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Janus Distributors LLC v. Roberts

United States District Court, D. Colorado

May 5, 2017




         This matter comes before the Court on Daniel Lawrence Roberts's (“Roberts”) Motion to Dismiss for Lack of Jurisdiction under Federal Rule of Civil Procedure 12(b)(1) (“Motion”). (ECF No. 11.) For the reasons set forth below, the Motion is granted.

         I. BACKGROUND

         Roberts was employed as an internal sales consultant with Janus Distributors LLC (“Janus”), from November 12, 2012 through November 14, 2014. (ECF No. 1 at 9.) Roberts is a resident of Colorado and Janus “is organized under the laws of Delaware [with] its principal place of business in Denver, Colorado.” (Id. at 7-8.)

         In November 2014, Janus permitted Roberts to resign following an investigation into his charging what he represented to be business expenses on a Janus credit card, when, Roberts concedes, those expenses were personal in nature. (Id. at 2.) Janus is a member of the Financial Industry Regulatory Authority (“FINRA”), and, per FINRA rules, when a “registered representative [such as Roberts] leaves a FINRA member firm for any reason, the firm must file a Form U5 identifying the circumstances of the separation of employment.” (Id. at 2.) The Form U5 is then maintained in the representative's individual Central Registration Depository (“CRD”)[1] record, which is “available to prospective employers and members of the public.” (Id. at 2.) In the subject Form U5, Janus reported that Roberts was “under investigation at the time of termination for fraud or wrongful taking of property.” (ECF No. 16-1 at 5.)Unsurprisingly, Roberts has since had difficulty finding work, running “into rejection after rejection as a result of what amounts to a scarlet letter on his forehead.” (Id. at 6.)

         Based on this course of events, Roberts “brought claims in arbitration against Janus under FINRA's Code of Arbitration Procedure for Industry Disputes.” (ECF No. 1 at 3.) Roberts asserted the following causes of action: (1) expungement of statements defamatory in nature in his Form U5 and CRD record, and (2) damages for defamation. (See ECF Nos. 1-2, 16-1.)

         On August 5, 2016, after a five-day arbitration hearing in front of a FINRA arbitration panel, the panel issued a decision (the “Award”) in Roberts's favor, recommending expungement of the information stated in the Form U5 that was “defamatory in nature, ” and awarding monetary damages in excess of $500, 000. (ECF No. 1-2 at 4-5.)[2] The parties dispute, and the Award itself is unclear, [3] whether the monetary damages were awarded as part of the expungement recommendation or were based on a finding of tort liability. (Id. at 4-5.)[4]

         On August 23, 2016, Janus petitioned this Court to vacate the Award pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 10 (“Petition”). (ECF No. 1.) Janus asserts that vacatur is proper because “the panel exceeded its power, engaged in misbehavior, and acted in manifest disregard of the law.” (Id. at 17.) On October 4, 2016, Roberts filed the subject Motion. (ECF No. 11.) Janus filed its response on October 28, 2016. (ECF No. 12.) Roberts filed a reply on November 14, 2016. (ECF No. 16.)


         Under Federal Rule of Civil Procedure 12(b)(1), a defendant may move to dismiss a case by asserting that the Court lacks subject-matter jurisdiction over the claims in the operative complaint. See Fed. R. Civ. P. 12(b)(1). “District courts have limited subject matter jurisdiction and may hear cases when empowered to do so by the Constitution and by act of Congress.” Randil v. Sanborn Western Camps, Inc., 384 F.3d 1220, 1225 (10th Cir. 2004) (internal quotation omitted). “A court lacking jurisdiction cannot render judgment but must dismiss the case at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).

         Rule 12(b)(1) motions generally take one of two forms: a facial attack or a factual attack. When reviewing a facial attack on a complaint pursuant to Rule 12(b)(1), the Court accepts the allegations of the complaint as true. Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). A factual attack does not permit the court to presume the complaint's factual allegations are true, although the court does have “wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1).” Id. In such circumstances, the court's reference to evidence beyond the pleadings will not convert the motion to one under Rules 56 or 12(b)(6), unless the jurisdictional question is intertwined with the merits of the case. Id. “The jurisdictional question is intertwined with the merits of the case if subject matter jurisdiction is dependent on the same statute which provides the substantive claim in the case.” Id.

         III. ANALYSIS

         The party seeking to invoke federal jurisdiction bears the burden of proving that subject-matter jurisdiction exists. See Lindstrom v. U.S., 510 F.3d 1191, 1193 (10th Cir. 2007) (“The litigant asserting jurisdiction must carry the burden of proving it by a preponderance of the evidence.”). In addressing this burden, Janus asserts that this action is properly before the Court under federal question jurisdiction, 28 U.S.C. § 1331, arising from either the FAA, 9 U.S.C. § 10, or the Securities Exchange Act of 1934 (“SEA”), 15 U.S.C. § 78a et seq. (See ECF No. 1 ¶¶ 1, 87.)

         A. Federal ...

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