Shevland v. Orlando

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 21-24324-Civ-GAYLES/TORRES

BRIAN SHEVLAND,

Plaintiff,

v.

PATRICK ORLANDO and

ARC GLOBAL INVESTMENTS II, LLC

Defendants.

________________________________/

ORDER ON DEFENDANTS’ JOINT MOTION

TO COMPEL ARBITRATION AND STAY THE CASE

This matter is before the Court on Patrick Orlando’s (“Orlando”), and ARC

Global Investments II, LLC’s (“ARC”) (collectively “Defendants”) joint motion to

compel all of Brian Shevland’s (“Shevland” or “Plaintiff”) claims to arbitration and

stay the case pending completion of the arbitral proceedings. [D.E. 18]. Plaintiff

filed a response on February 18, 2022, [D.E. 21], to which Defendants replied on

March 7, 2022. [D.E. 24]. The motion is ripe for disposition.1 After careful review

of the motion, response, reply, relevant authority, and for the reasons discussed

below, Defendants’ motion to compel is GRANTED in part and DENIED in part.

1 On June 15, 2022, the Honorable Darrin P. Gayles referred the case to the

Undersigned for a ruling on all pre-trial, non-dispositive matters, and a report and

recommendation on all dispositive matters. Disposition of an arbitration motion

may be deemed non-dispositive. But given the hybrid nature of such a motion, the

Court will enter an Order on the motion but the parties have leave to appeal, if

desired, by seeking de novo review as if the Order was a Report and Recommendation.

1

This case arises from a business relationship gone sour. Shevland is a

founder and CEO with over twenty years of experience in the financial services

industry. [D.E. 1, ¶13]. Orlando is a financial advisor and is the managing

member of co-Defendant ARC. Shevland was introduced to Orlando in late 2020

through a friend who told Shevland that Orlando was looking for help in setting up a

business dedicated to the formation and execution of Special Purpose Acquisition

Companies (“SPACs”).2 ¶14. The gist of the enterprise encompassed: creating

SPACs from scratch, bringing in investors, identifying potential targets, and

effectuating a successful merger. If all went well, Shevland and Orlando would reap

the benefits by having their founder shares grow in value exponentially. ¶11.

Following multiple discussions, Shevland and Orlando entered into an oral

agreement setting forth the terms of their collaboration agreement on or about

December 21, 2020. According to the Complaint, the parties agreed to being equal

partners in all future SPAC opportunities, meaning that, in exchange for their

contributions to the enterprise, both Shevland and Orlando would have the right to

invest in founder shares of each SPAC at the same price and to purchase the same

number of shares. ¶15. Soon thereafter, however, Orlando allegedly breached

the oral contract by limiting the number of shares to which Shevland was entitled in

2 “A SPAC is a publicly traded corporation with a two-year life span formed with the

sole purpose of effecting a merger, or “combination,” with a privately held business to

enable it to go public. SPACs raise money largely from public-equity investors and

have the potential to derisk and shorten the IPO process for their target companies,

often offering them better terms than a traditional IPO would.” Max H. Bazerman

& Paresh Patel, , Harvard Business Review, July-

connection with Benessere Capital Acquisition Corporation (“BENE”), their first

SPAC opportunity. Despite Shevland’s displeasure with their first deal, he was still

interested in pursuing this venture with Orlando but insisted in memorializing the

agreement in writing. ¶¶17-19.

Between January 31 and February 10, 2021, the parties exchanged multiple

email communications discussing the terms of their agreement, and on February 10,

2021, the parties executed a final version of the agreement in writing. Among other

things, the agreement provides that:

Patrick and Brian will have the opportunity but not the obligation to

invest up to equal amounts in all current and future SPAC

opportunities, whether internal or external, at the same terms (same

price/share). In the event that Brian and his network are able to raise

more sponsor capital in order to reduce the price per share, both Brian

and Patrick will share equally in the price/share reduction, the shares

will not be bifurcated. This right does not extend to BENE since those

terms are outlined in the subscription agreement but would apply to all

other SPAC opportunities.

