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WESTMORELAND CAPITAL CORP. v. FINDLAY

February 14, 1996

WESTMORELAND CAPITAL CORPORATION, JOSEPH M. JAYSON, and JUDITH P. JAYSON, Petitioners,
v.
GEORGE D. FINDLAY, and JOHN F. JOYCE, Respondents.


LESLIE G. FOSCHIO, UNITED STATES MAGISTRATE JUDGE


The opinion of the court was delivered by: FOSCHIO

LESLIE G. FOSCHIO

 UNITED STATES MAGISTRATE JUDGE

 JURISDICTION

 The parties to this matter executed a consent to proceed before the undersigned on the pending motions to dismiss the complaint on February 13, 1996. The matter is presently before the court on Respondents' motion to dismiss the petition, dated July 27, 1995, and Petitioners' cross-motion for summary judgment, dated November 1, 1995.

 BACKGROUND

 Petitioner, Westmoreland Capital Corporation ("Westmoreland"), is a New York corporation with a principal business of financial planning and investment counselling. Petitioners Joseph M. Jayson and Judith P. Jayson are the principals of Westmoreland. Respondents, George D. Findlay and John F. Joyce are individuals who sought investment advice from Westmoreland, and acted on such advice. Petitioners, who filed their petition on April 20, 1995, have filed this petition, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., seeking an order preliminarily and permanently enjoining an arbitration proceeding before the National Association of Securities Dealers, Inc. ("NASD") in which Respondents are charging Petitioners with various instances of securities fraud as allegedly committed by Westmoreland's employee, Terry King. Respondents filed their answer on July 28, 1995, interposing a counterclaim, based upon an agreement for arbitration between Petitioners and Respondents, seeking an order to compel arbitration.

 On July 28, 1995, simultaneously with the filing of their answer, Respondents filed a motion to dismiss the petition on the grounds that the Federal Arbitration Act does not authorize the court to stay the arbitration, and that the court lacks jurisdiction to enjoin an arbitration on statute of limitations grounds under Rule 15 of the Code of Arbitration Procedure of the NASD.

 On November 1, 1995, Petitioners filed a cross-motion for summary judgment seeking a permanent injunction barring Respondents from pursuing any claims in arbitration against Joseph Jayson or Judith Jayson, a permanent injunction barring Respondents from pursuing any arbitration proceedings on their claims based on applicable statute of limitations grounds, dismissal of Respondents' counterclaim, and denial of Respondents' motion to dismiss.

 FACTS

 Findlay first sought advice from King in the summer of 1988. His liquid assets in September, 1988, held in the form of cash savings, mutual funds, and some common stocks which he had inherited from his father and sister, valued at approximately $ 272,000. Joyce also sought advice form King in the summer of 1988. His liquid assets in September, 1988 were comprised of eleven common stocks, a mutual fund, and a U.S. Treasury bond, valued at approximately $ 230,000.

 King met with both Findlay and Joyce, whom are not acquainted with each other, separately, at the Westmoreland offices, and proposed similar investment plans to both. As a result of the proposed plans, both Findlay and Joyce liquidated assets and purchased shares in the Oppenheimer Equity Income Fund, and also purchased units of the Jaysons' "Realmark Property Investors Limited Partnership VI," projected to earn tax free income of 5%; Findlay investing $ 80,000 and Joyce investing $ 35,000. Findlay and Joyce also transferred funds, in the form of loans, to two start-up corporations promoted by King, the Triad Manufacturing Group ("Triad") and the "Pharmgard Company" in return for 12% interest.

 Between November, 1988 and May, 1990, Findlay transferred $ 96,000 to Triad, along with an additional $ 26,000 in personal loans to King. Joyce transferred $ 99,500 to Triad between November, 1988 and November, 1990. On King's advice, the loans were converted to common shares of Triad stock, in association with a private placement offering of Triad stock in September, 1989. Joyce also invested on King's advice, in April of 1990, $ 20,247.50 into a ...


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