# Raymond James Financial Services Inc. v. Armijos

> District Court, S.D. Florida · April 27, 2020

URL: https://www.frixlaw.com/law-library/cases/10117618

## Case

- **Court:** District Court, S.D. Florida
- **Decided:** April 27, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 19-CIV-81692-RAR

RAYMOND JAMES FINANCIAL
SERVICES, INC.,

Plaintiff,

vs.

ADA SERENA CORDOVA
ARMIJOS, et al.,

Defendants.
________________________________/

MEMORANDUM OPINION IN SUPPORT OF
ORDER DENYING PLAINTIFF’S MOTION FOR PRELIMINARY
INJUNCTION AND DISSOLVING TEMPORARY RESTRAINING ORDER

This is an action for declaratory relief seeking to enjoin Defendants from pursuing an
arbitration proceeding before the Financial Industry Regulatory Authority (“FINRA”) against
Plaintiff Raymond James Financial Services, Inc. (“RJFS”). Defendants are claimants in the
underlying arbitration, wherein the arbitration panel permitted Defendants to add RJFS as a
respondent. The case is before the Court on RJFS’ Motion for Preliminary Injunction (“Motion”)
[ECF No. 3]. An evidentiary hearing was conducted on April 15, 2020 [ECF No. 13]
(“Hearing”).1 The Court has reviewed the Motion, RJFS’ Verified Complaint for Declaratory
Judgment and Injunctive Relief (“Verified Complaint”) [ECF No. 1], the parties’ supplemental
briefs [ECF Nos. 92-93], and the remainder of the docket. For the reasons stated on the record at
the Hearing, and being otherwise fully advised, it is hereby
ORDERED AND ADJUDGED that Defendants’ Motion for Preliminary Injunction
[ECF No. 3] is DENIED as explained herein.

1 The Court held the hearing telephonically given concerns related to the COVID-19 virus and the
recommendations set forth in Administrative Order No. 2020-21.
BACKGROUND
On August 17, 2018, Defendants initiated a FINRA arbitration proceeding (“Arbitration”)
against Raymond James & Associates, Inc. (“RJA”) and Insight Securities, Inc.2 Compl. ¶ 148.
Therein, Defendants claimed that they were victims of a fraud orchestrated by the developers of
financially-distressed real estate projects in Florida. See Second Amended Statement of Claim
[ECF No. 6-1] at 6. According to Defendants, the developers “formed a complex web of mutual
funds and bond issuers that would raise capital from foreign investors through a series of financial
products and then lend the capital raised back to the developers.” Id. Further, the developers

owned and controlled the borrower, lender, and issuer of the financial products. Id.
To promote these products, the developers formed Biscayne Capital International, LLC, a
U.S. registered investment advisor, and a British Virgin Islands-based broker-dealer called
Biscayne Capital (BVI), Ltd. (collectively, “Biscayne Capital”). See id. at ¶ 151; Response to
Motion to Vacate Temporary Restraining Order [ECF No. 28] at 7. Raymond James &
Associates, Inc. (“RJA”) served as the clearing firm for Biscayne Capital, performing back-office
execution and administrative functions. See VanOosting Decl. [ECF No. 28-1] ¶¶ 4-5.
A. Chatburn solicits Hinojosa and Defendants
One of the developers, a man by the name of Frank Chatburn, was an owner and investment

advisor with Biscayne Capital. Id. at ¶ 153. While in Ecuador in late 2007, Chatburn was
introduced to Edith Hinojosa—a “finder” for Bear Stearns. See Declaration of Edith Hinojosa
[ECF No. 19-2] ¶ 7; Deposition of Edith Hinojosa [ECF No. 76-1] at 55:9-21. At the meeting,
Chatburn told Hinojosa that he worked with Raymond James, which he touted as a well-known
American brokerage firm with lots of resources and employees. Hinojosa Decl. ¶ 7. Chatburn

