Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00611/USCOURTS-azd-2_15-cv-00611-2/pdf.json

Nature of Suit Code: 896
Nature of Suit: Other Statutes - Arbitration
Cause of Action: 9:9 Motion to Confirm Arbitration Loan

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA

Douglas A. Haviland, 

Plaintiff, 

v. 

TD Ameritrade Incorporated, 

Defendant.

No. CV-15-00611-PHX-NVW

ORDER 

 On June 25, 2015, the court granted Plaintiff Douglas A. Haviland’s Motion to 

Confirm FINRA Arbitration Award (Doc. 1) “to the extent, and only to the extent, that 

TD Ameritrade must continue to make good faith efforts to transfer to Haviland a 

certificate recognizing ownership in his name of the 75,000 Bancorp X106 shares 

currently held by the Depository Trust Company.”1

 (Doc. 29 at 7.) The court’s Order 

assumed, consistent with the parties’ briefing, that confirming the Award in full would 

impermissibly require TD Ameritrade to perform an illegal act, since the Securities and 

Exchange Commission had revoked the registration of Bancorp’s stock in 2009. Section 

5 of the Securities Act of 1933 makes it unlawful to “offer to sell or offer to buy . . . any 

security, unless a registration statement has been filed as to such security,” 15 U.S.C. 

§ 77e(c), or to sell, or deliver after sale, any unregistered security, id. § 77e(a). 

 

1

 For a full account of the prior proceedings in this case, see Haviland v. TD 

Ameritrade, Inc., No. CV-15-00611-PHX-NVW, 2015 U.S. Dist. LEXIS 83340, 2015 

WL 3907117 (D. Ariz. June 25, 2015). 

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 On a Motion for Reconsideration (Doc. 31), however, Haviland attached a copy of 

an Oklahoma state court order, issued in January 2006, that approved a settlement 

agreement between Bancorp and two brokers, Capital Growth Financial, L.L.C., and JH 

Darbie & Co., among others. (See Doc. 31-2 at 25-29.) The agreement provided that 

Bancorp would issue new shares of common stock (“New Shares”) to the brokers and 

stipulated that those shares would be “deemed to be free-trading stock exempt from 

registration pursuant to Section 3(a)(10) of the 1933 Act, as amended.” (Id. at 27.) 

Under that provision, the prohibition on selling and buying unregistered securities does 

not apply to “any security which is issued in exchange for one or more bona fide 

outstanding securities, claims or property interests, or partly in such exchange and partly 

for cash, where the terms and conditions of such issuance and exchange are approved, 

after a hearing upon the fairness of such terms and conditions at which all persons to 

whom it is proposed to issue securities in such exchange shall have the right to appear, by 

any court, or by any official or agency of the United States, or by any State or Territorial 

banking or insurance commission or other governmental authority expressly authorized 

by law to grant such approval.” 15 U.S.C. § 77c(a)(10). As the Oklahoma court had 

invoked § 3(a)(10), it appeared TD Ameritrade could lawfully comply with the 

arbitrator’s Award by delivering to Haviland a certificate recognizing ownership in his 

name of 75,000 New Shares. This court therefore ordered TD Ameritrade to submit a 

supplemental brief “explaining why the court should not grant Haviland’s Motion for 

Reconsideration.” (Doc. 41 at 3.) 

 In a Response (Doc. 43) filed on August 7, 2015, TD Ameritrade argues that 

purchase of any New Shares would violate 15 U.S.C. § 78l(j), which provides, “No 

member of a national securities exchange, broker, or dealer shall make use of the mails or 

any means or instrumentality of interstate commerce to effect any transaction in, or to 

induce the purchase or sale of, any security the registration of which has been and is 

suspended or revoked.” TD Ameritrade contends the SEC “revoked the registration of 

[Bancorp]” in November 2009, and therefore “any transaction” involving any Bancorp 

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shares is barred by § 78l(j). (Doc. 43 at 3.) In fact, the SEC’s November 3, 2009 order 

merely directs that, “pursuant to Section 12(j) of the Securities Exchange Act of 1934, the 

registration of each class of registered securities of [Bancorp] is hereby REVOKED.” 

(Doc. 14-3 at 25 (italics added).) That order does not purport to affect any Bancorp 

shares, such as the New Shares, that are exempt from registration. And the statutory 

provision on which the SEC relied does not give the agency power to remove from the 

market shares issued under the authority of § 3(a)(10). Instead, it merely empowers the 

SEC to revoke a registration when such a registration exists. See 15 U.S.C. § 78l(j) (“The 

Commission is authorized . . . to revoke the registration of a security, if the Commission 

finds . . . that the issuer of such security has failed to comply with any provision of this 

title or the rules and regulations thereunder.”). But where, as here, the shares in question 

are unregistered, § 78l(j) by its terms is inapplicable. 