¶21. (emphasis removed).

Following execution of the agreement, Shevland and Orlando worked together

to build their next project, Digital World Acquisition Company (DWAC), a SPAC

sponsored3 by Orlando and co-Defendant ARC, and for which Orlando was Chairman

and CEO. ¶26. According to Plaintiff, Orlando relied on him for guidance,

support, and expertise to ensure that the launch of DWAC would be a success; and so

it was. In 2021, an opportunity arose for DWAC to merge with the Trump Media

3 “The SPAC process is initiated by the sponsors. They invest risk capital in the form

of nonrefundable payments to bankers, lawyers, and accountants to cover operating

expenses. If sponsors fail to create a combination within two years, the SPAC must

and Technology Group (“TMTG”), an emerging media company created by Donald

Trump. Shevland was instrumental in securing TMTG as well as raising capital for

DWAC, thereby ensuring DWAC’s success and subsequent enormous growth.

Among other things, Orlando asked Shevland to raise $5 million in investment

capital for DWAC, and Shevland’s likeness, credentials, and experience were included

in investor materials designed to attract investment in DWAC. ¶¶32-34.

Plaintiff alleges, however, that despite satisfactorily performing under the

agreement, in the weeks leading up to DWAC’s IPO, Orlando froze him out entirely

from DWAC, and refused to let him make any investment in DWAC in breach of their

agreement. ¶55. According to Plaintiff, after DWAC completed its IPO on

September 3, 2021, Orlando held 5,490,000 founder shares in DWAC, the value of

which increased to approximately $400 million after the TMTG merger was

announced. ¶¶60-61; [D.E. 21, pp. 5-6].

Based upon these facts, Shevland commenced this action in federal court on

December 14, 2021, alleging breach of contract (Count I) and breach of the implied

covenant of good faith and good dealing (Count II) against Orlando. Plaintiff also

brought a claim of unjust enrichment (Count III) against both Orlando and ARC in

the alternative, and a claim for declaratory judgment (Count IV) against Defendants.

Defendants have responded by first moving to dismiss all counts in favor of

arbitration and to stay this action pending completion of arbitral proceedings.

Defendants argue that all of Plaintiff’s claims should be dismissed in favor of

arbitration. Defendants do not dispute that the SPAC investment agreement with

Shevland did not include an arbitration clause; rather, they contend that this dispute

is subject to arbitration under the auspices of the Financial Industry Regulatory

Authority (“FINRA”) because the parties are bound by FINRA’s mandatory

arbitration provisions. [D.E. 18, p. 4]. Specifically, Defendants allege that Shevland

and Orlando are subject to FINRA arbitration (i) by virtue of their current and prior

status as “associated persons” of a FINRA-member, and (ii) because this dispute arose

in connection with Shevland’s “business activity” as a FINRA associated person. As

to co-Defendant ARC, Defendants assert that ARC is entitled to arbitration by virtue

of ARC’s status as a “customer” of a FINRA associated person.

Plaintiff, on the other hand, opposes the motion because the claims against

Orlando fall outside the realm of FINRA arbitration as (i) Orlando was neither a

FINRA-member nor an associated person at the time the parties executed the

investment agreement, and (ii) the claims at issue do not relate to Shevland’s

business activity because he executed the agreement with Orlando in his individual

capacity and not in his capacity as a FINRA associated person. As to co-Defendant

ARC, Plaintiff asserts that ARC was never his customer because he and ARC never

engaged in any sort of transaction.

We address each of these arguments in turn. In short, we agree with

Defendants that the claims against Orlando are subject to FINRA arbitration but

disagree with respect to the claims against co-Defendant ARC, who is neither a

FINRA-member nor a customer of a FINRA associated person. Accordingly,

Defendants’ motion to compel is Granted in part only as to Orlando.