2 The Arbitration was originally styled Ada Serena Cordova v. Armijos, et al. v. Raymond James &
Associates, Inc. and Insight Securities, Inc., Case No. 18-02934. Compl. ¶ 145.
even asked Hinojosa to join him at Raymond James. Id. Importantly, Chatburn always referred
to “Raymond James” generally and never distinguished between any subsidiary entities or
divisions.3 See, e.g., Hinojosa Decl. ¶¶ 10, 16; Hinojosa Dep. 98:3-100:3; Declaration of Douglas
Ray Good [ECF No. 92-2] ¶ 17.
B. Chatburn touts his relationship with “Raymond James”
Several months later, Hinojosa flew to Florida at Chatburn’s invitation and had meetings
with Chatburn and his partners. Hinojosa Decl. ¶ 8. In these meetings, Chatburn and his partners
detailed their real estate projects and the “viability” of the financial products that would be used

to raise the capital necessary to fund them. Id. at ¶ 9. Essentially, a fund called Sentinel would
issue financial products that would be sold by Biscayne Capital through Raymond James. Id. at
10. Interested by the proposition, Hinojosa flew to Raymond James’ Tampa office in December
2007 where she met with a Raymond James executive at the behest of Biscayne Capital. See
Hinojosa Decl. ¶ 11; Declaration of Robb Combs [ECF No. 94-2] at Exhibit B (“I really feel that
what [sic] a visit to the Raymond James HQ will tip her over to come work with us on a fully
committed basis. She is really enthusiastic about RJ, but we are still trying to ‘reel her in,’ so any
help you could provide, will be greatly appreciated.”).
Hinojosa was given a tour of Raymond James’ offices, where she saw a sign that read

“Biscayne Capital” on the wall. See Hinojosa Decl. ¶ 13; Hinojosa Dep. 116:11-119:1. On the
tour, she was told that Raymond James was committed to the long-term success of Biscayne
Capital and that she could work with Biscayne Capital within the Raymond James platform. See
Hinojosa Decl. ¶ 13. Specifically, her job would be to identify potential investors in Latin

3 Notably, Chatburn’s use of “Raymond James” generally was prohibited. See Declaration of Michelle
Retzer [ECF No. 94-1] ¶¶ 2-6.
America for the financial products sold through Raymond James. Id. at ¶ 14. As an added
incentive, Raymond James would provide Hinojosa’s clients with accounts. Id.
Hinojosa eventually agreed to join Biscayne Capital based on Chatburn’s representations
and the “stellar reputation of Raymond James.” Id. at ¶ 15. Chatburn told Hinojosa that the
financial products she would be promoting were vetted and approved by “Raymond James.” See
Hinojosa Decl. ¶ 11; Hinojosa Dep. 121:18-126:16; see also Email from Chatburn, Hinojosa Decl.
at Exhibit A (“Raymond James owes its success precisely to the transparent manner in which we
work. We do not charge any hidden fees to the detriment of our clients. It would be an honor to

receive you in our home office in St. Petersburg so that you can get to know the human team that
would manage the money of the Andes Petrolean family.”). She was even provided with
Raymond James’ branded marketing materials to solicit clients. See Hinojosa Dep. 60:17-65:23.
In early 2008, Chatburn’s partners traveled to Ecuador to open Raymond James accounts
for Hinojosa’s clients—the Defendants—whose accounts were to be transferred from Bear Stearns
to Raymond James. See Hinojosa Decl. ¶ 19. This included a specific client who initially
demurred, only to be convinced by Chatburn, who personally visited the client and held himself
out as a “Raymond James” employee. Id. at ¶ 22.; Hinojosa Dep. 159:2-161:24. Ultimately,
each of the Defendants signed custodian agreements with RJA. See Hinojosa Decl. ¶¶ 22-24 at

Exhibit D. Notably, the letterhead on these agreements simply read “Raymond James.” Id.
Simultaneously, Hinojosa began to find success promoting Biscayne Capital’s financial products,
which she marketed as being “part of the Raymond James portfolio of products.” Id. at ¶ 20.
C. Chatburn holds himself out as a “Raymond James” advisor
While the parties dispute a large portion of the record, many facts are undisputed. First,
Chatburn was a registered broker with RJFS from March 2008 through August 2008. See
Declaration of Melissa A. Kelly [ECF No. 28-2] at Exhibit A. Moreover, the RJFS Independent
Associate Agreement with Chatburn, signed February 28, 2008 (“Chatburn Agreement”), defines
Chatburn’s title as “Branch Manager or Representative in Charge” of the RJFS Miami office. See
Chatburn Agreement [ECF No. 63]. This aligns with Defendants’ understanding that Chatburn
was Raymond James’ Branch Manager between 2008 and 2012. See Hinojosa Decl. ¶ 23;
Hinojosa Dep. 156:14-163:1; Good Decl. ¶ 21. Chatburn went as far as to distribute business
cards stating as much inside Raymond James-branded folders. See Declaration of Edwin Alberto
Torres Mino [ECF No. 92-1] ¶¶ 6, 8; Hinojosa Decl. at Exhibit E; Hinojosa Dep. 98:3-8.
Between 2008 and 2015, Chatburn visited Ecuador “progressively” to meet with

