Securities Arbitration and the Courts: 2019 Year in Review
Posted on Categories Arbitration, Arbitration Agreements, Arbitration Awards, Class Action/Collective Waivers, Court Decisions, Feature Article, Federal, StateTags , , , , ,

By Richard P. Ryder*

Arbitration is, of course, an alternative to going to court, and for the most part it is just that -- a separate and independent process. But, sometimes, the parties need guidance from the courts on matters ranging from compelling arbitration to enforcing the Award. The Securities Online Litigation Alert (SOLA), this Alert's sister publication, follows court decisions relating to the activities of broker-dealers and investment advisers. In 2019, we covered more than 80 decisions in the state and federal courts dealing with arbitration in a financial services context. This article reviews the case law that the courts reinforced, amplified, or otherwise treated in those decisions. In the course of that exercise, we may drop a viewpoint or two into the mix.

How We Organize Our Coverage

The SOLA publication groups decisions summarized by our cadre of securities practitioners -- SOLA's Board of Contributing Editors -- into five subject categories: Arbitration; Business & Employment: Class Actions: Regulatory; and Securities Customers. The "Securities Customers" category treats those disputes that some scholars bemoan as having disappeared from the courts, thereby depriving us of an evolving thread of new securities case law. In fact, this is an expanding category, fed increasingly by securities disputes initiated by investment advisory clients (who, too often, do not have an available arbitration forum), Ponzi Scheme victims, aggrieved institutional clients, and other investor-related controversies. The "Arbitration" category covers investor and employment disputes, where compelling arbitration or challenging an arbitration Award is the objective.

U.S. Supreme Court & Arbitration

These are the chief varieties of cases that are grouped in the "Arbitration" category -- those deriving from pre-arbitration litigation and post-Award controversies. Occasionally, intervention is sought in the midst of an arbitration and, there, the courts generally observe a policy of abstention. Of the six SCOTUS decisions we covered in SOLA in 2019, three dealt with arbitration matters -- all of them based on pre-arbitration or arbitration-compelling issues. At the Federal Circuit and Supreme Court levels, SOLA casts a broader net, because these courts make arbitration and securities case law. In 2019, none of these arbitration decisions dealt with RIAs or BDs directly, albeit the resulting case law clearly affects them.

Henry Schein

First among the three 2019 SCOTUS decisions was Henry Schein v. Archer and White, which the Supreme Court issued in mid-January 2019. Henry Schein was also the first decision written for the majority by new Associate Justice Brett Kavanaugh. Believe it or not, this is a more than  seven-year-old case in which a retailer seeks injunctive relief from alleged antitrust violations by a manufacturer of dental equipment. While the AAA pre-dispute arbitration agreement (“PDAA”) between the parties specifically excluded injunctive actions, Henry Schein argued that the arbitrators, not the courts, should decide if that exclusion applied to this claim for injunctive relief and money damages. That position is "wholly groundless," cried Archer and White -- and the District Court and Fifth Circuit agreed. But the Supreme Court unanimously decided that the delegation authority in the AAA's Rules, incorporated into the PDAA, clearly delegated arbitrability questions to the arbitrators and no "wholly groundless" exception permits judicial intervention.1

New Prime

Justice Kavanaugh didn't participate in the second case, New Prime v. Oliveira, which was also, in part, a delegation decision. It, too, was decided without any dissents. The other new Justice -- Neil Gorsuch -- wrote the Majority Opinion, with a concurring Opinion by Justice Ginsburg. While it might seem, from Henry Schein's broad embrace of delegation provisions, that judicial purview over issues of arbitrability could be stripped away by forum rules, New Prime reminds us that certain legal issues -- in this case, FAA applicability -- remain the province of the courts. In New Prime, an interstate truck driver sought certain employment benefits, despite having signed an independent contractor agreement (ICA). New Prime argued that the driver was obliged to arbitrate under a PDAA in his ICA.  Mr. Oliveira responded that FAA section 1's exclusion of "contracts of employment" relating to interstate workers made the FAA inapplicable to his dispute. The Court explains that federal courts require FAA applicability in order to enforce arbitration agreements. If the Act does not extend to the agreement, then the courts cannot act. That issue cannot be delegated by contract. Deciding, then, the substantive issue. the Court finds that independent contractors and employees both are included under the section 1 exclusion. That means Mr. Oliveira's putative class action stays in court.

