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Dougherty v. VFG, LLC

United States District Court, E.D. Pennsylvania

July 28, 2015

EDWARD J. DOUGHERTY and HENRIETTA D'AGOSTINO
v.
VFG, LLC f/k/a VOYAGER FINANICAL GROUP, LLC, ET AL

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For EDWARD J. DOUGHERTY, HENRIETTA D'AGOSTINO, Plaintiffs: GLENN S GITOMER, LEAD ATTORNEY, McCAUSLAND, KEEN, & BUCKMAN, RADNOR, PA; BENJAMIN R. PICKER, MCCAUSLAND KEEN & BUCKMAN, RADNOR, PA.

For JOHN T. OATES, JR., Defendant: PAUL C. TROY, LEAD ATTORNEY, KANE PUGH KNOELL AND DRISCOLL, L.L.P., NORRISTOWN, PA.

For CETERA FINANCIAL SPECIALISTS LLC, AS SUCCESSOR BY MERGER TO GENWORTH FINANCIAL SECURITIES CORPORATION, Defendant: LUIGI SPADAFORA, MATTHEW TRACY, LEAD ATTORNEYS, PRO HAC VICE, WINGET SPADAFORA & SCHWARTZBERG LLP, NEW YORK, NY; JONATHAN P. COHEN, Jonathan P. Cohen, P.A., Fort Lauderdale, FL.

For BRUCE A. BRAVERMAN, MAIN LINE GUARANTEE, LLC, Defendants: BART D. COHEN, LEAD ATTORNEY, Law Office of Bart D. Cohen, Villanova, PA.

For FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER OF VANTAGE POINT BANK, Defendant: TODD JAMES COOK, LEAD ATTORNEY, STEVENS & LEE, PC, KING OF PRUSSIA, PA.

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MEMORANDUM

R. BARCLAY SURRICK, J.

Presently before the Court is the Motion for Reconsideration filed by Defendant, Cetera Financial Specialists, LLC, as successor by merger to Genworth Financial Securities Corporation (" Cetera" ). (ECF No. 16.) For the following reasons, the Motion for Reconsideration will be granted.

I. BACKGROUND

This is a securities related action involving the marketing, sale, and purchase of certain fixed-income pension stream securities. Prior to removal to this Court, Cetera moved to compel Plaintiffs to arbitrate their claims against Cetera and its registered representative, Defendant John T. Oates, Jr., pursuant to an arbitration agreement and securities industry rules. Plaintiffs agreed with Cetera's request. Oates, a non-signatory to the arbitration agreement, objected to the request. The Court of Common Pleas of Bucks County, Pennsylvania denied Cetera's Motion without opinion. Cetera now moves for reconsideration of the state court's Order.

A. Factual Background

On or around October 26, 2006, Plaintiff Edward Dougherty opened a securities account with Genworth Financial Securities Corporation (the predecessor to Cetera). (Securities Account Form, Cetera's Mot. Ex. " B," ECF No. 16.) From March 2011 through 2012, Edward Dougherty invested in eight fixed-income pension stream securities in a total sum of $1,465,693.69. (Compl. ¶ 12, Notice of Removal Ex. " B," ECF No. 1.) In April 2011, his mother, Plaintiff Henrietta D'Agostino, invested in one fixed-income pension stream security in the sum of $49,452.89. ( Id. ¶ 13.) The specific securities purchased by Plaintiffs were civil service, military, and private corporate pensions, purchased from a pensioner for a lump-sum payment in return for the receipt of the monthly pension checks. ( Id. ¶ ¶ 23-27.)

The Plaintiffs obtained their investments through Defendant VFG, LLC, f/k/a Voyager Financial Group, LLC (" Voyager" ). ( Id. ¶ ¶ 12-13.) Oates was the registered representative of Cetera at all times material. ( Id. ¶ 6.) Plaintiffs purchased the securities at issue based upon recommendations made by Oates. ( Id. ¶ ¶ 12-13, 15-16.)

Plaintiffs allege that they have not received all monthly payments promised. ( Id. ¶ 29.) They also allege that many payments have not been timely received, that the securities purchased have attributes different from what was promised (including alleged illegality under 38 U.S.C. § 5301), and that the securities carry a far greater risk than what was represented. ( Id. ¶ ¶ 15-17, 29.)