Defendants. Hinojosa Decl. ¶ 24; Hinojosa Dep. 167:12-168:17. During these trips, Chatburn
succeeded in selling Defendants more products, always touting the imprimatur of Raymond James.
Hinojosa Decl. at ¶ 24; Hinojosa Dep. at 145:3-156:13; 159:24-162:17. In fact one of the
Defendants, Douglas Ray Good, confirmed that Chatburn solicited various Raymond James
products to him, both individually and in his capacity as a member of the Andes Petroleum savings
plan committee. Good Decl. ¶ 12. Chatburn advised Good that he could order trades for him
and place the trades directly through Good’s RJA account. Chatburn even went so far as to
provide Good with a proprietary Raymond James Equity Research report. Id. at ¶ 29. Again, all
the record evidence indicates that Chatburn always referred to “Raymond James” in the global

sense and never distinguished between the Raymond James entities. Id. at ¶¶ 7, 10-16, 23-29.
Although Chatburn continued to hold himself out as a Raymond James advisor for years,
the truth is that he was terminated on August 15, 2008. See Form U5, Expert Report of Thomas
Franko [ECF No. 97-1] at Exhibit 3. Importantly, neither Chatburn or anyone from Raymond
James (or RJFS or RJA) ever notified Defendants that Chatburn, who was still holding himself out
to be a Raymond James advisor, had left RJFS. Id. at ¶ 31; Hinojosa Dep. 159:24-162:17. Indeed,
on numerous occasions in 2008 and 2009—after Chatburn was no longer a registered broker with
RJFS—Chatburn continued to hold himself out to Good and the Andes Petroleum savings plan
committee as being associated with “Raymond James.” Good Decl. ¶¶ 12-16, 23-29. Trusting
in Chatburn, Good and his wife continued to invest through their RJA accounts. Id. at ¶¶ 17, 20,
30, 32. Unfortunately for Defendants, Chatburn and Biscayne Capital ran into legal trouble
around 2016. See SEC Order [ECF No. 31-4]; Chatburn’s Factual Proffer in Support of Guilty
Plea [ECF No. 31-3].
D. Raymond James
Much of the confusion in this case seems to center around what it means to be “Raymond

James.” RJFS maintains that it and RJA are wholly separate entities under the same parent
company, Raymond James Financial, Inc. See, e.g., Deposition of Melissa Kelly [ECF No. 77-1]
128:23-129:2. RJFS’ corporate representative testified that RJA and RJFS share a campus, share
resources when possible, and ultimately report to the same General Counsel for compliance
matters. See id. at 137:13-140:24. RJA and RJFS also share a database of client records and
information that allows employees of either entity to search the parent company’s records. Id. at
48:1-50:24. As part of Chatburn’s Agreement, RJFS makes clear that it contracts on behalf of
itself and RJA, and Chatburn was authorized to sell RJA products, a process known as “selling
away.” See, e.g., Chatburn Agreement at § 1(e), § 4. Given the interrelatedness of these

similarly-named entities, one can understand how referring to any of them as “Raymond James,”
as Chatburn constantly did, could cause confusion.
E. The Arbitration
Defendants initially brought the Arbitration against RJA and Insight Securities, Inc. On
September 16, 2019, Defendants requested that the three-person Arbitration panel permit them to
add RJFS as a respondent. Compl. ¶ 151. The Arbitration panel granted Defendants’ request
and RJFS became a named respondent in the Arbitration. Id. at ¶ 149. Although Defendants do
not have an arbitration agreement with RJFS, the Arbitrators found that RJFS was a proper party
to the Arbitration under the FINRA Code of Arbitration Procedure (“FINRA Code”). Id. at ¶ 154.
In the Arbitration, Defendants allege that both RJA and RJFS are liable for “aiding and abetting in
the fraud perpetuated by the Biscayne Individuals [(which includes Chatburn and others)], and the
entities they controlled, gross negligence, negligence, breach of fiduciary duty, and for failure to
supervise its agents.” Defendants’ Supplement [ECF No. 92] at 10.
F. The Litigation
RJFS filed its Verified Complaint on December 19, 2019. Count I seeks a declaration that

