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ZANDFORD v. NASD

July 15, 1998

CHARLES ZANDFORD, Plaintiff,
v.
NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC., et al., Defendants.



The opinion of the court was delivered by: KESSLER

MEMORANDUM OPINION

 This is Plaintiff Charles Zandford's third suit against Defendants relating to actions taken under the regulatory and disciplinary authority of the National Association of Securities Dealers, Inc. ("NASD"). Both prior cases have been dismissed.

 This case arises from a 1994 indictment and subsequent conviction of Zandford on thirteen counts of wire fraud. Zandford alleges that, in pursuing its investigation against him, Defendants abused process in violation of common law (Count I) and violated the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(c), 1962(d), and 1964(c) ("RICO") (Count II).

 This matter is before the Court upon the Defendants' Motion to Dismiss [# 25] pursuant to Fed. R. Civ. P. 12(b)(6). Upon consideration of the Defendants' Motion, Plaintiff's Opposition, Defendants' Reply, and the entire record herein, Defendants' motion is hereby granted.

 I. BACKGROUND1

 Charles Zandford was employed as a registered representative by Dominick and Dominick, Inc. ("Dominick"), a securities brokerage firm, in its Bethesda, Maryland retail sales office from May 1987 until February 1991. Zandford and Dominick were subject to regulation by the NASD, a national securities association responsible for bringing disciplinary proceedings against member firms and their registered representatives. The NASD was subject to direct oversight by the Securities and Exchange Commission ("SEC").

 In early 1987, a NASD District Business Conduct Committee ("DBCC") filed an administrative complaint against Zandford. (Compl. P 42(A).) In October 1988, the DBCC conducted a hearing and found Zandford guilty of securities violations. *fn2" (Compl. P 42(C), (E).) In March 1989, Zandford appealed the DBCC decision to NASD's Board of Governors. (Compl. P 42(F).) The Board of Governors dismissed the excessive trading charge and affirmed the violation of improper deposit of funds. (Compl. P 42(G).) Zandford then appealed the Board of Governor's ruling to the SEC. In November 1991, the SEC reversed the NASD Board of Governors' decision and set aside all charges against Zandford. (Compl. P 42(I).)

 In 1991, the NASD initiated a new investigation of Dominick. (Compl. P 42(J).) During the course of its investigation of Dominick, the NASD discovered information leading them to initiate an investigation of Zandford for theft and embezzlement. (Compl. PP 42(K), 42(L).)

 On February 2, 1994 Zandford filed Civil Complaint No. 94-180 (GK), in this District Court, against the NASD, Brian Hobbs, and David Bender, alleging defamation, false light invasion of privacy, and continuing interference with business relations, all claims being based on the 1991 investigation of Zandford and Dominick. *fn3" (Compl. PP 12, 13.) On February 3, 1994, the NASD, Hobbs, Bender, Roger Sherman, James Lindsay, Jr., and Lynn Nellius referred Zandford to the Federal Bureau of Investigation ("FBI") for investigation of suspected securities violations. *fn4" (Compl. P 42(R).)

 In July 1995, Zandford was convicted by a federal jury of thirteen counts of wire fraud in violation of 18 U.S.C. § 1343. He was sentenced to fifty-two months in federal prison. On April 8, 1996, this Court stayed Civil Action No. 94-180 (GK) pending a review of Zandford's conviction by the Fourth Circuit. Zandford's conviction was affirmed by the Fourth Circuit Court of Appeals on April 3, 1997. See United States v. Zandford, 110 F.3d 62 (4th Cir. 1997) (unpublished disposition). On May 7, 1997, the stay was lifted. Thereafter, this Court dismissed Civil Action No. 94-180 (GK) for failure to state a claim, Fed. R. Civ. P. 12(b)(6).

 In Count I of his current Complaint, Zandford alleges abuse of process. Zandford argues that his referral to the FBI, indictment, and subsequent prosecution were caused by the Defendants in order to leverage their defense to Civil Action No. 94-180 (GK). (Compl. PP 9, 15, 23, 30.) Zandford claims the Defendants used his indictment as grounds to dismiss Civil Action No. 94-180 (GK) by arguing that the indictment vindicated their tortious conduct. (Compl. P 21.)

 Count II of Zandford's Complaint alleges that the Defendants engaged in a pattern of racketeering activity, beginning with the 1987 DBCC complaint and continuing through Zandford's 1995 wire fraud conviction, in violation of RICO. (Compl. PP 10, 38.) He seeks compensatory and punitive damages. (Compl. P 36.)

 II. STANDARD OF REVIEW

 "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). As noted earlier, the factual allegations of the complaint must be presumed true and liberally construed in favor of the plaintiff. Shear v. National Rifle Ass'n of Am., 196 U.S. App. D.C. 344, 606 F.2d 1251, 1253 (D.C. Cir. 1979).

 III. ANALYSIS

 Given the absence of any citeable controlling authority from this Circuit, the Court will assume, arguendo, Defendants have not established immunity and will decide the merits of the case. *fn5"

 A. Abuse of Process Claim

 The parties do not dispute that the substantive law of the District of Columbia governs Zandford's common law tort claim. See Ideal Elec. Sec. Co., v. International Fidelity Ins. Co., 327 U.S. App. D.C. 60, 129 F.3d 143, 148 (D.C. Cir. 1997); Rafferty v. Nynex Corp., 314 U.S. App. D.C. 1, 60 F.3d 844, ...


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