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Mical v. Glick

United States District Court, Seventh Circuit

January 28, 2014



CHARLES P. KOCORAS, District Judge.

This matter comes before the Court on: (i) the motions of Defendants E*TRADE Securities LLC ("E*TRADE") and Philip Glick, Alan Case and Lynn Hirschfeld Brahin (the "Arbitrators") (collectively "Defendants") to dismiss the complaint of Plaintiffs Stanley Mical ("Mr. Mical") and Lutgarda Mical (collectively the "Micals") pursuant to Federal Rule of Civil Procedure 12(b)(6); (ii) the Micals' motion for discovery from the Arbitrators; and (iii) E*TRADE's motion to confirm an arbitration award (the "Award") rendered on June 14, 2013. For the reasons set forth below, Defendants' motions to dismiss are granted, the Micals' motion for additional discovery is denied as moot, and E*TRADE's motion to confirm the Award is granted.


I. Facts

The following well-pleaded allegations are derived from the Micals' first amended complaint, and the Court accepts them as true and draws all reasonable inferences in favor of the Micals for purposes of the instant motion. In early 2008, the Micals opened an account with E*TRADE for the purpose of trading stocks and securities. By the end of June 2008, the Micals' balance was nearing $0.00, and by July 7, 2008, their account had negative equity. E*TRADE issued a margin call of $35, 000 on July 1, 2008. The Micals were informed that they could satisfy this margin call by: (i) depositing cash into their account; (ii) liquidating securities; or (iii) depositing additional marginable securities.

On July 7, 2008, Mr. Mical engaged in a telephone conversation with Stuart Novoselski ("Novoselski"), an E*TRADE representative. Novoselski implied that the Micals needed to remit approximately $111, 000 to satisfy the margin call, whereas Mr. Mical was willing to pay $35, 000. After this phone call, pursuant to an agreement entered into with the Micals at the beginning of their relationship with E*TRADE, E*TRADE liquidated the stocks in the Micals' account to cover open call options that the Micals had drawn on their account.

II. Procedural History

On July 5, 2011, pursuant to their agreement with E*TRADE, the Micals filed a Statement of Claim with FINRA Dispute Resolution, Inc. seeking to arbitrate E*TRADE's liquidation of their account. The Micals alleged that E*TRADE's actions had been negligent and that E*TRADE should have given them until the close of business on July 7, 2008, to transfer cash into their account to satisfy the margin call. Pursuant to their agreement with E*TRADE, the arbitration proceedings (the "Arbitration") would be conducted consistent with the rules of the Financial Industry Regulatory Authority ("FINRA").

For nearly two years, the Micals and E*TRADE engaged in discovery and submitted briefs to the Arbitrators. The Micals and E*TRADE participated in the selection of the Arbitrators, and four pre-hearing sessions were held prior to the final stage of the Arbitration, a hearing that occurred over five sessions between June 4, 2013 through June 6, 2013.

At the hearing, the Arbitrators heard all of the evidence presented and did not exclude any evidence. The evidence included a tape recording of the phone call between Mr. Mical and Novoselski. The Arbitrators declined to replay the tape of the conversation during the hearing but read the transcript of it in addition to the one playing of the phone call. Ultimately, the Arbitrators rejected the Micals' version of events-that Novoselski had demanded $111, 000. Instead, the Arbitrators accepted E*TRADE's version-that the Micals' charge of negligent liquidation was false and that E*TRADE had sold the Micals' stocks after Mr. Mical had indicated that the Micals would not satisfy the margin call. On June 14, 2013, the Arbitrators issued the Award in which E*TRADE and the Micals were assessed costs of the Arbitration, the Micals' claim was deemed to be false, a counterclaim by E*TRADE for over $60, 000-the Micals' outstanding balance at the end of July 2008-was dismissed, and a recommendation that any record of this allegation be expunged from Novoselski's records maintained by the Central Registration Depository ("CRD"). On November 20, 2013, the Micals filed a two count first amended complaint seeking to vacate or modify the Award pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. ยง 1 et seq. Specifically, the Micals request an award of $481, 617-the amount of the liquidated securities. In addition to its motion to dismiss, E*TRADE has moved this Court to confirm the Award.


A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint and not the merits of the case. McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 878 (7th Cir. 2012). The allegations in a complaint must set forth a "short and plain statement showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Plaintiffs need not provide detailed factual allegations but must provide enough factual support to raise their right to relief above a speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A claim must be facially plausible, meaning that the pleadings must allow the court to draw the reasonable inference that the defendant is liable for the purported misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, " are insufficient to withstand a motion to dismiss under Rule 12(b)(6). Id. at 678. Pro se complaints should be construed liberally and held to a less stringent standard than those drafted by attorneys. Luevano v. Wal-Mart Stores, Inc., 722 F.3d 1014, 1027 (7th Cir. 2013).


I. The Arbitrators' Motion to Dismiss and the Micals' ...

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