Defendants’ claims against RJFS are not arbitrable under Rule 12200 of the FINRA Code.
Specifically, RJFS seeks a declaration that Defendants “are not and never were ‘customers’ of
RJFS within the meaning of FINRA Rule 12200 or otherwise.” Compl. ¶¶ 57-160. Rule 12200
“requires a FINRA member and its associated persons to arbitrate certain disputes with customers
before FINRA upon the customer’s demand.” Pictet Overseas, Inc. v. Helvetia Trust, 905 F.3d
1183, 1187 (11th Cir. 2018). Defendants argue that they fall under the definition of “customer”
pursuant to Rule 12200 and thus, should be permitted to proceed against RJFS as the arbitrators
have ordered.
Count II asks the Court to enjoin Defendants from proceeding with the Arbitration against

RJFS. Id. at ¶ 168. However, “[t]he Court readily dispenses with Count II, as that count does
not state a claim for relief. Injunctive relief is a remedy, not a separate cause of action.” Viyella
v. Nicor, No. 19-25094-CIV, 2020 WL 977481, at *1 (S.D. Fla. Feb. 28, 2020) (citing Blaszkowski
v. Mars Inc., No. 07-21221-CIV, 2008 WL 11408620, at *3 (S.D. Fla. Apr. 8, 2008) (“An
injunction is a remedy potentially available only after a plaintiff can make a showing that some
independent legal right is being infringed—if the plaintiff’s rights have not been violated, he is not
entitled to any relief, injunctive or otherwise.”) (internal quotation marks omitted); Alabama v.
U.S. Army Corps of Eng’rs, 424 F.3d 1117, 1127 (11th Cir. 2005)).
The Court entered a Temporary Restraining Order (“TRO”), restraining Defendants from
proceeding against RJFS in the Arbitration until such time as it had the opportunity to hold an
evidentiary hearing on the Motion [ECF No. 14]. As further explained herein, after carefully
considering the record and evidence presented at the Hearing, the Court found that RJFS failed to
show that it had a substantial likelihood of success on the merits of its claim, thereby warranting
denial of the Motion and dissolution of the TRO.

LEGAL STANDARD
To obtain a preliminary injunction, a party must demonstrate “(1) a substantial likelihood
of success on the merits; (2) that irreparable injury will be suffered if the relief is not granted; (3)
that the threatened injury outweighs the harm the relief would inflict on the non-movant; and (4)
that entry of the relief would serve the public interest.” Schiavo ex. rel Schindler v. Schiavo, 403
F.3d 1223, 1225–26 (11th Cir. 2005) (per curiam) (citation omitted). “[A] preliminary injunction
is an extraordinary and drastic remedy not to be granted unless the movant clearly establishe[s]
the burden of persuasion as to the four requisites.” McDonald’s Corp. v. Robertson, 147 F.3d
1301, 1306 (11th Cir. 1998) (alteration added; internal quotation marks, citation, and footnote call

number omitted).
Both the Supreme Court and Eleventh Circuit specifically hold that courts must interpret
the FINRA Code “as it would a contract under the applicable state law.” MONY Securities Corp.
v. Bornstein, 390 F.3d 1340, 1342 (11th Cir. 2004) (citing Multi-Financial Sec. Corp. v. King, 386
F.3d 1364, 1367 (11th Cir. 2004); Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987)). “Because the
FINRA Arbitration Code is unambiguous, the parties’ intent must be gleaned from the four corners
of the document.”4 Pictet, 905 F.3d at 1188 (quoting Crawford v. Barker, 64 So. 3d 1246, 1255
(Fla. 2011) (internal quotations omitted)). “[T]he language of the Code itself is the best evidence
of the parties’ intent, and its plain meaning controls.” Id. (internal quotation marks omitted).
And “unlike other contracts, any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.” King, 386 F.3d at 1367 (quoting Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983) (internal quotations omitted)). Further, it is
well settled that the FINRA Code constitutes a written agreement to arbitrate. Deutsche Bank
Sec. Inc. v. Simon, No. 19-20053-CIV, 2019 WL 4864465, at *3 (S.D. Fla. Aug. 20, 2019), report

