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LEIBOWITZ v. SMITH BARNEY INC.

September 23, 1994

LAWRENCE LEIBOWITZ and JOSEPH RONDINA, Plaintiffs,
v.
SMITH BARNEY INC., FIRST ALBANY CORPORATION, ALAN F. COATES, and "JOHN DOE" as personal representative of the Estate of Frederick Purtell, deceased, Defendants.



The opinion of the court was delivered by: DENNY CHIN

 Chin, D.J.

 This is a motion by plaintiffs Lawrence Leibowitz and Joseph Rondina for a temporary restraining order and preliminary injunction staying an arbitration pending before the National Association of Securities Dealers (the "NASD"). For the reasons set forth below, the motion is denied.

 FACTS1

 This case arises from a series of investments made by plaintiffs on the advice of Frederick Purtell, an investment advisor and securities broker formerly employed by Shearson Lehman Brothers, Inc. ("Shearson," the predecessor to defendant Smith Barney Inc.) and defendant First Albany Corporation ("First Albany"). From November 1985 to August 1991, plaintiffs invested more than $ 2.5 million with Shearson and First Albany through Purtell. As a result of these investments, plaintiffs sustained substantial losses.

 In November 1992, plaintiffs commenced an NASD arbitration against Purtell, *fn2" First Albany and Shearson for fraud and securities laws violations. Plaintiffs filed a pro se Joint Statement of Claim with the NASD at that time, and they also signed Uniform Submission Agreements by which they agreed to submit their claims to the NASD for arbitration. Plaintiffs' decision to submit their dispute to arbitration was based on the erroneous advice of a bond broker and an attorney that arbitration was their only recourse. Neither the broker nor the attorney was in any way affiliated with defendants.

 In or shortly before May 1993, plaintiffs retained counsel to represent them in the arbitration proceedings. Plaintiffs' new counsel filed an Amended Joint Statement of Claim on plaintiffs' behalf on May 15, 1993.

 It is undisputed that plaintiffs participated in the arbitration proceedings by: 1) taking part in the NASD's arbitrator selection process, 2) engaging in discovery pursuant to rules set by the NASD, 3) attending a pre-hearing discovery conference with one of the arbitrators, and 4) opposing a motion to sever certain claims. Plaintiffs also requested and received adjournments of the arbitration hearing, and the hearing was finally scheduled to commence on September 21, 1994. Although the hearing was scheduled for only two days, the parties agree that the hearing will require more than two days to complete.

 In early September 1994, when preparing for the arbitration hearing, plaintiffs realized that certain client agreements between plaintiffs and defendants were forged. These agreements, which contained arbitration clauses had been produced by the defendants during discovery in the fall of 1993. Plaintiffs contend that the client agreements are null and void because of the forgeries.

 On September 16, 1994, three business days before the arbitration hearing was to commence, some 22 months after plaintiffs submitted their dispute to arbitration, and some 16 months after counsel appeared in the arbitration proceedings on plaintiffs' behalf, plaintiffs brought on by order to show cause the present motion for a temporary restraining order and preliminary injunction to enjoin defendants from proceeding with the arbitration. Plaintiffs contend that their submission to arbitration was based on erroneous advice, that defendants should have realized that the client agreements were forgeries, and that defendants should have promptly apprised plaintiffs of their right to pursue their claims in court rather than through arbitration.

 DISCUSSION

 A party seeking a temporary restraining order or preliminary injunction must show: 1) irreparable harm and 2) either (a) the likelihood of success on the merits or (b) the existence of sufficiently serious questions on the merits to make them fair ground for litigation and a balance of hardships tipping decidedly in favor of the movant. Local 1814 International Longshoremen's Assoc. AFL-CIO v. New York Shipping Assoc. Inc., 965 F.2d 1224, 1228 (2d Cir. 1992); McNeilab, Inc. v. American Home Products Corp., 848 F.2d 34, 37 (2d Cir. 1988). Both remedies are extraordinary ones that will be granted only upon a showing that the alleged threat of irreparable harm is not remote or speculative, but actual and imminent. See Kaplan v. Board of Education of City School District of the City of New York, 759 F.2d 256, 259 (2d Cir. 1985); State of New York v. Nuclear Regulatory Commission, 550 F.2d 745, 755 (2d Cir. 1977); Marisa Christina, Inc. v. Bernard Chaus, Inc., 808 F. Supp. 356, 360 (S.D.N.Y. 1992).

 A. Irreparable Harm

 Plaintiffs have failed to show that they would suffer irreparable harm if this Court denies their motion for a temporary restraining order and preliminary injunction. Plaintiffs' only assertion of irreparable harm is their statement that "the arbitration proceeding may result in collateral estoppel and/or issue preclusion against them, in a forum where their substantive rights are limited." (Pl. Mem. at 5) (emphasis added). The mere possibility that plaintiffs may be precluded from raising issues in a subsequent lawsuit, however, is simply too speculative and remote to justify the imposition of a preliminary injunction. See Kaplan v. Board of Education, 759 F.2d at 259; see also In re Montauk Oil Transportation Corp., 859 F. Supp. 669 (S.D.N.Y. 1994) (determination of collateral estoppel effect of arbitration on subsequent court proceeding can only be made once the arbitration is complete since such a determination requires ...


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