Claimants failed to produce evidence to support any count against Guariglia while he was employed by MSSB.

Taking the Claimants' opposition first. Claimant asserted that the most egregious mistake was the Panel's failure to see the margin call ordered by Respondent Guariglia. Notwithstanding that Claimants failed to offer a scintilla of proof for such claim, the Panel questioned the Respondents further on this matter at the expungement hearing. We remain satisfied there was no margin call ordered.

Claimants also made many arguments regarding various frauds that were perpetrated on them. Yet, while the record is replete with arguments, there is no evidence or testimony of any kind of fraud committed by Respondents Guariglia or MSSB.

Finally, Claimants demanded an in-person hearing on the merits in their opposition to the expungement. Claimants asserted as part of the demand that Respondent Guariglia would be subject to cross examination "so that the merits of Respondents' motion. however predictable the outcome, can be preserved for the record." Claimants chose not to appear; therefore there is no cross examination for the record.

. . .

The Statement of Claim alleges there is fraud. There was no evidence to support this claim. The Statement of Claim alleges that the Claimants' investments were not suitable for them. Claimant Kenneth Goldman's own testimony disposed of this claim. Besides having a law degree, he had previously held a securities license and he had been managing his own accounts for many years. The Statement of Claim repeatedly refers to margin calls. The evidence shows there were no margin calls while Claimants maintained their accounts at Morgan Stanley Smith Barney. Therefore the Panel finds the initial claim was clearly erroneous.

The Claimants failed to prove that Respondent Guariglia was involved in a single sales practice violation. The Panel, though, remains concerned about the timeline surrounding the power of attorney for Claimant Judith Goldman after her account was moved to MSSB. However, the testimony of both Judith and Kenneth Goldman amply demonstrated that Kenneth Goldman made all ofthe decisions in his wife's account with her approval. There was no claim for unauthorized trades in the Judith Goldman account In addition there were no losses in Judith Goldman's account while at Morgan Stanley Smith Barney. Finally, there was no violation, forgery, theft or misappropriation by Barry Guariglia.  

In their motion to vacate the arbitration, Plaintiffs Judith and Kenneth Goldman allege that they began a financial advisory relationship with Defendant Barry Guariglia in the 1990s. See Refiled Mot. to Vacate ¶ 2 n.3, ECF No. 42. At the time, Guariglia worked for Merrill Lynch, Pierce, Fenner & Smith Inc. ("Merrill Lynch"). Id. In November 2008, Guariglia transferred from Merrill Lynch to CGMI. He convinced the Goldmans to transfer their accounts with him to CGMI. See id. ¶ 3 n.4 The Goldmans contend that this transfer allegedly triggered a "margin call" that liquidated their retirement savings. See id. They claim that Guariglia and CGMI knew or should have known that the transfer of the Goldmans' accounts would trigger a margin call, and knew or should have known that a margin call would harm the Goldmans' accounts. The Goldmans claim that CGMI and Guariglia had a duty to warn the Goldmans of these risks. See id. ¶¶ 3 n.4, 47-50.

[T]he Goldmans contend that the arbitration process involved numerous procedural deficiencies in violation of FINRA rules. For example, they claim the arbitration panel allowed CGMI and Guariglia to harass the Goldmans by demanding discovery of irrelevant materials. They also allege that the arbitration panel denied the Goldmans access to important discovery materials from CGMI and Guariglia. Refiled Mot. to Vacate ¶¶ 11(a)-(c), 12-15. They also contend that mediator Pieroni allowed CGMI to attend mediation sessions even though CGMI refused to negotiate with the Goldmans. CGMI's presence during mediation allegedly breached FINRA's confidentiality requirements. Id. ¶¶ 16-24. As a result, CGMI allegedly had access to information that proved beneficial to its defense at the arbitration hearing. The Goldmans also allege that the panel chair had an undisclosed relationship with mediator Pieroni. The Goldmans claim that this relationship was a breach of FINRA ethics rules. Id. ¶¶ 25-28.

In addition to these procedural defects, the Goldmans argue that the panel erred in determining that no margin call occurred. Id. ¶¶ 3 n.4, 45-46. The Goldmans assert that, taken together, these errors show that their arbitrators were "blatantly partial" and acted with manifest disregard of federal law. Id. ¶ 11(d), 46(a). Defendants CGMI and Guariglia move to dismiss, claiming that this Court has no jurisdiction to vacate the arbitration award. See Mot. to Dismiss, ECF No. 43.

SIDE BAR: As with many appeals by public customers in FINRA arbitrations (and consistent with their motions to vacate unpopular panel decisions), this case is no different in presenting unflattering pictures of the hardball tactics of litigation and the manner in which many aspects of mediation, settlement, and arbitration hearings are conducted. In Goldman we are asked to consider allegations of harassing discovery, an oft-told tale. On top of that is the somewhat unusual facts involving mediator Pieroni and his conduct of mediation sessions. The Goldmans assert that Pieroni's manner of handling mediation somehow provided CGMI with beneficial information. On top of that, the FINRA Arbitration Chair is charged with having some "undisclosed relationship" with Pieroni that breached FINRA's rules, whatever that might mean. Finally, as is often the case when moving to vacate, the core complaint is that the Panel simply got it wrong and by failing to see the purported "truth," the arbitrators must have been partial and manifestly disregarded the law.

SIDE BAR: An important issue -- and distinction -- to understand is that the Goldmans filed their Motion to Vacate pursuant to the provisions of the FAA; however, merely moving to vacate pursuant to the federal arbitration act does not, in and of itself, create the requisite federal question necessary to impose subject matter jurisdiction. What the EDPA is saying, in essence, is "okay, we know that you're here pursuant to the FAA but now show us some aspect of your case that gives us the right to consider your appeal." The Goldmans attempted to show that their case presented a federal question because their arbitration claims were based on federal securities laws; the arbitrators manifestly disregarded the federal securities/banking laws; and the arbitrators violated FINRA's rules (which are subject to federal regulation).

The Goldmans' allegations that the panel manifestly disregarded FINRA rules do not constitute a valid claim for manifest disregard of federal law. The Goldmans claim they were denied discovery by the arbitration panel. They also claim that the panel chair was that biased in part because of an undisclosed relationship with FINRA mediator Pieroni. Finally, they claim that CGMI had access to valuable information about the Goldmans' case through violations of FINRA confidentiality requirements. Even though the Goldmans claim that these allegations amount to manifest disregard of federal law, they are more appropriately viewed as issues in the arbitration process addressed by § 10 of the FAA. As discussed, these deficiencies in the arbitration process do not create subject matter jurisdiction. . .

[T]hey present three theories for why their motion to vacate does so. First, they say that federal courts may "look through" a motion to vacate to the subject matter of the underlying arbitration, and that, because the underlying arbitration in this case involved federal securities law claims, the District Court had jurisdiction. Second, they contend that, because they alleged that the FINRA panel manifestly disregarded federal law, they have raised a federal question. Finally, they say that the FINRA procedures at issue here are so integrally related to federal law that disputes over those procedures raise federal questions. We consider each jurisdictional theory in turn, ultimately agreeing with the District Court that none satisfies the stringent Grable test for federal question jurisdiction in the absence of a federal cause of action.

We therefore hold that a district court may not look through a § 10 motion to vacate to the underlying subject matter of the arbitration in order to establish federal question jurisdiction. Instead, the traditional well-pleaded complaint rule applies so that the motion to vacate must, on its face, "necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314.