Opinion
FBTCV166056970
01-09-2017
Ronald Roganti v. Richard D. Ketchum, Director Financial Industry Regulation Authority, Inc.
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION TO DISMISS
Richard E. Arnold, Judge.
The Financial Industry Regulation Authority, Inc. (" FINRA") has filed a motion to dismiss pursuant to Practice Book § 10-30. FINRA claims: (1) the plaintiff lacks standing; (2) the case is moot; and (3) plaintiff fails to allege a justiciable controversy. FINRA argues that the defects in the plaintiff's complaint prevent him from invoking the subject matter jurisdiction of the court and thus, the plaintiff's case must be dismissed. In support of its motion the plaintiff has submitted a memorandum of law with attached documentation and a reply memorandum of law. The plaintiff has filed an objection and a memorandum of law in opposition to the motion to dismiss, also with supporting documentation. Oral argument on the subject motion was heard by the court on September 19, 2016.
Plaintiff was a successful executive with the Metropolitan Life Insurance Company (" MetLife" 1) until 2005, when he resigned in the face of pay reductions that he claims were levied in retaliation for his opposition to unethical business practices. Roganti brought arbitration proceedings against MetLife before the Financial Industry Regulatory Authority (" FINRA"), seeking, among other things, wages that he would have been paid but for the retaliatory pay reductions, as well as compensation for the decreased value of his pension, which was tied to his wages.
FINRA is a private, not for profit corporation and a self-regulatory organization (" SRO") which is registered with the Securities and Exchange Commission (" SEC") as a national securities association pursuant to the Maloney Act of 1938, 15 U.S.C. § § 78o-3 et seq., amending the Securities Exchange Act of 1934, 15 U.S.C. § § 78a et seq. (" Exchange Act"). As an SRO, FINRA is part of the Exchange Act's plan for regulating the securities markets. See 15 U.S.C. § § 78q, 78s; see also, Desiderio v. NASD, 191 F.3d 198, 201 (2d Cir. 1999), cert. denied, 531 U.S. 1069, 121 S.Ct. 756, 148 L.Ed.2d 659 (2001).
FINRA operates the largest arbitration forum in the securities industry and conducts arbitrations pursuant to FINRA's Codes of Arbitration Procedure to resolve disputes between investors, securities firms and individual registered representatives. FINRA acts as an administrator of arbitration proceedings and sets hearing dates; appoints arbitrators; and transmits pleadings and motions form the parties to the arbitration panels. It also transmits and final awards issued by the panels to the parties. The arbitrators who conduct the arbitration hearings are not FINRA employees. They are volunteers who receive a stipend for their service. The arbitrators in the FINRA forum hold the hearings, during which they receive evidence and hear arguments. They then issue arbitration awards after considering the evidence presented during the hearings.
After conducting the arbitration hearing involving the plaintiff and MetLife, the FINRA panel awarded Roganti approximately $2.49 million in " compensatory damages, " but its award did not clarify what that sum was compensation for. Roganti then filed a benefits claim with MetLife, arguing that the award represented back pay and that his pension benefits should be adjusted upward as if he had earned the money while he was still employed. MetLife denied the claim because the FINRA award did not say that it was, in fact, back pay.
Upon joining FINRA, a member organization agrees to comply with FINRA's rules. See UBS Fin. Servs. v. W.Va. Univ. Hosps., Inc., 660 F.3d 643, 648 (2d Cir. 2011). As a FINRA member, therefore, MetLife was bound to adhere to FINRA's rules and regulations, including its Code and relevant arbitration provisions contained therein. Id., 649. With respect to these provisions, the Federal Arbitration Act, 9 U.S.C. § 1 et seq., requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms. Volt Information Sciences v. Board of Trustees, 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); see also Bensadoun v. Jobe-Riat, 316 F.3d 171, 176 (2d Cir. 2003) (FINRA Rules must be interpreted in accordance with principles of contract interpretation). " In interpreting the FINRA Rules, we need not reach the issue of which state law applies." UBS Financial Services, Inc. v. West Virginia University Hospitals, Inc., supra, 660 F.3d 649.