Lamps Plus

It might have been that Mr. Oliveira would have lost the battle to stay in court and the "war" to maintain his class action, if New Prime prevailed and its PDAA also called for individual arbitration in a class action waiver clause. That actually happened in Lamps Plus v. Varela when employee Frank Varela began a class action on behalf of his fellow workers for allegedly improper tax disclosures by Lamps Plus. The courts below mandated arbitration, but declined to enforce the call for individual arbitration. Lamps Plus applied to the Supreme Court for relief from the order compelling class arbitration and it enforces the PDAA as written -- this time, in a 5-4 decision. First, the Court answers an objection that FAA §16 denies immediate appeals in cases involving arbitration-compelling orders. The case was dismissed after the arbitration order issued, so the order was "final" and, therefore, appealable under §16, but the Court also prepares the runaway for its next proposition -- that class arbitration and individual arbitration are wholly different from one another.

The principles of the FAA favoring arbitration and construing contracts to compel arbitration do not mesh well with class arbitration. Class arbitration, writes Chief Justice Roberts for the Majority, "sacrifices the principal advantage of arbitration – its informality – and makes the process slower, costlier, and more likely to generate procedural morass than final judgment.” Springboarding from that premise to the issue of relief from the class arbitration order, the Court rules that class arbitration is such a different animal that the Ninth Circuit could not use the ambiguity it perceived in the PDAA to find that class arbitration was intended. Instead, class arbitration requires something more specific by way of an affirmative contractual commitment. Individual arbitration should have been presumed and, consistent with this Opinion, ordered on remand.

Federal Circuits - Overview

The federal Courts of Appeal were well-represented among our SOLA-related collection of arbitration-related cases, with about a dozen court decisions spread among six circuits. Four of the twelve decisions deal with arbitration at the back-end -- post-Award judicial review -- but the greater majority address questions of arbitrability or other issues among parties disputing the arbitration obligation at the front-end. With the laser-focus of SCOTUS on the delegation issue, i.e., who decides "questions of arbitrability," the fact that the question of "who is a customer?" under FINRA Rule 12200 continues to occupy the courts is a bit dismaying. From our viewpoint, "customer" is a term appearing in FINRA's Customer Code, which, just like the "six-year eligibility" rule in Howsam v. Dean Witter Reynolds, falls outside the "questions of arbitrability" arena and presents an issue of contract interpretation. Arbitrating parties would expect that FINRA, or the arbitrators under Rule 12409, would decide who qualifies as a "customer" to use its forum. We group the cases below by issue.

Defining "Customer" (12200)

In Pictet Overseas v. Helvetia Trust (SOLA 2019-08), FINRA made the decision to accept the underlying arbitration and leave the issue of "customer" eligibility to the arbitrators. When Pictet Overseas chose the courts instead, the applicability of Rule 12200 drew the Eleventh Circuit's focus, instead of delegation. The putative customers were fleeced by their asset manager, who misappropriated investment funds from their bank accounts. Banque Pictet held those accounts, but its securities affiliate and the individual owners were the named Respondents, and they sought to enjoin the Claimant-Appellants from proceeding at FINRA. The Eleventh Circuit approached the applicability of Rule 12200 by examining the "business activities" of the individual Respondents, who together owned both Pictet Overseas and the Banque. The Court asks whether the "business activities" of the partners were involved and reasons, if they were implicated, they were still not those "business activities" that impact the partners' relationship with Pictet Overseas. So, for purposes of Rule 12200, the partners were not "associated persons" subject to the 12200 requirement to arbitrate.

