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Cor Clearing, LLC v. Jarvis

United States District Court, D. Nebraska

April 7, 2014

COR CLEARING, LLC, Plaintiff,
v.
DAVID H. JARVIS, Defendant.

ORDER

THOMAS D. THALKEN, Magistrate Judge.

This matter is before the court on the plaintiff's Motion for Reconsideration of Filing No. 26 (Filing No. 27). The plaintiff filed a brief (Filing No. 28) and an index of evidence (Filing No. 29) in support of the motion. The defendant filed a brief (Filing No. 33) and an index of evidence (Filing Nos. 34-36) in opposition to the motion. The plaintiff filed a brief (Filing No. 37) in reply.

BACKGROUND

The plaintiff brought suit against the defendant for breach of a fiduciary relationship. See Filing No. 1 - Complaint ¶ 1. The plaintiff, a clearing broker, is "an independent full-service clearing and settlement firm, " providing "technology, administrative services and product offerings through multiple customized platforms" to "approximately 75 introducing brokers." Id. ¶ 10; see Filing No. 17 - Brief p. 7 n.1. An introducing broker has a direct relationship with an investing client and delegates the work of the floor operation, trade execution, and handling of securities and money to a clearing broker. See Filing No. 17 - Brief p. 7 n.1.

In January 2012, the plaintiff acquired Legent Clearing. See Filing No. 1 - Complaint ¶ 10. The defendant had been employed by Legent Clearing since December 31, 2009, as the Executive Vice President and General Counsel, and continued to work for the plaintiff as an employee, an attorney, and as General Counsel or Deputy General Counsel, until September 30, 2012. Id. ¶ 12; see Filing No. 17 - Brief p. 2-3.

The defendant was an independent contractor for the plaintiff from October 1, 2012, until December 31, 2012. See Filing No. 17 - Brief p. 3. As part of the change in his status, in October 2012, the defendant signed a Separation Agreement and General Release, including a Contractor Agreement. See Filing No. 23 - Ex. 1(A).

In late 2012 and early 2013, more than one of the plaintiff's introducing brokers, independent of their relationships with the plaintiff, became clients of the defendant. See Filing No. 17 - Brief p. 7; see also Filing No. 1 - Complaint ¶¶ 18-22. The plaintiff alleges that in May and June 2013, the defendant contacted the plaintiff by identifying himself as the attorney for two of the plaintiff's clients. See Filing No. 1 - Complaint ¶¶ 19, 21. In these communications, the defendant represented the clients in disputes against the plaintiff. Id. ¶¶ 19-22. The plaintiff alleges the defendant "appeared" to have disclosed the plaintiff's confidential information and strategies to the clients to assist them in their disputes against the plaintiff. Id. ¶¶ 20, 22.

The plaintiff also alleges it has "uncovered multiple instances" of the defendant disclosing information he received during privileged legal communications with the plaintiff's Board of Directors to non-essential employees, placing the communications at risk while he was still employed with the plaintiff. Id. ¶¶ 23-24. The plaintiff alleges the defendant has continued to disclose privileged communications since his departure. Id. ¶ 23. The plaintiff contends these disclosures significantly disadvantaged the plaintiff in dealings with its adversaries and damaged its relationships with clients. Id. ¶ 28. Based on these allegations, the plaintiff asserts claims for breach of fiduciary duty (Claim 1) and negligence (Claim 2) against the defendant. Id. at 7-11. Additionally, the plaintiff seeks injunctive relief forbidding the defendant from disclosing confidential attorney-client communications and confidential documents and information. Id. at 11-14.

Prior to filing an answer, the defendant sought a stay of all proceedings pending arbitration. See Filing Nos. 16, 18. Specifically, the defendant argued the parties are bound to arbitrate by virtue of the plaintiff's broker-dealer license through the United States Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). See Filing No. 17 - Brief p. 10. The plaintiff initially denied the applicability of FINRA because of the defendant's change in employment status. See Filing No. 21 - Response p. 2-3.

On January 9, 2014, the court entered an order staying the litigation proceedings and compelling the parties to engage in arbitration. See Filing No. 26. The court determined the parties are subject to arbitration pursuant to FINRA rules because the plaintiff is a FINRA member, the defendant is "a person formerly associated with a member, " and "the dispute arises out of the business activities of a member or an associated person." FINRA R. 13100(r); FINRA R. 13200(a).

On January 31, 2014, the plaintiff filed the instant motion for reconsideration of the court's January 9, 2014, order compelling arbitration. See Filing No. 27. The plaintiff contends that, although it diligently sought to arbitrate, a FINRA representative informed the plaintiff FINRA has limited jurisdiction over the defendant and any award may be unenforceable. See Filing No. 28 - Brief p. 1. Based on this information from FINRA, the plaintiff argues arbitration is futile. Id. at 1, 4-5. The plaintiff also argues the parties' dispute does not relate to FINRA rules or regulations and FINRA has no disciplinary authority over attorneys who appear before it. Id. at 3.

ANALYSIS

The plaintiff filed the motion for reconsideration pursuant to Federal Rule of Civil Procedure 60(b).

Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence. They are not to be used to introduce new evidence that could have been adduced during pendency of the motion at ...

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