NYPPEX, LLC v. Financial Industry Regulatory Authority, Inc.

Background

FINRA removed this action from the Supreme Court of the State of New York, County of Westchester, on February 23, 2022. The plaintiffs—NYPPEX, LLC, Michael Schunk, and Laurence Allen—then sought a temporary restraining order and preliminary injunction. After hearing argument about the plaintiffs’ request and FINRA’s basis for removal, the court remanded the action to state court on February 25, 2022, because the federal court lacked subject-matter jurisdiction.

FINRA filed a motion for reconsideration of the remand order. The plaintiffs had not filed opposition, although their time to do so had not expired; the court found additional briefing unnecessary.

Standard for Reconsideration

The court explained that reconsideration under Local Rule 6.3 is appropriate when the moving party identifies controlling decisions or information that the court overlooked and that could reasonably change the result. Reconsideration may also be warranted because of a change in controlling law, new evidence, clear error, or the need to prevent manifest injustice. The standard is strict, and reconsideration is not a chance to repeat arguments already decided or to introduce arguments that could have been made earlier.

FINRA’s Arguments

FINRA argued that the court should not have remanded the action because federal-question jurisdiction supported removal. FINRA characterized the plaintiffs’ breach-of-contract claim as a challenge to the validity and propriety of FINRA’s regulatory proceedings, which FINRA said created federal questions. FINRA also argued that the court could have dismissed the action because the plaintiffs failed to exhaust their administrative remedies.

Ruling

The court denied the motion for reconsideration. It held that FINRA was attempting to relitigate whether federal subject-matter jurisdiction existed. The court found no intervening change in controlling law during the approximately twelve hours between the remand order and FINRA’s reconsideration motion, and FINRA had not identified any controlling decisions that the court overlooked.

The court also rejected FINRA’s preference for dismissal rather than remand. It relied on the rule that a federal court must remand an action to state court when, before final judgment, it appears that the court lacks subject-matter jurisdiction. Because the court had already found that jurisdiction was lacking, it stated that it could not issue rulings on the merits or consider FINRA’s proposed dismissal theory. The motion for reconsideration was denied, and the Clerk was directed to terminate Doc. 10.