and recommendation adopted, No. 19-20053-CIV, 2019 WL 4685876 (S.D. Fla. Sept. 26, 2019)
(internal citations omitted).
In short, if the Court finds that RJFS has failed to show a substantial likelihood of success
in establishing that Rule 12200 bars the Arbitration, the Motion must be denied.
ANALYSIS
RJFS maintains that Defendants’ claims are not arbitrable under Rule 12200 of the FINRA
Code. Compl. ¶ 157. Where no written agreement to arbitrate exists, as is the case here, Rule
12200 states that “[p]arties must arbitrate a dispute under the Code” if (1) “[r]equested by a
customer;” (2) “[t]he dispute is between a customer and a member or associated person of a

member;” and (3) “[t]he dispute arises in connection with the business activities of the member or
associated person . . . .” (emphasis added). Simon, 2019 WL 4864465, at *3 (citing FINRA, RULE
12200). At the Hearing, the parties agreed that the third factor is largely not in dispute—namely,
that the dispute arises in connection with RJFS’ or Chatburn’s business activities. See, e.g.,
Deutsche Bank Sec., Inc. v. Ades, No. 18-25142-CIV, 2019 WL 1077905, at *3 (S.D. Fla. Mar. 7,

4 RJFS filed the Expert Report of Thomas A. Franko [ECF No. 97-1], which presented Mr. Franko’s expert
opinion on several legal matters in this case. As discussed at the Hearing, although the Court has no reason
to doubt Mr. Franko’s expertise, it need not consider his report to the extent it opines on questions of law.
2019) (citing Bornstein, 390 F.3d at 1344-45; King, 386 F.3d at 1370) (“The Eleventh Circuit has
made clear that a customer’s claim that a FINRA member failed to supervise its associated person
in connection with the dispute satisfies the second requirement of a connection between the
customer and the member’s conduct.”). Thus, in order to forestall being hailed into arbitration,
RJFS must show (1) that Defendants were not “customers” of RJFS or (2) that Chatburn was not
an “associated person” of RJFS under Rule 12200. The Court will address each point in turn.
1. RJFS failed to show that it has a substantial likelihood of proving that Defendants
are not “customers” of Chatburn for purposes of Rule 12200.

As discussed at the Hearing, the FINRA Code does not define “customer,” except to state
that a “customer shall not include a broker or dealer.” Sagepoint Fin., Inc. v. Small, No. 15-CV-
0571 DLI RML, 2015 WL 2354330, at *4 (E.D.N.Y. May 15, 2015) (citing FINRA, RULE
12100(k)). “[T]he Rule provides no further guidance as to the definition of a customer[.]”
Viyella, 2020 WL 977481, at *5. This exceedingly broad definition was slightly clarified by the
Second Circuit in Citigroup Global Markets, Inc. v. Abbar, 761 F.3d 268, 275 (2d Cir. 2014).
There, the Second Circuit held that a “customer” for purposes of Rule 12200 is one who, while not
a broker or dealer, either “(1) purchases a good or service from a FINRA member, or (2) has an
account with a FINRA member.” Id.
Here, the undisputed facts easily satisfy even the Second Circuit’s definition of “customer.”
Chatburn solicited Defendants to sign custodial agreements with RJA while he was a registered
financial advisor for RJFS. See Hinojosa Decl. ¶¶ 22-24. Moreover, Defendant Edwin Alberto
Torres Mino, as well as Good, confirmed that Chatburn directly solicited and promoted Raymond
James products and services to them. See Mino Decl. ¶¶ 4-8; Good Decl. ¶¶ 4-32. Both had
various communications with Chatburn, during which time Chatburn held himself out to be a