FINRA is a non-profit corporation registered with the Securities and Exchange

Commission that regulates securities firms and investment advisors. FINRA

derives its authority and duties from the Securities Exchange Act of 1934, 15

U.S.C. §§ 78a, and has “the authority to exercise comprehensive oversight

over all securities firms that do business with the public.”

., 905 F.3d 1183, 1187 (11th Cir. 2018).

FINRA regulations provide that its “[r]ules shall apply to all members and

persons associated with a member. Persons associated with a member shall have the

same duties and obligations as a member under the Rules.” [D.E. 18, p. 4] (citing Rule

0140(a)). Rule 13200 requires arbitration when “the dispute arises out of the

a member or among:

members, members and associated persons, or .” (emphasis

added). In turn, Rule 13100(a) defines an “associated person” as a “[a] natural

person who is registered or has applied for registration[,]” a “partner, officer, director,

or branch manager of a member, or other natural person occupying a similar status

or performing similar functions[,]” or “a natural person engaged in the investment

banking or securities business who is directly or indirectly controlling or controlled

by a member.”

In addition, Rule 13000(u) provides that “

” at 3 (emphasis added). FINRA

Rule 12200 also provides that arbitration between a “customer” and a Member or an

associated person is mandatory upon request by the customer. at 4.

Both the Supreme Court and Eleventh Circuit hold that courts must interpret

the FINRA Code “as it would a contract under the applicable state law.”

, 390 F.3d 1340, 1342 (11th Cir. 2004) (citing

, 386 F.3d 1364, 1367 (11th Cir. 2004); ,

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.” , 905 F.3d at 1188 (quoting , 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.” (internal

quotation marks omitted). And “unlike other contracts, any doubts concerning the

scope of arbitrable issues should be resolved in favor of arbitration.” , 386 F.3d

at 1367 (quoting , 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 and can be enforced as

such. , No. 19-20053-CIV, 2019 WL 4864465, at *3

(S.D. Fla. Aug. 20, 2019), , No. 19-20053-CIV,

2019 WL 4685876 (S.D. Fla. Sept. 26, 2019) (internal citations omitted).

We first address Defendants’ claim that both Shevland and Orlando are

associated persons of a FINRA Member and, as such, are subject to the arbitration

mandate of Rule 13200. In essence, Defendant’s argument is that a plain reading of

Rules 13100(a) and 13200 dictate a finding of association because it is uncontested

that Shevland has been an associated person of FINRA-member MCG Securities LLC

(“MCG”) since 2014,4 and that Orlando was an associated person of FINRA-member

Stillpoint Capital, LLC (“Stillpoint”) from January 1, 2013, to May 2019, and of

FINRA-member Entoro Securities, LLC (“Entoro”) since May 2021. Hence,

Defendants allege that by virtue of their previous and current status as associated

persons, both Shevland and Orlando meet FINRA’s definition of associated persons.

Defendants’ position is well founded. As even Plaintiff acknowledges, the

plain reading of Rule 131000(u) provides that “a person formally associated with a

member” is deemed “a person associated with a member” for FINRA purposes.

[D.E. 21, p. 7]. As such Shevland and Orlando are by Rule associated persons

subject to FINRA’s arbitration mandate.

Yet, Plaintiff asserts that Orlando’s status as an associated person to the

FINRA-members is futile here because he was not associated with either of these

firms in February 2021, the date on which the parties executed the investment

agreement. This is so, Plaintiff posits, because “there must still be a nexus between

the former FINRA membership and the issues at hand in the Complaint,”

[D.E. 21, p. 7], a dubious proposition that finds no support in the cases cited by

Plaintiff. , 390 F.3d at 1343 (observing that the Eleventh Circuit applied

“a two-part test” framework to the enforcement of arbitration under NASD, FINRA’s

predecessor, whereby the court first addresses whether the dispute is between

4 “It is also true that since April 8, 2014, I have been registered with MCG Securities

members or associated persons (prong one), and then determines whether the dispute

has a connection (or nexus) with the activities of the associated person (prong two)).

