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Fiorilla v. Citigroup Global Markets, Inc.

United States District Court, S.D. New York

June 25, 2018

JOHN LEOPOLDO FIORILLA, Individually and as Trustee FBO John Leopoldo Fiorilla Trust U/A/D 06-25-2003, Plaintiff,
v.
CITIGROUP GLOBAL MARKETS, INC. and EDWARD JAMES MULCAHY, JR., Defendants.

          OPINION AND ORDER

          P. KEVIN CASTEL UNITED STATES DISTRICT JUDGE

         Plaintiff John Leopoldo Fiorilla brings this action individually and in his capacity as trustee of the John Leopoldo Fiorilla Trust. In 2010, Fiorilla commenced arbitration proceedings against defendants Citigroup Global Markets, Inc. and one of its employees, Edward James Mulcahy, Jr. (collectively, “CGMI”), asserting that their mismanagement and malfeasance “eviscerated” an investment account that he opened with them in 2006.

         An arbitration panel issued an award in Fiorilla's favor (the “Award”), but upon application from CGMI, the New York Supreme Court, New York County, vacated the Award on grounds of manifest disregard for the law. It concluded that the parties had agreed to a final settlement prior to the arbitration hearing, which the arbitrators disregarded without explanation. Fiorilla then brought an ex parte proceeding before a tribunal in France, which recognized the Award. On CGMI's motion, the New York Supreme Court issued a worldwide anti-suit injunction against the Award's enforcement, indicating that Fiorilla's action before the French tribunal was inconsistent with “respect for law.”

         The Second Amended Complaint (the “Complaint”) bring two counts of declaratory judgment and asserts a claim of “Fraud/Fraud on Courts.” Fiorilla seeks a declaration that the state court's rulings were beyond its jurisdiction and to lift the anti-suit injunction that the state court issued against enforcement of the Award.

         CGMI has moved to dismiss this action pursuant to Rules 12(b)(1) and 12(b)(6), Fed.R.Civ.P. For reasons that will be explained, this Court concludes that it does not have subject-matter jurisdiction over Fiorilla's claims, which fall squarely within the Rooker-Feldman doctrine. See generally Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70, 94 (2d Cir. 2015). CGMI's motion to dismiss pursuant to Rule 12(b)(1), Fed. R. Civ. P., is therefore granted. Because the Court does not have subject matter jurisdiction, it does not reach the other arguments raised by CGMI.

         BACKGROUND.

         A. The Parties' Arbitration Proceedings.

         Fiorilla describes himself as an “unsophisticated” investor who, in 2006, retained CGMI to manage his life savings, which were estimated to be worth as much as $19, 500, 000. (Compl't ¶ 39.) Fiorilla alleges that through mismanagement and malfeasance, CGMI “eviscerated” his savings, resulting in their value dropping to just $20, 000. (Compl't ¶ 41.)

         The parties had entered into an arbitration agreement governed by FINRA rules and procedures.[1] (Compl't ¶ 40.) In August 2010, Fiorilla commenced a FINRA arbitration against CGMI. (Compl't ¶¶ 6, 42.)

         In April 2012, shortly before arbitration proceedings were scheduled to commence, Fiorilla's attorney agreed to a settlement offer from CGMI in the amount of $800, 000, subject to agreement on additional terms and a written agreement. (Compl't ¶ 44.) Fiorilla alleges that, at that time, the parties had no more than an agreement in principle. (Compl't ¶ 45.) He alleges that the parties had not agreed to all material terms and that the agreement had not been reduced to writing. (Compl't ¶ 50.) Counsel to CGMI notified the arbitration panel in writing that a settlement had been reached, but on May 9, 2012, Fiorilla instructed his attorneys that the claim had not settled and should proceed to arbitration. (Compl't ¶¶ 46-48.)

         CGMI made an application to the arbitration panel to enforce the purported settlement agreement, which the panel denied, and arbitration proceedings began in October 2012. (Compl't ¶¶ 51-54.) In February 2013, CGMI made a motion to terminate the arbitration proceedings based on the settlement agreement, which the arbitration panel denied. (Compl't ¶¶ 55-56.) On July 30, 2013, the arbitration panel issued the Award, which awarded Fiorilla $10, 750, 000 against CGMI and $250, 000 against Mulcahy, plus interest. (Compl't ¶¶ 14, 60; Docket # 29-2 at 8-15.)

         B. CGMI's Successful Motion to Vacate.

         On August 28, 2013, CGMI filed a petition to vacate the Award in the New York Supreme Court, New York County. (Compl't ¶ 61.) Among other things, it argued that the arbitrators acted in manifest disregard of the law when they held hearings and issued an Award despite the parties' agreement to a valid and enforceable final settlement. (Docket # 29-2 at 76-100.) It argued that Fiorilla had unambiguously agreed to the settlement, which “terminated FINRA's powers to decide the case, ” and that his subsequent change of heart did not invalidate the agreement. (Id. at 97-100.)

         Justice Charles E. Ramos of the Commercial Division of the Supreme Court of the State of New York, New York County, vacated the Award in a two-page written order. (Docket # 29-1 at 29-30.) He concluded that the dispute had settled, and that the parties had informed the panel and FINRA of the settlement in writing. (Id.) Justice Ramos concluded that by going forward with the proceedings and ...


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