The plaintiff then brought an action against the plan administrator and MetLife, alleging that the administrator's failure to include award by arbitral panel of $2, 492, 442.07 million in his favor and against employer in his historical income when tabulating his pension violated Employee Retirement Income Security Act (ERISA). The United States District Court for the Southern District of New York denied the defendants' motion to dismiss and granted judgment for the plaintiff after summary trial on the administrative record. See. Roganti v. Metropolitan Life Ins. Co., 972 F.Supp.2d 658, 661, 664 (SDNY), rev'd in part and aff'd in part, 786 F.3d 201 (2d Cir. 2015). Thereafter, MetLife appealed the District Court's ruling to the Second Circuit Court of Appeals, which " conclude[d] that MetLife's denial of Roganti's benefits claim was not arbitrary and capricious" and reversed the District Court's determination that the arbitration award constituted back pay. Roganti v. Metropolitan Life Ins. Co., 786 F.3d 201, 219 (2d Cir. 2015).
In May 2016, the plaintiff initiated the present action seeking injunctive relief and by way of having this court order the defendant to submit the plaintiff's Request for Clarification to the arbitration panel with instructions that the panel provide a reasonably immediate response to the plaintiff. The plaintiff seeks clarification only with respect to paragraph 1 of the arbitration award which states:
1. Respondent is liable for and shall pay the Claimant [plaintiff] compensatory damages in the amount of $2, 492, 442.07 above its existing pension and benefit obligation to the Claimant.
The plaintiff requests that Richard D. Ketchum, Director of FINRA, submit his request to the Arbitration Panel for the purpose of providing clarifying responses regarding the Panel's intent in issuing the Award, so that it is clear. The plaintiff requests that the Panel provide documents explaining how it arrived at the amount of the Award and to answer the following questions:
Defendant Richard D. Ketchum has been named as a defendant in his official capacity as Director of Financial Industry Regulatory Authority, Inc., otherwise known as " FINRA."
1. How the Panel arrived at an Award in the amount of $2, 492, 442.07;
2. Explain what mathematical formula was used to arrive at the amount of the Award;
3. Explain if all of the Award represented lost earnings or wages (" back wages") suffered by the Claimant-plaintiff as a result of the improper actions of another form of compensation MetLife;
4. If all of the Award did not represent lost earnings or back wages, then allocate what portion of the Award represents back wages and what portion represents another form of compensation, setting forth a clear and precise allocation of each portion . . .; and
5. To explain in as much detail as possible, the Panel's rationale for declining to award plaintiff attorneys fees in connection with the Award.
The plaintiff has also requested that the court order the Panel, in preparing its Clarification, to re-examine the transcript of the arbitration hearing, along with all documents presented and admitted during the arbitration proceedings.
I.
Standard of Law
" A motion to dismiss . . . properly attacks the jurisdiction of the court . . . [It] admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone." (Citations omitted; internal quotation marks omitted.) Ferreira v. Pringle, 255 Conn. 330, 346, 766 A.2d 400 (2001). " A motion to dismiss is the appropriate vehicle for challenging the jurisdiction of the court . . . The grounds which may be asserted in this motion are: (1) lack of jurisdiction over the subject matter; (2) lack of jurisdiction over the person; (3) improper venue; (4) insufficiency of process; and (5) insufficiency of service of process." (Citation omitted.) Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985). " [B]ecause the issue of standing implicates subject matter jurisdiction it may be a proper basis for granting a motion to dismiss . . . [S]ee Practice Book § 10-31(a)(1)." (Citation omitted.) Electrical Contractors, Inc. v. Dept. of Education, 303 Conn. 402, 413, 35 A.3d 188 (2012).
