Federal District Court Opinions

BROKERAGE SERVICES, formerly known as Global Tradz, FUAD
Action No. 05-4746. United States District Court, E.D.
Pennsylvania. May 25, 2006


BERLE SCHILLER, District Judge

In this action Plaintiff Domenic Tricome asks the Court to
vacate the ruling of a National Association of Securities
Dealers, Inc. (“NASD”) arbitration panel. Defendants Online
Brokerage Services, Inc., Christopher Campbell, Kevin Overy
and Daniel Zaleski (“Online Brokerage Defendants”) oppose
Tricome’s request and have filed a motion to dismiss.
Defendants Success Trade Securities, Inc., Fuad Ahmed,
Margaret Ziegler and Darren Menaker (“Success Trade
Defendants”) have filed a separate motion to dismiss. These
motions to dismiss are presently before the Court, and they
are granted for the reasons discussed below.


In September 2005, Plaintiff Domenic Tricome filed a pro
se Complaint alleging that Defendants “have committed
securities fraud by knowingly and willingly allowing a flaw
in their online software to exist for years without any
communication of that to their customers and the SEC.”
(Compl. at 2.) Tricome was a customer of Defendant Success
Trade Securities (“STS”). Page 2 (Success Trade Defs.’
Mem. at 3.) STS, a broker-dealer, utilizes software called
Success Trader that allows its customers to buy and sell
publicly traded stock over the Internet using a margin
account.[fn1] (Id.) Tricome avers he lost money on trades
due to a flaw in the Success Trader software that allowed
him to make purchases in excess of the amount of money in
his account. (Compl. at 2.) Specifically, Tricome alleges
that: (1) “Success Trade, Ahmed and Menaker lied about the
performance of the software;” (2) “Success Trade and
Ziegler were negligent in not keeping track of a plummeting
stock while Plaintiff was on the phone due to the
malfunction of the software;” and (3) “Online Brokerage
Services, Campbell, Overy and Zaleski knew about the
software. They used it and told the Plaintiff. They have
conspired to withhold evidence.” (Id.)

In September 2004, Tricome filed an arbitration claim
before the NASD, alleging negligence and fraud related to
the Success Trader software. (Online Brokerage Defs.’ Mem.
at 1 & Ex. B (NASD Dispute Resolution Report on Tricome
Matter) at 2.) The respondents filed motions to dismiss, to
which Tricome filed responses. (Online Defs.’ Mem. Ex. B at
1-2.) On May 25, 2005, the NASD panel dismissed Tricome’s
claim with prejudice following a pre-hearing telephone
conference. (Id. at 2.) The panel also recommended
expunging all reference to the Tricome matter from the NASD
registration records of Ahmed, Zaleski, Menaker, Overy,
Campbell and Ziegler. (Id.)

In the present action, Tricome seeks to overturn the
arbitration panel’s ruling, asserting: “The NASD arbitrators
are guilty of misconduct. . . . They didn’t even grant a
hearing. . . . [during the phone telephone conference] the
Arbitrators didn’t know what the case was about, which
includes probably never reading a document (still). . . .
The Plaintiff feels there was bias, because the Page 3
Defendants had lawyers.” (Compl. at 3.) All the defendants
seek dismissal of this action because the Complaint does
not set forth a basis for overturning the findings of the
arbitration panel. (Success Trade Defs.’ Mot. to Dismiss at
2; Online Defs.’ Mem. at 1.) The Success Trade Defendants
also seek dismissal due to res judicata and lack of subject
matter jurisdiction because Tricome has filed the action as
a complaint rather than as an appeal. (Success Trade Defs.’
Mot. to Dismiss at 2.) In addition, the Online Brokerage
Defendants assert that they had no connection to Tricome’s
unsuccessful trades. (Online Defs.’ Mem. at 1.) According
to the Online Brokerage Defendants, Tricome’s sole
allegation against them is that they used the same software
as he did and commented on it, and thereby “they somehow
conspired to keep secret the fact that a certain trading
program may or may not have worked.” (Id. at 1, 3.)

