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SAUNDERSON v. GARY GOLDBERG & CO.

September 28, 1995

ELEANOR SAUNDERSON, Plaintiff, against GARY GOLDBERG & COMPANY, INC., Defendant.


The opinion of the court was delivered by: PARKER

 This action for fraud is presently before the Court on the motion of defendant Gary Goldberg, Inc. to dismiss the complaint for failure to state a claim for which relief may be granted pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons stated below, the motion to dismiss is granted.

 FACTS

 On December 15, 1994, Eleanor Saunderson ("Saunderson"), commenced an arbitration before the National Association of Securities Dealers, Inc. ("the NASD") based on fraud, breach of contract and breach of fiduciary duty claims and violations of the "know your customer rule" against Gary Goldberg ("Goldberg"). In her statement of claim, Saunderson alleged that Goldberg's agent, Lou Scipione, swindled her out of her retirement savings by encouraging her to invest in risky limited partnerships. According to Saunderson's claim, Scipione did not disclose risks specific to these investments. Apparently, the investments went sour, and Saunderson lost most of her money. At some point between August 14, 1986 and December 15, 1994, Saunderson discovered that her investments were not profitable, and so, on December 15, 1994, she filed her statement of claim for arbitration and elected to arbitrate before the NASD.

 Goldberg filed an action in the New York State Supreme Court ("the supreme court") seeking to stay the arbitration on grounds that the action was time barred under Section 15 of the NASD Code. *fn1" That Section provides:

 
No dispute, claim or controversy shall be eligible for submission to arbitration under this Code where six (6) years shall have elapsed from the occurrence or event giving rise to the act or dispute, claim or controversy. This section shall not extend applicable statutes of limitations, nor shall it apply to any case which is directed to arbitration by a court of competent jurisdiction.

 The supreme court agreed that under Section 15, the action was time barred, and it stayed the arbitration. Specifically the supreme court found that "all claims arising from transactions prior to 12/15/88 are time-barred by Sec. 15 of the NASD Code." The court "permitted" Saunderson to "withdraw[]" her time barred claims but authorized her to proceed on any remaining transactions which took place after December 15, 1988.

 On April 18, 1995, Saunderson filed the present action for fraud in connection with Goldberg's recommendation and sale of securities to Saunderson.

 DISCUSSION

 A complaint must be dismissed under Fed.R.Civ.P. 12(b)(6) only if "it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of [her] claim that would entitle [her] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); see also Easton v. Sundram, 947 F.2d 1011, 1014 (2d Cir. 1991), cert. denied, 504 U.S. 911, 118 L. Ed. 2d 548, 112 S. Ct. 1943 (1992). In addition, in deciding a motion to dismiss, the court must read the facts alleged in the complaint "generously" drawing all reasonable inferences in favor of the party opposing the motion. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The trial court's role is to appraise the legal merits of the complaint and not to weigh the evidence which might be introduced at trial. See Ricciuti v. New York City Transit Authority, 941 F.2d 119, 124 (2d Cir. 1991) (plaintiff is not compelled to prove her case at the pleading stage). The issue "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). Finally, the trial court should grant a Rule 12(b)(6) motion "only if is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984) (citing Conley, 355 U.S. at 45-46). Because Saunderson agreed in August, 1986 to resolve any disputes with Goldberg through arbitration, we find that she has failed to state a claim upon which relief can be granted.

 Goldberg argues that the Complaint must be dismissed because, inter alia, Saunderson signed a Customer Agreement which requires that all disputes between Saunderson and Goldberg be submitted to arbitration. Because Saunderson elected to proceed before the NASD, she is bound by Rule 15 of the NASD Code which mandates that any disputes be submitted to arbitration no later than six years after their occurrence.

 Saunderson does not dispute that more than six years have elapsed since the last of the events giving rise to the claim. Moreover, Saunderson does not dispute that her claims are ineligible for arbitration. She contends, however, that because the state court permitted her to withdraw her claims instead of dismissing them altogether, her claims are properly before this court. We do not agree.

 We cannot decipher the meaning of the supreme court's statement that Saunderson is permitted to withdraw her claims. Nevertheless, even if her claims were indeed withdrawn, we would dismiss this action. Saunderson entered into customer agreement with Goldberg along with Bear Stearns as clearing broker on August 14, 1986. That agreement contained a binding arbitration clause which provides:

 
All controversies which may arise between us concerning any transaction or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof shall be determined by arbitration in accordance with the rules, then in effect, of the National Association of Securities Dealers, Inc., ...

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