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IN THE UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

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JOSEPH STEVENS & COMPANY, INC.,

Petitioner,

vs. Case No. 07 CV 3385

DAVID CIKANEK, Hon. Barbara Jones

Respondent. 

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RESPONDENT’S REPLY MEMORANDUM IN SUPPORT OF

MOTION TO DISMISS AND IN THE ALTERNATIVE FOR TRANSFER 

I. Introduction

Respondent, David M. Cikanek (“Cikanek”), submits this Reply Memorandum in further

support of his Motion to Dismiss and in response to Petitioner Joseph Stevens & Company,

Inc.’s (“Stevens”) “Memorandum of Law in Further Support of Motion to Vacate Arbitration

Award” (“Stevens’ Reply Memo”). This memorandum will:

• Disprove Stevens’ assertion that Cikanek has somehow conceded the merits of

Stevens’ petition. 

• Show that Stevens has withheld the complete record below in disregard of its legal

duty. 

• Show that Stevens’ Reply Memo mischaracterizes the facts in order to present this

Court with an inaccurate picture of Cikanek’s contacts – or more precisely lack of

contacts – with the State of New York. 

In the alternative, this brief will show transfer of venue should be granted because a

weighing of all pertinent factors establishes Chicago as the proper forum for this action.

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 1 of 12
 On June 8, 2007, Leslie A. Blau, counsel for Respondent, called and e-mailed Alison Cohen, co-counsel for 1

Petitioner, informing her that Cikanek intended to “answer or otherwise move.” (Emphasis added) (Blau Decl., July

9, 2007, Exhibit A). Thus, Stevens’ counsel was more than well aware that by moving to dismiss Cikanek was not

conceding anything regarding the merits of the petition to vacate.

 Under Fed. R. Civ. P. 81(a)(3), the Federal Rules of Civil Procedure apply to proceedings under the Federal

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Arbitration Act (“FAA”), Title 9, U.S.C., to the extent that matters of procedure are not provided for in the FAA. 

The FAA does not provide for motions to dismiss for lack of jurisdiction, and so any such motion thus is a motion

permitted under Rule 12 of the Federal Rules of Civil Procedure (specifically, Fed. R. Civ. P. 12(b)(4)). Fed. R.

Civ. P. 12(a)(4)states:

(4) Unless a different time is fixed by court order, the service of a motion permitted under this rule

alters these periods of time as follows:

(A) if the court denies the motion or postpones its disposition until the trial 

 on the merits, the responsive pleading shall be served within 10 days after

 notice of the court’s action.

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II. Argument

A. Cikanek’s Rule 12(b) Motion Tolled His Time to Respond to the Merits

Stevens tells this Court that Cikanek has conceded on the merits of Stevens’ case. 

Stevens baldly states: “David Cikanek does not even contest the fact that the arbitration panel

exceeded its power and acted in manifest disregard of the law...” (Stevens’ Reply Memo, p. 1). 

Stevens later follows with “Cikanek does not dispute that the arbitration award in his favor is the

result of arbitrators exceeding their power and manifestly disregarding the law.” (Id.) Moreover, in a June 29, 2007 letter to this Court, Stevens’ counsel stated: 

“There is confusion with regard to whether these papers are

complete.....Cikanek served a motion to dismiss, which we consider his

opposition to our motion to vacate.... Consequently, we believe that the

petition and motion to vacate the arbitration award is fully briefed.”

(Emphasis added) 

A copy of the letter is attached as Exhibit A. 

Stevens’ “confusion” is bizarre. Cikanek’s counsel specifically asked Stevens for an

extension that Cikanek intended “to answer or otherwise move.” A motion to dismiss for lack 1

of jurisdiction suspends the time to answer. See Fed. R. Civ. P. 12(a)(4). Bishop v. Colorado, 2

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 2 of 12
 For example, Stevens has neither filed the Statement of Answer submitted in the NASD arbitration by Stevens or 3

the other respondents, nor the various motions made in the arbitration (including a request for change in venue to

New York, which was denied). (Sugarman Decl., July 9, 2007, Exhibit A.)

