BOKF, NA v. Estes et al

Filing 56

ORDER that plaintiff's motion for an injunction pending appeal (ECF No. 54 ) and motion to shorten briefing schedule (ECF No. 55 ) are DENIED. Signed by Judge Larry R. Hicks on 3/14/2018. (Copies have been distributed pursuant to the NEF - LH)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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BOKF, NA,

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Plaintiff,
Case No. 3:17-cv-0694-LRH-(WGC)

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v.
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ORDER
ROBERT ESTES, KAREN NILES, JERRY
CARPENTER, SHIRLEY CARVEY, and
JAMES CARPENTER and BECKY LYNN
CARPENTER as Co-Trustees of the
CARPENTER FAMILY REV TRUST UAD
1/19/14,

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Defendants.

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Before the court are plaintiff BOKF, NA’s (“BOKF”) motion for an injunction pending

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appeal (ECF No. 54) and motion to shorten briefing time (ECF No. 55).

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I.

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Facts and Procedural Background
Plaintiff BOKF is a federally chartered commercial bank. BOKF’s Corporate Trust

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Department served as the indenture trustee for a series of allegedly fraudulent conduit municipal

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bond offerings for the purchase and renovation of senior living facilities located throughout the

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Southeastern and Midwestern United States.

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Defendants are bondholders of the underlying conduit municipal bonds. In June, 2017,

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defendants initiated arbitration proceedings against BOKF pursuant to the Code of Arbitration of

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the Financial Industry Regulatory Authority (“FINRA”) alleging that BOKF engaged in
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violations of federal securities laws in connection with the underlying conduit municipal bonds.

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In response, BOKF filed a complaint against defendants alleging two causes of action: (1)

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declaratory judgment that BOKF is not subject to FINRA arbitration; and (2) injunctive relief.

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ECF No. 1. Along with its complaint, BOKF filed a motion for a preliminary injunction seeking

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to enjoin defendants from prosecuting or taking any other action in furtherance of the pending

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FINRA arbitration. ECF No. 17.
On March 2, 2018, the court denied BOKF’s motion. ECF No. 48. BOKF then appealed

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the court’s denial of its motion for a preliminary injunction to the Ninth Circuit. See ECF No. 50.

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Thereafter, BOKF filed the present motion for an injunction pending appeal. ECF No. 54.

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II.

Legal Standard
Pursuant to Rule 62 of the Federal Rules of Civil Procedure, a court may “suspend,

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modify, restore, or grant an injunction” related to a court order while an appeal of that order is

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pending. FED. R. CIV. P. 62(c). Rule 62 codifies the court’s inherent power to preserve the status

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quo pending an appellate court’s decision. McClatchy Newspapers v. Central Valley

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Typographical Union No. 26, 686 F.2d 731, 734 (9th Cir. 1982).
An injunction pending appeal is not granted as a matter of right. See First 100, LLC v.

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Omni Financial, LLC, 2016 WL 3536841, at *2 (D. Nev. June 28, 2016). Rather, the

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determination of whether to grant an injunction pending appeal under Rule 62(c) is a matter of

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discretion for the court, and the “propriety of its issue is dependent upon the circumstances of the

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particular case.” Id. Further. the party moving for relief under Rule 62(c) bears the burden of

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showing that the particular circumstances of the action justify the exercise of the court’s

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discretion. Id. The standard for relief under Rule 62(c) is similar to that employed by a district

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court in determining whether to grant a preliminary injunction under Rule 65.1 Eruchalu v. U.S.

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Bank, Nat. Ass’n, 2014 WL 496949, at *2 (D. Nev. February 6, 2014) (citing Lopez v. Heckler,

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713 F.2d 1432, 1435 (9th Cir. 1983)).

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Pursuant to Rule 65 of the Federal Rules of Civil Procedure, a court may issue a preliminary injunction only upon
a showing that: (1) the petitioner is likely to succeed on the merits of his complaint; (2) the petitioner will suffer
irreparable harm absent an injunction; (3) the balance of equities weighs in petitioner’s favor; and (4) an injunction
is in the public’s interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

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III.

