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Lanza v. Financial Industry Regulatory Authority

United States District Court, D. Massachusetts

September 25, 2018

GIOVANNI LANZA and MARIANTONIA LANZA, Plaintiffs,
v.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA), Defendant.

          MEMORANDUM AND ORDER

          Patti B. Saris Chief United States District Judge

         INTRODUCTION

         Plaintiffs 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.

         For the reasons set forth below, the Court ALLOWS FINRA's motion to dismiss (Docket No. 9).

         FACTUAL BACKGROUND

         The 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).

         I. Parties

         Plaintiffs 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 customers.

         This 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 this action.

         II. Dispute with Ewing and Ameriprise

         In 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.

         After 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.[1] In December 2015, they attended mediation in Concord, New Hampshire and entered into a settlement agreement for $52, 500.

         III. Contested Arbitration

         Shortly 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 ...


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