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Release Agreement Forum Choice Gives Oliver’s Arbitration a Twist: Merrill Lynch, Pierce, Fenner & Smith Inc. v. Oliver
Posted on Categories Court Decisions, Securities ArbitrationTags , ,

By Sarah G. Anderson

If an agreement contains a mandatory forum selection clause that substantially excludes arbitration, it supersedes a prior arbitration agreement.

Merrill Lynch, Pierce, Fenner & Smith Inc. vs. Oliver, No. 15-CV-4971 (S.D. N.Y., 1/27/16).

The Settlement and the Arbitration

Marc Oliver left his job as a compliance officer at Bank of America Securities (“BAS”) in 2004 and, the following year, filed a lawsuit for discrimination against his former employer, which his attorney settled for $100,000 in 2007. The settlement was memorialized in a General Release and Settlement Agreement (“Agreement”) signed by BAS and Oliver, in which Oliver released any claims against BAS “arising out of his employment relationship with BAS, and/or the termination of such employment relationship,” including “all unknown, unsuspected or unanticipated injuries and damages … which arose prior to [his] execution of this Agreement.”

In March 2015, Oliver commenced a FINRA arbitration proceeding against Plaintiff Merrill Lynch, as successor to BAS, for defamation, relating to purportedly false statements in Oliver’s Form U5 and the Agreement itself. Plaintiff filed the present action to enjoin the arbitration and now moves for summary judgment, while Oliver, proceeding pro se and alleging that he signed an arbitration agreement in 2000, moves to dismiss and to compel arbitration.

Oliver's Arbitration Must Fail

The Court grants Plaintiff’s motion for summary judgment. It is well-established, it declares, that a district court may enjoin arbitration proceedings that are not covered by a valid and binding arbitration agreement. Further, if an agreement contains a mandatory forum selection clause that substantially excludes arbitration, it trumps any prior arbitration agreement. The Agreement here contains a merger clause and therefore supersedes the arbitration agreement, it includes a mandatory forum selection clause identifying the New York courts as the forum to resolve all claims between the parties and it specifically precludes the disputed arbitration; therefore, Oliver’s claims are not subject to arbitration.
Even if Oliver’s claims do fall within the scope of a valid arbitration agreement, Plaintiff would be entitled to the relief it seeks for multiple reasons. First, all of Oliver’s claims arise from his termination by BAS and were thus released by the Agreement. Although Oliver alleges that he did not discover BAS’s statements until years later, the Agreement extends to all unknown, unsuspected and unanticipated injuries and damages that arose prior to his execution of the Agreement. Secondly, it is well-settled that statements made by an employer on a U5 are absolutely privileged under New York law.

Attorney Fees?

Finally, Plaintiff seeks attorney fees and costs for Defendant’s breach of the Agreement. The Court notes that nothing in the Agreement itself permits such an award, and the “American Rule” requires parties to bear their own fees and costs absent a statutory or contractual provision. Additionally, it is the practice in the Court that attorney’s fees are not recoverable as damages in an action for breach of a settlement agreement. Although the Court may award fees if a losing party’s conduct was in bad faith, vexatious or wanton, Plaintiff has not attempted to show that the standard is met here, and the Court is disinclined to award fees in this pro se case. Nevertheless, the Court gives Plaintiffs 10 days to show cause why its request for attorney fees should not be denied, reserving judgment on that issue until then.

(S. Anderson) (EIC: *Had Merrill Lynch lost its attempt to stop the arbitration, it would have had two strong grounds for a pre-hearing adjudication before the FINRA panel. One of the surviving grounds for a pre-hearing motion to dismiss under Rule 13504 (which is applicable in an Employee-Member case, such as the one filed by Oliver) is the existence of a written release of the claims. Moreover, Oliver’s FINRA claim was filed more than ten years after the U5 from which it arose, and it is therefore vulnerable to the six-year eligibility rule in Rule 13206, which provides a separate basis for early dismissal. **The forum selection clause actually stated that “any action involving the validity, interpretation or enforcement of this Agreement … or claiming breach thereof, shall exist exclusively in a court or government agency located within the State of New York and City of New York.” ***A forum selection clause in Release Agreement appears to be a targeted response to the lack of a remedy (see Rule 13504) when associated persons "relitigate" settled claims in FINRA arbitration, as opposed to an all-out attempt to deny the right to arbitrate.)

(SLC Ref. No. 2016-07-01)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA)from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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