COR Clearing, LLC v. Jarvis

Filing 43

ORDER - IT IS ORDERED: The plaintiff's Motion for Reconsideration of Filing No. 26 (Filing No. #27 ) is denied. Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk of the Court within fourteen (14) days after being served with a copy of this Order. Failure to timely object may constitute a waiver of any objection. The brief in support of any objection shall be filed at the time of filing such objection. Failure to file a brief in support of any objection may be deemed an abandonment of the objection. Ordered by Magistrate Judge Thomas D. Thalken. (TCL )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

COR CLEARING, LLC,
Plaintiff,

8:13CV292

vs.
ORDER
DAVID H. JARVIS,
Defendant.
This matter is before the court on the plaintiff’s Motion for Reconsideration of
Filing No. 26 (Filing No. 27). The plaintiff filed a brief (Filing No. 28) and an index of
evidence (Filing No. 29) in support of the motion. The defendant filed a brief (Filing No.
33) and an index of evidence (Filing Nos. 34-36) in opposition to the motion. The
plaintiff filed a brief (Filing No. 37) in reply.

BACKGROUND
The plaintiff brought suit against the defendant for breach of a fiduciary
relationship. See Filing No. 1 - Complaint ¶ 1. The plaintiff, a clearing broker, is “an
independent

full-service

clearing

and

settlement

firm,”

providing

“technology,

administrative services and product offerings through multiple customized platforms” to
“approximately 75 introducing brokers.” Id. ¶ 10; see Filing No. 17 - Brief p. 7 n.1. An
introducing broker has a direct relationship with an investing client and delegates the
work of the floor operation, trade execution, and handling of securities and money to a
clearing broker. See Filing No. 17 - Brief p. 7 n.1.
In January 2012, the plaintiff acquired Legent Clearing.
Complaint ¶ 10.

See Filing No. 1 -

The defendant had been employed by Legent Clearing since

December 31, 2009, as the Executive Vice President and General Counsel, and
continued to work for the plaintiff as an employee, an attorney, and as General Counsel
or Deputy General Counsel, until September 30, 2012. Id. ¶ 12; see Filing No. 17 Brief p. 2-3.
The defendant was an independent contractor for the plaintiff from October 1,
2012, until December 31, 2012. See Filing No. 17 - Brief p. 3. As part of the change in

his status, in October 2012, the defendant signed a Separation Agreement and General
Release, including a Contractor Agreement. See Filing No. 23 - Ex. 1(A).
In late 2012 and early 2013, more than one of the plaintiff’s introducing brokers,
independent of their relationships with the plaintiff, became clients of the defendant.
See Filing No. 17 - Brief p. 7; see also Filing No. 1 - Complaint ¶¶ 18-22. The plaintiff
alleges that in May and June 2013, the defendant contacted the plaintiff by identifying
himself as the attorney for two of the plaintiff’s clients. See Filing No. 1 - Complaint ¶¶
19, 21. In these communications, the defendant represented the clients in disputes
against the plaintiff. Id. ¶¶ 19-22. The plaintiff alleges the defendant “appeared” to
have disclosed the plaintiff’s confidential information and strategies to the clients to
assist them in their disputes against the plaintiff. Id. ¶¶ 20, 22.
The plaintiff also alleges it has “uncovered multiple instances” of the defendant
disclosing information he received during privileged legal communications with the
plaintiff’s Board of Directors to non-essential employees, placing the communications at
risk while he was still employed with the plaintiff. Id. ¶¶ 23-24. The plaintiff alleges the
defendant has continued to disclose privileged communications since his departure. Id.
¶ 23. The plaintiff contends these disclosures significantly disadvantaged the plaintiff in
dealings with its adversaries and damaged its relationships with clients.

Id. ¶ 28.

Based on these allegations, the plaintiff asserts claims for breach of fiduciary duty
(Claim 1) and negligence (Claim 2) against the defendant. Id. at 7-11. Additionally, the
plaintiff seeks injunctive relief forbidding the defendant from disclosing confidential
attorney-client communications and confidential documents and information. Id. at 1114.
Prior to filing an answer, the defendant sought a stay of all proceedings pending
arbitration. See Filing Nos. 16, 18. Specifically, the defendant argued the parties are
bound to arbitrate by virtue of the plaintiff’s broker-dealer license through the United
States Securities and Exchange Commission (SEC) and the Financial Industry
Regulatory Authority (FINRA). See Filing No. 17 - Brief p. 10. The plaintiff initially
denied the applicability of FINRA because of the defendant’s change in employment
status. See Filing No. 21 - Response p. 2-3.

