United States District Court, N.D. California, Oakland Division
ORDER DENYING PETITION TO VACATE AND GRANTING
CROSS-PETITION TO CONFIRM ARBITRATION AWARD Dkt. 24,
SAUNDRA BROWN ARMSTRONG Senior United States District Judge.
7, 2017, a Financial Industry Regulatory Authority
(“FINRA”) arbitration panel rendered an award
(“Award”) in favor of Zenaida Gantan
(“Gantan”) on her claims against Freedom
Investors Corporation (“Freedom”). Thereafter,
Freedom commenced the instant action by filing a Petition to
Vacate Arbitration Award. Gantan, in turn, filed a
Cross-Petition to Confirm FINRA Arbitration Award. Magistrate
Judge Sallie Kim (“the Magistrate”) was
originally assigned to this case. Because Gantan declined to
consent to the Magistrate's jurisdiction, the matter was
reassigned to this Court. In conjunction with the
reassignment order, the Magistrate issued a Report and
Recommendation (“R&R”) in which she
recommends denying Freedom's petition.
matter is now before the Court on Freedom's Motion for De
Novo Determination of Dispositive Matter Referred to
Magistrate Judge. In its motion, Freedom objects to certain
of the Magistrate's findings and recommendations and
requests that the court vacate the Award. Gantan agrees that
Freedom's objections are subject to de novo review, but
opposes Freedom's objections and seeks to confirm the
Award. Having read and considered the papers submitted, and
being fully informed, the Court GRANTS Freedom's request
for de novo review, OVERRULES Freedom's objections,
DENIES Freedom's petition to vacate and GRANTS
Gantan's cross-petition to confirm the Award. The Court,
in its discretion, finds this matter suitable for resolution
without oral argument. See Fed.R.Civ.P. 78(b); N.D.
Cal. Civ. L.R. 7-1(b).
FINRA Arbitration Proceedings
October 29, 2014, Gantan, an elderly widow, filed a Statement
of Claim with FINRA against Merrimac Corporate Securities,
Inc. (“Merrimac”), the brokerage firm where she
maintained a brokerage account. Oakes Decl. ¶ 9, Dkt.
28-1. Gantan alleged that Chad Thompson
(“Thompson”), a Merrimac broker and
representative, had “churned” her account in
violation of FINRA rules as well as various federal and state
securities laws. Claimant's Pre-Hearing Br. at 8, Dkt.
28-10. Churning involves initiating excessive transactions
for the purpose of generating commissions. Id. at 1,
commencing the arbitration proceeding, Gantan sought leave to
amend her Statement of Claim to join Freedom, among others,
as an additional respondent, and to add a cause of action for
successor firm liability. Award at 3, Dkt. 28-11. In her
motion for leave, Gantan alleged that Freedom was a
“continuance” of Merrimac. Claimant's
Pre-Hearing Br. at 1-3. Freedom responded, inter alia, that
it could not be held liable as Merrimac's successor
because it never entered into any merger or other agreement
under which Freedom would assume the liabilities of Merrimac.
Resp't's Answer at 2-6, Dkt. 28-7. FINRA granted
Gantan's request for leave to file an Amended Statement
of Claim. Award at 3; Ruling and Order Re: Claimant's
Mot. to File First Am. Stmt. of Claim and Add Parties, Dkt.
arbitration began on May 8, 2017, and concluded on May 10,
2017. Oakes Decl. ¶ 19. After the conclusion of
Gantan's case-in-chief, Freedom and Apex, another alleged
successor to Merrimac, orally moved to dismiss the claims
against them. Award at 4. A three-person arbitration panel
denied the motion “based on the credible evidence that
Freedom and Apex were successors to Merrimac.”
7, 2017, a unanimous arbitration panel issued its Award in
Gantan's favor. Award at 4-7. The panel held Freedom and
Merrimac jointly and severally liable for $210, 487 in
compensatory damages and $5, 162 in costs. Award at 5. The
panel denied Gantan's request for punitive damages.
Id. at 7.
The Instant Proceedings
11, 2017, Freedom filed a Petition to Vacate Arbitration
Award in this Court. Pet., Dkt. 1. As grounds for vacatur,
the petition alleges arbitrator misconduct and that the
arbitration panel exceeded its authority, pursuant to 9
U.S.C. § 10(a)(3) and (4), respectively. Id. at
August 29, 2017, Gantan filed her Answer to the petition and
opposition thereto, and cross-petitioned to confirm the
Award. Dkt. 18, 19, 20.
September 7, 2017, Gantan filed a declination to consent to
the jurisdiction of a magistrate judge. Dkt. 23. On the same
day, the Magistrate issued an R&R, which recommends the
Court deny Freedom's petition to vacate. Dkt. 24. For
reasons not articulated in the R&R, the Magistrate made
no recommendation on the merits of Gantan's
cross-petition to confirm the Award. See Dkt. 24 at
4. The matter was subsequently reassigned to this Court. Dkt.
has now filed a motion for de novo review of the R&R in
which it objects to the Magistrate's R&R. Dkt.
In response, Respondent filed a combined opposition and
cross-petition to confirm the arbitration award. Dkt. 32, 34.