Nothing in the text of FINRA Rule 131000(u) requires a showing of nexus between

membership and the claims alleged in the Complaint, and Plaintiff does not cite any

legal authority in support of this proposition.

Indeed, this court has previously rejected similar extrapolations of the nexus

prong into other parts of the FINRA code. , No. 19-25094-CIV,

2020 WL 977481, at *6 (S.D. Fla. Feb. 28, 2020),

, No. 20-11224-BB, 2020 WL 5755844 (11th Cir. July 14, 2020)

(rejecting the notion that ’s nexus requirement applies to the definition of

“customer” under FINRA, and holding that “Movants’ insistence the Court should

follow the FINRA’s guidance on the definition of a customer under a different rule

fails to persuade.”).

Notwithstanding, Plaintiff argues to the contrary by relying on a single case

from Georgia for the proposition that a former FINRA member is subject to

arbitration only “if its membership was not terminated or cancelled prior to the

events giving rise to the dispute.” [D.E. 21, p. 8 (citing ,

No. 1:13-CV-3858-TWT, 2014 WL 1817636, at *2 (N.D. Ga. May 6, 2014))]. But

Plaintiff’s reliance in is misplaced. First the facts in that case were

significantly different from those at hand. In , the Court refused to send a

breach of contract case (regarding non-solicitation obligations) to FINRA arbitration

on the basis that all of the material events giving rise to the dispute took place several

years after the relevant had terminated .

, 2014 WL 1817636 at *2. Hence, that court’s focus was on the

membership status of the FINRA-member itself, and not on the membership status

of an associated person. By contrast, nowhere does Plaintiff allege that the relevant

FINRA-members to this dispute have had their FINRA memberships cancelled,

terminated, or suspended. As such is simply inapposite.

Second, a closer reading of undermines Plaintiff’s position that the

relevant time frame in determining FINRA association status is the date on which

the contract was executed. In the court expressly noted that there were

numerous “material events giving rise to [the action,]” one of which was the date of

execution. Yet, the court notably also deemed relevant the date on which the

defendant was terminated form his job, as well as the date on which he poached some

of his former colleagues. Like , execution of the investment agreement in our

case is only one of the dates material to the dispute. Just as material, or even more

material, are the dates in which Orlando allegedly breached the agreement during

the months of June, July, August, and September, [D.E. 1, pp. 11-17], when Orlando

enjoyed status as a FINRA associated person by virtue of both his prior and current

association to FINRA-member entities. 13000(u) (providing that

“a person formerly associated with a member is a person associated with a member.”).

Consequently, Plaintiff’s argument that he and Orlando were not FINRA

associated persons when the material events giving rise to this dispute is

unpersuasive. This theory belies the plain meaning of FINRA Rules and misapplies

the relevant law. Hence Defendants’ motion is entirely sound in this respect.

Having found that Shevland and Orlando are associated persons under

FINRA, we turn to the second argument Plaintiff raises in opposition to Orlando’s

motion to compel arbitration: that his claims do not relate to his business activity

because he executed the agreement with Orlando in his individual capacity and not

in his capacity as a FINRA associated person.

We again agree with Defendants on this score because the claims against

Orlando are subject to arbitration under Rules 12200 and 13200. The crux of the

dispute arises from Shevland’s business activities as an associated person of a FINRA

member. Specifically, in performing under the agreement, Shevland was, by

necessity, required to engage in investment-related activity connected to his status

as a FINRA associated person. As such FINRA arbitration is properly triggered.

Plaintiff takes issue with this proposition but cites no authority, and we are

unaware of any, supporting the claim that a FINRA associated person is absolved

from his FINRA obligations when engaging in investment-related activity in his

individual capacity. Instead, Plaintiff primarily relies on the Eleventh Circuit’s

decision in , where the court enjoined two trust funds from proceeding in

arbitration against a Canadian entity and some of its indirect owners. There, the

enjoined trusts had hired an independent investment manager and through him

opened custodial accounts with Banque Pictet, a Swiss bank. , 905 F.3d

at 1185. After the investment manager stole the money from the accounts, the

trusts initiated FINRA arbitration against eight partners and several corporate

affiliates of Banque Pictet, one of which was Pictet Overseas, Inc., a Canadian broker-

dealer and FINRA member. . But because Pictet Overseas was not in the

business of keeping custodial accounts, was not licensed to engage in such activities,

and where the business of custodial accounts was not even FINRA regulated, the

court held that a dispute arising from the maintenance of such accounts could not

possibly relate to the business activities of a FINRA member. at 1190.