 Stevens has paid for and received a copy of a court reporter’s transcript(see Blau Decl., July 9, 2007, Exhibit 4

B). Cikanek’s counsel asked Stevens more than once to supply this Court with the entire record—transcripts and

exhibits. (Sugarman Decl., July 9, 2007, Exhibit A). Cikanek’s counsel told Stevens’ counsel: "I believe that it is

Nixon Peabody’s sole responsibility to supply Judge Jones with a complete record of the hearing--including all

exhibits--not just the selected portions you deem helpful to the application to vacate filed by Joseph Stevens &

Company. There is no legitimate basis for your law firm’s refusal to provide the judge with records that you

admit you have.” That refusal forces Mr. Cikanek – who is the Respondent in this vacatur proceeding – to spend

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115 F. Supp.2d 1108, 1115 (D. Minn. 2000). Stevens’ petition to vacate the arbitration award

is not ready for resolution on the merits. Cikanek retains his right to address the merits once this

Court rules on his motions to dismiss or transfer.

B. Stevens Has Withheld the Complete Record of the Arbitration in Violation of

Applicable Case Law

A party moving to vacate an arbitration award under the Federal Arbitration Act should

provide the complete record to the court, “and the failure to offer the entire record leaves the

Court unable to exclude the possibility that the award is supported by evidence that the Petitioner

has not supplied.” Paper, Allied-Industrial, Chemical & Energy Workers Intl. Union v. S.D.

Warren Co., 382 F.Supp.2d 130 at 139 (D. Me. 2005) (“Paper Union”). The penalty for

supplying the court an incomplete record can be severe. In a case in which a brokerage firm

sought to vacate an NASD arbitration award, District Court Judge Kaplan of this court held that

“the lack of a complete record alone is sufficient to require rejection of Commonwealth’s [the

brokerage firm’s] position.” Commonwealth Associates v. Letsos, 40 F.Supp.2d 170 at 175

(S.D.N.Y. 1999), accord, Paper Union at 141, n. 14).

Stevens’ original petition attached limited portions of the record. Stevens has persisted 3

in this practice even after being advised by Cikanek’s counsel. When it filed its Reply Memo, 4

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 3 of 12
money to obtain records that you have in your possession and should have filed. (Blau Decl., July 9, 2007, Exhibit

B) Stevens’ counsel, Martin Russo, has refused, asserting that Stevens has no obligation to provide parts of the

record that they did not use in their papers. (Sugarman Decl., July 9, 2007, Exhibit A).

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Stevens once again presented selected parts of the record and refused to file the entire record

with this Court.

Stevens’ refusal to supply a full record has permitted Stevens to “cherry pick” portions

of the record. This presentation gives a misleading picture of the facts. See ; Lew Lieberbaum

& Co., Inc. v. Randle, 85 F.Supp.2d 123 at 126 (E.D.N.Y. 2000) (rejecting a petition by a

securities broker seeking to vacate NASD arbitration award for filing a self-serving excerpt of

the record). Stevens’ cherry-picking forces Cikanek to refute via declaration the self-serving

and selective facts that Stevens presents. Stevens thereby forces this Court to sift through

competing submissions without a full transcript. So long as Stevens refuses to file a complete

record, disputes of fact regarding personal jurisdiction – and other factual disputes – should be

resolved in favor of Cikanek.

C. Cikanek Did Not Engage in Transactions Sufficient to Confer Personal

Jurisdiction under New York’s Long-Arm Statute

Stevens’ Reply Memo, supported by attorney Alison Cohen’s declaration, sets out a list

of alleged “undisputed facts” that supposedly prove Cikanek “transacted business” in New York 

subjecting him to personal jurisdiction under the New York long-arm statute. Her “facts” are

irrelevant or disputed:

1. The Fidelity and LCP Capital Accounts are Irrelevant 

 The Stevens’ Reply Memo claims that Cikanek’s accounts at Fidelity, later

transferred to an unrelated entity in New York (LCP Capital), confers jurisdiction over Cikanek. 

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 4 of 12
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Stevens’ Reply Memo next claims as an “undisputed fact” that “in opening his account with LCP Capital,

Cikanek signed a customer account agreement and sent it to Inserra in New York.” (Stevens’ Reply Memo, at 7). 

This so-called “fact” is irrelevant, in any event, since it involves another firm. However, this “undisputed fact” is

not supported by the section of the record cited by the Alison Cohen Declaration. Cikanek merely testified that “I

would have had to [fill out a new account form at LCP] in order to be an investor.” (Cohen Decl., Exhibit B, p. 9). 

