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Chehebar v. Oak Financial Group, Inc.

United States District Court, E.D. New York

March 7, 2017

DR. VICTOR CHEHEBAR and DONNA CHEHEBAR, Plaintiffs,
v.
OAK FINANCIAL GROUP, INC. and NEIL D. HACKMAN, Defendants.

          MORITT HOCK & HAMROFF LLP BY: David A. Schrader, Esq. Attorney for Plaintiffs

          GIBBONS P.C. BY: William M. Moran Esq. Attorneys for Defendants

          MEMORANDUM & ORDER

          LEONARD D. WEXLER UNITED STATES DISTRICT JUDGE

         Presently before the Court is Plaintiffs' motion to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and an agreement between the parties. See Motion, Docket Entry ("DE") [23]. Plaintiffs further seek a stay of this matter pending the completion of arbitration. Defendants have opposed the motion. For the reasons set forth herein, the motion to compel arbitration is granted, and the case is stayed.

         I. BACKGROUND

         The following facts, taken from the complaint, are considered true for purposes of this motion. Additional facts are drawn from the agreement that governed the relationship between the parties.

         A. Factual History

         Defendant Oak Financial is an investment advisory firm, and defendant Hackman is an investment advisor at Oak Financial as well as an owner and principal of the firm. Complaint ("Compl.") ¶4, DE [1-2]. Plaintiffs Victor and Donna Chehebar are married to one another and are the owners of several investment accounts that were handled by defendants. Id. ¶2. In brief, plaintiffs allege that defendants were tasked, via specific instructions, with implementing an aggressive trading strategy, that defendants ignored those instructions, and that as a result, plaintiffs lost profits of no less than $981,268.66 over the nine month period from February to November 2009.

         The parties executed a written agreement in February and March 2009 that governed their relationship. See Oak Financial Group, Inc. Advisory Agreement (the "Agreement"), Declaration of David A. Schrader, Ex. B, DE [24-2]. The Agreement contains an Arbitration clause that provides in its entirety as follows:

Any controversy or claim, including but not limited to, errors and omissions arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration in Connecticut in accordance with the securities arbitration rules then in effect with the National Association of Securities Dealers, and judgment upon the award rendered by the arbitrators) may be entered in any court having jurisdiction thereof. Client understands that this agreement to arbitrate does not constitute a waiver of the right to seek a judicial forum where such waiver would be void under the federal securities laws. Arbitration is final and binding on the parties.

         Plaintiffs claim in their motion papers that they filed an arbitration with the Financial Industry Regulatory Authority ("FINRA") on March 13, 2013.[1] Plaintiffs further assert that FINRA allegedly rejected the claim because defendants are not broker-dealers, but would have accepted the claim if defendants had consented to FINRA's jurisdiction. Plaintiffs contend that they asked defendants to consent, but that defendants refused to sign the form. Defendants vigorously dispute this contention, claiming that prior to the filing of the complaint in April 2014, they were unaware of any attempt by plaintiffs to commence an arbitration proceeding with FINRA. Moreover, defendants claim that they were never approached with a request to consent to a proceeding before FINRA.

         B. Procedural History

         On April 1, 2014, Plaintiffs filed a complaint in New York State Supreme Court, Nassau County, containing causes of action for breach of contract, breach of fiduciary duty, and negligence. Defendants filed their answer on May 5, 2014, and subsequently removed the case to this Court by Notice dated May 12, 2014.

         After removal, the first action taken by either party was the plaintiffs' filing of a letter on June 18, 2014. In that letter, plaintiffs requested a pre-motion conference for leave to file a motion to stay this action and to compel arbitration. On June 25, 2014, Defendants sought leave to file a motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Ultimately, defendants were given ...


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