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William H. Agnew, et al v. E*Trade Securities LLC

September 8, 2011


The opinion of the court was delivered by: Eduardo C. Robreno, J.



On April 4, 2010, pro se Petitioners William H. Agnew and Bernadine R. Agnew ("Petitioners" or "Agnews") initiated this action against Respondent E*Trade Securities, LLC ("Respondent" or "E*Trade") by filing a motion to vacate a Financial Industry Regulatory Authority ("FINRA") award, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 10-11. On July 7, 2011, the Court entered default against E*Trade shortly after service upon E*Trade was effectuated.

E*Trade brought a Motion to Set Aside Default. For the reasons set forth below, the Court will grant E*Trade's motion, set aside the entry of default, impose costs and expenses of service upon E*Trade and impose a $10,000 sanction upon E*Trade.


On April 4, 2010, pro se Petitioners initiated this action against E*Trade by filing a motion to vacate a FINRA award, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 10-11, seeking to vacate the award that denied their claims against E*Trade for over $26,000*fn1 in damages and awarded $4,050 to E*Trade for costs of arbitration. Petitioners also seek a refund of the $600 filing fee paid to the Arbitration Panel.

A. The Parties

E*Trade is a holding company, the major business of which is an online discount stock brokerage service for self-directed investors where investors can buy and sell securities such as stocks, bonds, options, mutual funds, and exchange-traded funds via electronic trading platforms or by phone via E*Trade Mobile Pro. E*Trade advertises that it is an "online leader" and that "[w]hether you're new to online investing, an experienced investor, or an active trader, E*Trade has everything you need to succeed." Indeed, E*Trade advertises that it has all information available so that individuals new to investing, can use E*Trade's services, such as "independent research," "online tools," and instructional videos to invest. E*Trade also advertises its "five-star customer service" that is provided for its 4.3 million customer accounts. (See E*Trade's Homepage,, last visited August 26, 2011.) Petitioners maintained an account with E*Trade for stock purchases.

B. Petitioners' Claim Petitioners' claims against Respondent are as follows.

On February 4, 2010, Petitioners' two claims are (1) that E*Trade did not sell Petitioners' stock (for Fulton Financial) at "a price as favorable as possible under prevailing market conditions," in violation of NASD's Best Execution Rule 2320; and

(2) that E*Trade failed to fill an Order to purchase Susquehanna Bancshares, Inc.-Pa. shares as directed by Petitioners. (See Mot. Vacate Arb. Award ¶¶ 7, 8.)

On February 24, 2008, Petitioners filed a Statement of Claims with FINRA, by which each party agreed to submit any controversies to arbitration. The Arbitration Panel ("Panel") consisted of three arbitrators and entered an award on February 4, 2010, denying both of Petitioners' claims. See id. ¶ 3. Petitioners now seek to vacate that award on the grounds that the Panel improperly: (1) assessed a $600 session fee against Petitioners; (2) refused an evidentiary hearing; and (3) prejudiced Petitioners by violating their procedural due process rights. See id. ¶¶ 32-39. On April 4, 2010, the Petitioners filed a Motion to Vacate FINRA Arbitration Award with this Court ("Petition"). (Doc. no. 1.)

C. Petitioners' Efforts in Attempting to Effectuate

Service On April 2, 2010 a copy of the Petition and Certificate of Service were sent by Petitioners to John Bersin, Esq., the attorney that represented E*Trade in the Arbitration with Petitioners. (Doc. No. 11, Ex. A & A-1.) On April 5, 2010, Bersin sent Petitioners a letter acknowledging he had received the Petition but stated:

I am in receipt of your cover letter and [the Petition]. My copy of this document does not bear an index number, judge's name or any local rules. Please provide this information, at a minimum. This letter does not constitute a waiver or acceptance of service. (Doc. No. 11, Ex. B.) Shortly thereafter, Petitioners responded by letter, advising Bersin of the Docket Number of this case in the Eastern District of Pennsylvania and the name of the Judge assigned to the case. Having received no response, on May 24, 2010, Petitioners wrote a letter to the Court requesting advice as E*Trade had not answered nor had Bersin or any other attorney made an appearance on behalf of E*Trade. (Doc. No. 11, Ex. C.)

On June 21, 2010, Petitioners called E*Trade's office in Menlo Park, California (Bersin's office) and attempted to obtain the identity of individuals that could be served, but were unsuccessful. On June 24, 2010, Petitioners sent Bersin a letter requesting the name and address of two officers of E*Trade that could waive personal service or be served. On June 30, 2010, Petitioners sent a letter to the Court stating that once Bersin responds and identifies the individuals, Petitioners would promptly serve them. Neither Bersin, nor any other representative for E*Trade, ever answered the Agnews' letter.

On June 30, 2010, Tim Nelson, Esq. of Seyfarth & Shaw's Sacramento office, E*Trade's national counsel, called Petitioners and said that upon receiving the appropriate forms to waive service on behalf of E*Trade, those forms would be sent to the appropriate person at E*Trade for signing. On July 1, 2010, the Agnews forwarded the letter from Nelson to the Court.

On July 2, 2010, William M. Connor, Esq. entered his appearance as counsel for E*Trade. On July 9, 2010, the Court entered an Order granting E*Trade's Motions to admit Kurt A. Kappes, Esq. and James D. McNairy, Esq., as counsel pro hac vice for E*Trade. On July 16, 2010, the Petitioners sent Connor a copy of the Petition and all appropriate waiver documents, and certified the mailing of this package.

D. The Dismissal of Petitioners' Claim

On June 2, 2010, the Court issued a Rule to Show Cause for Petitioners to show why service had not been effectuated in accordance with Rule 4 of the Federal Rules of Civil Procedure, footnoting ...

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