United States District Court, E.D. Wisconsin
DECISION AND ORDER ON PLAINTIFF'S MOTION FOR
PRELIMINARY INJUNCTION AND DEFENDANT'S MOTION TO
JOSEPH, UNITED STATES MAGISTRATE JUDGE
Financial, Inc. seeks declaratory and injunctive relief
against Adam Ausloos, precluding him from pursuing an
arbitration proceeding he filed against Centaurus before the
Financial Industry Regulatory Authority
(“FINRA”). Centaurus has moved for a preliminary
injunction enjoining Ausloos from arbitrating the dispute
before FINRA until its request for declaratory judgment has
been decided. (Docket # 7.) Ausloos subsequently moved to
dismiss pursuant to Fed.R.Civ.P. 12(b)(3) for improper venue,
or alternatively to stay the litigation until the parties
have completed arbitration before FINRA. (Docket # 17.) For
the reasons more fully explained below, Centaurus' motion
for a preliminary injunction is granted and Ausloos'
motion to dismiss is denied.
a California corporation, is a national, independent
broker/dealer licensed to offer securities, investment
advisory services, and insurance products throughout most of
the fifty states. (Compl. ¶ 1.) Centaurus is registered
with the United States Securities & Exchange Commission
(“SEC”) and is a member of FINRA. (Id.)
FINRA is a Delaware nonprofit corporation that is a
securities self-regulatory organization, registered with the
SEC, whose principal place of business is Washington, D.C.
(Id. ¶ 4.) FINRA regulates securities brokerage
firms doing business with the public in the United States,
including in Wisconsin. (Id.) Ausloos is a resident
of Wisconsin (id. ¶ 3) and is an executive and
sole owner of Adviceworks Wealth Advisors, LLC, a Registered
Investment Advisory firm (id. ¶ 10).
avers that in mid-2017, he engaged in a business relationship
with Robert Binkele, a registered securities broker.
(Affidavit of Adam Ausloos in Supp. of Mot. to Dismiss
(“Ausloos Aff.”) ¶¶ 3-4, Docket # 19.)
Centaurus alleges that Binkele is a “registered
representative” of Centaurus. (Compl. ¶ 13.)
Ausloos alleges that Binkele owns Estate Planning Team, Inc.
(“EPT”), a company that offers and sells, either
directly or through affiliates, certain deferred sales trusts
(“DSTs”). (Ausloos Aff. ¶ 5.) Ausloos
alleges that on May 22, 2017, he and Binkele entered into a
“Marketing Sublicense Agreement” that contains a
clause guaranteeing a return on investment. (Id.
¶¶ 6-7 and Ex. B, Docket # 19-1.) Ausloos alleges
that pursuant to the contract, he paid Binkele and EPT $125,
000.00 in exchange for the promise of a guaranteed income.
(Id. ¶ 8.)
alleges that Binkele defrauded him out of the $125, 000.00 by
selling him an unregistered security. (Id. ¶
4.) On December 14, 2018, Ausloos initiated a FINRA
arbitration against Centaurus and Binkele, and FINRA assigned
Milwaukee, Wisconsin as the arbitration location because it
was convenient to Ausloos. (Id. ¶ 13.) Ausloos
asserts the following claims against Centaurus in the FINRA
arbitration: (1) Fraud; (2) Theft of Investment; (3)
Misrepresentation; (4) Bail [sic] and Switch; (5) Ponzi
Scheme; (6) Selling Unregistered Security; (7) Failure to
Supervise; (8) Failure to Investigate Complaint; (9)
Additional FINRA Regulations Violations; and (10) Additional
Financial Crimes. (Id. ¶ 14.)
alleges that all of Ausloos' claims in the FINRA
arbitration relate to his and his company's, Tax Deferral
Trustee Services, alleged contract and subsequent purchase of
a trusteeship from Binkele through Binkele's company,
EPT. (Id. ¶ 15.) Centaurus alleges that EPT is
not affiliated with Centaurus and is not a FINRA member firm.
