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Habliston v. Finra Dispute Resolution, Inc.

United States District Court, District of Columbia

May 8, 2017



          AMY BERMAN JACKSON United States District Judge.

         Pursuant to Federal Rule of Civil Procedure 59(e), plaintiffs have moved for reconsideration of the Court's order dismissing this case with prejudice, Pls.' Mot. to Amend or Alter Final J. [Dkt. # 25] ("Pls.' Mot."), and plaintiffs have also moved for leave to file a substitute amended complaint under Federal Rule of Civil Procedure 15(a)(2). Pls.' Mot. & Mem. of Authorities for Leave to File First Substitute Am. Compl. [Dkt. #31] ("Pls.' Mot. Am. Compl."). Because plaintiffs have not identified any proper basis for the Court to alter or set aside its judgment, and because any amendment to the complaint would be futile, the Court will deny the motions.


         Plaintiffs are involved in an arbitration against Wells Fargo Advisors, LLC concerning their deceased parents' brokerage accounts, and they brought this action against defendant FINRA Regulation, Inc. ("FINRA Regulation") while the proceedings were ongoing. See Substitute Am. Compl. [Dkt. # 10] ("Compl."). On July 29, 2016, defendant moved to dismiss the complaint on a number of grounds, including Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), 12(b)(7), and 12(h)(3). Mot. to Dismiss Compl. [Dkt. # 16] ("Def's Mot"). They argued that: plaintiffs'claims are not ripe for review; defendant is immune from suit under the doctrines of arbitral and regulatory immunity; plaintiffs failed to name indispensable parties; defendant is not a state actor; the Securities and Exchange Act does not create a private right of action for alleged violations of rules enacted under the Act; and plaintiffs' request that the Court appoint new arbitrators is moot because replacement arbitrators have already been appointed. Mem. of Law in Supp. of Def's Mot. [Dkt. # 17] ("Def's Mem.") at 1-2. Plaintiffs opposed the motion, but they only briefed the issues of arbitral immunity, whether FINRA Regulation is a state actor, and whether their claims were ripe for review. Pls.' Mem. in Opp. to Def's Mot. [Dkt. # 21] ("Pls.' Opp.") at 8-11, 18-19. Plaintiffs failed to respond to any of defendant's other contentions. On January 27, 2017, the Court granted defendant's motion to dismiss. See Habliston v. FINRA Regulation, Inc., No. 15-2225, 2017 WL 396580 (D.D.C. Jan. 27, 2017).

         In granting the motion to dismiss, the Court found that the four arguments plaintiffs failed to address had been conceded. Id. at *4. But the dismissal of the case was ultimately predicated upon lack of subject matter jurisdiction and failure to state a claim under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Id. at *7. The Court concluded that plaintiffs' claims that their constitutional rights had been violated in an allegedly unfair arbitration process were not ripe for review and should be dismissed for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). Id. at *5. And the Court held that all of plaintiffs' claims should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) because FINRA Regulation is immune from suit under the doctrine of arbitral immunity. Id. at *6-7.

         On February 16, 2017, plaintiffs filed a motion to amend or alter the final judgment under Rule 59(e), arguing that it was an abuse of discretion for the Court to deem issues not opposed as conceded, and asking the Court to dismiss all counts without prejudice. Pls.' Mot. at 1; Pls.' Mem. of P. & A. to Alter or Amend Final J. [Dkt. # 25-1] ("Pls.' Mem.") at 1. Plaintiffs also stated that they intended to file a motion for leave to file an amended complaint that would be limited to the topics of "adhesion, unconscionability and material breach of contract to have the arbitration agreements declared unenforceable under 9 U.S.C. § 2, and [to] add new facts to appoint new arbitrators under 9 U.S.C. § 5." Pls.' Mem. at 1. Defendant opposed the motion on March 2, 2017, arguing that plaintiffs had failed "to meet the stringent standards established by Rule 59(e), " and that they should have filed a Rule 15 motion accompanied by their proposed amended complaint together with their Rule 59(e) motion if they intended to seek leave to amend. Opp. to Pls.' Mot. [Dkt. # 26] ("Def's Opp") at 1-2 & n.2. Defendant also took the position that any amendment would be futile. Id. at 10. Plaintiffs replied in support of their motion on March 8, 2017. Pls.' Reply in Supp. of Pls.' Mot. [Dkt. # 27] ("Pls.' Reply").