It is worth noting that the decisions, both at the district and appeals

levels, relied heavily on , a California Court of Appeals’ case that warrants

closer review. , 174 Cal. App. 4th 606,

608, 94 Cal. Rptr. 3d 526, 527 (2009). In the court refused to compel

arbitration in a dispute concerning the parties’ ownership interest in one of plaintiff’s

businesses (a non-FINRA business) and the parties’ respective right to certain clients

of that business. Concerned with the effects that an untethered construction of

the phrase “arising out of the business activity of an associated person” could have,

the court found that commonsense instructed that FINRA requires arbitration of

disputes:

[O]nly if they arise out of the business activities of an individual as an

associated person of a FINRA member. With this interpretation, FINRA

and the registered representatives under its jurisdiction are assured

that arbitration will pertain to matters with some nexus to the activity

actually regulated by FINRA. This is nothing else than common sense

meaning of the plain language contained in Rule 13200, and any other

interpretation would wrongly strip individuals of their civil jury trial

rights

.

, 174 Cal. App. 4th at 616. (emphasis added).

According to , this common-sense construction of the scope of FINRA

arbitration would safeguard the expectations that associated person also engaged in

side businesses “as freelance photographer[s], coin collector[s], novelist[s], [or] real

estate agent[s][,]” would have about not arbitrating before FINRA “these types of non-

investment disputes.” at 615-16; , 905 F.3d at 1189 (observing that

the business activities of an associated person in his capacity as a real estate agent

have nothing to do with his status as a FINRA member); 1189 n.8 (“Like the

district court, we are persuaded by the reasoning in ”).

Against this backdrop, then, it is hard to see how the concerns underpinning

the reasoning of and could possibly apply to Shevland’s situation.

Here, the dispute does not arise from Shevland’s side business on freelance

photography or real estate; it arises from Shevland’s involvement in an investment

venture aimed at forming and launching special investment vehicles. By Shevland’s

own account, this venture entailed his active involvement in the solicitation of

investors, the offering of SPAC securities, and the raising of investment capital for

the respective SPACs. [D.E. 1, ¶¶ 32-34]. Clearly, this is the sort of activity in which

FINRA maintains a regulatory interest. Furthermore, Shevland’s involvement in

this venture presupposed a level of involvement that had a connection to his status

as a FINRA associated person. That is miles apart from the types of claims at issue

in and .

Indeed, contrary to Plaintiff’s claim that his involvement in the SPAC

investment agreement was entirely divorced from his connection to FINRA member

MCG, exhibits attached to the Complaint bolster Defendants’ position as they reflect

that the parties expressly discussed and contemplated Plaintiff’s status as a FINRA

associated person. [D.E. 1-8, Ex. E (reading in relevant part: “[Orlando] and Eric to

partner with [Shevland] to launch investment banking desk for/clear through

bluestone CM/MCG? [Orlando] and Eric to be registered reps of Bluestone CM or

MCG” and “[Orlando] to run investment banking efforts for/clear through Bluestone

CM/MCG.”)]; , No. 19-20053-CIV, 2019

WL 4685876, at *2 (S.D. Fla. Sept. 26, 2019) (finding that claims arose from the

business activities of associated person where relevant correspondence reflected his

association with FINRA member).

In sum, the record here does not support Plaintiff’s theory that he executed

and performed under this agreement in his individual capacity such that it absolves

him from the requirements of FINRA. The overall record reflects that Shevland’s

involvement in the investment venture concerned a “subject matter in which FINRA

maintain[s] [a] regulatory interest,” , 174 Cal. App. 4th at 616, and that

his performance of the agreement entailed investment-related activities with a

connection to his status as a FINRA associated person, , F.3d at 1189.

