Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-03360/USCOURTS-cand-3_07-cv-03360-8/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 09:0010 Petition to Vacate Arbitration Award

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

REGINA JIMENEZ,

Plaintiff,

 v.

NATIONAL ASSOCIATION OF

SECURITIES DEALERS, ET AL,

Defendant. /

No. C 07-03360 JSW

ORDER GRANTING

DEFENDANTS’ MOTIONS TO

DISMISS

Now before the Court is the motion to dismiss filed by defendants Lawrence Ian Prozan

(“Prozan”) and Multi-Financial Securities Corp. (“MFSC”) (collectively “Defendants”). 

Having carefully reviewed the parties’ papers and considering their arguments and the relevant

legal authority, the Court hereby GRANTS Defendants’ motion to dismiss. 

BACKGROUND

In this action, plaintiff Regina Jimenez (“Jimenez”) seeks to vacate the final arbitration

award and decision rendered by the Financial Industry Regulatory Authority, Inc. (“FINRA”)

f/k/a National Association of Securities Dealers, Inc. (“NASD”) on July 24, 2007. The Court

will address additional specific facts as required in the analysis.

ANALYSIS

A. Applicable Legal Standards.

When a defendant moves to dismiss a complaint or claim for lack of subject matter

jurisdiction, the plaintiff bears the burden of proving that the court has jurisdiction to decide the 

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claim. Thornhill Publ’n Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). 

Federal courts can only adjudicate cases which the Constitution or Congress authorize them to

adjudicate: those cases which involve diversity of citizenship, or those cases which involve a

federal question, or those cases which involve the United States as a party. See e.g., Kokkonen

v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). 

A motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) may be

“facial or factual.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). 

Where an attack on jurisdiction is a “facial” attack on the allegations of the complaint, the

factual allegations of the complaint are taken as true and the non-moving party is entitled to

have those facts construed in the light most favorable to him or her. Fed’n of African Am.

Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). If the jurisdictional attack

is “factual,” a defendant may rely on affidavits or other evidence properly before the Court, and

the non-moving party is not entitled to any presumptions of truthfulness with respect to the

allegations in the complaint. Rather, he or she must come forward with evidence establishing

jurisdiction. Thornhill, 594 F.2d at 733. 

B. Defendants’ Motion to Dismiss.

Defendants move to dismiss on the grounds that, inter alia, this Court lacks jurisdiction

over Jimenez’s claims. The United States Supreme Court has held that the Federal Arbitration

Act (“FAA”) does not provide a separate basis for federal subject matter jurisdiction. Rather,

there must exist other independent grounds for federal jurisdiction. Moses H. Cone Memorial

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983); see also Luong v. Cicuit City

Stores, Inc., 368 F.3d 1109, 1111 (9th Cir. 2004) (holding that section 10 of the FAA does not

confer federal subject matter jurisdiction). Therefore, Jimenez must demonstrate another

independent grounds for federal jurisdiction. She has not done so.

Jimenez argues that this court has jurisdiction over her claims pursuant to the Securities

and Exchange Act. The Court provided Jimenez leave to state a claim against Defendants under

the Securities and Exchange Act. Because the basis of Jimenez’s claim or claims under the 

Securities and Exchange Act was not clear from the SAC, the Court provided Jimenz an

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opportunity at the hearing on Defendants’ motion to dismiss to clarify what statutory provisions

she alleges were violated and what supporting facts she would allege to state a claim under such

provisions. All of Jimenez’s alleged violations that she raised at the hearing have already been

raised and addressed by the NASD through the underlying arbitration. 

“‘Res judicata, also known as claim preclusion, bars litigation in a subsequent action of

any claims that were raised or could have been raised in [a] prior action.’” Owens v. Kaiser

Foundation Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (quoting Western Radio Servs.

Co. v. Glickman, 123 F.3d 1189, 1192 (9th Cir. 1997)). Res judicata applies when, as between

two (or more) actions, there is “‘(1) an identity of claims, (2) a final judgment on the merits, and

(3) identity or privity between parties.’” Id. Collateral estoppel, or issue preclusion, bars

“relitigation of issues actually litigated and necessarily decided, after a full and fair opportunity

for litigation, in a prior proceeding.” Shaw v. Hahn, 56 F.3d 1128, 1131 (9th Cir.1995). “A

federal court decision has preclusive effect where (1) the issue necessarily decided at the

previous proceeding is identical to the one which is sought to be relitigated; (2) the first

proceeding ended with a final judgment on the merits; and (3) the party against whom collateral

estoppel is asserted was a party or in privity with a party at the first proceeding.” Kourtis v.

Cameron, 419 F.3d 989, 994 (9th Cir. 2005). “An arbitration decision can have res judicata or

collateral estoppel effect, even if the underlying claim involves the federal securities laws.” 

Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1360 (9th Cir. 1985).

The Court finds that the elements for res judicata and collateral estoppel are satisfied

here. Therefore, Jimenez’s claims under the Securities and Exchange Act are barred by the

doctrine of res judicata and collateral estoppel and cannot be re-litigated in this Court. Such

claims thus fail to provide an independent grounds for federal jurisdiction. Accordingly, the

Court grants Defendants’ motion to dismiss based on lack of jurisdiction.

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CONCLUSION

For the foregoing reasons, the Court grants Defendants’ motion to dismiss without 

leave to amend. 

IT IS SO ORDERED.

Dated: August 8, 2008 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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