B. Procedural Background

Plaintiffs filed this action on March 13, 2013, in the Court of Common Pleas of Bucks County, Pennsylvania. In addition to Cetera, Voyager, and Oates, Plaintiffs

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also named Andrew P. Gamber, Jonathan Sheets, Bruce A. Braverman, Vantage Point Bank, and Main Line Guarantee as Defendants. Plaintiffs bring the following causes of action, all sounding in state law: violation of the Arkansas Security Act, Ark. Code Ann. § 23-42-101 et seq. ; violation of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101 et seq. ; violation of the Pennsylvania Securities Act, 70 Pa. Stat. § 1-101 et seq. ; violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons. Stat. § 201-1 et seq. ; breach of contract; fraud; negligent misrepresentation; negligent supervision; breach of fiduciary duty; and civil conspiracy and/or aiding and abetting. (Compl. Counts I-X.)

On August 28, 2013, Cetera moved to stay the action as to Plaintiffs' claims against Cetera and Oates, and to compel Plaintiffs to arbitrate those specific claims only. (Cetera's Mot. 5.) Plaintiffs agreed to arbitrate their claims against Cetera and Oates. Oates opposed the compulsory arbitration. ( Id. ) By Order dated March 21, 2014 (and entered on March 28, 2014), the state court denied, without opinion, Cetera's Motion. ( Id. ; see also id. at Ex. " C." ) On April 16, 2014, Cetera timely appealed the state court's Order to the Superior Court of Pennsylvania.

On February 28, 2014, during the pendency of Cetera's Motion in the state court, the Commonwealth of Pennsylvania Department of Banking and Securities closed Vantage Point Bank. (Notice of Removal ¶ 1.) The FDIC was appointed as Receiver for Vantage Point Bank. ( Id. ) On April 9, 2014, the FDIC-Receiver was substituted for Vantage Point Bank as the real party in interest to this litigation. ( Id. ¶ 6.) The FDIC-Receiver then removed the action to this Court on April 18, 2014, pursuant to 12 U.S.C. § 1819(b)(2)(B) and 28 U.S.C. § 1441(a). Due to the removal of this case, the Superior Court of Pennsylvania dismissed Cetera's appeal. (Pls.' Reply Mem. of Law 2, ECF No. 31.)

Immediately following removal to this Court, the FDIC-Receiver moved to stay this action pending the completion of a mandatory administrative claims process under 12 U.S.C. § 1821(d). (FDIC-Receiver Mot. to Stay, ECF No. 2.) On May 7, 2014, the FDIC-Receiver's Motion was granted, and this action was placed in civil suspense for a period of 180-days, retroactive to April 14, 2014. (Order, ECF No. 5; see also FDIC-Receiver Status Report, ECF No. 10.) On October 28, 2014, at the conclusion of the 180-day period, Cetera filed the instant Motion for Reconsideration. This action was officially removed from civil suspense by Order dated October 30, 2014. (ECF No. 17.)[1]

II. LEGAL STANDARD

The " purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985), cert. denied, 476 U.S. 1171, 106 S.Ct. 2895, 90 L.Ed.2d 982 (1986). " [R]econsideration is justified in extraordinary circumstances such as where: (1) there has been an intervening change in the law; (2) new evidence has become available; or (3) reconsideration is necessary to prevent clear error or a manifest injustice." Council of Alternative Political Parties v. Hooks, 179 F.3d 64, 69 (3d Cir. 1999) (citing In re City of Philadelphia Litig., 158 F.3d 711, 718 (3d Cir. 1998)).

III. DISCUSSION

Cetera argues that Plaintiffs must be compelled to arbitrate their claims against

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Cetera and Oates. Plaintiffs agree, independently making their own request to compel arbitration. Oates objects. He argues that Cetera's Motion is untimely. He also argues that the Motion does not provide a sufficient justification to warrant reconsideration, and reversal, of the state court's Order.

A. Timeliness of the Motion for Reconsideration

Oates first argues that Cetera's Motion should be denied as untimely. He contends that Cetera failed to abide by this Court's Local Rule of Civil Procedure 7.1(g). The Local Rule requires motions for reconsideration to be filed within 14 days after entry of the order at issue. Cetera responds that specific intervening acts--the FDIC-Receiver's removal of this ...


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