Roth v. Financial Industry Regulatory Authority
1:18-cv-10383
| S.D.N.Y. | May 6, 2019Background
- Byron Roth, David Farina, and Jared Schramm (Roth Capital Partners principals) were involved in a 2016 sale of 3,055,000 PDN shares on behalf of Matthew Proman; 860,000 shares were placed into RCP-related accounts.
- In August 2016 PDN announced a controlling-interest sale to Cosmic Forward Limited at $1.20 per share.
- Proman initiated FINRA arbitration in January 2017 alleging Petitioners traded on material nonpublic information and sought about $2 million in damages.
- After three days of hearings, the parties executed a Settlement Agreement on April 11, 2018, and Proman withdrew his claims in a notarized retraction asserting no factual support for his allegations.
- The FINRA panel (on April 24, 2018) unanimously recommended expungement of the arbitration from Petitioners’ CRD records, noting the withdrawal and evidentiary record; Proman did not oppose expungement.
- Petitioners filed to confirm the FINRA award in federal court; FINRA did not contest, Proman did not oppose, and the Court considered the petition as unopposed summary judgment input.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FINRA award recommending CRD expungement should be confirmed under the FAA | Petitioners: award is final, based on Proman's withdrawal and evidentiary record, so confirmation is required | Proman: did not oppose; FINRA: does not contest confirmation | Court confirmed the arbitration award and ordered case closed |
| Whether there is a genuine dispute of material fact precluding confirmation | Petitioners: no material factual dispute; record and retraction support expungement | Opposing parties: offered no response or dispute | Court found no material factual dispute and treated petition as unopposed summary judgment |
| Whether the FINRA panel acted within its authority in recommending expungement | Petitioners: panel relied on pleadings, evidence, and Proman's notarized withdrawal, within authority under FINRA Rule 2080 | No contested argument presented | Court concluded the panel did not exceed its authority and had a colorable justification |
| Whether the settlement/withdrawal bars expungement or required additional conditions | Petitioners: settlement did not condition withdrawal on non-opposition to expungement; withdrawal supports expungement | No contesting position offered | Court accepted the panel’s finding that the settlement was not conditioned and granted expungement confirmation |
Key Cases Cited
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006) (courts generally convert final arbitration awards into judgments; confirmation is summary in nature)
- Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241 (2d Cir. 2004) (district court may not grant unopposed summary judgment without ensuring movant met its burden)
- Amaker v. Foley, 274 F.3d 677 (2d Cir. 2001) (discusses standards for treating unopposed summary judgment motions and movant's burden)