UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 97-10383
E. TROY HAWKINS,
Plaintiff - Appellant,
VERSUS
NATIONAL ASSOCIATION OF SECURITIES DEALERS INC, ET AL,
Defendants,
NATIONAL ASSOCIATION OF SECURITIES DEALERS INC,
Defendant - Appellee.
Appeal from the United States District Court For the Northern District of Texas June 23, 1998
Before POLITZ, Chief Judge, HIGGINBOTHAM and DeMOSS, Circuit Judges.
PER CURIAM:
Troy Hawkins appeals from the district court’s denial of his
motion to remand this lawsuit to state court. He also appeals the
lower court’s subsequent dismissal of his lawsuit for failure to
state a claim. We affirm. I.
This appeal arises from Hawkins’s dispute with his former
employer, Prudential Securities, Inc., and five of Prudential’s
employees (collectively, the PSI Defendants). Hawkins sued the PSI
Defendants in state court, alleging claims of libel and slander.
Based on an arbitration agreement between Hawkins and Prudential,
however, the Supreme Court of Texas concluded that Hawkins’s claims
had to be sent to arbitration. See Prudential Sec. Inc. v.
Marshall, 909 S.W.2d 896 (Tex. 1995) (orig. proceeding) (per
curiam).
Pursuant to the arbitration agreement, Hawkins’s claims were
arbitrated in a forum provided by the National Association of
Securities Dealers. After nine days of proceedings the arbitration
panel handed down an “award,” which provided:
(1) That [Hawkins’s] Statement of Claim is hereby dismissed in its entirety without prejudice.
(2) That each party shall be responsible for his or her own Attorney’s Fees incurred as a result of legal representation in this case;
(3) That all relief requested in this cause and not expressly granted is hereby denied[.]
At the parties’ request, the arbitration panel issued an Order of
Clarification in which the panel stated that it “intended to render
a full and final resolution of all matters in controversy” and that
-2- it “intended to dismiss the Claim in its entirety with prejudice.”
Hawkins then proceeded to institute a new action in Texas
state court, realleging his original claims against the PSI
Defendants. This new lawsuit also named the NASD as a defendant,
alleging that the NASD was biased against him, failed to properly
administer the arbitration proceeding, and conspired with
Prudential to harm him and deprive him of a fair arbitration.
The NASD removed the case to the United States District Court
for the Northern District of Texas based on “original federal
question jurisdiction under the provisions of 28 U.S.C. § 1331 and
15 U.S.C. § 78aa.” It then moved to dismiss the case. Hawkins
moved to remand the case to state court based on the district
court’s alleged lack of subject-matter jurisdiction. After
receiving argument on these motions, the district court denied the
motion to remand, granted the NASD’s motion to dismiss the claims
against it, and then remanded the remainder of the action between
Hawkins and the PSI Defendants. Hawkins timely appealed.
II.
As an initial matter, we note that there is no inconsistency
in the district court’s action of denying remand and then
dismissing Hawkins’s claims against the NASD.
Jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the
-3- failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction. Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy. If the court does later exercise its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be on the merits, not for want of jurisdiction.
Bell v. Hood, 327 U.S. 678, 682, 66 S. Ct. 773, 776 (1946) (citing
Swafford v. Templeton, 185 U.S. 487, 493, 494, 22 S. Ct. 783, 785,
786 (1902) and Binderup v. Pathe Exch., Inc., 263 U.S. 291, 305-08,
44 S. Ct. 96, 98-99 (1923)); cf. Steel Co. v. Citizens for a Better
Env’t, 118 S. Ct. 1003, 1013 (1998) (a federal court must resolve
an issue of subject-matter jurisdiction before considering the
merits of the lawsuit).
III.