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On January 9, 2014, the court entered an order staying the litigation proceedings
and compelling the parties to engage in arbitration.

See Filing No. 26. The court

determined the parties are subject to arbitration pursuant to FINRA rules because the
plaintiff is a FINRA member, the defendant is “a person formerly associated with a
member,” and “the dispute arises out of the business activities of a member or an
associated person.” FINRA R. 13100(r); FINRA R. 13200(a).
On January 31, 2014, the plaintiff filed the instant motion for reconsideration of
the court’s January 9, 2014, order compelling arbitration.

See Filing No. 27.

The

plaintiff contends that, although it diligently sought to arbitrate, a FINRA representative
informed the plaintiff FINRA has limited jurisdiction over the defendant and any award
may be unenforceable. See Filing No. 28 - Brief p. 1. Based on this information from
FINRA, the plaintiff argues arbitration is futile. Id. at 1, 4-5. The plaintiff also argues the
parties’ dispute does not relate to FINRA rules or regulations and FINRA has no
disciplinary authority over attorneys who appear before it. Id. at 3.

ANALYSIS
The plaintiff filed the motion for reconsideration pursuant to Federal Rule of Civil
Procedure 60(b).
Motions for reconsideration serve a limited function: to
correct manifest errors of law or fact or to present newly
discovered evidence. They are not to be used to introduce
new evidence that could have been adduced during
pendency of the motion at issue . . . [or] to tender new legal
theories for the first time.
Arnold v. ADT Sec. Servs., Inc., 627 F.3d 716, 721 (8th Cir. 2010) (internal citation
and quotation marks omitted). Under the rule, a court may reconsider a previous order
based on additional facts or a change of circumstances. See Peter Kiewit Sons’, Inc.
v. Wall St. Equity Grp., Inc., No. 8:10CV365, 2012 WL 5400037, *4 (D. Neb. Nov. 5,
2012).
Reconsideration is appropriate where the movant shows entitlement to relief
under at least one of the following conditions:
(1)

mistake, inadvertence, surprise, or excusable neglect;

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(2)
newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to move
for a new trial under Rule 59(b);
(3)
fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4)
the judgment is void,
(5)
the judgment has been satisfied . . .; or
(6)
any other reason that justifies relief.
Fed. R. Civ. P. 60(b).
The plaintiff states the motion is based on newly discovered evidence, which did
not exist prior to the court issuing the January 9, 2014, order compelling arbitration.
See Filing No. 28 - Brief p. 1, 4-7. The plaintiff argues the new evidence is relevant to
the court’s decision because it is evidence the arbitration will be futile. Id. Further the
plaintiff argues the arbitration is futile because:
Plaintiff may not be able to recover against Defendant in the
FINRA forum, which supports Plaintiff’s position that this
matter -- which is a dispute between COR and its former
general counsel that does not invoke or require application
of any FINRA rules or regulations -- should not be ordered to
arbitration.
Id. at 6.
The new information offered by the plaintiff fails to provide justification for
reconsideration of the court’s January 9, 2014, order compelling arbitration. The plaintiff
acknowledges the information merely “supports” the plaintiff’s prior equity argument
opposing arbitration. The plaintiff’s equity and futility arguments unsuccessfully rebut
the relevant legal considerations for determining whether to compel a dispute to
arbitration.
A dispute falling within the scope of a valid arbitration agreement must be
submitted to arbitration. See Simmons Foods, Inc. v. H. Mahmood J. Al-Bunnia &
Sons Co., 634 F.3d 466, 468 (8th Cir. 2011). In this case, the parties are subject to
arbitration pursuant to FINRA rules because the plaintiff is a FINRA member, the
defendant is “a person formerly associated with a member,” and “the dispute arises out
of the business activities of a member or an associated person.” FINRA R. 13100(r);
FINRA R. 13200(a). Under the broad language of the rules, the parties’ dispute is
subject to arbitration under FINRA, as elected by the defendant. This court cannot
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abridge the plaintiff’s agreement to arbitrate under the circumstances.

The limited

jurisdiction of the arbitration forum and its means of enforcing a judgment are not
relevant to the court’s analysis, whether or not the plaintiff recently discovered the
limitations. Upon consideration,

IT IS ORDERED:
The plaintiff’s Motion for Reconsideration of Filing No. 26 (Filing No. 27) is
denied.

ADMONITION
Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk
of the Court within fourteen (14) days after being served with a copy of this Order.
Failure to timely object may constitute a waiver of any objection. The brief in support of
any objection shall be filed at the time of filing such objection. Failure to file a brief in
support of any objection may be deemed an abandonment of the objection.

Dated this 7th day of April, 2014.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge

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