LUIS ORTIZ-ESPINOSA; MARITZA SOTO-GARCIA; CONJUGAL PARTNERSHIP ORTIZ-SOTO; LUIS ORTIZ-ESPINOSA, as Trustee of Centro Dermatológico San Pablo PSC Retirement Plan, Plaintiffs, Appellants,
BBVA SECURITIES OF PUERTO RICO, INC.; RAFAEL RODRÍGUEZ-ABELLA, Defendants, Appellees.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
PUERTO RICO [Hon. Pedro A. Delgado-Hernández, U.S.
D. Vicente Colon, with whom Harold D. Vicente-González
and Vicente & Cuebas were on brief, for appellants.
A. Oliver, with whom Melissa Hernández-Carrasquillo
and Fiddler González & Rodríguez, PSC were
on brief, for appellees.
C. Fleming, Ari J. Savitzky, Peter J. Macdonald, Ross E.
Firsenbaum, Adriel I. Cepeda Derieux, Michael J. Morillo, and
Wilmer Cutler Pickering Hale and Dorr LLP on brief for UBS
Financial Services Inc. and UBS Financial Services
Incorporated of Puerto Rico, amici curiae.
Howard, Chief Judge, Dyk [*] and Thompson, Circuit Judges.
case requires us to determine the test for district court
federal question jurisdiction in the context of motions to
vacate or modify an arbitration award. This turns on whether
the court may look through the motion to the underlying
dispute to determine whether the court would have federal
question jurisdiction. Here, the district court applied the
look-through test, finding that jurisdiction existed and that
there was no basis for setting aside the award. We affirm,
holding that the look-through approach is the correct test,
that federal jurisdiction existed, and that the district
court did not err in refusing to vacate the award and in
2006, appellants Dr. Luis Ortiz-Espinosa and his wife,
Maritza Soto-García; the conjugal partnership formed
by them (Espinosa-Soto); and Luis Ortiz-Espinosa, as trustee
of Centro Dermatológico San Pablo PSC Retirement Plan,
opened two sets of brokerage investment accounts with BBVA
Securities of Puerto Rico, Inc. ("BBVA"). The
accounts included personal accounts for the married couple
and accounts for a retirement plan. Rafael
Rodríguez-Abella, a securities broker employed at
BBVA, managed the accounts. The married couple deposited $2,
113, 154 into the personal accounts and $491, 054 into the
retirement plan accounts. By September 2009, the accounts had
collectively suffered large losses in the amount of $2, 049,
340. The married couple believed that BBVA and
Rodríguez-Abella were responsible for the losses. The
brokerage agreements provided for arbitration of disputes
before the Federal Industry Regulatory Authority
March 25, 2010, the married couple and representatives of the
retirement plans (hereinafter, "claimants") sought
arbitration with BBVA and Rodríguez-Abella in the
FINRA forum. We refer to BBVA and Rodríguez-Abella as
"defendants." In their statement of claim
requesting arbitration, claimants alleged that between 2006
and 2009, defendants
in total disregard and open violation of the instructions
received from [c]laimants and of [c]laimants' investment
objectives, engaged in a pattern of unsuitable investments in
high risk securities, with the sole objective of maximizing
commissions or trading profits for [defendants], while
deceiving [c]laimants about the true nature of the
investments made by [defendants] in the Accounts. Said
investments were made by [defendants] without consulting
[c]laimants, and [defendants] exercised unauthorized
discretion in the handling of the Accounts.
asserted several claims under both federal and Puerto Rico
law, alleging, inter alia, violations of Section
10(b) of the Securities Exchange Act, Rule 10b-5 of the
Securities Exchange Commission, and also the securities laws
of Puerto Rico. The statement of claim alleged claims under
state tort and contract law as well. With respect to the
retirement plan accounts, claimants also alleged that the
investments and margin loans were violations of the Employee
Retirement Income Security Act. Finally, in addition to
compensatory damages in the amount of at least $2, 102, 976,
claimants sought punitive damages, interest, attorney's
fees, expenses, and disgorgement of defendants'
commissions and service fees.
arbitration panel comprised of three members conducted
seventeen hearing sessions in Puerto Rico. On April 3, 2012,
the arbitrators issued an award denying claimants'
claims. The award stated in its entirety:
After considering the pleadings, the testimony and evidence
presented at the hearing, and the post-hearing submissions,
the Panel has decided in full and final resolution of the
issues submitted for determination as follows:
The Panel finds for Respondents and Claimants' claims are
denied in their entirety.
Any and all relief not specifically addressed herein,
including Claimants' request for attorneys' fees and
punitive damages, is denied.
29, 2012, claimants filed a complaint (hereinafter,
"petition to vacate") in the Puerto Rico Court of
First Instance requesting that the court vacate or modify the
arbitration award. Claimants, in their petition to vacate,
did not invoke the Federal Arbitration Act ("FAA");
instead, claimants sought relief under the Puerto Rico
Arbitration Act ("PRAA"), 32 L.P.R.A. §§
3201 et seq. The petition alleged various errors of the
arbitrators, including the fact that they denied
claimants' claims despite an alleged admission of
responsibility by defendants and "clear evidence"
supporting claimants' claims on the merits.
Appellants' Appx. 15. The petition to vacate also alleged
that the arbitrators were biased against claimants and had
refused to hear relevant evidence.
30, 2012, defendants removed the case to the United States
District Court for the District of Puerto Rico asserting that
the district court had federal question jurisdiction. There
was no basis for diversity jurisdiction because all of the
parties in this case are residents of Puerto Rico or are
entities created or organized under the laws of Puerto Rico.
Defendants based their claims of federal subject matter
jurisdiction on a look-through approach, asserting that the
underlying claims were based on federal securities laws, and
that the district court would have had jurisdiction if the
claims had been filed in district court. Defendants urged
that the court also had supplemental jurisdiction over the
state law claims.
August 17, 2012, claimants moved to remand the case to Puerto
Rico state court for lack of jurisdiction. The district court
denied the motion for remand, holding that the court had
federal question jurisdiction. It applied the look-through
approach, determining that the underlying statement of claim
alleged federal claims. Claimants filed an interlocutory
appeal of the order denying their motion to remand, but on
May 28, 2013, this Court dismissed the appeal because the
order was not a final decision under 28 U.S.C. § 1291.
December 17, 2015, the district court denied claimants'
petition to vacate or modify the arbitration award and
entered a judgment confirming the award, holding that
claimants "did not demonstrate any plausible ground to
vacate or modify the award." Appellants' Br. Add.
28. The court did not decide whether the FAA or PRAA
standards for vacating or modifying an arbitration award
applied. Instead, the court held that "given the
similarities between the FAA and PRAA with respect to the
grounds for vacating or modifying" an arbitration award,
disturbing the award "is not warranted under FAA or
PRAA." Appellants' Br. Add. 24 n.9. Claimants appeal
both the district court's denial of their motion to
remand and the judgment confirming the arbitration award. We
have jurisdiction pursuant to 28 U.S.C. § 1291.
first consider the issue of federal question jurisdiction.
Where pertinent facts are not in dispute, we review the
district court's determination of subject matter
jurisdiction de novo. Sa ...