representative of “Raymond James” in the global sense. Id. In fact, on numerous occasions in
2008 and 2009—after Chatburn was allegedly no longer a registered broker with RJFS—Chatburn
continued to hold himself out to Good and the Andes Petroleum savings plan committee as being
associated with “Raymond James.” Good Decl. ¶¶ 12-16, 23-29. Through it all, Good continued
to purchase through his RJA account. Id. at ¶¶ 17, 20, 30, 32. Moreover, Courts have found that
a “selling away” relationship where the associated person of a FINRA member sells the financial
products of an affiliated company to an investor is sufficient to establish a customer relationship.
See Viyella, 2020 WL 977481 at *5; King, 386 F.3d at 1370; Bornstein, 390 F.3d at 1344.
Consequently, the Court finds that Defendants were Chatburn’s “customers” for purposes of Rule
12200.

Nevertheless, RJFS urges the Court to abandon the plain language of the Code and define
“customer” more narrowly—as one who has a direct relationship with a FINRA member either
through a) a written customer agreement or b) a direct purchase from the FINRA member. First,
the absence of a direct, written agreement is not fatal to Defendants’ claim. As the Court deftly
explained in Pictet, when a member joins FINRA, it agrees, like all other FINRA members, to
comply with FINRA’s rules. Pictet, 905 F.3d at 1187. Those rules include Rule 12200, which
requires a FINRA member and its associated persons to arbitrate certain disputes with customers
before FINRA upon the customer’s demand. Id.; see also King, 386 F.3d at 1367 (“Although
there is no direct written agreement to arbitrate between IFG and King, the Code serves as a

sufficient written agreement to arbitrate, binding its members to arbitrate a variety of claims with
third party claimants.”) (citation omitted). Importantly, “all that matters is the relationship
between the investor and the advisor, and the advisor’s status as an associated person.” Triad
Advisors, Inc. v. Siev, 60 F. Supp. 3d 395, 398 (E.D.N.Y. 2014). Thus, RJFS’ argument that
Defendants were not customers of RJFS because they lacked signed agreements is unavailing.
Moreover, the absence of a direct customer relationship between RJFS and the Defendants
is of no moment. Again, the Court must look to the unambiguous language of the Code, which
makes clear that the definition of “customer” is broad. In King, the Eleventh Circuit reaffirmed
this broad definition, finding that King was a “customer as long as she is not a broker or dealer;
nothing in the Code directs otherwise or requires more.” 386 F.3d at 1364. Faced with a similar
argument, the King Court found that the plaintiff’s interpretation would read “a limitation into the
Code that is absent from its language.” Id. As explained in Viyella, when faced with the
unambiguous language of the Code and the aforementioned Eleventh Circuit case law, there is no
need to refer to extrinsic evidence.5 See Viyella at *7. Analyzing King, the Viyella Court noted
that “[t]he court found King was a customer for purposes of arbitration because she was a customer

of IFG’s associated person, even though she did not have a direct transactional relationship with
IFG.” Id. (citing King, 368 F.3d at 1368–70); see also Bornstein, 390 F.3d at 1344 (relying on
King and concluding that the claimants were customers of the member because they were
customers of the member’s registered representative). In sum, there is no requirement that a party
directly transact with a FINRA member to qualify as a “customer” for purposes of Rule 12200.
Thus, the Court finds that RJFS has failed to show it has a substantial likelihood of success
in proving that Defendants were not Chatburn’s “customers.” This bring the Court to its second
point—whether RJFS can establish that Chatburn was not an “associated person” of RJFS.
2. RJFS failed to show that it has a substantial likelihood of proving that Chatburn
was not an “associated person” of RJFS for purposes of Rule 12200.