The Ninth Circuit's decision in BOKF v. Estes involved a similar kind of "customer" conundrum as Pictet, except that, instead of a bank and a securities affiliate in the form of a separate corporation, the bank and dealer affiliate were both housed within the same entity. Just as in Pictet, the problem at issue occurred in-house -- in Estes, it was allegedly bad municipal bonds touted by the BOKF Corporate Trust Department. A different department of the Bank acted as the "municipal securities dealer" and only that dealer was obliged by an agreement between MSRB and FINRA to comply with Rule 12200. In Ninth Circuit's view, the fact that one department of BOKF was a registered municipal securities dealer did not mean that another unit within the bank, or the bank as a whole, was a municipal securities dealer. Accordingly, the plaintiff bank was not subject to FINRA’s arbitration rules.2

Whistleblower Retaliation

The many protections laid on by government to protect employees from predatory employers and biased supervisors has resulted in progress over the years, no doubt, but also new tensions in the workplace and much public controversy and litigation. A few years ago, government agencies tried to take on employer use of the class action waiver, which businesses have embraced -- not for love of arbitration, but for distrust of class action litigation. It took Congress to stop the CFPB's crusade against such waivers,3 and the Supreme Court in the Epic Systems v. Lewis decision (SOLA 2018-20) to preempt the NLRB's statutory assault on class action waivers. Encouraging whistleblowers and, consequentially offering them statutory protections, has been another government initiative that generates workplace tension and has, periodically, also tarred arbitration unfairly. Congress in Dodd-Frank (2010) invited the SEC and directed the CFPB to study and, perhaps, restrict, establish conditions for use, or eliminate the use of PDAAs in their areas of authority and, in that same Dodd-Frank legislation, outright outlawed "mandatory arbitration" of SOXA whistleblower disputes. If any doubt existed that Congress meant to include in that prohibition whistleblower rights separately erected in that sweeping legislation, the Second Circuit quelled those doubts in Daly v. Citigroup. The Daly Court painstakingly examined the two pieces of legislation and set forth the reasons why the SOXA protections would be designated non-arbitrable, while Dodd-Frank whistleblowing cases should remain arbitrable.4

The Third Circuit also ruled in 2019 on the arbitrability of a whistleblower retaliation claim in Jaludi v. Citigroup, but the decision makes no clear law on the subject. The Court reverses the District Court below, which compelled arbitration of a SOXA whistleblower claim. It does so, because there were two PDAAs, one pre-Dodd-Frank and one post-Dodd-Frank, and the District Court chose the wrong one to enforce. The post-Dodd-Frank PDAA quite rightly struck SOXA claims from the statutory claims that had to be arbitrated. The law had changed! However, the District Court enforced the pre-Dodd-Frank (2009) PDAA, because it saw the two PDAAs as able to co-exist and the claim arose that early. This could have been an interesting retroactive application case, but the stricken SOXA text in the second PDAA, and the Court's emphasis on the superseding nature of the later PDAA, converted it to a straight-forward contract construction case.

Juxtaposing Two Outliers

We want to cover the federal circuits' treatment of post-Award challenges before moving on to the lower courts, but, first, we deem two special decisions worthy of mention. First, Dorman v. Charles Schwab earns honorable mention, because the Ninth Circuit Panel cut through some hostile precedent to make a decision on arbitrability that SCOTUS has not yet reached: the arbitrability of ERISA claims. The District Court denied arbitration, following a 1984 Ninth Circuit's Amaro decision, but the Circuit Panel reviews Supreme Court cases since then and comes to the inescapable conclusion that, if asked today, SCOTUS would rule in favor of ERISA arbitrability. It also avoids the need for an en banc ruling -- Amaro is discredited, because it irreconcilably conflicts with intervening Supreme Court precedent.

