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ROTHSTEIN v. FUNG

United States District Court, S.D. New York


May 24, 2004.

GRETA ROTHSTEIN and KONSTANTINOS KARETSOS, Plaintiffs, -against- KUOSEN FUNG; MICHAEL PAUL FIX; PETER BON VISO; DANIEL GLATTER; MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., and UNKNOWN AIDERS AND ABETTORS, Defendants

The opinion of the court was delivered by: MIRIAM CEDARBAUM, Senior District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Greta Rothstein and Konstantinos Karetsos, husband and wife, bring this action against Merrill Lynch, Pierce, Fenner & Smith, Inc., and four of its employees. Plaintiffs, who are proceeding pro se, allege fraudulent handling of their joint investment accounts and assert claims under Sections 10(b) and 20 of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j (b) & 78t, and the rules promulgated thereunder. All defendants have moved pursuant to the Federal Arbitration Act, 9 U.S.C. § 1-4, for an order compelling arbitration of plaintiffs' claims and staying this proceeding in the interim.

Defendants have presented two written agreements containing arbitration clauses, which they argue are binding on plaintiffs. The issue is whether Greta Rothstein is a party to these arbitration agreements. Konstantinos Karetsos concedes that he signed these agreements. However, in opposition to the motion to compel, plaintiffs have submitted affidavits which state that Rothstein did not sign the agreements, but that Karetsos signed them on her behalf. Plaintiffs claim that Karetsos' power of attorney was limited and did not authorize him to sign these agreements for his wife. By order of October 17, 2003, plaintiffs were directed to submit a copy of the power of attorney document on which they rely. However, plaintiffs were unable to locate the document.

  Under § 4 of the Federal Arbitration Act compliance with a written arbitration agreement may be compelled. The section also provides that, "[i]f the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof." 9 U.S.C. § 4. As the moving party, defendants bear the burden of proving written agreements obligating both plaintiffs to arbitrate. They have made a prima facie showing by submitting signed Merrill Lynch Client Relationship agreements. Plaintiffs then have the burden of demonstrating a "substantial issue" of fact as to whether these are binding agreements to arbitrate. Blatt & Blatt v. Shearson Lehman/American Express Inc., No. 84 Civ. 7715, 1985 WL 2029, *2 (S.D.N.Y. July 16, 1985) (citing Almacenes Fernandez, S.A. v. Golodetz, 148 F.2d 625, 628 (2d Cir. 1945)); Scone Investments, L.P. v. American Third Market Corp., 992 F. Supp. 378, 381 (S.D.N.Y. 1998).

  Since plaintiffs unequivocally deny that Karetsos was authorized to sign these agreements on behalf of Rothstein, plaintiffs have raised a "substantial issue" as to whether the arbitration agreements are binding as to Rothstein. Accordingly, the issue will be resolved by summary trial before a jury pursuant to 9 U.S.C. § 4. All parties are directed to appear and present their evidence on the question on Wednesday, June 30, 2004 at 10:00am in courtroom 14A, United States Courthouse, 500 Pearl Street, New York, N.Y. 10007. The merits of defendants' motion to compel arbitration will be resolved when it is determined whether both plaintiffs are parties to agreements to arbitrate.

  SO ORDERED.

20040524

© 1992-2004 VersusLaw Inc.



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