United States District Court, S.D. New York
DR. EUBULUS J. KERR, III, Plaintiff,
JOHN THOMAS FINANCIAL et al., Respondents. ANASTASIOS BELESIS and JOSEPH CASTELLANO, Petitioners,
EUBULUS J. KERR III, Respondent.
OPINION & ORDER
KATHERINE B. FORREST, District Judge.
Now before the Court are dueling petitions to confirm and vacate an award issued in an arbitration before the Financial Industry Regulatory Authority ("FINRA") initiated by petitioner Dr. Eubulus J. Kerr III against respondents John Thomas Financial ("JTF"), Anastasios Belesis ("A. Belesis"), George Belesis ("G. Belesis"), and Joseph Castellano. In the arbitration, Kerr accused respondents of churning his securities brokerage account. Kerr won the arbitration, and the arbitration panel awarded him nearly $1 million in damages. For the reasons set forth below, Kerr's petition to confirm the arbitration award is GRANTED and respondents' petitions are DENIED.
Kerr has also moved for sanctions against A. Belesis and G. Belesis, arguing that their motions to vacate are frivolous and designed to delay payments owed to Dr. Kerr. As the circumstances in this case are not so extraordinary as to justify the imposition of sanctions, Kerr's motion for sanctions is DENIED.
In April 2011, Dr. Kerr opened a securities brokerage account with JTF,  a registered broker/dealer regulated by FINRA. (ECF No. 12 ("Kerr Pet.") ¶ 3; ECF No. 44 ("G. Belesis Pet.") ¶ 5; ECF No. 60 at 4.) At the time, A. Belesis was JTF's Chief Executive Officer; Castellano was JTF's Chief Compliance Officer; and G. Belesis, who is A. Belesis' younger brother was JTF's President. (G. Belesis Pet. ¶¶ 6-9.) JTF assigned brokers Brian Roth and Peter Viglione and branch managers Marc Greenberg and Michele Misiti to Dr. Kerr's account. (G. Belesis Pet. ¶¶ 16, 21 n.2, 41(e)-(f).)
On or about January 3, 2013, Dr. Kerr initiated an arbitration before FINRA pursuant to the compulsory securities industry arbitration rules. (Kerr Pet. ¶ 9.) In essence, Kerr alleged that JTF's brokers churned his account by executing a high volume of purchases and sales in order to generate excessive commissions and fees. (See Kerr Pet. ex. A.) The arbitration hearing took place from June 16-18, 2014 in New Orleans, Louisiana. (Kerr Pet. ¶ 12.) Respondents were called as witnesses at the hearing. (ECF No. 61 at 10.) Castellano and G. Belesis appeared at the hearing, were represented by counsel, and provided testimony on their own behalf. (ECF No. 61 at 11.) However, G. Belesis was not in attendance at the start of the evidentiary hearings. (ECF No. 44 ¶ 39.) A. Belesis chose not to appear, even though he was named as a party and at the time was a registered investment adviser and therefore required to appear. (ECF No. 61 at 10-11.) At the beginning of the hearing, when neither A. Belesis nor G. Belesis was in attendance, one of the arbitrators commented that their absence was "disrespectful, at the least." (See ECF Nos. 43 at 4; 44 ¶¶ 33, 38, 40; 70 ¶ 13.) When the arbitration panel later inquired into A. Belesis' absence, G. Belesis stated that it was because an aunt was visiting him, and A. Belesis did not want to travel. (ECF No. 61 at 11.)
On August 5, 2014, FINRA issued a written award (the "Award") setting forth the Arbitration Panel's decision. The Award states:
Respondents JTF, A. Belesis and G. Belesis are liable, jointly and severally, for churning and failure to supervise and shall pay to [Dr. Kerr] compensatory damages in the amount of $600, 000.00 plus interest accruing at the Louisiana statutory rate from April 1, 2012, until the date of payment of the Award.
Respondent Castellano is liable for churning and failure to supervise and shall pay to [Dr. Kerr] compensatory damages in the amount of $5, 000.00 plus interest accruing at the Louisiana statutory rate from April 1, 2012, until the date of payment of the award.
Respondents JTF, A. Belesis and G. Belesis are liable, jointly and severally, and shall pay to Claimant punitive damages in the amount of $300, 000.00 pursuant to Alabama Code 1975 § 6-11-20.
Respondents JTF, A. Belesis and G. Belesis are liable, jointly and severally, and shall pay to [Dr. Kerr] costs in the amount of $14, 732.96.
Respondents JTF, A. Belesis and G. Belesis are liable, jointly and severally, and shall pay to [Dr. Kerr] the sum of $375.00 representing reimbursement of the nonrefundable portion of the claim filing fee previously paid by Claimant to FINRA Dispute Resolution.
The awards against Respondents [above] shall be over and above any sums received by [Dr. Kerr] through settlements with other Respondents.
Respondents JTF, Roth, Viglione, A. Belesis, G. Belesis, Castellano and Misiti's request for expungement is denied without prejudice because it was not pursued at the evidentiary hearing.
[Dr. Kerr]'s claims against Respondent Misiti are denied, with prejudice.
Any and all relief not specifically addressed herein, including [Dr. Kerr's] request for attorneys' fees, is denied.
(Kerr Pet. ¶ 13 & ex. A at 4-5.) To date, respondents have not remitted any payment to Dr. Kerr in accordance with the Award. (Kerr Pet. ¶ 15.)
G. Belesis filed a petition for voluntary bankruptcy on September 12, 2014. (Kerr Pet. ¶¶ 6, 14.) On October 16, 2014, A. Belesis and Castellano filed a petition to vacate the arbitration award. (14-cv-8306 ECF No. 1.) On October 20, 2014, Dr. Kerr commenced an action in the Supreme Court of the State of New York, New York County, seeking to confirm the arbitration award against A. Belesis, Castellano, and JTF. (ECF No. 1 ¶ 1.) A. Belesis, Castellano, and JTF removed Dr. Kerr's state court action to federal court on November 18, 2014. (ECF No. 1.)
At the time, A. Belesis, Castellano, and JTF were represented by Dan A. Druz, who evidently failed to prosecute their case. On November 18, 2014 the Court gave A. Belesis and Castellano notice of its intention to dismiss their petition to vacate pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. (14-cv-8306 ECF No. 5.) Since Druz took no action following that order, the Court dismissed A. Belesis and Castellano's ...