Returning to the subject of delegation, i.e., who decides "questions of arbitrability," we cite MetLife v. Bucsek, a Second Circuit decision that denied FINRA arbitration of an ex-employee's claims, because the claims arose after MetLife ceased membership in the SRO (it now has an affiliated FINRA member, MetLife Securities). Appellant Bucsek objected, however, that the question should be left to the FINRA arbitrators, citing "clear and unmistakable" evidence that the parties' agreement made that delegation. SOLA Contributing Editor Prof. Jill Gross, who summarized this decision for Alert #2019-20, labeled the Court's response "an end-run on Henry Schein," because it first declared the claims clearly non-arbitrable and then used that non-arbitrable finding to support its rejection of the delegation argument. Appellant made the same charge of circular reasoning. He decried the Panel's use of a "wholly groundless" exception to avoid delegation, but the Court distinguished its ruling as adherence to the general principle, i.e., courts decide arbitrability.

Post-Award Challenges

While we're handing out demerits, the Ninth Circuit's decision in Sayre v. JP Morgan Chase, vacating a FINRA Award, based upon a Panel's refusal to postpone, disregards facts that we only know because the dissent cited them. The Majority took just two pages to explain why a complicated fact pattern left them opposed to the Arbitrator's ruling. American Brokerage v. American General, another Ninth Circuit decision, proved tough on an arbitrator's failure to disclose, but with some measure. Precedent places an affirmative duty on the neutral in non-disclosure matters to conduct conflicts check and investigate red flags. This Arbitrator performed a conflicts check and made disclosures about her law firm's general relationship with Respondent's parent company, AIG. The parties inquired no further until after the Award, when American Brokerage discovered numerous undisclosed retentions. True, the Arbitrator might have investigated further, but the Court places the greater responsibility on the challenging party for not following up on what was disclosed. The vacatur below must be reversed.

Two other confirmation decisions drew our attention. One, Fidelity Brokerage v. Deutsch, decided by the Second Circuit, rejects manifest disregard challenges by the investors, who claimed $125 million in losses, on the premise that egregious conduct is only actionable, if the claimant can demonstrate their damages. These investors proved no damages; the Arbitrators thus found no basis for relief existed. That surely surprised the parties, because they spent 96 sessions at hearing and the Deutsch's objection that the Panel refused to hear their expert drew the observation that six of the 16 witnesses for Claimant were testifying experts.

The second confirmation decision exhibits the strong adherence among the federal circuits to the principle of finality that keeps arbitration affordable, relative to litigation. In Walker v. Ameriprise Financial Services, the challenging Plaintiff participated in two related FINRA arbitration proceedings and then climbed the judicial ladder to the Fifth Circuit. The Court deals with numerous challenges, maintaining throughout the propositions that judicial review is exceedingly deferential and that errors, even serious errors, will not justify vacatur. Arbitration is a creature of contract and it only performs its proper role when the courts enforce the precepts that underlie its effectiveness. Generally speaking, the federal circuits do that job well on the post-Award end (...not so much on the pre-arbitration side: see, e.g., Henry Schein).

Browsing Lower Court Decisions

We mean no disrespect in grouping the State high courts with those on the trial level; in truth, though, the federal design tasks the top federal courts with vigilant enforcement of the Federal Arbitration Act. We'll be looking in this section for the more topical issues that are percolating below and awaiting appellate action, as well as treating some themes that we find of lasting interest.

Look-Back Jurisdiction

Although the claims that investors bring against their broker-dealers are often federal statutory claims or rule violations, most vacatur and confirmation motions in federal court are based upon diversity jurisdiction. This had been the case when parties made independent motions to compel arbitration or stay litigation pending arbitration under FAA sections 3 and 4. When such motions were made in the course of merits proceedings, there was no need to demonstrate independent jurisdiction to the courts, but proceedings that were initiated for the purpose of obtaining an order to compel arbitration or stay litigation did require a separate jurisdictional showing. Since the issues at hand were restricted for the most part to procedural matters under the FAA, conjuring up an independent federal question required more imagination than legal precision.

