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Virchow Krause Capital, LLC, N/K/A Baker Tilly v. John H. North

May 30, 2012

VIRCHOW KRAUSE CAPITAL, LLC, N/K/A BAKER TILLY CAPITAL, LLC, PLAINTIFF,
v.
JOHN H. NORTH, DEFENDANT.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff Virchow Krause Capital, LLC n/k/a Baker Tilly Capital, LLC's (Baker) motion for summary judgment, and on Defendant John H. North's (North) motion for summary judgment. For the reasons stated below, Baker's motion for summary judgment is granted, and North's motion for summary judgment is denied.

BACKGROUND

Baker acted as a placement agent for an investment in subordinated notes (Investment) issued by an entity known as KeyLime Cove of Gurnee, LLC (KeyLime). In April 2007, North entered into a contract to purchase notes from KeyLime (Purchase Contract) through Ausdal Financial Partners, Inc. (Ausdal). Baker asserts that it had no contact with North prior to the time North made his investment or during the actual investment process. Baker also contends that it is not a party to the Purchase Contract. In October 2009, KeyLime allegedly filed for bankruptcy. On August 29, 2011, North initiated arbitration proceedings (Arbitration Proceedings) by filing a Statement of Claim with the Financial Industry Regulatory Authority (FINRA) naming Ausdal and Baker as Respondents. Baker contends that it made a request to FINRA to deny North's request to arbitrate against Baker. FINRA allegedly denied the request. Baker asserts that it did not enter into any arbitration agreement with North and that it is not required to arbitrate the claims presented by North in the Arbitration Proceedings. Baker brought the instant action and includes in its complaint a claim seeking a declaratory judgment stating that it is not required to arbitrate the claims brought by North. Baker also includes in the complaint a claim seeking to enjoin North from proceeding against Baker in the Arbitration Proceedings. Baker moved for a preliminary injunction, and on January 17, 2012, the court granted the motion for a preliminary injunction. Baker and North now each move for summary judgment.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Fed. R. Civ. P. 56(c); Smith v. Hope School, 560 F.3d 694, 699 (7th Cir. 2009). A "genuine issue" of material fact in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). In ruling on a motion for summary judgment, the court must consider the record as a whole, in the light most favorable to the non-moving party, and draw all reasonable inferences in favor of the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the court should construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made. Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d 523, 526-27 (7th Cir. 2005).

DISCUSSION

Baker argues that it did not enter into an arbitration agreement with North and that Baker did not have a relationship with North that would require Baker to arbitrate the instant dispute under FINRA Rules. The parties agree that the determinative rule in this case is FINRA Rule 12200, which provides in part the following:

Parties must arbitrate a dispute under the Code if:

a) Arbitration under the Code is either:

1) required by a written agreement, or

2) requested by the customer;

b) the dispute is between a customer and a member or associated ...


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