DRONEY, Circuit Judge.
The Respondents-Appellants are five former employees of Credit Suisse Securities (USA) LLC ("Credit Suisse") who entered into employment agreements with
On appeal,
Accordingly, we
Respondents-Appellants John David Tracy, Charles Tharnstrom, Leonard Kortekaas, Christopher Chapin, and Steven Lazny (collectively "Employees") are a team of Los Angeles-based financial advisors who began working at Credit Suisse in April 2008 after resigning from Goldman Sachs & Co.
J.A. 55.
The EDRP provided further details as to the three-step process discussed in the contract, including that "[a]ll arbitrations under the Program will be conducted by a single arbitrator, or upon written consent of both parties, a panel of three arbitrators, supplied by JAMS
On March 27, 2014, Employees resigned from Credit Suisse and became employed by Merrill Lynch. As a result of the still unpaid balance relating to the Currency Facility plan, Credit Suisse commenced arbitration on this issue in JAMS on April 15, 2014. On May 14, 2014, Employees filed a statement of counter-claims and affirmative defenses in that arbitration.
Also on May 14, 2014, Credit Suisse initiated a JAMS mediation against Employees claiming improper solicitation of Credit Suisse clients and employees in connection with their move to Merrill Lynch. On October 7, 2014, following unsuccessful mediation of the employment-related claims, Employees and Merrill Lynch initiated an arbitration against Credit Suisse with FINRA. That Statement of Claim asserted that Credit Suisse breached an industry agreement regarding employee mobility and clients' interests of privacy and freedom of choice called the "Protocol for Broker Recruiting,"
Rather than participate in the FINRA arbitration, Credit Suisse commenced an action in the Southern District of New York seeking an order to stay or dismiss the FINRA arbitration and to compel arbitration by JAMS in accordance with the EDRP. Credit Suisse argued that the claims raised by Employees were "Employment-Related Claims" under the EDRP and were therefore required to be arbitrated before JAMS or AAA. Employees argued before the district court that FINRA Rule 13200 ("Rule 13200"), which provides that "a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among . . . Members and Associated Persons," prohibited Credit Suisse from selecting a non-FINRA arbitral forum for arbitration. The district court granted Credit Suisse's petition, ordered Employees to dismiss their claims in the FINRA arbitration and compelled arbitration in a
This Court reviews the grant of a petition to compel arbitration de novo. Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 364 (2d Cir.2003).
FINRA is an independent organization authorized by Congress to regulate the U.S. securities markets and professionals who sell securities in the United States. "FINRA is a self-regulatory organization ["SRO"] that (among other things) sponsors an arbitration forum." Cohen v. UBS Fin. Servs., Inc., 799 F.3d 174, 176 (2d Cir.2015). Use of the FINRA arbitration forum to adjudicate disputes between its member securities firms and "associated persons" is governed by the Code of Arbitration Procedure for Industry Disputes (the "Code"), which regulates different features of arbitration between FINRA members and their employees. Id. Again, Rule 13200 of the Code states:
J.A. 166.
The parties do not dispute that Credit Suisse is a FINRA "member" or that Employees are "associated persons" under Rule 13200. Neither do they question the fact that the Employees' employment-related claims and Credit Suisse's improper-solicitation claims "arise[] out of the business activities" of Credit Suisse and Employees. See FINRA Rule 13200. Nor is there any dispute that, as a member of FINRA, Credit Suisse is bound to follow FINRA's arbitration rules. Arbitration rules, as we have previously concluded, bind FINRA members, see UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648-49 (2d Cir.2011) ("Upon joining FINRA, a member organization agrees to comply with FINRA's rules . . . including its Code and relevant arbitration provisions contained therein."). Nor do the parties dispute that Employees entered into the employment agreements that contained the EDRP provision, or that the EDRP provided for resolution of employment-related claims in a private non-FINRA arbitral forum.
The parties do disagree, however, as to whether Rule 13200 requires them to arbitrate their disputes before FINRA. Employees argue that the plain language of Rule 13200 requires arbitration in a FINRA forum and that the rule is not subject to waiver. Credit Suisse contends to the contrary that notwithstanding the mandatory language of Rule 13200, it can be waived by a private pre-dispute arbitration agreement pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., such as that included in Employees' employment agreements.
Employees argue that the plain terms of Rule 13200 require arbitration under the Code. Unless there is an explicit exception in the FINRA Rules,
Rule 13200 plainly requires arbitration pursuant to the FINRA code: "a dispute must be arbitrated under the Code." To interpret the plain language of the Rule otherwise would render the phrase "under the Code" of no effect. This Court must construe the text of the rule so that no part is rendered inoperative or superfluous. Cf. Krys v. Farnum Place, LLC (In re Fairfield Sentry Ltd.), 768 F.3d 239, 245 (2d Cir.2014).
Credit Suisse argues that Rule 13200 makes no mention of a specific forum and so cannot preclude arbitration by JAMS or the AAA. While Rule 13200 does not explicitly require arbitration in a FINRA forum, by requiring that "a dispute must be arbitrated under the Code," the Rule must be read to require arbitration in a FINRA forum because the Code of Arbitration Procedure applies only to FINRA arbitrations. Therefore, Rule 13200 by its own terms requires arbitration in a FINRA forum.
Because the Credit Suisse EDRP requires that arbitration take place in a non-FINRA forum, it is clearly inconsistent with Rule 13200. But this does not mean that Rule 13200 necessarily trumps the parties' pre-dispute private agreement to arbitrate in a non-FINRA arbitral forum, for if Rule 13200 can be waived, then arbitration before FINRA is not required.
