United States District Court, E.D. New York
For Triad Advisors, Inc., Plaintiff: Gerard J. Kowalski, PRO HAC VICE, Marshall Dennehey Warner Coleman & Goggin, Philadelphia, PA; Richard David Lane, Jr., Marshall, Dennehey, Warner, Coleman & Goggin, New York, NY.
For Avinadav Siev, Individually and as member of Flag Management, LLC, sole member of B& B Alexandria Corporate Park 18, LLC and B& B Alexandria Corporate Park 19, LLC, Francisco Gonzalez, Individually and as member of Flag Management, LLC, sole member of B& B Alexandria Corporate Park 18, LLC and B& B Alexandria Corporate Park 19, LLC, Defendants: Stephen Krosschell, PRO HAC VICE, Kalju Nekvasil, LEAD ATTORNEY, Goodman & Nekvasil, P.A, Clearwater, FL.
For Pazia Siev, Individually and as member of Flag Management, LLC, sole member of B& B Alexandria Corporate Park 18, LLC and B& B Alexandria Corporate Park 19, LLC, Defendant: Kalju Nekvasil, LEAD ATTORNEY, Stephen Krosschell, PRO HAC VICE, Goodman & Nekvasil, P.A, Clearwater, FL.
MEMORANDUM DECISION AND ORDER
Brian M. Cogan, United States District Judge.
Plaintiff, an investment broker-dealer, brings this action for declaratory judgment and to enjoin an arbitration which defendants have commenced pursuant to plaintiff's membership in FINRA. The underlying dispute concerns a real estate investment that was recommended to defendants and facilitated by one of plaintiff's " associated persons," an investment advisor, who then received a finder's fee. Before me are defendants' motion to compel arbitration and plaintiff's motion to stay arbitration. Plaintiff also requests discovery on the issue of arbitrability. Because I find that defendants are entitled to arbitration under FINRA Rule 12200, their motion is granted and plaintiff's motion is denied.
Beginning in June 2008, an investment advisor named Tim Tehan, who was a registered representative of plaintiff Triad Advisers, Inc. (" Triad" ), worked with defendant Avinadav Siev (" Siev" ) to locate a
new real estate investment that would qualify defendants for certain tax advantages following the sale of another holding. Tehan provided defendants with examples of various investment offerings, some of which were being offered directly through Triad. After Tehan concluded that defendants were not interested in any of these, he referred them to the principals of a real estate venture called B& B Alexandria Corporate Park, LLC (" B& B" ).
Tehan subsequently mentioned various aspects of a private placement offering from B& B in email correspondence and conversations, and discussed the offering with defendants from time to time after making the introduction and referral. On December 9, 2008, defendants invested $2,075,516 into B& B.
B& B had no selling agreement or any other agency relationship with Triad or Tehan; apparently, its practice was simply to pay referral fees to real estate brokers who introduced investors. Defendants have never maintained an account with Triad or with Tehan. Neither Triad nor Tehan is mentioned in any disclosure or agreement relating to the B& B transaction. Nevertheless, once defendants had decided to invest, B& B paid Tehan a finder's fee in the amount of $61,920. Triad itself has received no direct compensation in connection with the B& B transaction, and Tehan has received no compensation other than his finder's fee.
After becoming unhappy with their investment in B& B for reasons that are not material, defendants commenced the FINRA arbitration against Triad that gave rise to this action.
Whether a party is entitled to an order of this Court compelling arbitration is determined entirely by the consent of the other party. In re American Exp. Fin. Advisors Secs. Litig.,672 F.3d 113, 127 (2d Cir. 2011) (citing the Federal Arbitration Act). FINRA members are considered to have consented to arbitration in accordance with the terms of FINRA Rule 12200. Id. at 127-29. There is no dispute that Triad ...