" [J]usticiability comprises several related doctrines, namely, standing, ripeness, mootness and the political question doctrine, that implicate a court's subject matter jurisdiction and its competency to adjudicate a particular matter." Office of the Governor v. Select Committee of Inquiry, 271 Conn. 540, 569, 858 A.2d 709 (2004). " Justiciability requires (1) that there be an actual controversy between or among the parties to the dispute . . . (2) that the interests of the parties be adverse . . . (3) that the matter in controversy be capable of being adjudicated by judicial power and (4) that the determination of the controversy will result in practical relief to the complainant . . ." (Citations omitted; internal quotation marks omitted.) Id., at 568-69, 858 A.2d 709. " A case that is non-justiciable must be dismissed for lack of subject matter jurisdiction." Mayer v. Biafore, Florek & O'Neill, 245 Conn. 88, 91, 713 A.2d 1267 (1998). " Mootness . . . implicates subject matter jurisdiction, which imposes a duty on the [trial] court to dismiss a case if the court can no longer grant practical relief to the parties." (Internal quotation marks omitted.) Curley v. Kaiser, 112 Conn.App. 213, 229, 962 A.2d 167 (2009); We The People of Connecticut, Inc. v. Malloy, 150 Conn.App. 576, 92 A.3d 961 (2014).
II.
Discussion
The defendant argues that the court lacks subject matter jurisdiction over this action because the plaintiff fails to allege a justiciable controversy. Specifically, the defendant states: (1) the plaintiff lacks standing; (2) the case is moot; and (3) there is no controversy between the parties. It's the defendant's position that the plaintiff fails to allege that he suffered any injury that was caused by FINRA; nor has the plaintiff alleged facts to show he is classically aggrieved.
" Because courts are established to resolve actual controversies, before a claimed controversy is entitled to a resolution on the merits it must be justiciable." (Internal quotation marks omitted.) Valvo v. Freedom of Information Commission, 294 Conn. 534, 540, 985 A.2d 1052 (2010). " Justiciability requires (1) that there be an actual controversy between or among the parties to the dispute . . . (2) that the interests of the parties be adverse . . . (3) that the matter in controversy be capable of being adjudicated by judicial power . . . and (4) that the determination of the controversy will result in practical relief to the complainant." (Internal quotation marks omitted.) JP Morgan Chase Bank, N.A. v. Mendez, 320 Conn. 1, 6, 127 A.3d 994 (2015); see also Wyatt Energy, Inc. v. Motiva Enterprises, LLC, 308 Conn. 719, 736, 66 A.3d 848 (2013). " [J]usticiability comprises several related doctrines, namely, standing, ripeness, mootness and the political question doctrine, that implicate a court's subject matter jurisdiction and its competency to adjudicate a particular matter." (Emphasis added.) Office of the Governor v. Select Committee of Inquiry, 271 Conn. 540, 569, 858 A.2d 709 (2004). " A case that is non-justiciable must be dismissed for lack of subject matter jurisdiction." Mayer v. Biafore, Florek & O'Neill, supra, 245 Conn. 91.
A.
Standing
" Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy . . . When standing is put in issue, the question is whether the person whose standing is challenged is a proper party to request an adjudication of the issue . . . Standing requires no more than a colorable claim of injury; a [party] ordinarily establishes . . . standing by allegations of injury. Similarly, standing exists to attempt to vindicate arguably protected interests . . ." Elec. Contrs., Inc. v. Dep't of Educ., 303 Conn. 402, 411, 35 A.3d 188 (2012). " Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved . . . The fundamental test for determining aggrievement encompasses a well-settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the subject matter of the challenged action], as distinguished from a general interest, such as is the concern of all members of the community as a whole. Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action] . . . Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." (Internal quotation marks omitted.) Id., 411-12; May v. Coffey, 291 Conn. 106, 112, 967 A.2d 495 (2009).
The defendant claims the plaintiff lacks standing because he has failed to allege he suffered any injury caused by FINRA. To the extent the plaintiff argues that the arbitration panel's failure to specify the nature of the compensatory damage award has caused or will cause him to suffer damages in the form of lost wages and/or pension, the defendant argues that its only connection to this case is as the forum that administered the arbitration between the plaintiff and MetLife. FINRA claims its conduct was not the proximate cause of any alleged harm or damages to the plaintiff.
