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HAYDEN v. NEW YORK STOCK EXCH.

June 15, 1998

JEFFREY A. HAYDEN, Plaintiff, against NEW YORK STOCK EXCHANGE, INC., and REGINA C. MYSLIWIEC, Vice President of the New York Stock Exchange's Division of Enforcement, Defendants.


The opinion of the court was delivered by: SPRIZZO

MEMORANDUM OPINION AND ORDER

 SPRIZZO, D.J.:

 Plaintiff Jeffrey A. Hayden ("Hayden") brings the instant action for declaratory and injunctive relief against defendants the New York Stock Exchange, Inc. ("NYSE"), and Regina C. Mysliwiec, Vice President of the Enforcement Division of the NYSE. *fn1" Hayden seeks relief from certain disciplinary proceedings instituted against him by the NYSE, arguing that these proceedings are subject to the five-year statute of limitations imposed by 28 U.S.C. § 2462. Hayden moves for summary judgment pursuant to Fed. R. Civ. P. 56(a); the NYSE cross-moves to dismiss Hayden's complaint pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). For the reasons set forth below, the NYSE's motion to dismiss is granted and Hayden's motion for summary judgment is denied.

 BACKGROUND

 From 1977 to the present, Hayden has been employed in the Chattanooga, Tennessee office of Dean Witter Reynolds, Inc. ("Dean Witter"), a member organization of the NYSE. See Complaint ("Compl.") P 6. The NYSE is a self-regulatory organization registered pursuant to the Securities and Exchange Act of 1934. See id. P 18. Hayden is a registered representative of Dean Witter. Id. P 6.

 By a "Charge Memorandum" dated November 15, 1996, the NYSE's Division of Enforcement brought disciplinary charges against Hayden pursuant to Exchange Rule 476(a). Id. P 7; Exh. A at 29-30. The Charge Memorandum alleges that Hayden "engaged in conduct inconsistent with just and equitable principles of trade" by causing customers to purchase unsuitable investments and by omitting or misrepresenting to his clients pertinent information in connection with their investments. Id. The Charge Memorandum further alleges that Hayden caused inaccurate information to be entered on Dean Witter's books and records. Id. These allegations relate to Hayden's conduct as early as 1982, fourteen years before the NYSE's initiation of disciplinary proceedings. *fn2" Id. PP 9, 21.

 Hayden filed the Complaint in this action on January 7, 1997. Claiming that the NYSE disciplinary proceeding against him is subject to the five-year statute of limitations imposed by 28 U.S.C. § 2462, Hayden moved for a temporary restraining order against the NYSE and preliminary and permanent injunctive relief. Following oral argument, the Court denied Hayden's motion for a temporary restraining order. See Transcript of Oral Argument, dated January 22, 1997, at 11. Thereafter, the NYSE moved to dismiss this action pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). The Court denied the NYSE's motion without prejudice and also denied plaintiff's motion for a preliminary injunction. See Transcript of Oral Argument, dated February 12, 1997, at 40-50. Hayden's counsel having represented at Oral Argument that he would appeal the Court's denial of his motion for a preliminary injunction, the Court ordered that this action be stayed pending a decision by the Court of Appeals. See Order, dated February 13, 1997.

 Hayden filed a Notice of Appeal from the Court's denial of his motion for a preliminary injunction but then withdrew his appeal from active consideration and requested that the Court lift its prior stay of this action. See Order, dated March 31, 1997. Hayden then moved for summary judgment and the NYSE renewed its motion to dismiss.

 DISCUSSION

 When a party moves to dismiss under both Fed. R. Civ. P. 12(b)(1) and 12(b)(6), a district court should first decide the challenge to the court's subject matter jurisdiction. See Bell v. Hood, 327 U.S. 678, 682, 90 L. Ed. 939, 66 S. Ct. 773 (1945). Careful adherence to this rule is essential to preserve the prohibition against advisory opinions as a meaningful limitation upon the power of the federal judiciary. As Justice Scalia has recently stated,

 
The statutory and (especially) constitutional elements of jurisdiction are an essential ingredient of separation and equilibration of powers, restraining the courts from acting at certain times, and even restraining them from acting permanently regarding certain subjects. For a court to pronounce upon the meaning or the constitutionality of a state or federal law when it has no jurisdiction to do so is, by very definition, for a court to act ultra vires.

 Steel Company v. Citizens for a Better Environment, U.S. , 118 S. Ct. 1003, 1016, 140 L. Ed. 2d 210 (1998) (internal citations omitted).

 A motion brought pursuant to Rule 12(b)(1) may challenge either the truth of the jurisdictional allegations of the complaint or, alternatively, the legal sufficiency of the allegations to support an exercise of the district court's jurisdiction. In this case, although both Hayden and the NYSE have submitted affidavits and exhibits for consideration by the Court, the Court need not venture beyond the facts alleged in Hayden's complaint to conclude that the complaint must be dismissed.

 The subject matter jurisdiction of the lower federal courts is determined by Congress "'in the exact degrees and character which to Congress may seem proper for the public good.'" Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 433, 102 L. Ed. 2d 818, 109 S. Ct. 683 (1989) (quoting Cary v. Curtis, 44 U.S. (3 How.) 236, 11 L. Ed. 576 (1845)); see also Patsy v. Board of Regents, 457 U.S. 496, 501-502, 73 L. Ed. 2d 172, 102 S. Ct. 2557 (1982)("Congress is vested with the power to prescribe the basic procedural scheme under which claims may be heard in federal courts"). Thus, where Congress specifically mandates exhaustion of administrative remedies as a prerequisite for the court's exercise of jurisdiction, the court cannot entertain the controversy until the plaintiff has first ...


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