United States District Court, S.D. New York
ORRICK, HERRINGTON & SUTCLIFFE LLP By: Michael Delikat, Esq., John D. Giansello, Esq., New York, NY, Attorneys for Petitioner.
SHER TREMONTE LLP By: Robert Knuts, Esq., New York, NY, Attorneys for Respondent.
ROBERT W. SWEET, District Judge.
Petitioner Stifel Nicolaus & Company, Incorporated, Petitioner ("Stifel" or "Petitioner") moved pursuant to Sections 9 and 13 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., for an order confirming the award of the arbitration panel in the matter of the arbitration between Stifel and Respondent Craig S. Forster, Respondent ("Forster" or "Respondent"), entered on July 29, 2014. Upon the facts and conclusions set forth below, the motion of Stifel is granted, the arbitration award is confirmed, and judgment will be so entered.
On May 31, 2013, Forster filed an action in this Court against Stifel and individual defendants, captioned Craig S. Forster v. Stifel, Nicolaus & Company, Frank Story and Andrea Schiaffino, docketed as No. 13 Civ. 3711, alleging various claims under federal, state and local law, including claims of religious and disability discrimination arising out of his employment with Stifel and the termination of that employment by Stifel on October 3, 2011.
On August 15, 2014, Stifel filed its Petition in this action as a related case to 13 Civ. 3711. The following facts are set forth in the Stifel's Petition and Forster's Cross-Petition to vacate the arbitration award.
The Financial Industry Regulatory Authority ("FINRA") is a self-regulatory organization ("SRO") under the Securities Laws of the United States, see 15 U.S.C. §§ 78f, 78o-3 and 78s, created in 2007 as a consolidation of the National Association of Securities Dealers, Inc. ("NASD") and the member regulation, enforcement and arbitration functions of the New York Stock Exchange.
Stifel is a corporation organized and incorporated under the laws of the State of Missouri, having its principal place of business in Saint Louis, Missouri. It has been a registered broker-dealer and a member firm of FINRA at all relevant times. Following an Agreement and Plan of Merger dated January 8, 2007, Stifel became the successor in interest to Ryan Beck & Co., Inc. ("Ryan Beck"). Ryan Beck was a New Jersey corporation having its principal place of business at Florham Park, New Jersey. Ryan Beck has been a registered broker-dealer and a member firm of FINRA at all relevant times.
Forster, an individual, is a resident of Millwood, New York. From August 25, 2006, Forster was a registered representative with FINRA employed by Ryan Beck and subsequently by Stifel, until October 3, 2011. At all relevant times, Forster has been an "associated person" or an "associated person of a member" of FINRA. See FINRA Code of Arbitration Procedure ("Code") §§ 13100 (a), (o) & (r) (1).
Under the Code, Forster is required to arbitrate any dispute between himself as an "associated person of a member" of FINRA and Stifel as a member of FINRA arising out of their business interactions with one another. Code § 13200(a). The dispute resulting in the FINRA arbitration award Stifel now seeks to enforce in this action arose out of business activities of Forster as an "associated person of a member" of FINRA and Stifel as a member of FINRA.
Pursuant to a Form U4 Agreement entered into between Forster and FINRA in connection with his employment by Ryan Beck, Forster agreed "to arbitrate any dispute, claim or controversy that may arise between [him] and [his] firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the SROs indicated in Section 4 (SRO Registration) as may be amended from time to time and that any arbitration award rendered against Forster may be entered as a judgment in any court of competent jurisdiction." Among the SROs "indicated in Section 4" of the Form U4 is NASO, now consolidated into FINRA.
Forster's U4 Agreement is a contract with the securities exchanges, and disputes arising out of the U4 Agreement constitute "transaction involving commerce" within the meaning of the Federal Arbitration Act ("FAA"). See 9 U.S.C. § 2; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23-25 (1991). There is complete diversity of citizenship between the parties, and more than $75, 000 in controversy, so that this Court has jurisdiction of this matter pursuant to the provisions of 28 U.S.C. § 1332(a) (1). Venue is proper in the Southern District of New York because Arbitration Award was issued in this district.
Forster entered into a five promissory note agreements ("Notes") with Ryan Beck and Stifel during the course of his employment. The first four Notes specified a principal amount and each contained a term forgiving repayment of the principal and interest in monthly installments ("forgiveness period") as long as Forster remained an employee with the applicable promisee, i.e., Ryan Beck or Stifel. The Notes' unpaid balances would become immediately due and payable if Forster should cease to be employed by the promisee for any reason.
On August 28, 2006, Forster and Ryan Beck entered into the first written promissory note agreement ("Note 1") with a principal sum of $734, 000.00 and a forgiveness period of ten years. Note 1 was assigned by Ryan Beck to Stifel on March 31, 2008. On March 28, 2007, Forster and Stifel entered into a second written promissory note agreement ("Note 2") with a principal sum of $13, 333.33 and a forgiveness period of seven years. On November 5, 2007, Forster and Stifel entered into the third written promissory note agreement ("Note 3") with a principle sum of $87, 447.91 and a forgiveness period of nine years. On November 6, 2008, Forster and Stifel entered into the fourth written promissory note agreement ("Note 4") with a principal sum of $105, 702.00 and a forgiveness period of eight years. On January 6, 2011, Forster and Stifel entered into the fifth written promissory note agreement ("Note 5") in the principal sum of $40, 000.00. Unlike Notes 1 through 4, Forster agreed to repay Note 5's principal amount in ...