Hamrit v. Citigroup Global Markets, Inc.

Background

In earlier findings of fact and conclusions of law, the Court granted the defendants’ motion to compel arbitration and ordered the parties to begin arbitration before the Financial Industry Regulatory Authority (FINRA) within sixty days, by June 23, 2025. The Court had repeatedly emphasized that deadline.

The parties submitted letters stating that arbitration would not begin by the deadline. Hamrit had refused to file a claim with FINRA because he believed the defendants, as the parties who sought arbitration, should initiate the process. He also was concerned that starting arbitration could prejudice his pending interlocutory appeal.

Court’s reasoning

The Court concluded that neither concern excused Hamrit’s failure to comply with its orders. It noted that Hamrit had told the Second Circuit that he would be required to initiate or participate in the arbitration if no stay were granted. The Court accepted the defendants’ explanation that the party advancing a claim must begin the FINRA process by filing and serving an initial statement of claim under FINRA Rule 12302(a). Because the defendants were not bringing claims, the Court said they were not responsible for initiating the arbitration.

The Court also stated that the Second Circuit had denied Hamrit’s request for temporary relief and that Hamrit had not obtained a stay from either court. He therefore remained required to arbitrate under the Court’s directives. The Court expressed concern about a quotation Hamrit attributed to a cited opinion, stating that the quotation did not appear in that opinion. It said this raised concerns about compliance with Federal Rule of Civil Procedure 11, which requires parties and attorneys to support legal arguments with accurate legal authority. The Court did not impose a Rule 11 sanction in this order.

Order and effect

The Court extended the deadline to commence FINRA arbitration to June 27, 2025. It ordered the parties to file a joint status letter by June 30 stating whether arbitration had begun. If Hamrit did not initiate arbitration by June 27, the Court stated that it would order him to show cause—meaning explain why the Court should not take further action—why sanctions, including dismissal of the action with prejudice, should not be imposed for failure to comply with the Court’s orders or failure to prosecute. The order itself extended the deadline and issued this warning; it did not dismiss the action or impose those sanctions.