Securities Litigation

The Second Circuit stayed its mandate last week to allow public-pension litigants to file cert petitions seeking review of its August holding that a subsequent account-agreement forum-selection clause requiring federal-court litigation trumps FINRA's rules requiring all member firms to arbitrate on a customer's request. Goldman, Sachs & Co., v. Golden Empire Schools Financing Auth., Nos. 13-797-cv, 13-2247-cv (2^nd Cir. Aug. 21, 2014), here. We discussed the opinion here. The public-pension litigants argued three grounds for the stay. First, they wrote the Second Circuit's opinion was contrary to other circuits that apply a presumption favoring arbitration when facing claim that broad arbitration agreement is waived by later forum-selection clause not referencing the arbitration. E.g. Personal Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F. 3d 388 (5^th Cir. 2002); Patten Securities Corp. v. Diamond Greyhound & Genetics, Inc., 819 F. 2d 400 (3d Cir. 1987). Second, the Opinion itself noted that while it aligned with the Ninth Circuit, it conflicted with opinions by the Fourth Circuit and others. Third, the pension plans argued the holding conflicted with the Court's arbitration precedent enforcing the broad policy goals of the Federal Arbitration Act. The stay motion is here. The pension-petitioners will join City of Reno, which filed its cert petition August 7, seeking review of the Ninth Circuit's opinion. See Goldman Sachs & Co., v. City of Reno, 747 F. 3d 733 (9^th Cir. 2014), cert. pending, No. 14-146 (U.S. filed Aug. 7, 2014). Reno's petition presents the question as:

Does a presumption of arbitrability apply when a broad arbitration agreement allegedly is waived through a subsequently-enacted forum selection clause that does not reference arbitration and that covers an arguably narrower scope of claims (as the Second, Third and Fifth circuits have held), or is there no presumption in favor of arbitration in these circumstances (as the Ninth Circuit has held)?

Quoted 46 Sec. Reg. & L. Rep. 1821 (BNA 9/22/2014). Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 28 years' experience representing financial institutions in litigation, regulatory and compliance matters. © 2014 by Thomas K. Potter, III (all rights reserved)