United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
B. Saris Chief United States District Judge
Giovanni Lanza and Mariantonia Lanza initiated an arbitration
through Defendant Financial Industry Regulatory Authority
(“FINRA”)'s Office of Dispute Resolution
against their securities brokers as part of a dispute
involving mismanagement of their accounts. After a three-day
hearing, the arbitrators summarily dismissed Plaintiffs'
claims in a two-sentence decision. Plaintiffs sued FINRA for
breach of contract, alleging that the arbitrators'
failure to issue a reasoned explanation for their decision
constituted a breach of the implied covenant of good faith
and fair dealing. Plaintiffs request an order compelling
FINRA to refer their dispute back to the arbitrators to write
a full decision explaining their dismissal of Plaintiffs'
claims. They also seek $200, 000 in damages.
reasons set forth below, the Court
ALLOWS FINRA's motion to
dismiss (Docket No. 9).
following factual background comes from the complaint and
attached documents and must be taken as true at this stage.
See Foley v. Wells Fargo Bank, N.A., 772 F.3d 63,
71-72 (1st Cir. 2014).
are an elderly married couple living in Campton, New
Hampshire and Cambridge, Massachusetts. Both are 91-year-old
former professors. Defendant FINRA is a private regulatory
organization headquartered in New York and Washington, D.C.
that monitors and regulates the financial industry and the
relationship between financial institutions and their
action arises from a dispute between Plaintiffs and their
former securities brokers, Ameriprise Financial Services,
Inc. (“Ameriprise”) and Richard Ewing
(“Ewing”). Ameriprise is a securities brokerage
company headquartered in Minnesota. Ewing is employed at
Ameriprise as a securities broker in its office in Palm Beach
Gardens, Florida. Ameriprise and Ewing managed two brokerage
accounts of over $800, 000 in total assets for Plaintiffs
from 2006 to 2014. Neither Ameriprise nor Ewing is a party to
Dispute with Ewing and Ameriprise
2015, Plaintiffs filed suit against Ewing and Ameriprise in
the United States District Court for the District of
Massachusetts, alleging that Ewing and Ameriprise had
mishandled their brokerage accounts. They contended, inter
alia, that Ewing had fraudulently convinced them to move
their accounts when he transferred in 2006 from Merrill Lynch
to H&R Block (which Ameriprise subsequently acquired),
failed to administer their accounts in line with their stated
goals, carelessly managed their accounts, was nonresponsive
to their concerns, and lied about the investments he made on
their behalf and the performance of their investment
portfolio. They claimed losses of over $400, 000 for
negligence, breach of contract, and fraud, as well as
violations of federal securities law.
Ameriprise and Ewing notified Plaintiffs that they had signed
an arbitration agreement when they opened their accounts,
Plaintiffs consented to the dismissal of their federal court
action. Plaintiffs and Ewing then submitted their dispute to
arbitration with FINRA's Office of Dispute
Resolution. In December 2015, they attended mediation
in Concord, New Hampshire and entered into a settlement
agreement for $52, 500.
thereafter, Ewing refused to comply with the settlement
agreement. Plaintiffs therefore filed a new statement of
claim against Ewing and Ameriprise for arbitration with FINRA
in June 2016, alleging similar claims based on the same
misconduct. To submit their dispute for arbitration,
Plaintiffs signed the “FINRA Arbitration Submission
Agreement” (“Submission Agreement”). In the
Submission Agreement, Plaintiffs acknowledged that they had
“read the procedures and rules of FINRA relating to
arbitration” and agreed “to be bound by these
procedures and rules.” In the same vein, they agreed to
submit their claim to arbitration “in accordance with
the FINRA By Laws, Rules, and Code of Arbitration
Procedure” and to conduct the arbitration “in
accordance with the FINRA ...