" An allegation of injury is both fundamental and essential to a demonstration of standing. Under Connecticut law, standing requires no more than a colorable claim of injury; a plaintiff ordinarily establishes his standing by allegations of injury . . . As long as there is some direct injury for which the plaintiff seeks redress, the injury that is alleged need not be great." (Internal quotation marks omitted.) (Citations omitted.) Johnson v. Rell, 119 Conn.App. 730, 737, 990 A.2d 354 (2010). Thus, " [a]bsent an allegation of direct injury, the plaintiff lacks standing to invoke the jurisdiction of the court." Id., 738.
The plaintiff argues he does have standing to bring this action. As to the first prong of the standing test, he states he has demonstrated a specific, personal and legal interest in the arbitration panel's award and no other member of the general public has any claim or interest in the panel's calculation of the award. The plaintiff also argues he meets the second prong of the standing test in that his personal and legal interests have been adversely affected by the defendant's actions. He states the defendant voluntarily decided to adopt its rule of arbitration 13905 and give its members an avenue by which to pursue the requested clarification and has denied to take the steps to obtain the requested information. The defendant's denial has created an adverse effect to his legal interest.
FINRA's Code of Arbitration Rule 13905 involves Submissions [by the parties] after a case has closed and reads as follows:
(a) Parties may not submit documents to arbitrator(s) in cases that have been closed except under the following limited circumstances:
(1) as ordered by a court;
(2) at the request of any party within 10 days of service of an award or notice that a matter has been closed, for typographical or computational errors, or mistakes in the description of any person or property referred to in the award; or
(3) if all parties agree and submit documents within 10 days of (1) service of an award or (2) notice that a matter has been closed.
(b) Parties must make requests under this rule in writing to the Director and must include the basis relied on under this rule for the request. The Director will forward documents submitted pursuant to paragraph (a)(1), along with any responses from other parties, to the arbitrators. The Director will determine if submissions made pursuant to paragraphs (a)(2) and (a)(3) comply with the grounds enumerated in the rule. If the Director determines that the request complies with paragraphs (a)(2) and (a)(3), the Director will forward the documents, along with any responses from other parties, to the arbitrators. The arbitrators may decline to consider requests that the Director forwards to them under paragraphs (a)(2) and (a)(3).
(c) Unless the arbitrators rule within 10 days after the Director forwards the documents to the arbitrators pursuant to a request made under paragraphs (a)(2) and (a)(3), the request shall be deemed considered and denied.
(d) Requests under this rule do not extend the time period for payment of any award pursuant to Rule 13904.
While the plaintiff cites Rule 13905 in support, a review of the District Court's opinion in Roganti v. Metropolitan Life Ins . Co., 972 F.Supp.2d 658, 661, 664 (SDNY), rev'd in part and aff'd in part, 786 F.3d 201 (2d Cir. 2015) (" Roganti SDNY"), and the 2d Circuit Court's opinion in Roganti v. Metropolitan Life Ins. Co., 786 F.3d 201, 219 (2d Cir. 2015) indicate that the plaintiff never availed himself of any relief set forth in Rule 13905. Plaintiff only requested a clarification from FINRA's panel pursuant to Rule 13905 prior to initiating this present action, and not within 10 days of service of an award or notice that a matter has been closed.
In its reply to the plaintiff's objection, the defendant again argues that plaintiff's complaint does not allege any injury, much less a direct injury, caused by FINRA; nor does he allege facts to establish classical aggrievement. The defendant claims the plaintiff is essentially seeking is an explained decision and FINRA Rule 13514 provides the only avenue for parties to an underlying decision to obtain an explained decision. None was requested and none was provided. The defendant also argues that even if the plaintiff had timely sought an explained decision requiring the arbitrators to provide " a fact based award stating the general reason(s) for their decision, " the arbitrators, pursuant to Rule 13904(g) were not obligated to provide a damage calculation.
