Bass, Berry & Sims attorney Chris Lazarini analyzed the case of Primesolutions Securities, Inc. vs. Winter in which the opposing parties in a customer-initiated FINRA arbitration filed competing state court actions; one to confirm, the other to vacate the arbitration award. The court, applying the priority rule, decided that exclusive jurisdiction rests in the court that first obtained service of process.
Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Primesolutions Securities, Inc. vs. Winter, No. 103961 (Ohio App., 8Dist., 6/30/16)
Where parties seeking relief on the same claims or causes of action file competing suits in courts otherwise having jurisdiction over the dispute, the court whose power is first invoked by proper filing of the action and service of the required process is vested with exclusive jurisdiction over the matter.
This matter concerns the proverbial "race to the courthouse" between opposing parties in the wake of a customer-initiated FINRA arbitration. The dispute arose out of an alleged Ponzi scheme, and the arbitration panel's Award for Claimants Charles and Jennifer Winter (FINRA ID #14-01186 (Cleveland, 9/11/15)) was served on September 11, 2015. On September 17, 2015, the Winters filed an application to confirm the Award in the Wayne County (Ohio) Court of Common Pleas. The following day, September 18, Primesolutions filed its application to vacate the Award in the Cuyahoga County (Ohio) Court of Common Pleas. Primesolutions hired a private process server who served the Winters with notice of the Cuyahoga County action the same day it was filed. The Winters' efforts to serve Primesolutions by certified mail and private process were not initially successful, and Primesolutions was not served with notice of the Wayne County action until November. On the Winters' motion, the Cuyahoga County court dismissed Primesolutions' action, finding that it did not have subject matter jurisdiction due to the first-filed Wayne County action.
On appeal, the Court reverses and remands. First, the Court notes that both the Wayne and Cuyahoga courts obtained jurisdiction over the parties' dispute. Next, it finds the causes of action – one seeking confirmation, the other seeking vacatur – sufficiently similar to invoke the priority rule, because the resolution in one case would affect or interfere with the resolution in the other. In such cases, the Court explains, exclusive jurisdiction rests in the court that first obtained service of process. Finally, the Court rejects the Winters' allegations that Primesolutions evaded service, finding the actions of no consequence because the Winters had already been served with notice of the Cuyahoga action before Primesolutions engaged in any alleged evasion.
Primesolutions' basis for vacatur was the arbitration panel's refusal to delay the hearings due to the unavailability of the broker involved in the alleged Ponzi scheme. While not stated in the Court's opinion, it's likely he was unavailable because he was facing criminal charges for his selling away activities, which he apparently concealed from Primesolutions. The outcome will be interesting as a panel's refusal to postpone due to witness unavailability is one of the few areas where courts sometimes grant relief.