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Ploetz v. Morgan Stanley Smith Barney, LLC

United States District Court, D. Minnesota

May 25, 2017

Ann Eleanor Ploetz, as Trustee For the Laudine L. Ploetz, 1985 Trust, Petitioner,
Morgan Stanley Smith Barney, LLC, Respondent.


          Paul A. Magnuson United States District Court Judge.

         This matter is before the Court on a Petition to Vacate Arbitration Award. For the following reasons, the Petition is denied.


         Petitioner Ann E. Ploetz, in her capacity as Trustee of the Laudine L. Ploetz, 1985 Trust, sought to arbitrate tort and contract claims against Respondent Morgan Stanley Smith Barney (“MSSB”), accusing MSSB of making unauthorized transfers from the Trust's account. (Pet. (Docket No. 1) Ex. A at 1; MacDonald Aff. (Docket No. 3) ¶ 2.) Under the arbitration rules of the Financial Industry Regulatory Authority (“FINRA”), the arbitration panel was comprised of three arbitrators. (Pet. Ex. A at 4.) After more than a year of discovery, and less than a week before the January 2017 arbitration was to begin, the chairperson of the panel resigned due to a scheduling conflict. (Kendrick Aff. (Docket No. 11) ¶ 3-4.) The parties agreed to truncated procedures for selecting another arbitrator, and ultimately selected Barry Goldman as the new chair of the panel. (MacDonald Aff. ¶ 4.)

         FINRA requires that arbitrators disclose any potential conflicts, including past service as an arbitrator or mediator. FINRA Rule 12405. Goldman disclosed that he had served as an arbitrator in proceedings involving MSSB on four occasions and was currently serving as an arbitrator in two pending MSSB arbitrations. (MacDonald Aff. Ex. 5.) Neither party sought to disqualify him on the basis of these contacts with MSSB. After a two-day hearing, the panel unanimously determined that Ploetz's claims were without merit. (Pet. Ex. A.)

         In February, Ploetz's attorney learned that Goldman had served as a mediator in a 2012 proceeding in Michigan involving MSSB. (MacDonald Aff. ¶ 9.) Mediation under FINRA is voluntary and private, akin to settlement discussions, and thus there was no record of this proceeding and it was handled by attorneys not involved in the instant arbitration. The 2012 mediation was unsuccessful and that case eventually proceeded to arbitration, with the arbitration panel finding for the claimant and against MSSB. (Kendrick Aff. ¶ 7.) There is no indication that Goldman was involved in the case after the unsuccessful mediation.

         Ploetz contends that Goldman's failure to disclose his service as a mediator on the prior MSSB case warrants vacating the arbitration award and requiring the parties to arbitrate the case anew.


         A. Service of Petition

         MSSB argues that it was not served with the Petition in the manner the statute requires and that any attempted service now would be untimely. A motion to vacate must be served within three months of the award. 9 U.S.C. § 12. MSSB contends that the statute requires service by marshal because MSSB is not a resident of Minnesota. The statute provides that nonresident parties must be served “by the marshal of any district within which the adverse party may be found in like manner as any other process of the court.” Id. But the statute provides that residents may be served “as prescribed by law for service of notice of motion in an action in the same court.” Id. Ploetz mailed the Petition to MSSB's main office in New York and to MSSB's attorney in the underlying arbitration, which complies with Fed.R.Civ.P. 5's requirements for service of notice of motion.

         MSSB has seven offices in Minnesota. Thus, under both federal and Minnesota law, it is a “resident” of Minnesota. As an LLC, federal law deems MSSB to reside “in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question.” 28 U.S.C. § 1391(c)(2). MSSB makes no argument that it is not subject to this Court's personal jurisdiction for this proceeding. And under Minnesota law, a corporation or other such entity “shall be considered as residing in any county wherein it has an office, resident agent, or business place.” Minn. Stat. § 542.09. Again, MSSB has multiple offices in Minnesota. Service was proper.

         B. Motion to Vacate

         “Under the [Federal Arbitration Act, ] courts may vacate an arbitrator's decision ‘only in very unusual circumstances.'” Oxford Health Plans LLC v. Sutter, 569 U.S. C, 133 S.Ct. 2064, 2068 (2013) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)). The FAA lists the only circumstances under which a court may vacate an ...

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