Morgan Keegan & Co. v. Shadburn

829 F. Supp. 2d 1141, 2011 U.S. Dist. LEXIS 128009, 2011 WL 5244696
CourtDistrict Court, M.D. Alabama
DecidedNovember 3, 2011
DocketCase No. 2:11-CV-624-WKW[WO]
StatusPublished
Cited by5 cases

This text of 829 F. Supp. 2d 1141 (Morgan Keegan & Co. v. Shadburn) is published on Counsel Stack Legal Research, covering District Court, M.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morgan Keegan & Co. v. Shadburn, 829 F. Supp. 2d 1141, 2011 U.S. Dist. LEXIS 128009, 2011 WL 5244696 (M.D. Ala. 2011).

Opinion

[1142]*1142 ORDER GRANTING PRELIMINARY INJUNCTION

W. KEITH WATKINS, Chief Judge.

I. INTRODUCTION

Plaintiff Morgan Keegan & Company brings this action under the Federal Arbitration Act, see 9 U.S.C. §§ 1-16, for declaratory and injunctive relief to prevent an arbitration proceeding brought against it by Defendant William Shadburn (“Dr. Shadburn”) before the Financial Industry Regulatory Authority (“FINRA”). Before the court is Morgan Keegan’s Motion for Preliminary Injunction (Doc. # 5), which has been fully briefed (Docs. # 13, 21, 25). For the reasons discussed, Morgan Keegan has shown a substantial likelihood of success on its claim that Dr. Shadburn’s FINRA claims are not arbitrable, that it would suffer irreparable injury if compelled to arbitrate, and that the balance of the harms and the public interest weigh in its favor. Accordingly, the Motion for Preliminary Injunction is due to be granted.

II. JURISDICTION AND VENUE

Personal jurisdiction and venue are not contested, and there are adequate allegations of both. More discussion is required, however, on the issue of subject matter jurisdiction.1 Although Morgan Keegan invokes the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16, as a source of subject matter jurisdiction, the FAA “bestows no federal jurisdiction but rather requires for access to a federal forum an independent jurisdictional basis over the parties’ dispute.” Vaden v. Discover Bank, 556 U.S. 49, 129 S.Ct. 1262, 1271, 173 L.Ed.2d 206 (2009) (internal quotation marks and alterations omitted); see also Cmty. State Bank v. Strong, 651 F.3d 1241, 1252 (11th Cir.2011) (“It is a long-accepted principle that the FAA is non jurisdictional: The statute does not itself supply a basis for federal jurisdiction over FAA petitions.”). It must be determined, therefore, whether an independent basis for subject matter jurisdiction exists.

Morgan Keegan also contends that this court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 because Dr. Shadburn’s claims in the underlying arbitration include alleged violations of the federal securities laws. The court agrees that § 1331 provides an independent jurisdictional basis for subject matter jurisdiction.

In Vaden, the Supreme Court held that, pursuant to 9 U.S.C. § 4, federal courts have subject matter jurisdiction to hear a petition to compel arbitration where the underlying dispute between the parties “arises under” federal law. 129 S.Ct. at 1273. A federal court may “look through” a petition under § 4 of the FAA and assess whether it is predicated on an action that “arises under” federal law. Id. Although Vaden addressed a federal court’s subject matter jurisdiction to compel arbitration, district courts have applied Vaden’s precepts when the motion is instead one to enjoin an arbitration proceeding, and the court agrees with the reasoning of these courts. See In re Sept. 11 Litig., 765 F.Supp.2d 587, 591 (S.D.N.Y.2011) (“Though Vaden considered the [jurisdictional] issue in the posture of a motion to compel arbitration, that distinction is legally insignificant” where the issue is whether [1143]*1143to stay an arbitration proceeding); see also UBS Sec. LLC v. Voegeli 684 F.Supp.2d 351, 354 (S.D.N.Y.2010) (Vaden’s “reasoning applies to situations where, as here, a party seeks to stay or enjoin an arbitration.”), aff'd, 405 Fed.Appx. 550 (2d Cir.2011).

Here, the underlying dispute between Morgan Keegan and Dr. Shadburn includes alleged violations of the Securities Act of 1933, see 15 U.S.C. §§ 77a-77aa, namely § 11 (governing misleading registration statements), § 12(a)(2) (governing material misstatements or misleading omissions in a prospectus or oral communication), and § 15 (governing liability of persons in a position of control over §§ 11 and 12 violators). See 15 U.S.C. §§ 77k, 77l, 77o. Dr. Shadburn also alleges violations of. Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Securities Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5. (Statement of Claim 6-16.) Federal courts have jurisdiction over claims arising under the Securities Act of 1933 and the Securities Exchange Act of 1934. See § 1331 (“The district court shall have original jurisdiction of all civil actions arising under the ... laws ... of the United States.”). Because the substantive controversy between Morgan Keegan and Dr. Shadburn “arises under” federal law, Vaden establishes that subject matter jurisdiction exists over Morgan Keegan’s action filed in this court.2 See § 1331; see also Household Bank v. JFS Group, 320 F.3d 1249, 1259 (11th Cir.2003) (“[A] federal district court has subject-matter jurisdiction over a declaratory judgment action if, as here, a plaintiffs well-pleaded complaint alleges facts demonstrating the defendant could file a coercive action arising under federal law.”).

The parties also have assumed, without discussion, that the FAA gives this court the power to grant the relief requested, that is, to enjoin the pending arbitration under the FAA. Section 4 of the FAA permits a party aggrieved by another party’s failure to arbitrate according to the terms of a written agreement to petition the court for an order compelling the arbitration to proceed as agreed. 9 U.S.C. § 4. Section 4 does not speak to the converse scenario where a party seeks federal court intervention to halt an arbitration on the ground that there is no written agreement to arbitrate. Notwithstanding this silence, the First Circuit has held that “the power to enjoin an arbitration is ‘the concomitant of the power to compel arbitration,’ and thus the same provision of the FAA, 9 U.S.C. § 4, authorizes both types of orders.”3 PCS 2000 LP v. Romulus Telecomm., Inc., 148 F.3d 32, 35 (1st Cir. [1144]*11441998) (quoting Societe Generale de Surveillance, S.A. v. Raytheon European Mgmt. & Sys. Co., 643 F.2d 863, 868 (1st Cir.1981)). On at least one occasion, the Eleventh Circuit has cited the holding in

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Viyella v. Fundacion Nicor
S.D. Florida, 2020
Kakawi Yachting, Inc. v. Marlow Marine Sales, Inc.
215 F. Supp. 3d 1259 (M.D. Florida, 2014)
Grant v. Rotolante
147 So. 3d 128 (District Court of Appeal of Florida, 2014)
Morgan Keegan & Co. v. McPoland
829 F. Supp. 2d 1031 (W.D. Washington, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
829 F. Supp. 2d 1141, 2011 U.S. Dist. LEXIS 128009, 2011 WL 5244696, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morgan-keegan-co-v-shadburn-almd-2011.