That problem of finding a federal question, when diversity failed, was resolved by SCOTUS for motions to compel arbitration in Vaden v. Discover Bank, where the Court held that petitioners under section 4 of the Act could "look-through" to the claims in the underlying proceeding and rely upon the federal questions presented there for jurisdictional purposes. Specific language in section 4 enabled the Vaden Court to make this jurisdictional.

Vaden was decided in 2009, yet, despite similar jurisdictional limitations, the "look-through" principle has not been universally extended to the confirmation and vacatur motions made under sections 9 and 10 of the Act. Only the First and Second Circuits have extended the holding. In Badgerow v. Walters, a Louisiana federal court made the leap, adopting the "majority" view that consistency of principles throughout the Act seems the best approach.

Defining "Customer" (12200)

We made plain our concern in the discussion above about Rule 12200's scope that investors are too often losing the right to arbitrate, purportedly secured by Rule 12200, by court decisions that narrowly view the definition of "customer." That was not the case in the matter of Deutsche Bank Securities, Inc. v. Saba Ades. There, the District Court for the Southern District of Florida heard a petition for a preliminary injunction to prevent an investor from utilizing the FINRA forum. The investors purchase a security called the Quintus Note, a creation of a Deutsche Bank affiliate, sold to the Sabas by a broker employed by DBSI and by an international affiliate. In fact, the broker solicited and sold to clients of many Deutsche Bank entities.

DBSI claimed that the Sabas were not its "customers." but the broker was registered with DBSI and, according the Sabas, other people from DBSI made representations to them about the Notes. In fact, the Quintus Note itself featured attributes, such as a loan from a DBSI affiliate, relating to more than a couple Deutsche entities and involving payments to some. In this case, DBSI loses its quest to avoid arbitration. First, the broker was registered with DBSI. The Note was part of DBSI "business activities." The Sabas' allegation that DBSI failed to supervise the broker also weighs, because supervision itself is a "business activity" of DBSI.

There were other "customer-defining" decisions during 2019 that we covered in SOLA, but the upshot is that the circuits are just "playing it as it lays." There is some adherence to the Second Circuit test, but, frankly, it does not include most "selling away" disputes, yet FINRA has publicly indicated it will take these cases, even though the "customer" has no account or securities transactions with the broker-dealer. Supervision may be the "hook" here; according to DBSI, supervision is a "business activity" of member firms.

Bottom line here, though, investors who legitimately see themselves as "customers" of a FINRA broker-dealer need to be able to rely upon the forum's 12200 promise to redress their grievance through the arbitration process, when they demand it. And who would the parties reasonably expect would be make the "customer “determination -- the courts? If an exercise in Code interpretation is required, the forum and its neutrals should be the arbiters of that space, through delegation (which might require a Code change) or through a Howsam-type analysis that separates the "customer-defining" mechanism from those "questions of arbitrability" that remain tied to judicial interpretation.

Misclassification of Arbitrators

FINRA has strict and abstruse classification criteria for its Public and Non-Public Arbitrators and the Rules carefully restrict the appearance of a Non-Public Arbitrator on the Arbitration Panels. So, if it's that important, will a misclassification of an Arbitrator result in vacatur of the Award? So far, the answer is "no" and we saw two cases this past year where the courts declined to regard the misclassification as material. In both Malone v. Credit Suisse and First Capital Real Estate Investments v. SDDCO Brokerage Advisors, the Arbitrator in question was seated as a Public Arbitrator when she should have been classified as a Non-Public Arbitrator.

Fortunately, these were three-member panels, not sole arbitrators. The reviewing courts in both cases found no prejudice to the parties, relying for that conclusion upon the fact that the votes in both matters were uniform and unanimous. We worried, when FINRA's arbitrator classifications grew more extreme, that the greater likelihood of misclassifications occurring would prove a ground for vacatur. From the decisions we've seen on this subject, arbitrator misclassification does not seem to pose a significant threat to Award finality.