 TD Ameritrade next argues that the “settlement presented to the Oklahoma state 

court for approval called for” the New Shares “to be presented to, and accepted by, the 

[Depository Trust Company] in exchange for the alleged ‘counterfeit’ shares of 

[Bancorp].” (Doc. 43 at 4.) But the Depository Trust Company allegedly “refused to 

accept the share certificates issued pursuant to the Oklahoma state court order.” (Id. at 

5.) It is not clear why TD Ameritrade believes this fact absolves it of its duty to comply 

with the arbitrator’s Award. TD Ameritrade offers no support for the idea that the 

Depository Trust Company’s rejection of the New Shares somehow renders the sale or 

purchase of those shares illegal. 

 In any event, TD Ameritrade’s brief appears to misstate the record. The 

settlement agreement merely requires Bancorp to “take such steps as are reasonably 

necessary and appropriate to ensure that such New Shares, among other things, shall be: 

a) Reasonably acceptable to [the Depository Trust Company] for deposit therein.” (Doc. 

31-2 at 35.) The court’s order itself makes no mention of the Depository Trust Company. 

There is no indication that Bancorp failed to comply with this term of the agreement. 

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Nor is there any reason to think that such failure would strip the New Shares of their 

exemption from the prohibition on buying or selling unregistered securities. 

 TD Ameritrade insists that it does not know how or where to purchase New Shares 

because a “real market” for such shares does not exist. (Doc. 43 at 5-6.) According to 

TD Ameritrade, “there has been no trading in those, or any other, [Bancorp] shares 

except for a 30 minute period in 2006.” (Id. at 5.) One of the brokers to whom the New 

Shares were issued was allegedly “expelled from the securities industry by order of the 

SEC in July 2008.” (Id. at 5-6 n.7.) That TD Ameritrade may have difficulty locating a 

seller of New Shares, however, does not mean that purchasing such shares and 

transferring them to Haviland would be either illegal or impossible. 

 Finally, it is irrelevant that the “Oklahoma state court proceeding is not referenced 

in the record before the Arbitrator, and . . . was not raised in the underlying arbitration as 

a basis for relief.” (Doc. 43 at 2.) Haviland’s request for relief to the arbitrator included 

a demand that TD Ameritrade “transfer my [Bancorp] ownership which is now registered 

on [TD Ameritrade’s] books into my name on the books of [Bancorp] and deliver to me a 

[Bancorp] stock certificate as proof of my registered ownership.” (Doc. 14-3 at 3.) 

Nevertheless, the arbitrator’s Award ordered only that TD Ameritrade “deliver to 

Claimant a physical share certificate for 75,000 [Bancorp] shares registered in Claimant’s 

name.” (Doc. 1-1 at 3.) The Award did not indicate that TD Ameritrade had to deliver 

Haviland’s previously purchased shares, or that TD Ameritrade would be excused from 

compliance if those specific shares were not transferrable. When TD Ameritrade asked 

the arbitrator to clarify which class of stock the Award called for—CUSIP No. 

05968X106, like Haviland’s original shares, or CUSIP No. 05968X205—the arbitrator 

did not respond. (Doc. 29 at 4.) The Award therefore appears to contemplate that TD 

Ameritrade may comply by furnishing Haviland a certificate for shares of a class other 

than that which he purchased in 2005. As a result, Haviland’s failure to mention the New 

Shares during arbitration does not mean those shares cannot be used to fulfill the Award. 

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 A court’s authority to vacate, modify, or correct an arbitration award is “narrowly 

circumscribed.” Haviland, 2015 U.S. Dist. LEXIS 83340, at *7, 2015 WL 3907117, at 

*3. “In sum, the Federal Arbitration Act allows a federal court to correct a technical 

error, to strike all or a portion of an award pertaining to an issue not at all subject to 

arbitration, and to vacate an award that evidences affirmative misconduct in the arbitral 

process or the final result or that is completely irrational or exhibits a manifest disregard 

for the law.” Id. at *7-8, 2015 WL 3907117, at *3. An award may also be modified if it 

calls for the performance of an impossible or illegal act. Id. at *8, 11, 2015 WL 3907117, 

at *3-4. TD Ameritrade has not shown that any such grounds for vacatur, modification, 

or correction exist in this case.

 IT IS THEREFORE ORDERED that the court’s June 25, 2015 Order (Doc. 29) 

and Judgment (Doc. 30) are vacated. 

 IT IS FURTHER ORDERED that Plaintiff Douglas A. Haviland’s Motion for 

Reconsideration (Doc. 31) is granted. The arbitrator’s Award of March 11, 2015, is 

confirmed in its entirety. 

 IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Haviland 

and against Defendant TD Ameritrade, Inc., confirming the arbitrator’s Award of March 

11, 2015, in its entirety. 

 Dated this 10th day of August, 2015. 

Neil V. Wake

United States District Judge

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