Wilson-Davis & Co. v. James Mirgliotta, 17-3496

James and Bette Mirgliotta opened IRAs at Wilson-Davis in July 2013 and, at the direction of financial advisors (Werbel, Cervino, Durante), moved substantial funds through Wilson-Davis and Liberty Bank to purchase penny-stock securities (notably New Market Enterprises).
Cervino was a Wilson-Davis representative who assisted with account openings, wired funds from the Mirgliottas’ Wilson-Davis IRAs, collected commissions, and later left Wilson-Davis for another firm.
Werbel, Cervino, and Durante were later convicted of fraud and related crimes for a scheme that funneled investor funds into worthless penny-stock investments.
James filed FINRA arbitration claims (seeking >$700,000) against Werbel, Cervino, Wilson-Davis, and others alleging negligence, respondeat superior, and negligent supervision.
Wilson-Davis sought declaratory and injunctive relief in federal court, arguing it was not required to arbitrate under FINRA Rule 12200 because the New Market trades occurred after funds left Wilson-Davis and thus did not “arise in connection with” Wilson-Davis’s business activities.
The district court rejected that argument for the New Market claim; the Sixth Circuit affirmed, holding the dispute falls within FINRA Rule 12200 because it arises from alleged supervisory failures tied to the member firm.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the dispute must be arbitrated under FINRA Rule 12200(2)	Mirgliottas: FINRA arbitration applies because they are customers and the dispute involves a FINRA member/associated person and arises from the member’s business activities (failure to supervise).	Wilson-Davis: Not required to arbitrate because the New Market purchases were made after funds left Wilson-Davis, Wilson-Davis had no involvement/knowledge, and thus the claims do not arise in connection with its business activities.	Held: Arbitration compelled under FINRA Rule 12200; the claims alleging negligent supervision of a broker who used the firm as a conduit arise in connection with the member’s business activities.

Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010) (arbitration is a matter of contract: only disputes parties agreed to submit are arbitrable)
Vestax Sec. Corp. v. McWood, 280 F.3d 1078 (6th Cir. 2002) (a dispute arising from a firm’s lack of supervision over brokers arises in connection with the firm’s business activities for FINRA arbitration)
Worldwide Basketball & Sport Tours, Inc. v. Nat’l Coll. Athletic Ass’n, 388 F.3d 955 (6th Cir. 2004) (standards of review for injunctions)
Hansmann v. Fid. Invs. Inst. Servs. Co., 326 F.3d 760 (6th Cir. 2003) (review standard for Rule 59(e) and 60(b) relief)