Hence, we hold that this dispute arises from Shevland’s business activities in

connection to his status as a FINRA associated person as defined by the FINRA Rules.

Accordingly, having concluded that both Shevland and Orlando fall within

FINRA’s definition of “associated persons” and that their dispute arises from

Shevland’s “business activities” in connection to his status as a FINRA associated

person, we find that all of the claims between Shevland and Orlando raised by the

Complaint are subject to mandatory arbitration pursuant the FINRA Rules.

We turn finally to the question of arbitrability as to co-Defendant ARC. The

claim here is not that he was an associated person like Orlando, but instead a

“customer” under the FINRA rules. Plaintiff’s opposition to arbitration is more

persuasive in this respect. We thus reject Defendants’ claim that co-Defendant ARC

is entitled to FINRA arbitration by virtue of its status as a customer of Shevland.

As noted above, FINRA Rule 12200 provides that arbitration between a

customer and a member or an associated person is mandatory upon request by the

customer. According to Defendants, FINRA Rules define customer as “not

include[ing] a broker or dealer[,]” and Eleventh Circuit precedent dictates that

nothing else is required. [D.E. 24, p. 9]. Our court, however, has taken a very

different view. As Judge Reinhardt explained, “[w]hatever the precise parameters

of a ‘customer’ for purposes of Rule 12200, at a minimum it requires a business

relationship between the parties.” , No.

19-81412-CIV, 2019 WL 8362167, at *3 (S.D. Fla. Dec. 26, 2019) (denying motion to

compel FINRA arbitration asserted by purported customer who had no tangible

business relationship with FINRA member). That is consistent with the widely

accepted principle that, though no precise definition exists in the statute or caselaw,

a core definition of “customer includes at least a non-broker or non-dealer who

purchases, or undertakes to purchase, a good or service from a FINRA member.”

, 660 F.3d 643, 649 (2d Cir. 2011)

(citing an online FINRA glossary stated that a “customer” is “[a] person or entity (not

acting in the capacity of an associated person or member) that transacts business

with any member firm and/or associated person.”;

559 (3d ed. 2002)) (defining “customer” as “one that purchases some

commodity or service” (def. 2a));

450 (4th ed. 2000) (defining customer as “[o]ne that buys goods and

services”)).

This contextual interpretation has been adopted by other circuits. The

Fourth Circuit, for instance, has held that a “customer” is “one, not a broker or dealer,

who purchases commodities or services from a FINRA member in the course of the

member’s business activities insofar as those activities are covered by FINRA’s

regulation, namely the activities of investment banking and the securities business.”

706 F.3d 319, 325 (4th Cir. 2013) (because

“customer” is undefined, interpretation depends on context of other provisions such

as Rule 12200 that provides that arbitrable disputes must arise in connection with

the “business activities” of the FINRA Member, suggesting that a person must be a

customer of a FINRA member’s business activities to obtain arbitration).

, 747 F.3d 733, 741 (9th Cir. 2014) (finding other

circuits’ analysis “persuasive” and “conclud[ing] that a ‘customer’ is a non-broker and

non-dealer who purchases commodities or services from a FINRA member in the

course of the member’s FINRA-regulated business activities, i.e., the member’s

investment banking and securities business activities.”).

With these principles in mind, Defendants’ simplistic application of Rule 12200

holds little weight because, as the Ninth Circuit explained, the text of that rule “does

not tell us what a ‘customer’ and because [ARC] is neither a broker nor a dealer,

the FINRA Rules’ definition, standing alone, cannot tell us whether [ARC] fits the

bill.” at 739 (emphasis in original). Looking at the case against ARC given the

context of the Rule, ARC is not a customer as it does not engage in the purchase of

commodities or services from a FINRA member. So compelled FINRA arbitration

against ARC, absent an express agreement to arbitrate that does not exist, is not

possible because ARC did not maintain “an account relationship, either individually

or jointly, with [Shevland]. Similarly, they have not received any investment or

brokerage services of any kind from [Shevland].” 2019 WL 8362167, at

*3 (enjoining filing of FINRA arbitration action against purported customer).

