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Stay Pending Arbitration Stalls Related Litigation Against Different Defendants: LaGrasso v. The Prudential Ins. Co., of America
Posted on Categories Court Decisions, Securities ArbitrationTags , ,

By Christopher G. Lazarini

Where non-arbitrable issues are intertwined with arbitrable issues, such as where the same operative facts and same claims exist in both proceedings, a Court may stay the litigation of the non-arbitrable issues pending the outcome of the arbitration.

Lagrasso vs. The Prudential Ins. Co., of America, No. 18-11497 (E.D. Mich., 7/12/18).

Two Proceedings

Plaintiff purchased several annuities in his IRA account through non-party Marcum, a registered representative of Allstate Financial Services. Plaintiff later filed a FINRA arbitration against Marcum and Allstate, alleging suitability, breach of fiduciary duty, fraud, failure to supervise, and other claims. Plaintiff simultaneously sued Defendants, companies that issued and/or distributed the annuities, in this Court, asserting the same causes of action on the same facts and seeking the same relief as in the arbitration. Defendants moved to stay pending the outcome of the arbitration.

Reasons for a Stay

Exercising its discretion under the FAA, the Court grants the motion. First, it points out, Plaintiff’s claims here are inseparable from those made in the arbitration. Second, if this action proceeds, Plaintiff must prove Marcum’s alleged misconduct. This, the Court explains, would subvert the arbitration agreement and undermine federal policy favoring arbitration. In contrast, the stay preserves those factors, as well as the Court’s and the parties’ resources, and mitigates the risk of inconsistent rulings. Third, the delay in litigation does not unduly prejudice Plaintiff. Finally, the Court rejects Plaintiff’s request to compel Defendants to arbitrate, finding no contract compelling Defendants to do so.

(C. Lazarini: The other Defendants are Pruco Life Insurance Company, Prudential Annuities Distributors, Inc., Voya Insurance and Annuity Company, and Voya Retirement Insurance and Annuity Corporation.) (EIC: Seemingly, the primary beneficiaries of Defendants' agreement to arbitrate are Defendants who did not agree to arbitrate, as they get to sit it out. One imagines a theoretical risk of offensive collateral estoppel, but, in our experience, it's just that -- theoretical.)

(SOLA Ref. No. 2018-29-01)

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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