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Paquette v. McDermott Investment Services, LLC

United States District Court, D. Massachusetts

October 17, 2014

ERIC E. PAQUETTE, as Personal Representative of the Estates of Shirley J. Ju and Chester Ju, Plaintiff,


F. DENNIS SAYLOR, IV, District Judge.

This matter involves a question of arbitrability that arises out of an employment dispute. Defendant McDermott Investment Services, LLC ("MIS"), brought an arbitration action against the personal representative of the estates of two former employees, Chester and Shirley Ju, alleging that they breached their employment contracts, breached their fiduciary duties to the company, converted property, and violated the Pennsylvania trade-secrets statute. Plaintiff Eric Paquette, as personal representative of the estates, has brought an action for declaratory judgment as to those claims and to recover commission payments that MIS allegedly owes Chester Ju.

MIS has moved to compel arbitration under the employment contracts with the Financial Industry Regulatory Authority ("FINRA"), or alternatively with the American Arbitration Association ("AAA"). For the following reasons, the motion to compel will be granted and the action will be stayed pending arbitration.

I. Background

McDermott Investment Services, LLC, is a registered broker-dealer in the securities industry that is owned solely by Dean McDermott, a citizen of Florida. The company operates primarily in Pennsylvania. Shirley J. Ju and Chester Ju were a married couple who lived in Massachusetts. They were both registered representatives in the securities industry, licensed by FINRA.

In May 2011, the Jus began working for MIS from their home office in Natick, Massachusetts. They each signed an Independent Contractor Agreement ("ICA") with MIS that included covenants to maintain confidentiality and trade secrets and to return all property relating to MIS in the event of termination.[1] In addition, each contract provided that

Any and all controversies which may rise between the parties concerning the construction, performance or breach of this Agreement shall be determined by arbitration. Any arbitration under this Agreement shall be held under and pursuant to the rules of FINRA. The award of the arbitrators or a majority of them, shall be final, and judgment upon the award rendered may be entered by any court of competent jurisdiction. In the event FINRA declines jurisdiction over the arbitration, the parties agree to submit the dispute to arbitration before the American Arbitration Association. Any proceeding in court shall be maintained in United States District Court for the Eastern District of Pennsylvania or, if federal jurisdiction is not available, in state court in Northampton County, Pennsylvania.

(ICA ¶ 19). The ICAs expressly stated that the duties and obligations contained in the agreements are binding on the parties' "successors, assigns, heirs and personal representatives." (ICA ¶ 14). Each provided that Pennsylvania law governed the agreement and "any claims, controversies, or disputes arising out of or relating to" the agreement. (ICA ¶ 12).

In June 2013, Shirley Ju resigned from MIS. On September 5, 2013, she contacted Marilee Hill, an acquaintance in the Virgin Islands who worked in the same field for the investment firm Concorde Investment Services, LLC. Ju wrote to Hill: "Marilee I don't have the heart for this anymore. Do you want some of my clients[?]" (Compl. ¶ 46). In October 2013, she sent Hill several e-mails identifying a subset of her clients. Plaintiff contends that Ms. Ju had begun providing services for these clients prior to her affiliation with MIS. (Compl. ¶¶ 47-48).

At some point prior to the fall of 2013, the Jus filed for divorce. (Compl. ¶ 44). On November 2, 2013, Chester Ju murdered Shirley Ju and then committed suicide. (Compl. ¶ 50). Shirley Ju's son, Eric Paquette, was appointed personal representative of their estates. (Compl. ¶ 1). He took responsibility for their house and affairs, including the business papers in their home office-most of which, he alleges, he discarded. (Compl. ¶¶ 51-52).

On November 6 and November 12, 2013, a lawyer for Dean McDermott of MIS contacted Chester and Shirley Ju's daughter, Nicole, to request various files and documents allegedly stored in their home. (Compl. ¶¶ 54-57, 60-61; Pl. Mem., Exs. A, B). Paquette spoke with the attorney on December 2, 2013, and sent whichever files he had preserved to the lawyer. (Compl. ¶¶ 67-69). He later arranged for access to the Jus' computers, which were in the custody of the Massachusetts State Police. (Compl. ¶¶ 74-77). At some point, the lawyer informed Paquette that Chester Ju had earned unpaid commissions of more than $20, 000. Paquette provided MIS an original copy of Chester's death certificate and of Paquette's appointment as personal representative in an effort to obtain that money. (Compl. ¶ 79).

On January 23, 2014, MIS filed a claim with the FINRA dispute resolution board against Paquette (as personal representative of Chester and Shirley Ju), Marilee Hill, and Concorde Investment Services. (Def. Mem., Gold Aff., Ex. C; Pl. Mem., Andrichik Aff.). MIS essentially contended that Shirley Ju had improperly disclosed client lists and confidential information to Hill and that Chester Ju had failed to protect that information and therefore aided and abetted Hill and his wife. MIS brought claims for breach of contract, breach of fiduciary duty, conversion, and violation of the Pennsylvania Uniform Trade Secrets Act ("PUTSA"). It also brought a claim for "turnover of property, " requesting that FINRA "order Shirley's estate and Chester's estate to immediately return to MIS all of its property." (Def. Mem., Gold Aff., Ex. C).

On March 19, 2014, FINRA informed Paquette that MIS had filed a claim but stated that he would "not [be] required to arbitrate disputes in the FINRA arbitration forum." (Pl. Mem., Ex. C).[2] On May 7, 2014, Paquette responded by letter that he did not voluntarily submit to its arbitration. (Gold. Aff., Ex. D). On May 13, 2014, Bonnie Simon wrote a letter to MIS's attorney stating the following:

The arbitration panel will only have the power to render an enforceable award against [the Estate of Shirley Ju] if [the Estate] agrees to submit voluntarily to FINRA's jurisdiction. In the absence of such a voluntary submission, FINRA has no alternative except to proceed with this action without the participation of [the Estate] and to advise ...

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