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James O'callaghan v. the New York Stock Exchange

August 6, 2012

JAMES O'CALLAGHAN, PLAINTIFF,
v.
THE NEW YORK STOCK EXCHANGE, JOSEPH PILOVSKY, DUNCAN NIEDERAUER, VIRGNIA J. HARNISCH, W. KWAME ANTHONY, MIKE DALTON, AND TOM BRUNO, DEFENDANTS.
JAMES O'CALLAGHAN, PLAINTIFF,
v.
THE NEW YORK STOCK EXCHANGE, JOSEPH PILOVSKY, DUNCAN NIEDERAUER, VIRGNIA J. HARNISCH, W. KWAME ANTHONY, MIKE DALTON, AND TOM BRUNO, DEFENDANTS.



The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge

MEMORANDUM AND ORDER

Pro se plaintiff James O'Callaghan has filed two related cases, now consolidated, against defendants the New York Stock Exchange,*fn1 Duncan Niederauer, Virginia J. Harnisch, W. Kwame

Anthony, Mike Dalton, and Tom Bruno (collectively, the "NYSE Defendants"). Plaintiff alleges, among other things, that the NYSE Defendants violated securities laws and due process requirements in the course of disciplinary proceedings conducted pertaining to his activities as a NYSE member and independent floor broker, and he contests various substantive matters related to the resulting decision. Plaintiff also claims that defendant Joseph Pilovsky made false statements in the course of his testimony before the hearing board conducting those disciplinary proceedings (the "Hearing Board"). The NYSE Defendants and Pilovsky have separately moved to dismiss the actions on multiple grounds, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).

For the reasons discussed below, defendants' motions to dismiss are granted.

BACKGROUND*fn2

I. The Parties

Plaintiff entered the securities industry in 1969 and became a member of the NYSE in 1973. He was employed on the floor of the stock exchange for over thirty years, and in 1997 he formed an independent floor brokerage firm, which he operated as a sole proprietorship until converting it to a limited liability company called J&D Securities LLC ("J&D") in 2003. Independent of his brokerage firm, plaintiff had been given investment discretion over an account belonging to LDL Trading, Inc. (the "LDL Account"). His trading in that account triggered alerts in the NYSE's surveillance systems,*fn3 and in 2001 the NYSE commenced an investigation into plaintiff's floor trading. This investigation eventually led to disciplinary proceedings and the subsequent imposition of sanctions against plaintiff.

The NYSE is a self-regulatory organization that operates the New York Stock Exchange, an equities market. Pursuant to its obligations under the Securities Exchange Act of 1934 (the "Exchange Act"), the NYSE is responsible for ensuring that its members and other persons associated with it abide by federal securities laws and NYSE rules. See 15 U.S.C. § 78f(b)(1), (d). Niederauer has served as chief executive officer and a director of the NYSE since December 2007 and has served as a member of the NYSE's management committee since April 2007.

Harnisch and Anthony are attorneys for NYSE Regulation, Inc. ("NYSE Regulation"), which is responsible for enforcing compliance by NYSE members with exchange rules and applicable federal securities requirements. They appeared before the Securities and Exchange Commission (the "SEC") on behalf of NYSE Regulation at plaintiff's disciplinary appeals of May 20, 2008 and December 10, 2009. They also appeared before the Hearing Board on behalf of NYSE Regulation at plaintiff's March 11, 2010 hearing.

Dalton was the NYSE investigator who investigated plaintiff's trading for the LDL Account. His testimony formed, at least in part, the basis of the NYSE's case against plaintiff. Bruno supervised Dalton's investigation.

Pilovsky was the branch manager of the brokerage organization at which the LDL Account was maintained. He testified as a witness before the Hearing Board in 2005, during the NYSE's investigation into plaintiff's trading activities.

II. Disciplinary Proceedings

A. The First Set of Disciplinary Proceedings

After the conclusion of an investigation into plaintiff's trading activities between December 2000 and October 2001, the NYSE conducted a hearing and found that those activities constituted violations of the Exchange Act and NYSE rules. See O'Callaghan, No. 05-74, 2005 WL 5600965 (N.Y.S.E. Nov. 2, 2005) (the "2005 Decision"). The Hearing Board accordingly suspended plaintiff for three months and fined him $30,000. See id. at *5. Plaintiff appealed the decision to NYSE ...


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