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Fiero v. Financial Industry Regulatory Authority, Inc.
Citations: 638 F. Supp. 2d 372; 2009 U.S. Dist. LEXIS 65581; 2009 WL 2355777Docket: 08 Civ. 1298 (VM)
Court: District Court, S.D. New York; July 24, 2009; Federal District Court
The United States District Court for the Southern District of New York ruled on July 24, 2009, regarding a declaratory judgment action brought by John J. Fiero and Fiero Brothers, Inc. against the Financial Industry Regulatory Authority, Inc. (FINRA). The court had previously granted FINRA's motion to dismiss the Fieros' action and denied their motion to dismiss FINRA's counterclaim, intending to award FINRA $1,010,809.25 with costs and interest. An oversight in the April 2, 2009, Decision and Order led the court to seek remand from the Second Circuit to correct the omission of the specific judgment amount. After the Second Circuit granted the remand on July 15, 2009, the court directed the Clerk to enter the judgment in favor of FINRA. The Fieros subsequently contended that this ruling violated the Full Faith and Credit Act, arguing that the court was improperly considering FINRA's cause of action as one for breach of contract when it had already been dismissed by the New York Court of Appeals due to federal jurisdiction. They also claimed that addressing this issue contravened the Rooker-Feldman doctrine, which prevents lower federal courts from reviewing state court decisions. The court acknowledged the Fieros' concerns but found them to be without merit, clarifying that federal district courts are not bound by state court interpretations of federal law. The court reaffirmed its authority to interpret federal legislation independently from state court rulings. Federal preemption is determined by federal law, and the New York Court of Appeals' ruling was jurisdictional, not merit-based. This Court maintained the right to bypass the New York Court's characterization of FINRA's cause of action as federally preempted and opted to apply state contract law under diversity jurisdiction, following its April Decision and Order. The Court clarified that it did not improperly review a state judgment, as claimed by the Fieros, but exercised its own jurisdiction over a case that had not been resolved on its merits by state courts. The Fieros' reference to the Full Faith and Credit Act is misplaced, as the Act asserts that state court determinations' preclusive effect is governed by state law. The Court noted that under New York preclusion law, FINRA's claim is not barred by the dismissal from the New York Court of Appeals, which was based on a lack of subject matter jurisdiction rather than the merits. Furthermore, the Fieros' reliance on the Rooker-Feldman doctrine is unfounded. The Court ordered a judgment in favor of FINRA for $1,010,809.25, including costs and interest, as documented in the April Decision and Order.