The truth is the new account form was never introduced in evidence at the hearing. Moreover, nowhere does the

transcript section referenced by Alison Cohen show that Cikanek sent an LCP customer account agreement to New

York.

A second “undisputed fact” alleged in the Stevens’ Reply Memo as to LCP Capital is that “Cikanek

engaged in voluminous trading in the LCP account” in which he lost $600,000. Again, this “fact” is irrelevant since

it involves another firm, but it is also a complete mischaracterization of the trading activity at LCP Capital. The

reality is that any “voluminous trading” which took place at LCP was not “engaged in” by Cikanek at all. Rather, as

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(Stevens’ Reply Memo, at 7). While Cikanek does not dispute that he had accounts with Fidelity

in Massachusetts, or that his accounts were transferred to LCP Capital, these facts are irrelevant

to the jurisdictional analysis. This is tantamount to arguing that transfer papers become

automatic summonses for any future account the customer might have. This argument was

rejected by L.F. Rothschild, Unterberg, Towbin v. McTamney, 59 N.Y.2d 651, 463 N.Y.S.2d

197, 449 N.E.2d 1275, aff’d, 89 A.D2d 540, 452 N.Y.S.2d 630 (1st Dept. 1982), cited in

Cikanek’s main brief. That case involved a challenge to personal jurisdiction by a brokerage

customer who “previously had an account at Merrill Lynch where Karanzalis had been his

account executive.” Just as in this case, the account executive, Karanzalis, moved to another

unrelated firm. The second firm alleged long-arm jurisdiction based upon the customer’s

transactions with Merrill Lynch (just as Stevens does here with respect to Fidelity and LCP

Capital). 

The court rejected this argument. The court stated, “[t]his previous account is unrelated

to the cause of action alleged herein and would, therefore, have no bearing on whether defendant

is subject to “long-arm” jurisdiction pursuant to CPLR 302.” 

The same is true here. Cikanek’s prior activity with a different brokerage firm is

completely irrelevant to the long-arm statute.5

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set forth in the Statement of Claim and as testified to by Cikanek, it was all completely unauthorized. (Martin Russo

Decl. April 28, 2007, Exhibit I, page 3) (Cohen Decl., Exhibit A, page 64, lines 8-16). 

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2. The “Fact” That Cikanek Filled Out 

Paperwork and Transferred His Account.

Stevens tells this Court that it is an undisputed fact that Cikanek filled out

“paperwork” and transferred his account to Stevens. Stevens, however, does not identify the

paperwork or supply copies to the Court. Although Cikanek testified that he believed he signed

new account agreements, Stevens was never able to produce copies of those executed

agreements. (Sugarman Decl., June 15, 2007, ¶ 3.) There is, therefore, nothing in the record

before this Court which supports this claim. It may just as well be possible that Cikanek’s LCP

broker Ross Inserra filled out and signed Cikanek’s name on the “paperwork.”

3. The “Fact” That Cikanek “Constantly” 

Called Inserra “to Discuss the Trading.”

The Stevens’ Reply Memo also tells this Court that Cikanek “constantly” called Inserra

“to discuss the trading,” as if Cikanek knew what was going on before a trade was made and was

involved in the investment decisions. This “undisputed fact” presents a wholly inaccurate

picture of what actually happened. Cikanek was not involved in any of the investments

decisions in his accounts. Inserra, who has since been indicted and convicted for securities

fraud, exercised complete discretion and control. On the very same page cited by Stevens

appears the following dialogue:

Q Was he [Inserra] calling you before he would decide to purchase a stock like

Global Net or something of that sort and would he call you before he decided to

sell a stock?

A: No.

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 6 of 12
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Q: How would you even have a know [sic] or find out about the status of

your account?

A: By calling him up and asking what was happening.

(Cohen Decl., Ex. A, page 64, lines 8-16).

Cikanek was not transacting business in his accounts; Inserra was. These after-the-fact

telephone calls were not “transacting business” within the meaning of the long-arm statute. 