Tricome’s response to the Online Brokerage Defendants’
motion to dismiss states: “When Arbitrators state that
going above the margin, basically a loan, is OK, that’s
nuts.” (Pl.’s Answer to Online Brokerage Defs.’ Mot. to
Dismiss at 3.) Tricome’s response to the Success Trade
Defendants’ motion to dismiss elaborates slightly. It
states, in relevant part:

When Arbitrators’ [sic] compare going above the margin to
a loan for “buying a fur,” and ask questions that make it
clear they have not read all if not any of the information
submitted, that is not just misconduct, it’s insane. The
Arbitrators acted like it is common knowledge that one can
over buy. The Plaintiff doesn’t know one person that
knows that. The Arbitrators’ notes should be made

(Pl.’s Answer to Success Trade Defs.’ Mot. to Dismiss at 3.)

Because Tricome’s responses lack clarity and he is
appearing pro se, on March 27, 2006, the Court afforded him
another opportunity to explain the merits of his appeal.
(Order, Mar. 27, 2006.) The Court ordered Tricome to show
cause “why this case should not be dismissed by filing an
explanation of why the NASD arbitration panel’s decision
should be vacated.” (Id.) The portion Page 4 of Tricome’s
response that is relevant to the Court’s inquiry reads:

When the arbitrators ask questions as if they have no
knowledge of the case, and refer to “over-buying” being
like “buying a coat” (a fur, if the Plaintiff remembers
correctly), it’s not a stretch to conclude that the
arbitrators were negligent. Further, they acted like
“over-buying” was as well documented as the margin, which
in itself has to be viewed as bizarre to say the least;
that is, borrowing money to buy stock; but then having to
pay for that stock or sell it before the day’s over or get
a penalty. From these, it can easily be concluded that
there is a bios [sic] against outsiders. Regardless of
the NASD’s assertion and effort, arbitrators are
insiders. The Plaintiff was an obvious outsider in the
NASD proceedings, and had no chance of winning given
everybody but he knew about over-buying. The arbitrators
were actually slightly indignant about the Plaintiff not
knowing it. . . . Why is there no arbitrator that is truly
an outsider to allow a full and proper perspective?

(Plaintiff’s Answer to J. Bernard [sic] Schiller’s Order
¶¶ 1, 3.)


Generally, a court may not review the merits of an
arbitration ruling on appeal. See Parsons v. Blue
Ridge-Winkler Textiles, 517 F. Supp. 422, 425 (E.D. Pa.
1981) (“Courts will uphold arbitration awards even if the
arbitrator made erroneous findings or misinterpreted the
law or the facts.”). A district court may vacate an
arbitration award only in very limited circumstances of
corruption or misconduct by the arbitrators. See Litvak
Packing Co. v. United Food & Commercial Workers, 886 F.2d
275, 276 (10th Cir. 1989) (“[A court’s] review of
arbitration awards is among the narrowest known to the
law.”); see also 9 U.S.C. § 10(a) (2006).
Specifically, 9 U.S.C. § 10(a) provides that:

[T]he district wherein the award was made may make an
order vacating the award upon the application of any party
to the arbitration —

(1) where the award was procured by corruption, fraud, or
undue means;

(2) where there was evident partiality or corruption in
the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and Page
5 material to the controversy; or of any other
misbehavior by which the rights of any party have been
prejudiced; or

(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not

9 U.S.C. § 10(a). In addition to these statutory
grounds, a court may vacate an arbitration award if it
reveals a manifest disregard of the law or is fundamentally
irrational. See Tanoma Mining Co. Inc. v. Local Union No.
1269, United Mine Workers of Am., 896 F.2d 745, 749 (3d
Cir. 1990) (arbitration decision can be vacated for
manifest disregard of law, not for an error of law); Swift
Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1131
(3d Cir. 1972) (court can revise irrational arbitration

Because Tricome is acting pro se, the Court must liberally
construe his pleadings and “apply the applicable law,
irrespective of whether [he] has mentioned it by name.”
Higgins v. Beyer, 293 F.3d 683, 688 (3d Cir. 2002) (quoting
Holley v. Dep’t of Veteran Affairs, 165 F.3d 244, 248 (3d
Cir. 1999)). Courts, however, are not obligated to credit a
party’s “bald assertions” or “legal conclusions.” In re:
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429
(3d Cir. 1997) (citation omitted).