Turning to the question of subject-matter jurisdiction, the
district court did not err by denying Hawkins’s motion to remand
the action to state court. Congress has granted broad subject-
matter jurisdiction in the arena of securities regulation. The
statute provides: “The district courts of the United States . . .
shall have exclusive jurisdiction of violations of this chapter or
the rules and regulations thereunder, and of all suits in equity
and actions at law brought to enforce any liability or duty created
-4- by this chapter or the rules and regulations thereunder.” 15
U.S.C. § 78aa.
All of Hawkins’s allegations against the NASD may be
categorized as an attempt to “enforce any liability or duty”
created by relevant federal securities laws and regulations. To
the extent that Hawkins claims that the NASD breached duties it
owed to Hawkins in its role as arbitrator, those duties arise from
the NASD Code of Arbitration Procedure, which is a body of rules
approved by the Securities and Exchange Commission and promulgated
under 15 U.S.C. § 78s. To the extent that Hawkins claims that the
NASD conspired with Prudential to deny relief to Hawkins, or that
the NASD failed to adequately supervise Prudential, he has alleged
violations of 15 U.S.C. § 78o-3, the statute which allows the
registration of the NASD as a self-regulating securities exchange,
and 15 U.S.C. § 78s(g), which requires the NASD to enforce
compliance with applicable securities statutes, rules, and
regulations. In short, all of Hawkins’s claims against the NASD,
though carefully articulated in terms of state law, are actions at
law seeking to enforce liabilities or duties created by federal
securities laws which are governed exclusively by federal courts
pursuant to 15 U.S.C. § 78aa.
Because there is subject-matter jurisdiction over Hawkins’s
claims against the NASD, the district court did not err by denying
the motion to remand.
-5- IV.
The district court was also correct to dismiss the claims
against the NASD.
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UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 97-10383
E. TROY HAWKINS,
Plaintiff - Appellant,
VERSUS
NATIONAL ASSOCIATION OF SECURITIES DEALERS INC, ET AL,
Defendants,
NATIONAL ASSOCIATION OF SECURITIES DEALERS INC,
Defendant - Appellee.
Appeal from the United States District Court For the Northern District of Texas June 23, 1998
Before POLITZ, Chief Judge, HIGGINBOTHAM and DeMOSS, Circuit Judges.
PER CURIAM:
Troy Hawkins appeals from the district court’s denial of his
motion to remand this lawsuit to state court. He also appeals the
lower court’s subsequent dismissal of his lawsuit for failure to
state a claim. We affirm. I.
This appeal arises from Hawkins’s dispute with his former
employer, Prudential Securities, Inc., and five of Prudential’s
employees (collectively, the PSI Defendants). Hawkins sued the PSI
Defendants in state court, alleging claims of libel and slander.
Based on an arbitration agreement between Hawkins and Prudential,
however, the Supreme Court of Texas concluded that Hawkins’s claims
had to be sent to arbitration. See Prudential Sec. Inc. v.
Marshall, 909 S.W.2d 896 (Tex. 1995) (orig. proceeding) (per
curiam).
Pursuant to the arbitration agreement, Hawkins’s claims were
arbitrated in a forum provided by the National Association of
Securities Dealers. After nine days of proceedings the arbitration
panel handed down an “award,” which provided:
(1) That [Hawkins’s] Statement of Claim is hereby dismissed in its entirety without prejudice.
(2) That each party shall be responsible for his or her own Attorney’s Fees incurred as a result of legal representation in this case;
(3) That all relief requested in this cause and not expressly granted is hereby denied[.]
At the parties’ request, the arbitration panel issued an Order of
Clarification in which the panel stated that it “intended to render
a full and final resolution of all matters in controversy” and that
-2- it “intended to dismiss the Claim in its entirety with prejudice.”
Hawkins then proceeded to institute a new action in Texas
state court, realleging his original claims against the PSI
Defendants. This new lawsuit also named the NASD as a defendant,
alleging that the NASD was biased against him, failed to properly
administer the arbitration proceeding, and conspired with
Prudential to harm him and deprive him of a fair arbitration.
