Court Opinion

ID: 15317
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:43:51+00
Date Added: 2024-06-11T13:31:52.431227
License: Public Domain

UNITED STATES COURT OF APPEALS
                          For the Fifth Circuit

                                 No. 97-10383

                             E. TROY HAWKINS,

                                                     Plaintiff - Appellant,

                                     VERSUS

     NATIONAL ASSOCIATION OF SECURITIES DEALERS INC, ET AL,

                                                                Defendants,

           NATIONAL ASSOCIATION OF SECURITIES DEALERS INC,

                                                     Defendant - Appellee.

            Appeal from the United States District Court
                 For the Northern District of Texas
                                 June 23, 1998

Before    POLITZ,   Chief   Judge,    HIGGINBOTHAM    and   DeMOSS,   Circuit
Judges.

PER CURIAM:

     Troy Hawkins appeals from the district court’s denial of his

motion to remand this lawsuit to state court.           He also appeals the

lower court’s subsequent dismissal of his lawsuit for failure to

state a claim.      We affirm.
                                I.

     This appeal arises from Hawkins’s dispute with his former

employer, Prudential Securities, Inc., and five of Prudential’s

employees (collectively, the PSI Defendants). Hawkins sued the PSI

Defendants in state court, alleging claims of libel and slander.

Based on an arbitration agreement between Hawkins and Prudential,

however, the Supreme Court of Texas concluded that Hawkins’s claims

had to be sent to arbitration.        See Prudential Sec. Inc. v.

Marshall, 909 S.W.2d 896 (Tex. 1995) (orig. proceeding) (per

curiam).

     Pursuant to the arbitration agreement, Hawkins’s claims were

arbitrated in a forum provided by the National Association of

Securities Dealers. After nine days of proceedings the arbitration

panel handed down an “award,” which provided:

                (1) That [Hawkins’s] Statement of Claim is
           hereby dismissed in its entirety without prejudice.

                (2) That each party shall be responsible for
           his or her own Attorney’s Fees incurred as a result
           of legal representation in this case;

                (3) That all relief requested in this cause
           and not expressly granted is hereby denied[.]

At the parties’ request, the arbitration panel issued an Order of

Clarification in which the panel stated that it “intended to render

a full and final resolution of all matters in controversy” and that

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it “intended to dismiss the Claim in its entirety with prejudice.”

      Hawkins then proceeded to institute a new action in Texas

state   court,    realleging      his   original    claims    against    the    PSI

Defendants.      This new lawsuit also named the NASD as a defendant,

alleging that the NASD was biased against him, failed to properly

administer    the     arbitration       proceeding,     and    conspired       with

Prudential to harm him and deprive him of a fair arbitration.

      The NASD removed the case to the United States District Court

for the Northern District of Texas based on “original federal

question jurisdiction under the provisions of 28 U.S.C. § 1331 and

15 U.S.C. § 78aa.”       It then moved to dismiss the case.              Hawkins

moved to remand the case to state court based on the district

court’s    alleged    lack   of    subject-matter     jurisdiction.           After

receiving argument on these motions, the district court denied the

motion to remand, granted the NASD’s motion to dismiss the claims

against it, and then remanded the remainder of the action between

Hawkins and the PSI Defendants.           Hawkins timely appealed.

                                        II.

      As an initial matter, we note that there is no inconsistency

in   the   district   court’s      action     of   denying    remand    and    then

dismissing Hawkins’s claims against the NASD.

                 Jurisdiction . . . is not defeated . . . by
            the possibility that the averments might fail to
            state a cause of action on which petitioners could
            actually recover. For it is well settled that the

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          failure to state a proper cause of action calls for
          a judgment on the merits and not for a dismissal
          for want of jurisdiction.    Whether the complaint
          states a cause of action on which relief could be
          granted is a question of law and just as issues of
          fact it must be decided after and not before the
          court   has    assumed   jurisdiction    over   the
          controversy. If the court does later exercise its
          jurisdiction to determine that the allegations in
          the complaint do not state a ground for relief,
          then dismissal of the case would be on the merits,
          not for want of jurisdiction.

Bell v. Hood, 327 U.S. 678, 682, 66 S. Ct. 773, 776 (1946) (citing

Swafford v. Templeton, 185 U.S. 487, 493, 494, 22 S. Ct. 783, 785,

786 (1902) and Binderup v. Pathe Exch., Inc., 263 U.S. 291, 305-08,

44 S. Ct. 96, 98-99 (1923)); cf. Steel Co. v. Citizens for a Better

Env’t, 118 S. Ct. 1003, 1013 (1998) (a federal court must resolve

an issue of subject-matter jurisdiction before considering the

merits of the lawsuit).

                               III.

     Turning to the question of subject-matter jurisdiction, the

district court did not err by denying Hawkins’s motion to remand

the action to state court.    Congress has granted broad subject-

matter jurisdiction in the arena of securities regulation.      The

statute provides: “The district courts of the United States . . .

shall have exclusive jurisdiction of violations of this chapter or

the rules and regulations thereunder, and of all suits in equity

and actions at law brought to enforce any liability or duty created

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by this chapter or the rules and regulations thereunder.”                         15

U.S.C. § 78aa.

      All    of    Hawkins’s    allegations    against        the   NASD   may    be

categorized as an attempt to “enforce any liability or duty”

created by relevant federal securities laws and regulations.                     To

the extent that Hawkins claims that the NASD breached duties it

owed to Hawkins in its role as arbitrator, those duties arise from

the NASD Code of Arbitration Procedure, which is a body of rules

approved by the Securities and Exchange Commission and promulgated

under 15 U.S.C. § 78s.         To the extent that Hawkins claims that the

NASD conspired with Prudential to deny relief to Hawkins, or that

the NASD failed to adequately supervise Prudential, he has alleged

violations of 15 U.S.C. § 78o-3, the statute which allows the

registration of the NASD as a self-regulating securities exchange,

and   15    U.S.C.   §   78s(g),   which    requires    the    NASD   to   enforce

compliance        with   applicable   securities       statutes,      rules,     and

regulations.       In short, all of Hawkins’s claims against the NASD,

though carefully articulated in terms of state law, are actions at

law seeking to enforce liabilities or duties created by federal

securities laws which are governed exclusively by federal courts

pursuant to 15 U.S.C. § 78aa.

      Because there is subject-matter jurisdiction over Hawkins’s

claims against the NASD, the district court did not err by denying

the motion to remand.

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                                         IV.

     The district court was also correct to dismiss the claims

against the NASD.          The NASD enjoys arbitral immunity from civil

liability   for     the    acts    of   its     arbitrators   in    the   course    of

conducting contractually agreed-upon arbitration proceedings.                      See

Corey v. New York Stock Exch., 691 F.2d 1205, 1208-11 (6th Cir.

1982); cf. Austin Mun. Sec., Inc. v. National Ass’n of Sec.

Dealers,    Inc.,    757    F.2d    676,      686-93   (5th   Cir.    1985)   (NASD

disciplinary officers enjoy official immunity).                    Because the NASD

is immune from civil liability arising from its actions taken in

the course of conducting arbitration proceedings, Hawkins has

failed to state a claim against the NASD.               The district court was

correct to dismiss the counts against the NASD.

                                           V.

     For the aforementioned reasons, we affirm the judgment of the

district court.

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