         On March 10, 2017, the Court directed plaintiffs to file any motion for leave to file an amended complaint by March 31, 2017, stating that it would be "in a better position to consider such issues as the futility of any amendment once the proposed amended complaint [was] before the Court." Min. Order (Mar. 10, 2017). Plaintiffs filed their motion on April 3, 2017, attaching a copy of the amended complaint. See Pls.' Mot. Am. Compl.; Ex. 1, First Substitute Am. Compl. [Dkt. # 31-1] ("Am. Compl."). On April 10, 2017, FINRA Regulation opposed the motion, arguing that the motion should be denied because: (1) plaintiffs have failed to satisfy their burden under Rule 59(e); and (2) the motion for leave to file an amended complaint was futile because plaintiffs' substitute amended complaint would not survive a motion to dismiss. Opp. to Pls.' Mot. Am. Compl. [Dkt. # 32] ("Def's Opp. to Pls.' Mot. Am. Compl") at 1. Plaintiffs replied on April 17, 2017. Pls.' Reply in Supp. of Pls.' Mot. Am. Compl. [Dkt. # 33], STANDARD OF REVIEW

         Under ordinary circumstances, when a party seeks to amend its pleading after a responsive pleading has been served, the Court should "freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a)(2); Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996) (per curiam). When evaluating whether to grant leave to amend, however, the Court must consider these factors: (1) undue delay; (2) prejudice to the opposing party; (3) futility of the amendment; (4) bad faith; and (5) whether the plaintiff has previously amended the complaint. Atchinson v. District of Columbia, 73 F.3d 418 (D.C. Cir. 1996), quoting Foman v. Davis, 371 U.S. 178, 182 (1962). The Court may deny leave to amend based on futility if the proposed claims would not survive a motion to dismiss. Rumber v. District of Columbia, 598 F.Supp.2d 97, 102 (D.D.C. 2009), citing James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir. 1996).

         However, a plaintiff may amend his or her complaint after judgment has been entered "only by filing ... a 59(e) motion to alter or amend a judgment combined with a Rule 15(a) motion requesting leave of court to amend the[] complaint." Firestone, 76 F.3d at 1208. "Rule 15(a)'s liberal standard for granting leave to amend governs once the court has vacated the judgment.... But to vacate the judgment, [a plaintiff] must first satisfy Rule 59(e)'s more stringent standard." Id.

         "A Rule 59(e) motion is discretionary and need not be granted unless the district court finds that there is an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error to prevent manifest injustice." Firestone, 76 F.3d at 1208 (internal quotation marks omitted). A motion to reconsider under Rule 59(e) "is [neither]... an opportunity to reargue facts and theories upon which a court has already ruled nor a vehicle for presenting theories or arguments that could have been advanced earlier." SEC v. Bilzerian, 729 F.Supp.2d 9, 14 (D.D.C. 2010) (internal quotation marks omitted), quoting New York v. United States, 880 F.Supp. 37, 38 (D.D.C. 1995) and Kattan by Thomas v. District of Columbia, 995 F.2d 274, 276 (D.C. Cir. 1993).


         I. Plaintiffs' Motion for Reconsideration Under Rnle 59(e)

         A. Plaintiffs have not identified an "intervening change in controlling law."

         In its memorandum opinion, the Court determined that plaintiff had conceded several arguments advanced in the motion to dismiss by failing to respond to them. See Habliston, 2017 WL 396580, at *4. Plaintiffs now move the Court to "vacate issues deemed conceded, and dismiss all [c]ounts without prejudice so [p]laintiffs may file an amended complaint." Pls.' Mot. at 1. They assert that "[r]ecent changes in controlling law hold it an abuse of discretion to deem issues not opposed as conceded under LCvR 7(b)." Id., citing Cohen v. Bd. of Trs. of Univ. ...

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