The NASD removed the case to the United States District Court
for the Northern District of Texas based on “original federal
question jurisdiction under the provisions of 28 U.S.C. § 1331 and
15 U.S.C. § 78aa.” It then moved to dismiss the case. Hawkins
moved to remand the case to state court based on the district
court’s alleged lack of subject-matter jurisdiction. After
receiving argument on these motions, the district court denied the
motion to remand, granted the NASD’s motion to dismiss the claims
against it, and then remanded the remainder of the action between
Hawkins and the PSI Defendants. Hawkins timely appealed.
II.
As an initial matter, we note that there is no inconsistency
in the district court’s action of denying remand and then
dismissing Hawkins’s claims against the NASD.
Jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the
-3- failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction. Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy. If the court does later exercise its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be on the merits, not for want of jurisdiction.
Bell v. Hood, 327 U.S. 678, 682, 66 S. Ct. 773, 776 (1946) (citing
Swafford v. Templeton, 185 U.S. 487, 493, 494, 22 S. Ct. 783, 785,
786 (1902) and Binderup v. Pathe Exch., Inc., 263 U.S. 291, 305-08,
44 S. Ct. 96, 98-99 (1923)); cf. Steel Co. v. Citizens for a Better
Env’t, 118 S. Ct. 1003, 1013 (1998) (a federal court must resolve
an issue of subject-matter jurisdiction before considering the
merits of the lawsuit).
III.
Turning to the question of subject-matter jurisdiction, the
district court did not err by denying Hawkins’s motion to remand
the action to state court. Congress has granted broad subject-
matter jurisdiction in the arena of securities regulation. The
statute provides: “The district courts of the United States . . .
shall have exclusive jurisdiction of violations of this chapter or
the rules and regulations thereunder, and of all suits in equity
and actions at law brought to enforce any liability or duty created
-4- by this chapter or the rules and regulations thereunder.” 15
U.S.C. § 78aa.
All of Hawkins’s allegations against the NASD may be
categorized as an attempt to “enforce any liability or duty”
created by relevant federal securities laws and regulations. To
the extent that Hawkins claims that the NASD breached duties it
owed to Hawkins in its role as arbitrator, those duties arise from
the NASD Code of Arbitration Procedure, which is a body of rules
approved by the Securities and Exchange Commission and promulgated
under 15 U.S.C. § 78s. To the extent that Hawkins claims that the
NASD conspired with Prudential to deny relief to Hawkins, or that
the NASD failed to adequately supervise Prudential, he has alleged
violations of 15 U.S.C. § 78o-3, the statute which allows the
registration of the NASD as a self-regulating securities exchange,
and 15 U.S.C. § 78s(g), which requires the NASD to enforce
compliance with applicable securities statutes, rules, and
regulations. In short, all of Hawkins’s claims against the NASD,
though carefully articulated in terms of state law, are actions at
law seeking to enforce liabilities or duties created by federal
securities laws which are governed exclusively by federal courts
pursuant to 15 U.S.C. § 78aa.
Because there is subject-matter jurisdiction over Hawkins’s
claims against the NASD, the district court did not err by denying
the motion to remand.
-5- IV.
The district court was also correct to dismiss the claims
against the NASD. The NASD enjoys arbitral immunity from civil
liability for the acts of its arbitrators in the course of
conducting contractually agreed-upon arbitration proceedings. See
Corey v. New York Stock Exch., 691 F.2d 1205, 1208-11 (6th Cir.
1982); cf. Austin Mun. Sec., Inc. v. National Ass’n of Sec.
Dealers, Inc., 757 F.2d 676, 686-93 (5th Cir. 1985) (NASD
disciplinary officers enjoy official immunity). Because the NASD
is immune from civil liability arising from its actions taken in
the course of conducting arbitration proceedings, Hawkins has
failed to state a claim against the NASD. The district court was
correct to dismiss the counts against the NASD.
V.
For the aforementioned reasons, we affirm the judgment of the
district court.
-6-