Defendants’ case for arbitration against ARC focuses on portions of Plaintiff’s

briefs wherein, in support of his unjust enrichment claim, he alleges that by

completing his part of the bargain, he conferred benefits on both Orlando and ARC.

According to Defendants, these allegations pull ARC within the scope of a “customer”

for FINRA purposes. Although Defendants cite multiple cases in support of their

claim, none of the cases provide actual support for their position.

Indeed, Defendants’ cherry-picked reading of this caselaw distorts the holdings

of these cases and misses the mark. For instance, Defendants cite and

for their assertion of customer status for ARC. But they are clearly inapposite. In

the first place, “[both and ] turned on whether the customer of an

associated person is also the customer of the broker-dealer who supervised the

associated person, even if the broker-dealer had no knowledge of the transaction.”

, 2017 WL 10403345, at *6. Here, in contrast, Defendants have not asserted

any supervision claims.

Second, and more fundamentally, Defendants ignore that embedded in these

cases is the requirement that the party asserting customer status must

with the FINRA-member or the associated person.

In other words, contrary to Defendants’ theory that to meet the meaning of

“customer” under FINRA a party must merely show that it is neither a broker nor a

dealer, these cases recognize that to be a FINRA customer a party must actually

engage in a transaction in its capacity as a customer. , 390 F.3d at 1344

(“there is no dispute that the [parties claiming customer status] were customers of

[the associated person]”); , No. 13-81088-

CIV, 2017 WL 10403345, at *4 (S.D. Fla. Apr. 14, 2017) (observing that the Eleventh

Circuit has deemed the idea of “direct transactional relationship” as an essential

factor in determining a customer relationship). Unlike , , or another

case they purport to rely on, , Shevland denies ever engaging in any sort of

transaction with ARC, and the evidence of record does not show otherwise.

Defendants do not point to any facts showing that ARC was considered a party to the

investment agreement, that ARC purchased any good or services form Shevland, that

ARC received investment advice from Shevland, or that ARC had any type of

contractual relationship with ARC. 5

5 We pause to note that Defendants also mischaracterize by claiming that

“[t]he court also rejected Shevland’s central argument ‘that Pictet limits the

definition of a customer.’” [D.E. 24, p. 10]. But did reject Pictet’s

“customer” analysis; rather, as noted above, that case simply refused to extrapolate

’s analysis regarding the business activity question (second prong) into the

definition of customer under FINRA. , 2020 WL 977481 at *6 (observing

that requiring a showing of nexus here would be redundant because “[t]he business

Because ARC cannot establish that it engaged in some sort of “transactional

relationship” with Shevland we agree with Plaintiff that ARC does not qualify as a

customer under FINRA. , 2017 WL 10403345, at *6 (holding that

parties failed to establish customer relationship where they admitted “they never had

accounts, never bought or sold any securities and never had any contractual

relationship with POI.”).

Accordingly, it is ORDERED AND ADJUDGED that Defendants’ motion to

compel arbitration and stay the case pending completion of the arbitral proceedings,

[D.E. 18], is GRANTED only as to Defendant Orlando. Defendants’ motion to

compel arbitration and stay as to Defendant ARC is DENIED. The case against

ARC may proceed while any claims against Orlando will be Stayed pending

completion of arbitration proceedings. If no appeal/objections are filed to this Order,

the parties shall confer and file a joint status report within 30 days that details

whether any agreement is reached to stay the action against ARC pending that

arbitration. Otherwise, the current scheduling Order shall govern all proceedings

against ARC.

DONE AND ORDERED in Chambers at Miami, Florida, this 19th day of

September, 2022.

/s/

EDWIN G. TORRES

United States Magistrate Judge