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Hawkins v. Questar Capital Corp.

United States District Court, Sixth Circuit

October 11, 2013



KARL S. FORESTER, Senior District Judge.

This matter is currently before the Court upon the motion filed pursuant to Fed. R. Civ. Pro. 12(b)(6) by the Defendants, Questar Capital Corporation ("Questar"), John Hart and Barry Seale (collectively, "Defendants"), seeking dismissal of the Complaint filed by Plaintiff, Douglas T. Hawkins ("Plaintiff") [DE #7]. This motion has been fully briefed and is ripe for review.


Pursuant to a Registered Representative Agreement dated February 17, 2009 (the "Agreement"), Plaintiff was appointed by Questar, a company engaged in the securities business as a broker/dealer registered with the Securities and Exchange Commission (the "SEC") and as a member of the Financial Industry Regulatory Authority ("FINRA"), as a Registered Representative for the purpose of engaging in the securities business on behalf of Questar [DE #1-2]. As part of this Agreement, Plaintiff agreed to be qualified as a Registered Representative with FINRA and to remain qualified as such during the duration of the Agreement, and, further, to be familiar with and strictly comply with the rules of FINRA [ Id. ].

In November 2011, the Kentucky Department of Financial Institutions, Division of Securities, conducted a routine inspection of Plaintiff's books and records, during which they discovered some irregularities [DE #1]. According to Plaintiff's complaint, he immediately corrected these irregularities and then drafted a letter addressing the paperwork issues found by the Department of Financial Institutions and informing Defendants of the actions he had put in place to correct the problems [ Id. ]. Plaintiff alleges that he was lead to believe that these corrections were adequate and that the relationship between Plaintiff and Defendants would carry on unchanged [ Id. ]. However, Plaintiff was notified on January 3, 2012 that he was terminated as a Questar Representative [ Id. ]. Based on his termination by Questar, Plaintiff brings two breach of contract claims: (1) Claim One, alleging that Questar breached the "Termination Without Cause" provision of the Agreement; and (2) Claim Two, alleging that Questar breached the "Termination For Cause" provision of the Agreement [ Id. ].

Plaintiff's complaint also brings claims for intentional interference with contract (Claim Three) and intentional interference with economic opportunities (Claim Four) [ Id. ]. Although the facts supporting these claims are vague, based on the allegations of the complaint, as well as a sworn affidavit by Plaintiff submitted in support of his complaint, apparently Plaintiff was also contracted as an insurance agent with Allianz, a company Plaintiff alleges owns Questar [DE #1-1]. Plaintiff alleges that confidential information was shared with Allianz without Plaintiff's permission and in violation of his express request to keep such information confidential [DE #1]. Plaintiff states that, shortly after he was terminated by Questar, Allianz terminated its agent contract with Plaintiff under a "no cause" provision of the agent agreement [DE #1-1]. In his intentional interference with contract claim against Questar, Plaintiff alleges that Defendants' sharing of confidential information induced Allianz to terminate Plaintiff's ability to offer its products to Plaintiff's clients [DE #1]. Further, in his intentional interference with economic opportunity claim, Plaintiff alleges that he had restructured his business around the products offered by Allianz and was making plans to partner with Allianz for the foreseeable future [ Id. ]. According to Plaintiff, Defendants' sharing of confidential information with Allianz caused Allianz to terminate its relationship with Plaintiff and effectively cut off all Plaintiff's future economic opportunities with Allianz, depriving Plaintiff of significant future earnings [ Id. ].

Defendants have now moved to dismiss Plaintiff's complaint on the grounds that, upon being hired by Questar, Plaintiff agreed that any dispute arising out of his employment must be resolved through arbitration before FINRA [DE #7]. According to Defendant, because Plaintiff agreed to arbitrate the claims raised in his complaint as a condition of his employment as a Questar Representative, the Federal Arbitration Act requires dismissal for failure to state a claim upon which relief can be granted.


The Federal Arbitration Act (the "FAA") creates a "body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983). Under the FAA, there is a strong presumption favoring arbitration. Glazer v. Lehman Bros, Inc., 394 F.3d 444, 450 (6th Cir. 2005). The FAA "was designed to override judicial reluctance to enforce arbitration agreements, to relieve court congestion, and to provide parties with a speedier and less costly alternative to litigation." Kruse v. AFLAC Intern., Inc., 458 F.Supp.2d 375, 381 (E.D.Ky. 2006)(citing Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270, 280, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)). Indeed, "[t]he preeminent concern of Congress in passing the [FAA] was to enforce private agreements into which parties had entered, ' a concern which requires that we rigorously enforce agreements to arbitrate.'" Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-626, 105 S.Ct. 3346, 3353 (1985)(quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 1242, 84 L.Ed.2d 158 (1985)). Thus, "[i]t is well-settled that courts should enforce private agreements to resolve disputes by mandatory binding arbitration and any ambiguities or doubts should be resolved in favor of arbitration." Kruse, 458 F.Supp.2d at 381 (citing Glazer, 394 F.3d at 451)(other citations omitted).

Under the statutory scheme established by the FAA, when considering a motion to dismiss due to an arbitration provision, the court has four tasks:

first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.

Glazer, 394 F.3d at 451 (quoting Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)). See also Manuel v. Honda R&D Americas, Inc., 175 F.Supp.2d 987, 990 (S.D.Ohio 2001)(applying inquiry to a motion to dismiss due to arbitration provision).

Here, neither party disputes the existence or validity of the agreement to arbitrate. Indeed, a review of the Agreement attached to Plaintiff's complaint shows that Plaintiff agreed that he will "be familiar with and will strictly comply with the rules of FINRA, the statutes administrated by the SEC and the rules and regulations promulgated there under" [DE# 1-2]. In addition, the Agreement refers to the information contained in Plaintiff's FINRA Form U-4, a document executed by Plaintiff on February 17, 2009, the same date as the Agreement [DE #1-2 and DE #7-3]. Pursuant to the FINRA Form U-4, Plaintiff agreed "to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the SROS indicated in Section 4 [i.e. FINRA]..." [DE # 7-3 (emphasis in original)].[1] Thus, pursuant to both the Agreement and FINRA Form U-4, Plaintiff agreed to arbitrate disputes as required by the Rules of FINRA.

FINRA Rule 13200(a) requires arbitration of a "dispute aris[ing] out of the business activities of a member or an associated person and is between or among: Members; Members and Associated Persons; or Associated Persons." FINRA R. 13200(a) [DE #7-4]. Under FINRA Rule 13100, "Associated Persons" is defined as "a person associated with a member." FINRA R. 13100(a) [DE #7-5]. A "Member" is defined as "any broker or dealer admitted to membership in FINRA..." FINRA R. 13100(o) [DE #7-5]. As provided by the Agreement, Questar is a member of FINRA [DE #1-2]. Thus, because of Plaintiff's association with Questar pursuant to the Agreement, Plaintiff is an "Associated Person" within the meaning of Rule 13200. Similarly, according to the complaint, Defendants Hart and Seale are agents of Questar [DE #1]. Thus, Hart and Seale are also "Associated Persons" within the meaning of Rule 13200. ...

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