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Banc of America Securities LLC v. Independence Tube Corp.

May 4, 2010

BANC OF AMERICA SECURITIES LLC AND BANC OF AMERICA INVESTMENT SERVICES, INC., PLAINTIFFS,
v.
INDEPENDENCE TUBE CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs, Banc of America Securities LLC ("BAS") and Banc of America Investment Services, Inc. (collectively, "BOA"), have moved for summary judgment seeking a declaratory judgment that Defendant, Independent Tube Corporation ("Independence Tube"), waived its right to arbitrate certain claims by pursuing them in federal court. Independence Tube has filed a motion that seeks to compel arbitration. For the following reasons, the Court grants BOA's summary judgment motion and denies Independence Tube's motion to compel arbitration.

BACKGROUND

I. Northern District of Illinois Local Rule 56.1

When determining summary judgment motions, the Court derives the background facts from the parties' Local Rule 56.1 statements. Specifically, Local Rule 56.1 assists the Court by "organizing the evidence, identifying undisputed facts, and demonstrating precisely how each side propose[s] to prove a disputed fact with admissible evidence." Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 527 (7th Cir. 2000). Local Rule 56.1(a)(3) requires the moving party to provide "a statement of material facts as to which the moving party contends there is no genuine issue." Cracco v. Vitran Exp., Inc., 559 F.3d 625, 632 (7th Cir. 2009). "The opposing party is required to file 'a response to each numbered paragraph in the moving party's statement, including, in the case of any disagreement, specific references to the affidavits, part of the record, and other supporting materials relied upon.'" Id. (citing N.D. Ill. R. 56.1(b)(3)(B)). In addition, Local Rule 56.1(b)(3)(C) requires the nonmoving party to present a separate statement of additional facts that require the denial of summary judgment. See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008). Pursuant to the Local Rules, the Court will not consider any additional facts proposed in the nonmoving party's Local Rule 56.1(b)(3)(B) Response, but instead must rely on the non-movant's Local Rule 56.1(b)(3)(C) Statement of Additional Facts when making factual determinations. See id. at 643; Cichon v. Exelon Generation Co., L.L.C., 401 F.3d 803, 809 (7th Cir. 2005) ("Local Rule 56.1 requires specifically that a litigant seeking to oppose a motion for summary judgment file a response that contains a separate 'statement . . . of any additional facts that require the denial of summary judgment.'") (emphasis in original).

Moreover, the purpose of Rule 56.1 statements is to identify the relevant evidence supporting the material facts, not to make factual or legal arguments, see Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir. 2006), and thus the Court will not address the parties' arguments made in their Rule 56.1 statements and responses. Also, the requirements for responses under Local Rule 56.1 are "not satisfied by evasive denials that do not fairly meet the substance of the material facts asserted." Bordelon, 233 F.3d at 528. Further, the Court may disregard statements and responses that do not properly cite to the record. See Cichon, 401 F.3d at 809-10. Finally, "hearsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial." Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir. 1997). With these standards in mind, the Court turns to the relevant facts of the case.

II. Relevant Facts

A. Northern District of Illinois Proceedings

On October 21, 2008, Independence Tube filed a complaint in the United States District Court for the Northern District of Illinois, seeking rescission of $22 million of auction-rate-securities ("ARS") purchases from BAS. (R. 49, Def.'s Resp. to Pls.' R. 56.1 Statement at ¶¶ 6-7.) Specifically, Independence Tube alleged in its complaint that BOA misrepresented and failed to disclose the risks of ARS by, among other things, representing that "ARS were highly liquid, safe investments for short-term investments and were equivalent to cash or money market funds." (Id. at ¶ 7.) At the time that Independence Tube filed its complaint, the FINRA Code of Arbitration Procedure required BOA to arbitrate disputes if "[r]equested by the customer," and Independence Tube was a customer. (Id. at ¶¶ 9-10.)

Less than one month after filing its complaint, Independence Tube filed a motion to commence discovery, arguing that it "need[ed] to promptly begin discovery so that [the] case [could] proceed efficiently." (Id. at ¶ 11.) BOA opposed that motion, asking the Court to stay the action pending the outcome of a motion that it had filed with the Judicial Panel on Multidistrict Litigation ("JPML") to centralize Independence Tube's action with two similar cases, Bondar v. Banc of America Corp. and Twin Lane, Inc. v. Banc of America Securities LLC. (Id. at ¶ 12; R. 49, Def.'s R. 56.1(b)(3)(C) Statement of Additional Facts at ¶¶ 2-3.) In opposing BOA's motion to stay, Independence Tube argued that it would "suffer undue prejudice if this case were stayed and it were unable to proceed with limited discovery" before the Court. (R. 49, Def.'s Resp. to Pls.' R. 56.1 Statement at ¶ 13.) The Court denied Independence Tube's motion to commence discovery and BOA's motion to stay the proceedings on December 2, 2008. (Id. at ¶ 14.)

BOA filed a motion to dismiss and a memorandum of law in support thereof on December 19, 2008, arguing for dismissal because (1) as it would later argue in the Bondar case, the allegations lacked the particularity that Federal Rule of Civil Procedure 9(b) requires, and (2) as it would later argue in the Twin Lane case, BOA disclosed the facts that it had allegedly concealed. (R. 49, Def.'s R. 56.1(b)(3)(C) Statement of Additional Facts at ¶¶ 5-10.) Independence Tube opposed BOA's motion to dismiss, asking for "a reasonable opportunity to present all the material that is pertinent to the motion including conducting discovery and providing all the materials required by Local Rule 56.1." (R. 49, Def.'s Resp. to Pls.' R. 56.1 Statement at ¶¶ 16-17.)

B. Judicial Panel on Multidistrict Litigation Proceedings

On November 19, 2009, BOA filed a motion before the JPML, requesting that Independence Tube's case join the Bondar and Twin Lane cases, arguing that "many of the operative allegations, claims, and damages" in the three actions were "identical." (R. 49, Def.'s R. 56.1(b)(3)(C) Statement of Additional Facts at ¶¶ 2-3.) Independence Tube opposed BOA's JPML motion. (R. 49, Def.'s Resp. to Pls.' R. 56.1 Statement at ¶ 15.) Before the Court ruled on BOA's motion to dismiss, on February 12, 2009, the JPML centralized Independence Tube's action with the Bondar and Twin Lane cases for purposes of pretrial proceedings in the Northern District of California. (Id. at ¶ 18.)

C. Northern District of California Proceedings

Four days after its case had been transferred to California, Independence Tube again asked BOA to commence discovery, arguing that the Court's preference to stay discovery pending resolution of the motion to dismiss was no longer applicable and stating that, should BOA object, it would seek appropriate relief in the Northen District of California. (Id. at ¶ 19.) In the parties' April 3, 2009, Joint Case Management Conference Statement, Independence Tube proposed completion of fact discovery by November 13, 2009, and submission of dispositive motions by February 26, 2010. (Id. at ¶ 20.) The Northern District of California denied Independence Tube's discovery ...


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