See n.3.
The court has reviewed the plaintiff's complaint in a manner favorable to the plaintiff, as well as, the decisions in Roganti v. Metropolitan Life Ins. Co., supra, 972 F.Supp.2d 658, and the 2d Circuit Court's opinion in Roganti v. Metropolitan Life Ins. Co., supra, 786 F.3d 201. The court finds that the plaintiff's allegations of direct injury are directed at the actions of MetLife and the administrator of its Pension Plan, who denied his claim that the compensatory damages awarded by the arbitration panel were compensation for back wages and wages going forward. The only claims regarding the defendant FINRA is that it provided the arbitration forum and the applicable rules and regulations of the arbitration proceedings.
The only " peg" that the plaintiff can " hang his hat on" is that in his complaint, he alleges that prior to initiating this present action, he requested that FINRA forward his Request for Clarification of the Award to the panel, itself and FINRA denied the request. FINRA had no obligation to do so, and in accordance with Rule 13904(g), the panel had no obligation to provide a damages calculation; had no obligation to clarify its Award; and presently has no obligation to clarify its Award. Additionally, the 2d Circuit Court of Appeals found that MetLife's Plan Administrator's decision that the award did not constitute back or forward wage losses was not " arbitrary and capricious, " and " that although the relevant arbitration procedures permitted the plaintiff to seek clarification of the award from the arbitrators, the period for doing so had passed." Roganti v. Metropolitan Life Ins. Co., supra, 786 F.3d 212-14 (2015).
The Second Circuit stated, " [i]t warrants emphasis that Roganti failed to obtain clarification of the award from the FINRA panel within the time limit prescribed for doing so. Once that opportunity was no longer available, it effectively became impossible for anyone--Roganti, MetLife, or the courts--to determine definitively what the award was compensation for. Permitting Roganti to recover under these circumstances, despite the uncertainty that he could have helped to prevent, would provide poor incentives for future claimants in his position. Only a claimant, and not his plan administrator, will know after he receives an arbitral award whether he will claim benefits on the ground that the award increases his benefits-eligible compensation. And the plan administrator, of course, will have no reason to seek clarification of the award until a claim is actually made. If the claim is made after the deadline for seeking such clarification has passed, the administrator will be powerless to shed light on what the award represents, except by recourse to the kind of unsatisfactory hypothesizing that the district court prescribed here. From this perspective, the better course is to place the burden on the claimant to ensure that the basis for his claim is as clear as possible before it is made, and to seek clarity during the arbitration or timely afterward. Id., 216-17."
This court finds that there is no claim in the plaintiff's complaint that FINRA's denial of his Request for Clarification was wrong or caused him any direct injury. The plaintiff lacks standing.
B.
Mootness
" Mootness is a question of justiciability that must be determined as a threshold matter because it implicates [this] court's subject matter jurisdiction . . . Because courts are established to resolve actual controversies, before a claimed controversy is entitled to a resolution on the merits it must be justiciable. In re Egypt E., 322 Conn. 231, 241, 140 A.3d 210 (2016). " A case is considered moot if [the trial] court cannot grant the appellant any practical relief through its disposition of the merits . . ." Id.
The defendant argues the dispositive question for the court to consider is whether the plaintiff or the defendant would benefit from a decision in this case. See Wendy V. v. Santiago, 319 Conn. 540, 545, 125 A.3d 983 (2015) (discussing the issue form the perspective of an appellate court). It's the defendant's position that since the Second Circuit has already determined that the arbitration award at issue in this case does not constitute back pay, this court is unable to provide any practical relief to the plaintiff. See. Roganti v. Metropolitan Life Ins. Co., supra, 786 F.3d 219.