Contract Formation

Without a contract, arbitration will not take place and, without a pre-dispute agreement, parties in conflict are unlikely to agree mutually that they should arbitrate. Technology, however, has changed the manner in which contracts are presented for consideration and some of the new electronic means -- say, email and online delivery -- do not encourage studied viewing of long documents. When, for instance, was the last time you read a Terms of Use Agreement when visiting a vendor's Website? On the other hand, without contract enforcement, commerce stops.

In Gupta v. Morgan Stanley, broker Gupta fought the idea that he had agreed to arbitrate with his former employer, even though Morgan Stanley could demonstrate that he had been given an opt-out opportunity by email. At first, he denied receiving the email, but Morgan Stanley provided evidence it was sent to his Morgan Stanley address. He continued to insist that he had not actually read the email. According to the Seventh Circuit, the question under Illinois law is whether the parties’ conduct objectively shows offer and acceptance – not whether it was their subjective intent to enter into a contract. Plaintiff’s argument that he did not have actual knowledge of the proposed modification is irrelevant. Caveat here: the Court distinguishes between customers and employees in granting enforcement -- in other words, context matters too. As the Court put it to Mr. Gupta: “Employment includes the understanding that employees will act with diligence in following an employer’s instructions and responding to requests, whether transmitted by email or another reasonable mode of communication.”

So, what about customers and their online interchange with their brokerage firm's Website? Must the client have actual knowledge of the terms of the customer agreement and the embedded PDAA? No, but a reasonable opportunity to read those terms will be vital to enforcement. In Sultan v. Coinbase, the user accessing Coinbase's Website was offered the choice of agreeing to Coinbase's User Agreement via a checkbox, which had to be checked for the user to proceed. Proceeding also meant that the required client information had to be filled out. Important to the Court in compelling arbitration was that the clarity of the screen containing the checkboxes, i.e., that it was uncluttered and without distractions, and that explicit acceptance was required. While implicit acceptance, such as a warning to read, might work, the explicit acceptance required here served as an even clearer signal that a Coinbase account would be subject to terms and conditions, and an even stronger prompt to a reasonably prudent user to click on the link to see what those terms and conditions were before agreeing.


Due to the nature of this article -- a review of individual court decisions -- this Conclusion will be less a summing up of what we've written than an "editor's note." The exercise of reviewing a year's worth of court decisions on a single area of law reminds me of the reason SAC started SOLA and why the publication persists: lawyers learn from the law; it feeds their legal thinking. That hasn't stopped because of arbitration. Court decisions and the fact patterns that make them interesting and memorable stimulate tactical thinking in our case work. We see a legal concept in an Opinion and it shapes our planning in an ongoing matter, fashions our legal arguments, and enriches our opening and closing presentations.

SOLA covers five categories of case law relating to the securities business -- mostly relating to sales and commercial transactions gone wrong -- and each case category intersperses with the other, while remaining vibrant and ever-changing in its own space. SOLA's Board of Contributing Legal Editors remains -- as it has been for the past twenty years -- comprised of lawyers active in the practice -- litigators, professors and neutrals -- who understand the value of staying current on "the law."  They do it, in part, to educate and inform some 6,000 colleagues around the country who are SOLA users, but they do it, too, because it sharpens their thinking and enlivens their professional pursuits.

