Santos-Buch v. Financial Industry Regulatory Authority, Inc. , 591 F. App'x 32 ( 2015 )


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  •      14-2767
    SANTOS-BUCH v. FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.
    UNITED STATES COURT OF APPEALS
    FOR THE SECOND CIRCUIT
    SUMMARY ORDER
    RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
    ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
    PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
    DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
    ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
    SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
    1            At a stated term of the United States Court of Appeals
    2       for the Second Circuit, held at the Thurgood Marshall United
    3       States Courthouse, 40 Foley Square, in the City of New York,
    4       on the 30th day of January, two thousand fifteen.
    5
    6       PRESENT: DENNIS JACOBS,
    7                GUIDO CALABRESI,
    8                RICHARD C. WESLEY,
    9                              Circuit Judges.
    10
    11       - - - - - - - - - - - - - - - - - - - -X
    12       ALAN SANTOS-BUCH,
    13                Plaintiff-Appellant,
    14
    15                    -v.-                                               14-2767-cv
    16
    17       FINANCIAL INDUSTRY REGULATORY
    18       AUTHORITY, INC.,
    19                Defendant-Appellee.
    20       - - - - - - - - - - - - - - - - - - - -X
    21
    22       FOR APPELLANT:                        Eric W. Berry, Berry Law PLLC,
    23                                             New York, New York.
    24
    25                                             Paul R. McMenamin, McMenamin Law
    26                                             Group, New York, New York.
    27
    1
    1   FOR APPELLEE:              Terri L. Reicher, Angela Pegram
    2                              Saffoe, Financial Industry
    3                              Regulatory Authority, Inc.,
    4                              Washington, District of
    5                              Columbia.
    6
    7        Appeal from a judgment of the United States District
    8   Court for the Southern District of New York (Scheindlin,
    9   J.).
    10
    11        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
    12   AND DECREED that the judgment of the district court be
    13   AFFIRMED.
    14
    15        Alan Santos-Buch appeals from the judgment of the
    16   United States District Court for the Southern District of
    17   New York (Scheindlin, J.), granting defendant-appellee’s
    18   motion to dismiss for lack of subject matter jurisdiction
    19   and for failure to state a claim. We assume the parties’
    20   familiarity with the underlying facts, the procedural
    21   history, and the issues presented for review.
    22
    23        Santos-Buch worked until 1996 as a stock broker
    24   employed by firms that were members of the National
    25   Association of Securities Dealers, Inc. (“NASD”). NASD was
    26   a self-regulatory organization (“SRO”) under the Securities
    27   and Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
    28   § 78s(a), and the Maloney Act of 1938, 
    id. § 78o-3.
    NASD
    29   delegated regulatory responsibility to a subsidiary, NASD
    30   Regulation, Inc. (“NASDR”).
    31
    32        In 1997, NASDR began disciplinary proceedings against
    33   Santos-Buch for an alleged 1994 violation of NASDR’s fair
    34   practice rules. Santos-Buch and NASDR resolved the
    35   disciplinary proceedings through a settlement contract
    36   called an Acceptance, Waiver and Consent (“AWC”). In the
    37   AWC, Santos-Buch agreed to a fine of $10,000 and a 30-day
    38   suspension. The AWC also contemplated public notice of the
    39   disciplinary action, by providing that “NASDR will make such
    40   public announcement concerning this agreement and the
    41   subject matter thereof as NASDR may deem appropriate”--a
    42   provision limited only by NASD rules. (AWC ¶ 4.) Santos-
    43   Buch argues that NASD rules at the time of the AWC limited
    44   such public notice to a one-time publication of the
    45   disciplinary action.
    46
    2
    1        In 2007, the Financial Industry Regulatory Authority,
    2   Inc. (“FINRA”) succeeded NASD and NASDR, and assumed their
    3   self-regulatory functions. Santos-Buch alleges that FINRA
    4   currently maintains two internet databases that disclose his
    5   disciplinary history to the public: one that includes his
    6   disciplinary records pursuant to 1999 and 2009 amendments to
    7   NASD and FINRA rules (“BrokerCheck”), and the other, without
    8   authorization by any rule at all (“Web File”).
    9
    10        Santos-Buch alleges causes of action for: publishing
    11   the 1997 disciplinary records in an internet database
    12   without authorization from the FINRA Rules, violation of due
    13   process under the Fifth Amendment, violation of the
    14   constitutional prohibition against ex post facto laws,
    15   invasion of privacy in violation of Washington law, breach
    16   of contract, and failure to provide “a fair procedure for
    17   the disciplining of members and persons associated with
    18   members” of SROs as required by 15 U.S.C. § 78o-3(b)(8).
    19   The claims variously seek monetary damages, declaratory
    20   relief, and injunctions.