(Id. ¶ 16.) Centaurus further alleges that
although Binkele was a registered representative of
Centaurus, there is no evidence that Binkele dealt with
Ausloos in his capacity as a registered representative for
Centaurus. (Id. ¶ 17.) Centaurus alleges that
there is no agreement to arbitrate between Centaurus and
Ausloos and neither Ausloos nor his company ever purchased
any security from Centaurus. (Id. ¶¶
18-19.) Thus, Centaurus asserts that it has no obligation to
arbitrate any of the claims brought by Ausloos. (Id.
¶ 23.) Centaurus now seeks a declaratory judgment that
Ausloos cannot compel Centaurus to arbitrate and a
preliminary and permanent injunction enjoining Ausloos'
pursuit of his claims against Centaurus in the FINRA
arbitration. (Id. ¶ 28.)
Subject Matter Jurisdiction
neither party has raised the issue, as a threshold matter, I
have a duty to independently ascertain whether the court has
subject matter jurisdiction over the instant dispute.
Steel Co. v. Citizens for a Better Env't, 523
U.S. 83, 94-95 (1998). The Declaratory Judgment Act, 28
U.S.C. § 2201, allows a party who expects to eventually
be sued (like Centaurus) to determine its rights and
liabilities without waiting for its adversary, the
presumptive plaintiff (Ausloos), to sue. DeBartolo v.
Healthsouth Corp., 569 F.3d 736, 741 (7th Cir. 2009).
The Declaratory Judgment Act does not supply the court with
independent subject matter jurisdiction; jurisdiction depends
upon the nature of the anticipated claims. Id.
alleges that the court has subject matter jurisdiction
pursuant to 28 U.S.C. § 1331 because the underlying
Statement of Claim seeks relief under federal securities
laws. (Compl. ¶ 7.) It is not clear, however, what
federal securities laws Ausloos' alleged claims fall
under. It appears, rather, that Ausloos alleges state common
law claims (such as fraud, misrepresentation, and failure to
supervise), violations of FINRA rules, and other non-causes
of action (such as “other financial crimes”).
Because Ausloos' presumed complaint to compel Centaurus
to arbitrate would not, on its face, include an action
arising under federal law, there is no subject matter
jurisdiction based on a federal question.
also, however, alleges subject matter jurisdiction pursuant
to 28 U.S.C. § 1332 because the matter in controversy
exceeds the sum or value of $75, 000.00, exclusive of
interest and costs, and is between citizens of different
states. (Id. ¶ 5.) Centaurus is a corporation
and for diversity jurisdiction purposes, a corporation is a
citizen of any state in which it has been incorporated and
the state where it has its principal place of business.
§ 1332(c). Centaurus alleges that it is a California
corporation with its principal place of business in
California and that Ausloos is a citizen of Wisconsin.
(Compl. ¶¶ 1, 3.) Thus, the parties are citizens of
different states. Further, according to Centaurus, Ausloos
seeks damages of at least $125, 000.00 in the request for
arbitration he initiated against Centaurus. (Docket # 1-1 at
11.) Ausloos has not contested Centaurus' jurisdictional
allegations. Where jurisdictional allegations are not
contested, “the sum claimed by the plaintiff controls
if the claim is apparently made in good faith.” St.
Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283,
288-89 (1938); Meridian Sec. Ins. Co. v. Sadowski,
441 F.3d 536, 541 (7th Cir. 2006) (vacating judgment of
dismissal and remanding with instructions to resolve the
dispute on the merits where none of the plaintiff's
jurisdictional allegations was contested). Thus, the Court
has diversity jurisdiction over Centaurus' declaratory
Motion to Dismiss for Improper Venue
moves to dismiss this action pursuant to Fed.R.Civ.P.
12(b)(3) for improper venue. (Docket # 17.) He argues that
his motion to dismiss is properly brought under Rule 12(b)(3)
because the Seventh Circuit in Faulkenberg v. CB Tax
Franchise Sys., LP,637 F.3d 801, 807 (7th Cir. 2011)
(internal quotation and citation omitted) stated that
“we have held that a motion to dismiss based on a
contractual arbitration clause is appropriately
conceptualized as an objection to venue, and hence properly
raised under Rule 12(b)(3).” However, the Faulkenberg
court also stated that a “Rule 12(b)(3) motion to
dismiss for improper venue, rather than a motion to stay or
to compel arbitration, is the proper procedure to use when
the arbitration clause requires arbitration outside the
confines of the district court's district.”
Id. at 808. Neither party contends ...