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Centaurus Financial Inc v. Ausloos

United States District Court, E.D. Wisconsin

May 8, 2019




         Centaurus 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.


         Centaurus, 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).

         Ausloos 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.)

         Ausloos 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.)

         Centaurus 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.)


         1. Subject Matter Jurisdiction

         Although 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.

         Centaurus 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.

         Centaurus 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 judgment action.

         2. Motion to Dismiss for Improper Venue

         Ausloos 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 ...

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