It is undisputed that Chatburn was a registered financial advisor for RJFS from March 18,
2008 through August 15, 2008. See Form U5, Expert Report of Thomas Franko at Exhibit 3.
RJFS maintains that Chatburn qualifies as its “associated person” only during this particular period
of time. In support of this position, RJFS points to Wheat, First Sec., Inc. v. Green, which held
that a broker-dealer was not obligated to arbitrate any claims arising from trading conducted

5 Consequently, RJFS’ argument based on securities industry guidance regarding the definition of
“customer” similarly misses the mark.
through its predecessor-in-interest. 993 F.2d 814 (11th Cir. 1993). However, RJFS misapplies
Wheat First. Wheat First does not stand for the proposition that there is a temporal bar that
requires a transaction to take place during the broker’s registration period for the broker to be
considered an “associated person.” Rather, “Wheat discussed timing for investors who were
harmed by the firm’s successor in interest. In contrast, in both King and here, the investor was a
customer at the time the events took place.” Bornstein, 390 F.3d at 1345 (citing King, 386 F.3d
at 1370). As in King and Bornstein, Defendants were customers at the time the events took
place—namely, when Chatburn solicited them to open accounts with the allure of financial

products backed by Raymond James. Although not all the transactions were executed during the
few months that Chatburn was registered with RJFS, many were executed while Chatburn had not
yet ceased his affiliation with Raymond James. Additionally, much of the investment activity
occurred while he was holding himself out to be a Raymond James-affiliated person. Thus, it
cannot be said that Defendants lack some sort of temporal nexus.
Moreover, the relevant question at this juncture is whether a person formerly associated
with a FINRA member can still be deemed an “associated person” for purposes of triggering
arbitration under Rule 12200. The Court answers this question in the affirmative, and the plain
language of the FINRA Code, once again, favors Defendants’ interpretation. Notably, FINRA

Rule 12100(u) specifically defines “associated member” as “a person formerly associated with
a member.” FINRA, RULE 12100(u) (emphasis added); see also Metlife Sec., Inc. v. Pizzano,
No. 09-CV-4459 (DMC-MF), 2010 WL 2545170, at *4 (D.N.J. June 18, 2010) (“Undeniably,
Lucchetto, a former registered agent of Plaintiff, terminated two months prior to the alleged
misconduct, is a person formerly associated with a member and, therefore, for purposes of the
Code, Lucchetto qualifies as a person associated with a member.”).
As noted at the Hearing, to read Rule 12100(u) as RJFS desires would require eliminating
the entire last sentence of the Rule in order to absolve RJFS of all liability. It is undisputed that
Chatburn was formerly associated with RJFS and initiated his solicitation of Defendants while
affiliated. Because “formerly associated” means “associated” under the FINRA Code, Chatburn
is an “associated person” with RJFS for purposes of Defendants’ claims.
Finally, at the Hearing, Defendants provided a separate and independent basis as to why
Chatburn should be considered an “associated person” of RJFS: Rule 12100(u)(2) provides that a
“person associated with a member” means: “branch manager of a member.” FINRA, RULE

12100(u)(2). Here, it is undisputed that Chatburn held himself out to be Raymond James’ Miami
Branch Manager for years. The business cards he distributed referred to him as Branch Manager
of RJFS. And although not all the transactions were executed during the few months that
Chatburn was registered with RJFS, many were executed while Chatburn had not yet ceased his
affiliation with Raymond James and continued to hold himself out as such. Ultimately, the Court
finds that RJFS has failed to show that it has a substantial likelihood of proving that Chatburn was
not an “associated person” of RJFS.
CONCLUSION
“The bottom line is that FINRA arbitration was established to deal with disputes between

customers and brokers or persons associated with brokers.” Abraham v. Simpson, No. 11-CV-
0637-RBJ-MJW, 2011 WL 5925522, at *5 (D. Colo. Nov. 28, 2011). RJFS, who seeks injunctive
relief, has not set forth sufficient evidence to meet its burden and cannot establish a substantial
likelihood of success on the merits of its claim in order to avoid FINRA arbitration of this dispute.
Consequently, the Court need not reach the other necessary elements for a preliminary injunction.
Accordingly, it is hereby
ORDERED AND ADJUDGED that the Motion [ECF No. 3] is DENIED. Given the
Court’s analysis and conclusions, the parties are directed, by no later than May 8, 2020, to file a
report advising whether any issues remain for trial. Should the parties intend to proceed with the
case, they must also file a Jomt Scheduling Report pursuant to Local Rule 16.1 by May 8, 2020.

DONE AND ORDERED in Fort Lauderdale, Florida this 27th day of April, 2020.

RODOLFOA.RUIZID
UNITED STATES DISTRICT JUDGE
cc: counsel of record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10117618. Public record. Not legal advice.