The Second Circuit affirmed two cases in which financial services firms had succeeded in enjoining FINRA arbitrations that were initiated against them by public financing entities. The court held that in each case, the FINRA arbitration rules were superseded by broad forum selection clauses in broker-dealer agreements requiring “all actions and proceedings” related to the transactions between the parties to be brought in court. The court noted that the interplay between forum selection clauses and the FINRA arbitration rule has been considered by the Ninth and Fourth Circuits, with the former holding that the forum selection clause controls and the latter reaching the opposite conclusion. In the Second Circuit, the court explained, “an agreement to arbitrate is superseded by a later-executed agreement containing a forum selection clause if the clause ‘specifically precludes’ arbitration.” The court found that the language “all actions and proceedings” fit that description, notwithstanding that the clause did not specify arbitration. Goldman Sachs & Co. v. Golden Empire Schools Financing Authority, Nos. 13-797-cv, 13-2247-cv (2d Cir. Aug. 21, 2014).
This post written by Michael Wolgin.
See our disclaimer.