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Cronin v. Monex Deposit Co.

February 17, 2009


The opinion of the court was delivered by: The Honorable David O. Carter, Judge



[I hereby certify that this document was served by first class mail or Government messenger service, postage prepaid, to all counsel (or parties) at their respective most recent address of record in this action on this date.]


Deputy Clerk: ___________________________________


Before the Court is Defendants Monex Deposit Company ("MDC"), Louis Carabini, Michael Carabini, Mike Moroni, David Gala, and Dan J. C. Wales' (collectively "Defendants") Motion to Compel Arbitration and for an Order Staying this Action. The Court finds the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing set February 23, 2009 is removed from the Court's calendar. After considering the moving, opposing, and replying papers thereon, and for the reasons stated below, the Court hereby GRANTS the Motion to Compel Arbitration and Stay this Action.


Plaintiff Darty Cronin ("Cronin") alleges that Defendant MDC, an entity in the retail precious metal business, and the other named individual defendants entered into a conspiracy to engage in the silvers futures market without becoming members of a commission-designated board of trade as required by federal law. Cronin claims that the Defendants did so with the intent of divesting investors of their monies for Defendants' personal gain. Specifically, Cronin alleges that Defendants managed his account in a manner calculated to cause him to lose money and to allow Defendants to gain profits for themselves. In doing so, Plaintiff alleges that Defendants made misrepresentations to him that ultimately caused Plaintiff to lose in excess of 6.3 million dollars.

Plaintiff contends that he first entered into a transaction with MDC by purchasing two-million dollars worth of gold coins of which he immediately took physical possession through MDC account representative Sherri Boland. He then claims that after entering into this so-called conventional precious metal transaction, he met with Boland who told him about another type of investment option offered by MDC referred to as "going short" in which Cronin could try to make money by speculating on the declining value of silver. While Cronin's First Amended Complaint indicates that he initially may have entered into a written agreement with MDC, he claims that this subsequent decision to "go short" based on Boland's investment advise was pursuant to a later oral

In "going short," Cronin contends that he was told he could profit by betting on the declining value of silver. Based on his representations, it appears he was told that he could borrow silver commodities from MDC and lock-in a particular sale price for a future sale, though Cronin would not have to personally purchase the silver at that time. Then, if the present value of silver dropped, Cronin could purchase the silver at the lower market rate and sell it to a buyer provided by MDC at the previously locked-in higher sale price, and thus make a profit. Cronin argues that these are illegal futures contracts. Further, Boland was then allegedly terminated in mid-July 2008, and Cronin alleges that his new account representative, Defendant Wales, convinced him to change his investment position knowing that such a change would involve a significant loss to Cronin and a major financial gain for Plaintiff's First Amended Complaint alleges causes of action against Defendants for: (1) Fraud under Commodity Futures Modernization Act of 2000, (2) Common Law Fraud, (3) Breach of Contract, (4) Negligent Misrepresentation, (5) Constructive Fraud, and (6) Common Count for Money Had and Received.

Defendants contend that at the outset of the parties' relationship they entered into two written account agreements with Cronin on June 20, 2007 (the MDC Purchase and Sale Agreement and the affiliated Monex Credit Company's Loan, Security and Storage Agreement). Section 15.11., subsections a through b, of the Purchase and Sale Agreement allegedly entered into between Plaintiff and Monex Deposit Company states as follows:

a. Arbitration of Claims

The parties agree that this Agreement and the transactions entered into pursuant to it are commercial in nature and do not involve consumer transactions. The parties agree that any and all disputes, claims or controversies arising out of or relating to any transaction between them or to the breach, termination, enforcement, interpretation or validity of this Agreement, including the determination of the scope or applicability of this agreement to arbitrate, shall be submitted to final and binding arbitration before JAMS, or its successor, in Orange County, California, in accordance with the laws of the State of California for agreements made in and to be performed in California (including, without limitation, the California Arbitration Act).

b. Additional Parties to this Agreement to Arbitrate

All partners of MDC and their officers and directors, and all employees, representatives, agents and affiliates of MDC, past, present or future, are parties to this arbitration agreement to the extent they are named as respondents in ...

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