Credit Suisse argues that even if Rule 13200 is inconsistent with the EDRP, this does not preclude waiver of the FINRA forum by the Employees in a pre-dispute agreement. Employees maintain that FINRA Rule 13200 cannot be waived, in part because FINRA arbitrations contribute to FINRA and the SEC's regulation of the securities markets. Employees also argue that because the SEC has approved the FINRA arbitration procedure, Rule 13200 has the force of law and cannot be superseded by a pre-dispute private agreement. We disagree. Our case law leads to the conclusion that a pre-dispute private agreement to arbitrate before a non-FINRA arbitral forum is enforceable.
We have held in several cases that an SRO's arbitration provisions are default rules which may be overridden by more specific contractual terms. See, e.g., Ameriprise Fin. Servs., Inc. v. Beland (In re
For instance, in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Georgiadis, 903 F.2d 109 (2d Cir.1990), a Merrill Lynch customer had agreed in an options trading agreement with Merrill Lynch to arbitrate any dispute about his trades before the New York Stock Exchange ("NYSE"). Merrill Lynch was a member of the American Stock Exchange ("AMEX"), and AMEX's Constitution provided for a customer's right to arbitration before the AAA. After a dispute arose concerning the customer's trades in put and call options, he demanded arbitration before the AAA. However, the district court compelled arbitration before the NYSE, pursuant to the customer trading agreement. We affirmed, and concluded that the arbitration provisions of the AMEX Constitution "may be superseded by a more specific customer agreement of the parties." Id. at 112.
Similarly in Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, 764 F.3d 210 (2d Cir.2014), we held that customers of FINRA-regulated securities firms were required to litigate their claims pursuant to a forum selection clause in their customer agreements rather than arbitrate under a FINRA rule requiring that customer disputes be arbitrated before FINRA if the customer chooses arbitration. See id. at 214-17.
We have also recently addressed the waiver of a different FINRA Rule in the employee-member context. In Cohen v. UBS Financial Services, Inc., we considered whether Rule 13204, which bans arbitrations of class action and collective claims in certain instances, can be waived by employees in a pre-dispute agreement. Cohen, a financial advisor for UBS Financial ("UBS"), had executed a class action waiver and an arbitration agreement as part of his initial employment contract with UBS. He subsequently filed a putative class action suit against UBS asserting wage and hour compensation violations. The district court granted UBS's motion for a stay of the action pending FINRA arbitration. On appeal, Cohen argued that UBS could not enforce the pre-dispute agreement because Rule 13204 prohibited enforcement of an arbitration agreement during the course of a class action. We concluded that "Rule 13204 says nothing about class action and collective action waivers, and cannot be read to bar enforcement of them." Id. at 178. Although Rule 13204 "bars arbitration of a claim so long as it is embedded in a class action," that Rule "does not preserve the right to assert a claim in class or collective form notwithstanding a contractual waiver." Id. (emphasis added). Cohen's pre-dispute class action waiver and agreement to arbitrate was thus enforceable.
Here, as in Merrill Lynch, Goldman, and Cohen, the parties signed a pre-dispute agreement that overrode an SRO's default rule: The Employees signed a pre-dispute waiver agreeing to arbitrate any employment related claims in a non-FINRA arbitral forum. Rule 13200 states that such disputes must be arbitrated "under the Code," but, like Rule 13204 addressed in Cohen, it does not address the issue of whether arbitration in a FINRA forum may be waived before a dispute arises.
It is true, as Employees argue, that a pre-dispute complete waiver of arbitration has been held unenforceable in the employment context. In Thomas James Associates v. Jameson, 102 F.3d 60 (2d Cir. 1996), a broker at a securities firm executed an employment agreement that waived arbitration of employment disputes. The rules of the National Association of Securities Dealers ("NASD")
Jameson does not compel non-enforcement of the EDRP here, however. Rather than waive the ability to arbitrate, Employees merely waived the right to arbitrate in a FINRA forum. Cf. Credit Suisse First Bos., LLC v. Groves, 333 F.Supp.2d 229, 232 (S.D.N.Y.2004) ("[N]othing in Jameson or in the law extends the public policy favoring arbitration to the point of favoring a particular arbitral forum, or one forum over another."). Forum preference does not raise the same public policy concern as a complete waiver of arbitration.
Employees' argument that FINRA arbitration allows for more consistency in arbitration awards is unavailing as a factual matter. Although the results of a FINRA arbitration award are publically disclosed, the awards include only the names of the parties, a summary of the issues, the damages awarded, and other general information about the nature of the arbitration. See FINRA Rule 13904(e), (h); J.A. 177-78. Parties may request an "explained decision," but only if there is a joint request. See FINRA Rule 13904(g); J.A. 177-78. The publicly available arbitration award, then, typically contains little helpful information that would provide guidance for future awards or enforcement actions.
Finally, Employees assert that since FINRA arbitration panels are comprised of FINRA-trained and approved arbitrators, private arbitrators such as those that make up JAMS and AAA panels may have lesser qualifications. But Employees do not assert any basis for concluding that JAMS or AAA arbitrators would be less competent. In fact, Employees have willingly engaged in arbitration before JAMS related to the Currency Facility dispute.
For the foregoing reasons, we conclude that Rule 13200 does not prohibit the enforcement of pre-dispute waivers of a FINRA arbitral forum. Accordingly, we