As a threshold matter, the Court notes that it considers
Plaintiff’s pro se action as an appeal and motion to vacate
the NASD arbitration award. (Order, Mar. 27, 2006 (citing
Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)
(“A party appearing without counsel is afforded extra
leeway in meeting the procedural rules governing
litigation, and trial judges must make some effort to
protect a party so appearing. . . .”).) Page 6

Although the bulk of Tricome’s pleadings address the merits
of the arbitration panel’s ruling, he also mentions
misconduct, partiality and incompetence by the arbitrators.
Tricome argues that the arbitrators “didn’t even grant a
hearing.” (Compl. at 3.) However, arbitrators may grant a
motion to dismiss without holding a full evidentiary
hearing. See Sheldon v. Vermonty, 269 F.3d 1202, 1206 (10th
Cir. 2001); Warren v. Tacher, 114 F. Supp. 2d 600, 602
(W.D. Ky. 2000). In Sheldon v. Vermonty, the Tenth Circuit
affirmed the confirmation of an arbitration award in which
the arbitration panel granted broker-dealers’ motions to
dismiss following a telephone hearing. 269 F.3d at 1207. As
Tricome argues here, the Sheldon plaintiff claimed that he
was denied a fundamentally fair hearing because the
arbitration panel exceeded its authority by dismissing his
claims based only on the pleadings and telephone hearing
related to the motions to dismiss. Id. at 1205-1206. The
Tenth Circuit rejected this claim and held that “a NASD
arbitration panel has full authority to grant a pre-hearing
motion to dismiss with prejudice based solely on the
parties’ pleadings so long as the dismissal does not deny a
party fundamental fairness.” Id. at 1206.

Similarly, in Warren v. Tacher the plaintiffs asserted
that arbitrators engaged in misconduct and exceeded their
powers by dismissing claims after briefs were submitted and
oral argument was held on a motion to dismiss, but prior to
discovery and a full evidentiary hearing. 114 F. Supp. 2d
at 602. The Warren court recognized the authority of NASD
arbitrators to grant pre-hearing dismissals for failure to
state a claim, and it noted that a panel’s refusal to hear
evidence is insufficient to overturn an arbitration award.
Id. The court held that “[p]etitioners must also show that
the excluded evidence was material to the panel’s
determination and that the arbitrator’s refusal to hear the
evidence was so prejudicial that the party was denied
fundamental fairness.” Id. Because the plaintiffs did not
meet this burden, their claim of arbitrator misconduct
failed. Id. at 602-603. Page 7

Tricome presents no evidence of arbitrator misconduct or
partiality in this case. Tricome was not denied fundamental
fairness because he was given opportunities to respond to
the motions to dismiss that were before the arbitration
panel, both in writing and during the telephone conference.
Moreover, Tricome does not identify any material evidence
that the panel failed to consider. Tricome’s allegations of
arbitrator misconduct are merely bald assertions, and
therefore they cannot provide the basis for this Court to
vacate the arbitration panel’s ruling. See Riley v. Jeffes,
777 F.2d 143, 148 (3d Cir. 1985) (Pro se complaint should
be dismissed if the plaintiff presents only vague and
conclusory allegations.).


For the reasons set forth above, the Court denies
Plaintiff’s appeal and motion to vacate the arbitration
award and grants the motions to dismiss all claims against
Defendants with prejudice. An appropriate Order follows.
Page 8


AND NOW, this 25th day of May, 2006, upon consideration of
Defendants’ motions to dismiss, Plaintiff’s responses
thereto, Plaintiff’s answer to the Order to Show Cause, and
for the foregoing reasons, it is hereby ORDERED that:

1. The motions to dismiss (Document No. 4 & Document No. 6)

2. The Clerk of Court is directed to close this case.

[fn1] Ahmed is STS’ President, and Ziegler and Menaker are
former STS employees. (Id.) Page 1