4. The “Fact” That Cikanek “Purposely and Systematically” 

Sent $60,000 to Stevens and Sent “More Money” to Invest Elsewhere

Two final “facts” are cited in the Stevens’ Reply Memo to support jurisdiction. The first

is that Cikanek, over the course of the years that his accounts were at Stevens, sent a lump sum

of $60,000 to Stevens. The second is that later on, money was transferred to Inserra to purchase

a private placement—another sham investment. These facts do not help Stevens either.

As to any money Cikanek may have sent to firms or individuals (i.e., Inserra) other than

Stevens, Cikanek has already pointed out that such activities are irrelevant to this Court’s

analysis of “long arm” jurisdiction. (See discussion above of the L.F. Rothschild case.) 

Stevens then claims that the $60,000 that Cikanek sent while his accounts were still at

Stevens is a fact that shows he “purposefully availed himself of the privilege of conducting

activities within New York.” Stevens Reply Memo at 10. Stevens essentially asks this Court to

ignore the Deutsche Bank Securities case, 7 N.Y.S. 3d 65, 818 N.Y.S.2d 164, 850 N.E.2d 1140

(2006), arguing that, “[t]he court in Deutsche Bank did not establish market sophistication as a

requirement to confer jurisdiction over an out-of-state customer in New York.” (Stevens Reply

Memo at 8.)

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 7 of 12
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Market sophistication may not be a “requirement” for jurisdiction, but Deutsche Bank

Securities holds an investor’s sophistication, or lack thereof, is something the courts of New

York can and should consider in determining long-arm jurisdiction. This case presents an

extreme example. The very testimony cited by Stevens to show that Cikanek sent in the $60,000

tells the pathetic story:

Q: Did there come a time, if you recall, after you came to Joseph

Stevens that your account was basically wiped out, no longer had

any money in it, if you recall?

A: Yes, and I can’t recall the date and I asked Ross what are we going

to do and – or – and he said, well, we need $60,000. I said, Ross,

you lost all this money and I don’t have money to be investing, but

he finally convinced me to send the money and I sent the money.

(Cohen Decl., Exhibit A, page 72, lines 15-24).

The above makes clear that Cikanek sent $60,000 to Inserra because Inserra told him to

do so. Nowhere in that excerpt does Cikanek testify Inserra told him why he needed $60,000 or

what he intended to do with it. Yet, Stevens claims the above constitutes “purposeful business

activity in New York” and “fair warning” that Cikanek would be subject to New York

jurisdiction.

No stronger case than this can be advanced to illustrate the principle laid out last year in

Deutsche Bank Securities that sophistication – or lack of it – is an extremely important factor in

deciding whether or not to dismiss an action for lack of personal jurisdiction. Cikanek was a

retired Illinois janitor who was “basically wiped out” and who was convinced to send in

$60,000. According to Stevens, it is a fact that Cikanek “purposefully and systematically”

engaged in business in New York State when he sent in that money. This Court should reject

this final “fact” and hold that Cikanek did not “transact business” within the meaning of CPLR

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 8 of 12
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302 when he capitulated to the greed of a broker who was later indicted and convicted for

securities fraud.

D. If this Court Determines to Exercise Personal Jurisdiction over Cikanek,

It Should Transfer this Action to the District of Illinois

There seems to be no dispute between the parties as to the factor that a court should

weigh on a motion to transfer venue. Stevens Reply Memo., at 11. A court should weigh the

following factors: “(1) the locus of the operative facts; (2) convenience of the parties; (3) the

convenience of witnesses; (4) the location of relevant documents and relative ease of proof; (5)

the relative means of the parties; (6) the availability of process to compel attendance of unwilling

witnesses; (7) a forum’s familiarity with governing law; (8) the weight accorded to plaintiff’s

choice of forum; and (9) trial efficiency and the interests of justice based on the totality of the

circumstances.” Arthur Metzler & Associates Consulting Engineers, P.C. v. Group Goetz

Architects, P.C., 01 Civ 7253, 2002 U.S. Dist. LEXIS, *11 (S.D.N.Y. April 29, 2002). 

Cikanek is a retired janitor in poor health who lives in Chicago, who has never traveled

to New York, and who lost the majority of his net worth as a result of acts of fraud by Stevens’

employees. (Declaration of David M. Cikanek in Support of Motion to Dismiss (“Cikanek

Decl.”), ¶¶ 1, 3, 14, 15.) After an arbitration hearing in Chicago, Cikanek received an arbitration

award that includes punitive damages. Stevens now wants Cikanek to defend his arbitration

award in New York. The arbitration hearing – the only event in dispute – took place in Chicago. 

