The opinion of the court was delivered by: MICHAEL B. MUKASEY
MICHAEL B. MUKASEY, U.S.D.J.
As a result of arbitration before the National Association of Securities Dealers ("NASD"), respondent Eva Dapelo secured an award against C. James Padgett and Stuart Graff, petitioners herein, and Stuart-James Company, Inc., Equitable Securities of New York, Inc., and Leonard D. Neuhaus, Jr. (collectively "third parties"). Petitioners move to vacate the award. Respondent cross-moves (i) to join the third parties as third-party respondents, (ii) to confirm the award against petitioners and third-party respondents, and (iii) for sanctions against petitioners' attorneys under Fed. R. Civ. P. 11. For the reasons set forth below, petitioners' motion to vacate the award is denied; respondent's motion to join the third parties is granted; her motion to confirm the arbitral award is granted as against all parties; and her motion for sanctions is denied.
In May 1988, respondent began trading so-called penny stocks as a client of broker Leonard Neuhaus then associated with First Interregional Equity Corporation. She remained Neuhaus' client and continued to trade in such securities through June 1989. During that time, Neuhaus was associated with several broker-dealers including the Stuart-James Company. Petitioners were directors of Stuart-James at the time of Neuhaus' association with that brokerage.
In March 1990, respondent filed a statement of claim with the NASD against Neuhaus and seven of the broker-dealers with which he was associated, including Stuart-James. Respondent alleged that between May 1988 and June 1989, Neuhaus executed several unauthorized and unsuitable trades and churned her account in violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240. 10b-5. Respondent claimed damages in the amount of $ 124,638. On May 14, 1990, respondent amended her statement of claim to add petitioners Graff and Padgett as parties to the arbitration. Petitioners answered on July 18, 1990.
Hearings were held between July 22 and July 25, 1991 before three arbitrators appointed by the NASD. On October 19, 1991, the arbitrators granted respondent the following relief:
1. First Interregional Equity Corporation and Leonard Dominick Neuhaus, Jr., are jointly and severally liable and shall pay to Claimant, Eva Dapelo, the sum of Four Thousand Three Hundred Dollars and No Cents ($ 4,300) plus interest at the rate of 9% per annum from the date of closing of the account to the date of payment of this Award;
2. The Stuart-James Company, Inc., Leonard Dominick Neuhaus, Jr., C. James Padgett and Stuart Graff, are jointly and severally liable and shall pay to Claimant, Eva Dapelo, the sum of Seventy Three Thousand Two Hundred Ninety Eight Dollars and No Cents ($ 73,298) plus interest at the rate of 9% per annum from 11/1/89 to the date of payment of this Award;
3. Equitable Securities of New York, Inc., and Dominick Neuhaus, Jr., are jointly and severally liable and shall pay to Claimant, Eva Dapelo, the sum of Six Thousand Dollars and No Cents ($ 6,000) plus interest at the rate of 9% per annum from 11/1/88 to the date of payment of this Award.
Stuart-James also was directed to pay respondent an additional $ 1,000 to cover forum fees.
Respondent served the third parties with her Counter-Petition by mail on December 10, 1991. Because the third parties have not responded, they are joined as third-party respondents and the ...