By Jessica Dye
NEW YORK, Dec 3 (Reuters) - A New York state judge has ruled
he has no jurisdiction to enforce a nearly $500,000 arbitration
award, saying the underlying claims brought by a customer
against a brokerage firm appeared to be based on violations of
federal securities law.
Nassau County Supreme Court Justice Stephen Bucaria held
that William Copperill could only seek to enforce the award
against Mitchell Sloane and his former brokerage firm Westrock
Advisors Inc through a federal, and not a state, court. The
award was handed down in 2011 by an arbitration panel of the
Financial Industry Regulatory Authority.
In his ruling, Bucaria cited Section 27 of the Securities
Exchange Act, violations of which fall under the exclusive
jurisdiction of federal district courts.
The judge said the arbitration award in this case did not
"expressly state which of the causes of action were sustained in
finding" for Copperill, a customer of Westrock and Sloane.
However, he said Copperill's claims, including unsuitable
investing and breach of fiduciary duty, were Securities Exchange
"Since the arbitration award is based upon liability created
by the Securities Exchange Act, the court is without
subject-matter jurisdiction to enforce the award," Bucaria
The ruling overturned a February 2012 order from Bucaria
enforcing the award.
The judge gave Copperill leave to recommence the petition in
The underlying arbitration was initiated by Copperill
against Sloane and Westrock in 2009. Copperill, who was one of
Sloane's customers, alleged a variety of claims, including
fraud, misrepresentation and mismanagement, in connection with a
trade involving shares of Agnico-Eagle Mines Ltd, the ruling
The FINRA arbitration panel awarded Copperill nearly
$500,000 in compensatory and punitive damages in 2011. FINRA
expelled Westrock from the securities industry that same year
for not paying fines, according to regulatory filings.
Copperill brought an action in Nassau County Supreme Court
to enforce the award.
In October, Copperill moved to restrain a brokerage account
held by Sloane's wife. After requesting briefing for both
parties on state courts' jurisdiction to enforce FINRA awards,
Bucaria on Friday vacated his own February order affirming the
In his ruling, Bucaria said the panel's award of more than
$211,000 in punitive damages "makes clear that the arbitrators
found one or more of the Exchange Act violations, as opposed to
mere breach of duty or good faith, or unjust enrichment."
"Where FINRA finds an Exchange Act violation, a FINRA award
in favor of the customer is a liability created by the Exchange
Act," he wrote. "Thus, a state court has no more jurisdiction to
confirm such an award in a special proceeding than it would have
to redress the violation in a plenary action."
A lawyer for Sloane, Allan Pullin, declined to comment. A
lawyer for Copperill did not immediately return requests for
Steven Caruso, a lawyer at Maddox Hargett & Caruso who
represents investors in securities arbitration and litigation
proceedings, said that the decision was an unusual one, since
FINRA arbitration awards are routinely affirmed in state courts.
"The court is reading into these being Exchange Act
violations -- the court says, those have to be Exchange Act
violations," Caruso said. "But they are also absolutely state
The case is Copperill v. Sloane, Nassau County Supreme
Court, no. 015723/2011.
For Copperill: Meyer Suozzi English and Klein.
For Sloane: Allan Pullin of Weber & Pullin.
(Additional reporting by Suzanne Barlyn)
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