Stevens’ choice of forum should be accorded little weight because there is no connection

between New York and the events in dispute. In addition, a transfer of venue would further the

interests of justice because Stevens has far more resources to litigate in a distant forum than does

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 9 of 12
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Cikanek.

1. This Matter Should be Adjudicated in the Northern District of Illinois Because the

Arbitration Hearing Took Place in Chicago.

The “core determination” on motions to transfer venue is the locus of operative facts. 

Viacom Intl., Inc. v. Melvin Simon Prods., Inc. 774 F.Supp. 858, 868 (S.D.N.Y. 2001). This

Court has held that in cases brought to vacate arbitration awards, the locus of operative facts is

where the arbitration hearing took place because the only relevant issues pertain to the

arbitrators’ actions. Thus, the action to vacate should be adjudicated in the forum Crowe

Construction Co. v. Jeffrey M. Brown Associates, Inc., No. 01 Civ. 3839, 2001 U.S. Dist. LEXIS

1392, at *7 (S.D.N.Y. August 30, 2001) (transferring an action to vacate an arbitration award to

the forum where the arbitration hearing occurred). This Court should likewise transfer this

action to the Northern District of Illinois because the arbitration hearing took place in Chicago,

the locus of operative facts. 

2. Stevens’ Choice of Forum Should Be Given Little Weight in this Court’s Analysis.

This Court has held that when there is no connection between the disputed events and

plaintiff’s initial choice of forum, “little weight should be given to the plaintiff’s choice of

forum.” Crowe Construction Co., 2001 U.S. Dist. LEXIS 1392, at *16 (quoting Watkins v.

Harvard University, No. 89 CV 2602, 1989 U.S. Dist. LEXIS 19122, at *2 (E.D.N.Y. Nov. 3,

1989)). As discussed in Part 1, the only disputed events in an action brought to vacate an

arbitration award are the arbitrators’ actions. Id. at *11. Since there is no connection between

Stevens’ chosen forum and the events in dispute, Steven’s choice of forum should be given little

weight.

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 10 of 12
 In this action, Cikanek will be required any resulting expenses including travel. (Blau Decl., July 9, 2007, ¶ 1.) 6

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3. Litigation in a Distant Forum Would be Far More Burdensome to Cikanek.

The relative means of the parties is an important consideration on motions to transfer

venue. Gottdiener v. D.H. Blair & Co., Inc., 462 F.3d 95, 107 (2nd Cir. 2006). Stevens does not

dispute the disparity in resources between Stevens and Cikanek and rightly so: Stevens is an

NASD registered broker-dealer, while Cikanek is a retired janitor who lost the majority of his

net worth as a result of actions by Stevens’ agents. (Cikanek Decl., ¶¶ 1, 15.) Instead, Stevens

asserts that there will be no oral argument and the location of the forum therefore makes no

difference to Cikanek. Stevens, however, provides no support for its assertion that there will be

no oral argument.

In the event that this Court schedules an oral argument, Cikanek would need to reimburse

his attorney for air fare, cab fare and potentially lodging expenses. These expenses would be 6

unduly burdensome for Cikanek. Since Cikanek lost most of net worth as a result of Stevens’

acts of fraud, the relative means of the parties should weigh heavily in this Court’s analysis.

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Conclusion

For the reasons stated, this Court should dismiss this case for lack of personal jurisdiction or in

the alternative transfer this case to the U.S. District Court for the Northern District of Illinois.

Respectfully Submitted,

/s/ ________Leslie A. Blau_______

Leslie A. Blau, Esq. Renan Sugarman, Esq.

BLAU & BONAVICH (pending admission pro hac vice)

140 South Dearborn, Suite 1610 30 North LaSalle, Suite 1530

Chicago, IL 60603-5202 Chicago, IL 60602

(312) 443-1600 fax- 1665 (312) 578-9411 fax-9431

Of Counsel

Paul Malmfeldt

Ari R. Madoff Dated: July 9, 2007

Case 1:07-cv-03385-BSJ-KNF Document 20 Filed 07/10/2007 Page 12 of 12