Gelman v. Borruso

Background

Clifford L. Gelman petitioned to confirm, or convert into a court judgment, a Financial Industry Regulatory Authority (FINRA) arbitration award against Thomas Joseph Borruso. Borruso had been a registered representative of LPL Financial LLC, a FINRA member. Gelman alleged that Borruso recommended moving Gelman’s retirement savings to LPL, invested the funds in speculative stocks without Gelman’s permission, and made excessive trades that caused losses.

The arbitration award stated that Borruso was liable for $250,000 in compensatory damages, interest at the Florida legal interest rate from the award date until payment, and $10,000 in attorneys’ fees under the Florida Securities Act. FINRA had served Borruso with the arbitration materials, and a process server later personally delivered the statement of claim and other documents. Borruso did not submit an answer or otherwise participate in the arbitration. The arbitrator conducted default proceedings and issued the award on April 16, 2019. The award had not been vacated or modified.

Federal Court Proceedings

Gelman filed the federal petition on November 18, 2019, and later moved to confirm the award. He also requested attorneys’ fees and costs incurred in bringing the federal case. The court gave Borruso deadlines to oppose the petition and later extended the response deadline, but Borruso filed no opposition.

The court explained that an unanswered petition to confirm an arbitration award is treated as an unopposed motion for summary judgment. Summary judgment is appropriate when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law. Even without an opposition, the court independently examined Gelman’s submissions rather than granting the motion automatically.

Confirmation of the Award

The court held that Gelman established the requirements for arbitration under FINRA Rule 12200. Gelman was a customer who requested arbitration; Borruso was an associated person of a FINRA member; and the dispute arose from Borruso’s business activities with LPL. Borruso’s later suspension and permanent bar from association with FINRA did not eliminate his status as an associated person under the FINRA rules.

The court also held that the FINRA rules constituted a written agreement to arbitrate within the Federal Arbitration Act. The arbitration award was entered in New York, and Gelman filed the confirmation petition within one year of the award. Because the evidence was uncontested, the award had not been vacated or modified, and a basis for the arbitrator’s decision could be inferred from the record, the court confirmed the award.

Attorneys’ Fees and Costs

The court granted Gelman’s request for attorneys’ fees and costs incurred in the federal confirmation proceeding. It reasoned that Borruso had not complied with the award and had offered no justification for failing to oppose the petition. The court directed Gelman to submit an affidavit and supporting documents accounting for those fees and costs within fourteen days of the order. The amount of fees and costs for the federal proceeding was therefore left for a later determination.

Disposition

The petition to confirm the arbitration award was granted. The Clerk was directed to enter judgment for $250,000, plus interest at 6.33% per year from April 16, 2019, through the date judgment was entered, and $10,000 in attorneys’ fees awarded in the arbitration. Gelman’s request for attorneys’ fees and costs incurred in the federal action was also granted, subject to the required supporting submission. The court directed the Clerk to close the case.