Opinion
NO. 3-03-CV-2957-R
March 8, 2004
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
This case has been referred to the United States magistrate judge for initial screening pursuant to 28 U.S.C. § 636(b) and a standing order of reference from the district court. The findings and recommendation of the magistrate judge are as follow:
I.
This is a pro se civil action brought by Plaintiff Charles Ray Smith to vacate an arbitration award in favor of Defendant UBS PaineWebber, Inc. On December 11, 2003, plaintiff tendered a one-page complaint to the district clerk and filed an application for leave to proceed in forma pauperis. Because the information provided by plaintiff in his pauper's affidavit indicates that he lacks the funds necessary to prosecute this case, the court granted leave to proceed in forma pauperis and allowed the complaint to be filed. Written interrogatories were then sent to plaintiff in order to obtain additional information about the factual basis of this suit. See Spears v. McCotter, 766 F.2d 179, 181 (5th Cir. 1985). Plaintiff filed his interrogatory answers with the district clerk on February 19, 2004. The court now determines that this case should be summarily dismissed for lack of subject matter jurisdiction.
II.
On or about May 19, 2000, plaintiff, a citizen of Texas and an employee of UBS PaineWebber, executed a promissory note in connection with an employee forgivable loan obtained from defendant, a Delaware corporation. ( Spears Quest., Exh. B). When plaintiff defaulted on his payment obligations, defendant instituted an arbitration proceeding to collect all sums due and owing under the note. An arbitrator ordered plaintiff to pay defendant the principal sum of $18,429.66, together with interest at the rate of 6% per annum, $1,717.00 in attorney's fees, and $1,050.00 in costs. ( Id., Exh. C at 1). In a letter advising plaintiff of this ruling, he was told that "[a]ny party wishing to challenge the award must make a motion to vacate the award in a federal or state court of appropriate jurisdiction pursuant to the Federal Arbitration Act, 9 U.S.C. § 10, or applicable state statute." ( Id., Exh. A at 1). Plaintiff then filed a motion in federal court to vacate the arbitration award. As grounds for his motion, plaintiff alleges that "UBS refuses to work out a payment plan [and] therefore I will lose my license and will not be able to make a living." (Plf. Compl. at 1).
The promissory note contains an arbitration clause which provides, in pertinent part:
. . . Employee and PaineWebber agree that any disputes between Employee and PaineWebber, . . . will be determined by arbitration as authorized and governed by the arbitration law of the state of New York. Any such arbitration will be conducted under the auspices and rules of The National Association of Securities Dealers, Inc., if available, or if not available The New York Stock Exchange Inc. Employee and PaineWebber agree that the decision of the Arbitrator(s) will be final and binding on both parties . . .
( Spears Quest., Exh. B at 5).
II.
The Federal Arbitration Act ("FAA") empowers a federal district court to vacate an arbitration award upon the application of any party:
(1) Where the award was procured by corruption, fraud, or undue means.
(2) Where there was evident partiality or corruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
(4) Where the arbitrators exceed their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter was not made.9 U.S.C. § 10(a). However, the FAA does not create an independent basis for federal subject matter jurisdiction. See Rio Grande Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683, 685 (5th Cir. 2001), citing 9 U.S.C. § 4. A party may obtain relief in federal court under the FAA only when the underlying civil action would otherwise be subject to the court's federal question or diversity jurisdiction. Id.; see also Southland Corp. v. Keating, 465 U.S. 1, 16 n. 9, 104 S.Ct. 852, 859 n. 9, 79 L.Ed.2d 1 (1984); Bank One, N.A. v. Boyd, 288 F.3d 181, 196 n. 2 (5th Cir. 2002).
Here, the underlying civil action is a suit on a promissory note. Such a claim does not implicate any federal statute and arises solely under state law. Thus, the only basis for federal subject matter jurisdiction is diversity of citizenship. Federal diversity jurisdiction is proper where the parties are citizens of different states and the amount in controversy exceeds $75,000, exclusive of interest and costs. See 28 U.S.C. § 1332(a). Although plaintiff and defendant are citizens of different states, the total amount of the arbitration award plaintiff seeks to vacate is $21, 196.66. Consequently, there is no basis for federal diversity jurisdiction. See Smith v. Rush Retain Centers, Inc., 291 F. Supp.2d 479, 489-90 (W.D. Tex. 2003) (dismissing motion to vacate arbitration award because complaint failed to allege either a federal question or diversity of citizenship).
RECOMMENDATION
Plaintiff's motion to vacate arbitration award should be summarily dismissed without prejudice for lack of federal subject matter jurisdiction. See FED. R. Civ. P. 12(h)(3). DATED: March 8, 2004.