Discussion
In its motion, BOKF contends that an injunction is necessary to prevent it from having to

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participate in the underlying FINRA arbitration while the appeal of the court’s order is pending.

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See ECF No. 54. The court has reviewed the documents and pleadings on file in this matter and

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finds that BOKF has not met the standard for an injunction pending appeal under Rule 62(c).

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Initially, the court notes that BOKF has failed to present any argument or identified any

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legal authority establishing that it is likely to succeed on the merits of its appeal. In its motion,

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BOKF recognizes that the issue raised in the underlying motion for a preliminary injunction,

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namely, whether BOKF was subject to FINRA arbitration under the Municipal Securities

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Rulemaking Board (“MSRB”) rules governing bank dealers of municipal securities, was an issue

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of first impression for the court. BOKF contends that because this was an issue of first

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impression, the court may grant an injunction pending appeal based on irreparable harm alone.

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See ECF No. 54 at 3-5. BOKF’s argument is without merit. Although irreparable harm is a

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significant factor in determining whether to grant an injunction pending an appeal, there still

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must be some showing of likelihood of success on the merits of the appeal. See, e.g., Human Soc.

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of U.S. v. Gutierrez, 558 F.3d 896 (9th Cir. 2009) (holding that a party must meet its burden of

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demonstrating a likelihood of success on the merits of its appeal to be entitled to relief under

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Rule 62(c)). BOKF’s failure to present any argument or evidence demonstrating a likelihood of

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success on the merits of its appeal precludes its requested relief. Moreover, BOKF’s requested

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relief of an injunction would be the opposite of maintaining and preserving the status quo while

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the appeal is pending as the current state of the world is moving forward on the FINRA

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arbitration. See Newton v. Consolidated Gas Co., 258 U.S. 165, 177 (1922) (holding that “after

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appeal a trial court may, if the purposes of justice require, preserve the status quo until decision

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by the appellate court[.]”).

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Additionally, the court finds that BOKF’s claim of irreparable harm is insufficient to

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warrant an injunction on appeal. In its motion, BOKF contends that it will suffer irreparable

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harm because it will be forced to participate in an arbitration forum which it argues does not

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have jurisdiction over the arbitration claim while the appeal of the court’s order is pending.
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Because the projected timeframe for the appeal would take longer than the FINRA arbitration

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which is currently scheduled for July 2018, BOKF contends that absent an injunction its appeal

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would be moot and the underlying legal issues would not be addressed. However, BOKF’s

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argument for irreparable harm is based on the assumption that FINRA does not have jurisdiction

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over the underlying arbitration. As the court found in its order denying BOKF’s motion for a

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preliminary injunction, BOKF failed to establish that FINRA was without jurisdiction over

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defendants’ arbitration claim. See ECF No. 48. Thus, BOKF would not suffer any irreparable

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harm in arbitrating in a forum that has jurisdiction over the arbitration claim. Further, BOKF’s

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unsupported argument that the pending appeal would become moot absent relief by this court

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strains credulity. BOKF has several options available to seek expedited relief on its appeal

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including those outlined in Rule 8 of the Federal Rules of Appellate Procedure which would

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prevent any alleged mootness of the appeal.

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Finally, the court finds that neither the balance of the equities nor the public interest favor

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granting BOKF an injunction pending appeal. The balance of the equities favors defendants as

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enjoining a legitimate arbitration without any legal basis would unfairly and prejudicially impair

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defendants from prosecuting their claims in their chosen forum. Further, the public interest

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favors ensuring that investors are protected under federal securities regulations like those enacted

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by FINRA and the MSRB when a party, like BOKF, has not established that such rules do not

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apply in a particular case. Accordingly, the court shall deny BOKF’s motion for an injunction

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pending appeal.

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IT IS THEREFORE ORDERED that plaintiff’s motion for an injunction pending appeal
(ECF No. 54) and motion to shorten briefing schedule (ECF No. 55) are DENIED.

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IT IS SO ORDERED.

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DATED this 14th day of March, 2018.

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LARRY R. HICKS
UNITED STATES DISTRICT JUDGE

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