Securities arbitration is only one area about which SOLA's Contributing Editors write. The other categories relate to more practice-oriented categories than forum-oriented, albeit the value proposition remains. Arbitration has not dampened the need for lawyers to use case law to salt their tactical thinking and stimulate strategies for success. It may have altered some of the ways in which we use the law, but it has not changed our need to know the law. By the same token, arbitration as a creature of contract can be a shape-shifting, malleable process, but its foundational tenets and structural principles, preserved by judicial guidance through court decisions, keep arbitration intact and thrivin


*Rick Ryder is the Founder and President, Securities Arbitration Commentator, Inc. (SAC), the publisher of Securities Arbitration Alert and Securities Online Litigation Alert. SAC also owns ARBchek, an online facility for searching Arbitrators' Award histories


1 This case deserves an article of its own -- so much we could talk about -- the consequences of judicial hostility; the parties' real motivations -- they're clearly not result-oriented. But, we'll have plenty of time to discuss the case, as it appears to be back in SCOTUS's bailiwick. On remand, the Fifth Circuit held that the issue was not delegation after all -- it was scope: Said the unanimous Court: “The most natural reading of the arbitration clause at issue here states that any dispute, except actions seeking injunctive relief, shall be resolved in arbitration in accordance with the AAA rules. The plain language incorporates the AAA rules – and therefore delegates arbitrability – for all disputes except those under the carve-out” (emphasis in original). Henry Schein, Inc. v. Archer and White Sales (5th Cir. Aug. 14, 2019). With the Motion to compel arbitration denied as to injunctive relief, the parties were back at the trial court on Archer and White’s original antitrust suit against Henry Schein – pursuing in the Eastern District of Texas a Petition for injunctive relief filed over seven years ago. On the eve of trial, SCOTUS on January 24 issued an Order granting Henry Schein’s Motion for a stay pending the filing and disposition of a Petition for a Writ of Certiorari (Justice Ginsburg was the only dissenter). Schein’s timely Petition in case No. 19-963 identified this sole issue: “Whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.” Archer and White has responded with a Cross-Petition of its own, raising two new questions: “1. Whether an arbitration agreement that identifies a set of arbitration rules to apply if there is arbitration clearly and unmistakably delegates to the arbitrator disputes about whether the parties agreed to arbitrate in the first place. 2. Whether an arbitrator or a court decides whether a nonsignatory to an arbitration agreement can enforce the arbitration agreement through equitable estoppel” (Petn. Nos. 19-963 & 19-1080). (Whew!)

2 The federal circuits appear to be taking a restrictive view of FINRA Rule 12200. We recently summarized a decision in SOLA by the Seventh Circuit where the decision below denied FINRA arbitration to a group of commodities investors. As in Estes, the Court in INTL FCStone v. Jacobson was dealing with a single entity that housed both a futures commission merchant (FCM) and a FINRA-registered broker-dealer. The District Court enjoined the investors from employing Rule 12200 to arbitrate, because the action happened in the FCM, not on the BD's side. The Seventh Circuit found the Order non-appealable, but it spent 22 pages saying so and defending the District Court's reasoning. Back in 2015, former FINRA-DR chief George Friedman wrote a SAC article, Defining Who is a "Customer" in FINRA Arbitration: Time to Clear Things Up!, urging FINRA to take control of defining "customer." That it has not continues to hurt investors who encounter costly and lengthy court battles (battles they appear to be losing) when seeking to access arbitration through the 12200 conduit.

3 The CFPB’s final arbitration rule was retroactively nullified in 2017, when President Trump signed into law a Joint Disapproval and Nullification Resolution passed under the Congressional Review Act (5 USC §§ 801-808). The rule would have: 1) banned class action waivers in predispute arbitration agreements (“PDAA”) in contracts for consumer financial goods and services; and 2) required regulated financial institutions to file customer claims and awards data with the CFPB, which the Bureau could choose to publish.

4 Veteran securities attorneys Stephanie Korenman and Aegis Frumento wrote "Arbitrating Dodd-Frank Whistleblower Claims," as a feature article for SAC 2019-07, analyzing the Daly Opinion, explaining the expected impact of Digital Realty Trust v. Somers on arbitration practice, and predicting the greater prevalence of such claims in FINRA intra-industry arbitrations.  Congress has not made it easy: while Dodd-Frank whistleblower claims remain arbitrable, the Taxpayer First Act of 2019H.R. 3151 – in section 1405 bans mandatory arbitration of IRS whistleblower claims.

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