non-frivolous, then this
Court should stay the litigation in the district court pending the
appeal of the denial of the motion to compel arbitration.
Id. at 1253. As Defendants argue Plaintiffs’ appeal is frivolous, the Defendants
argue that the case should proceed.
In response to this argument, the Plaintiffs cite dicta from Carlisle. There,
in explaining how the courts could minimize the impact of abusive appeals, the
Supreme Court stated, “[a]ppellate courts can streamline the disposition of
meritless claims and even authorize the district court’s retention of jurisdiction
when an appeal is certified as frivolous.” From this statement, the Plaintiffs
argue that it is only the Court of Appeals who may certify frivolity–not the
district court. Thus, because the Eleventh Circuit has not certified this appeal
frivolous, the district court must yield.
However, looking at this statement in context, the Supreme Court cites its
opinion in Behrens v. Pelletier, 516 U.S. 299, 310-11 (1996) in support of that
contention. In Behrens, the Supreme Court cited with approval the Circuits’

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practice of having district courts certify whether a qualified immunity appeal
was frivolous, and if they so found, to retain “jurisdiction pending summary
disposition of the appeal, and thereby minimiz[ing] disruption of the ongoing
proceeding.” Id. at 310-11. Thus, by its own citation, it is evident that the
Supreme Court did not mandate a Circuit-only approval process for frivolity.
Rather, the Eleventh Circuit has already established a divestiture
procedure which still applies after Carlisle. See National Auto Lenders, Inc. v.
Syslocate, Inc., No. 09-21765-CIV, 2010 WL 4867583, at *3 (S.D. Fla. April
27, 2010) (finding that the district court’s frivolity determination still applied to
FAA § 16(a) appeals after Carlisle). Thus, under Blinco, the Court is to
determine whether Plaintiffs’ appeal is frivolous.
Turning to the merits of the appeal, the Court notes that the Plaintiffs
made no arguments that their appeal was not frivolous. Thus, Defendant’s
arguments to the contrary are deemed UNOPPOSED. LR 7.1(B), NDGa
(“Failure to file a response shall indicate that there is no opposition to the
motion.”). But, even looking at the merits of Plaintiffs’ contentions, the Court
finds that Plaintiffs’ appeal is frivolous for all the reasons stated in its prior

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order. See Dkt. No. [63]. Plaintiffs’ Motion to Stay [67] is accordingly
DENIED.
III. Conclusion
Based on the foregoing, Defendant’s Motion for Oral Argument [73] and
Plaintiffs’ Motion to Stay [67] are DENIED. The Plaintiffs are ORDERED to
amend their complaint consistent with the Court’s February 28, 2011 Order [53]
within fourteen (14) days of this order. Plaintiffs should note that the filing of
any additional motions will not stay the obligation to amend their complaint.
SO ORDERED, this 9th

day of May, 2012.

________________________________
RICHARD W. STORY
United States District Judge

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