The plaintiff argues the matter is not moot because the Second Circuit Court never ruled that the award was not back wages. (Emphasis added) . It simply ruled that there was not enough evidence on the record to allow the lower court to reasonably conclude that the Award was for back wages. The defendant in its reply to the plaintiff's objection, again emphasizes that the Second Circuit's decision held that MetLife's decision that the compensatory damages awarded by the Roganti arbitration panel did not represent back pay was not arbitrary and capricious. Id., 213. Additionally and significantly, the Second Circuit also found that " the time for seeking clarification of the award from the arbitral panel was allowed to pass." Id.
The court finds that the plaintiff has fully litigated the issue of whether the arbitration award constitutes back or forward wages. See. Roganti v. Metropolitan Life Ins. Co., supra, 972 F.Supp.2d 658; see also, Roganti v. Metropolitan Life Ins. Co., supra, 786 F.3d 201. These decisions analyzed the denial of the plaintiff's claim by MetLife's Plan Administrator and ultimately, the Second Circuit upheld that decision. Roganti v. Metropolitan Life Ins. Co., supra, 786 F.3d 201. The Second Circuit also analyzed the award and found that clarification from the panel would have no practical effect. Lastly, the court specifically noted that the plaintiff failed to avail himself of the time-limited opportunity afforded by the arbitration Rules to seek a clarification. " Roganti failed to obtain clarification of the award from the FINRA panel within the time limit prescribed for doing so. Once that opportunity was no longer available, it effectively became impossible for anyone--Roganti, MetLife, or the courts--to determine definitively what the award was compensation for." Id., 216-17. The court finds that this matter is moot as the court cannot grant the appellant any practical relief through its disposition of the merits. In re Egypt E., supra, 322 Conn. 231.
Order
For the reasons set forth herein, the motion to dismiss is granted.
" [I]f the rules of an exchange (or similar organization) require arbitration of customer disputes, a broker's membership obligation confers upon the customer an option to arbitrate as the exchange rules provide." Kidder, Peabody & Co. v. Zinsmeyer Trusts P'ship, 41 F.3d 861, 864 (2d Cir. 1994) (citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Georgiadis, 903 F.2d 109, 113 (2d Cir. 1990)). A customer under the exchange's rules is entitled to invoke the arbitration provision " as an intended third-party beneficiary" in a dispute with a member. UBS Financial Services, Inc. v. West Virginia University Hospitals, Inc., supra, 660 F.3d 649.
Additionally, the plaintiff never sought an explained decision pursuant to Rule 13514(d), which reads as follows:
(d) Explained Decision Request At least 20 days before the first scheduled hearing date, all parties must submit to the panel any joint request for an explained decision under Rule 13904(g). Rule 13904(g) states in relevant part: (g) Explained Decisions (1) This paragraph (g) applies only when all parties jointly request an explained decision. (2) An explained decision is a fact-based award stating the general reason(s) for the arbitrators' decision. Inclusion of legal authorities and damage calculations is not required. (3) Parties must make any request for an explained decision no later than the time for the pre-hearing exchange of documents and witness lists under Rule 13514(d). (4) The chairperson of the panel will be responsible for writing the explained decision.The FINRA arbitration was conducted between 2004 and 2010, and culminated in a 17-day hearing. On August 28, 2010, the FINRA panel issued the award in Roganti's favor. On March 24, 2011 (roughly seven months after the panel issued its award), Roganti filed a benefits claim with MetLife, in its capacity as administrator of the Plans, arguing that the award was compensation for income that MetLife had unlawfully denied him while he was employed there, and that this increase in his pre-retirement earnings justified an increase in his benefits under the Plans. Roganti's claim and an appeal of his claim were denied by MetLife. See. Roganti v. Metropolitan Life Ins. Co., 972 F.Supp.2d 658, 661, 664 (SDNY), rev'd in part and aff'd in part, 786 F.3d 201 (2d Cir. 2015) (" Roganti SDNY") and the 2d Circuit Court's opinion in Roganti v. Metropolitan Life Ins. Co., 786 F.3d 201, 219 (2d Cir. 2015). Roganti then commenced an action in the United States District Court for the Southern District of New York on January 9, 2012, after his appeal at MetLife had been denied.