    21
    22        The district court granted FINRA’s motion to dismiss
    23   pursuant to Federal Rule of Civil Procedure 12(b)(1) and
    24   12(b)(6), on the grounds that: (1) the claims for
    25   declaratory and injunctive relief were subject to the
    26   (unfulfilled) requirement that Santos-Buch exhaust his
    27   administrative remedies before filing a civil action, and
    28   (2) the claims for monetary damages were barred by FINRA’s
    29   immunity to suits for damages in its regulatory capacity.
    30   On an appeal from dismissal for lack of subject matter
    31   jurisdiction, this Court reviews factual findings for clear
    32   error and legal conclusions de novo. Luckett v. Bure, 290
    
    33 F.3d 493
    , 496 (2d Cir. 2002). The Court reviews de novo the
    34   district court’s dismissal for failure to state a claim.
    35   MFS Secs. Corp. v. New York Stock Exch., Inc., 
    277 F.3d 613
    ,
    36   617 (2d Cir. 2002).
    37
    38        The doctrine of exhaustion requires a would-be
    39   plaintiff to seek available administrative remedies before
    40   seeking judicial relief “in cases where the relevant statute
    41   provides that certain administrative procedures shall be
    42   exclusive.” McKart v. United States, 
    395 U.S. 185
    , 193
    43   (1969). Challenges to SROs’ rules must proceed exclusively
    44   before the Securities and Exchange Commission (“SEC”), in
    45   accordance with “the comprehensive review procedure
    46   established by the Exchange Act.” Barbara v. New York Stock
    47   Exch., Inc., 
    99 F.3d 49
    , 57 (2d Cir. 1996) (internal
    3
    1   quotation marks omitted). Specifically, no such challenge
    2   “may be considered by the court unless it was urged before
    3   the [SEC] or there was reasonable ground for failure to do
    4   so.” 15 U.S.C. § 78y(c)(1). Exhaustion is not required,
    5   however, when an agency lacks the power to grant effective
    6   relief, including when the agency would be called upon to
    7   resolve a substantial constitutional issue. See McCarthy v.
    8   Madigan, 
    503 U.S. 140
    , 147 (1992).
    9
    10        The exhaustion requirement bars Santos-Buch’s claims
    11   for injunctive and declaratory relief with regard to
    12   publication of his disciplinary action via BrokerCheck. See
    13   
    Barbara, 99 F.3d at 56-57
    . Since this case involves no
    14   state action, there is no substantial constitutional issue.
    15   As a private actor whose conduct in this case is not “fairly
    16   attributable” to the government, FINRA could not have
    17   violated Santos-Buch’s due process rights or the Ex Post
    18   Facto Clause. See D.L. Cromwell Invs., Inc. v. NASD
    19   Regulation, Inc., 
    279 F.3d 155
    , 161-62 (2d Cir. 2002);
    20   Desiderio v. Nat’l Ass’n of Secs. Dealers, Inc., 
    191 F.3d 21
      198, 206-07 (2d Cir. 1999); cf. O’Neil v. Vermont, 
    144 U.S. 22
      323, 364 (1892) (Field, J., dissenting) (noting that the Ex
    23   Post Facto Clause is an “inhibition against state action”).
    24
    25        While Santos-Buch’s claims for injunctive and
    26   declaratory relief for publication of his disciplinary
    27   action via Web File are not subject to the Exchange Act’s
    28   exhaustion requirement because they challenge neither the
    29   disciplinary action taken by FINRA, nor a FINRA rule, they
    30   were also properly dismissed. Santos-Buch alleges that the
    31   Web File publication violates his substantive due process
    32   rights, but he fails to state a due process claim because
    33   FINRA is not a state actor that can be held to
    34   constitutional standards. To the extent that his claims for
    35   injunctive and declaratory relief rest instead on FINRA’s
    36   failure to comply with its own rules, as is required by
    37   statute, see 15 U.S.C. § 78s(g)(1) (“Every [SRO] shall
    38   comply with . . . its own rules.”), we have held that there
    39   is no implied private right of action to enforce this
    40   statutory obligation, see 
    Desiderio, 191 F.3d at 208
    .
    41
    42        Santos-Buch’s claims for monetary relief are foreclosed
    43   by immunity: “an SRO and its officers are entitled to
    44   absolute immunity from private damages suits in connection
    45   with the discharge of their regulatory responsibilities.”
    46   Standard Inv. Chartered, Inc. v. Nat’l Ass’n of Secs.
    47   Dealers, Inc., 
    637 F.3d 112
    , 115 (2d Cir. 2011), cert.
    4
    1   denied, 
    132 S. Ct. 1093
    (2012). Because all of the relevant
    2   conduct by FINRA (and by NASD and NASDR before it) was
    3   undertaken in furtherance of its regulatory responsibilities
    4   as an SRO, it is immune from Santos-Buch’s claims for
    5   damages.
    6
    7        For the foregoing reasons, and finding no merit in
    8   Santos-Buch’s other arguments, we hereby AFFIRM the judgment
    9   of the district court.
    10
    11                              FOR THE COURT:
    12                              CATHERINE O’HAGAN WOLFE, CLERK
    13
    5