Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Plaintiffs, former employees of Chase, filed a putative class action alleging violations of state and federal overtime laws. The district court denied Chase's motion to compel arbitration. The court affirmed, concluding that the arbitration clause in the employment contracts cover only claims or controversies “required to be arbitrated by the FINRA Rules.” The court agreed with the district court's ruling that it thus incorporated the arbitrability restrictions of the FINRA Code of Arbitration Procedure for Industry Disputes (FINRA Rules) and the district court's application of the current version of FINRA Rule 13204, which prohibits arbitration of claims brought as putative class or collective actions. View "Lloyd v. J.P. Morgan Chase" on Justia Law

Benihana America obtained a preliminary injunction in aid of arbitration of a dispute arising under its license agreement with Benihana of Tokyo, prohibiting Tokyo from: selling unauthorized food items at the restaurant it operates under the license agreement; using certain trademarks in connection with that restaurant in a manner not approved by the license agreement; and arguing to the arbitral panel, if it rules that Tokyo breached the license agreement, that Tokyo should be given additional time to cure any defaults. The Second Circuit affirmed with respect to the menu offering and trademark use injunctions. The court reasonably concluded that each of the relevant factors favored Benihana America. The court reversed the prohibition on arguing to the arbitral panel for an extended cure period. When a dispute is properly before an arbitrator, a court should not interfere with the arbitral process on the ground that, in its view of the merits, a particular remedy would not be warranted. Benihana America may challenge an arbitrator’s decision in court only after it has been issued. It may not subvert its agreement to arbitrate by obtaining an advance judicial determination that there are no grounds for the arbitrator to grant a particular remedy. View "Benihana, Inc. v. Benihana of Tokyo, LLC" on Justia Law

The law firm of Leeds, Morelli & Brown, representing 587 plaintiffs with discrimination claims against their employer, Nextel Communications, agreed with Nextel to set up a dispute resolution process whereby all of the plaintiffs’ claims against Nextel would be resolved without litigation. After most of the cases were settled through that process, a group of Nextel employees sued on behalf of the entire class of the firm’s Nextel clients against both the law firm and Nextel, alleging breach of fiduciary duty, legal malpractice, and breach of contract. The Second Circuit vacated dismissal of the case. On remand the district court certified a class under FRCP(b)(3), applying New York law to all of the class members’ claims, even though the class members came from 27 different states, and holding that common issues predominated over any individual issues, even though prior state court litigation indicated that for Colorado class members, individual waivers of the law firm’s conflict of interest could have vitiated defendants’ liability. The Second Circuit vacated: the district court erred in its choice‐of‐law analysis, and a proper analysis makes clear that the individual issues in this case will overwhelm common issues. View "Johnson v. Nextel Communications Inc." on Justia Law

This case stemmed from a dispute between Citigroup and ADIA regarding an Investment Agreement under which ADIA invested billions of dollars in Citigroup. At issue is the arbitration clause contained in the Agreement. The court held that the extraordinary remedies authorized by the All Writs Act, 28 U.S.C. 1651(a), cannot be used to enjoin an arbitration based on whatever claim-preclusive effect may result from the district court's prior judgment when that judgment merely confirmed the result of the parties' earlier arbitration without considering the merits of the underlying claims at issue in that arbitration. Because Citigroup has not demonstrated an adequate basis for an extraordinary injunction under the Act, the court affirmed the judgment dismissing Citigroup's complaint and compelling arbitration. View "Citigroup, Inc. v. Abu Dhabi Investment Auth." on Justia Law

Goldman appealed from the denial of its motion to compel arbitration of a suit brought against it by NCUA. The court concluded that NCUA successfully repudiated the Cash Account Agreement (CAA), including the arbitration provision. The court rejected Goldman's arguments that NCUA's repudiation of the CAA in this case should not be understood to encompass repudiation of the arbitration clause contained in the overall agreement where 12 U.S.C. 1787(c)'s grant of authority to NCUA in its role as liquidating agent to repudiate contracts includes authority to repudiate arbitration agreements. In this case, NCUA's lack of awareness of the CAA, and its consequent delay in repudiating it, cannot be deemed unreasonable. Once Goldman brought the CAA to NCUA's attention, NCUA repudiated the contract within nine days. The court rejected Goldman's challenge to the timeliness of the repudiation given NCUA's excusable unawareness of the CAA until Goldman disclosed it. Accordingly, the court affirmed the district court's order denying arbitration. View "National Credit Union Admin. Bd v. Goldman, Sachs & Co." on Justia Law

NASDAQ conducted the initial public offering (IPO) for Facebook in May 2012. UBS subsequently initiated an arbitration proceeding against NASDAQ seeking indemnification for injuries sustained in the Facebook IPO, as well as damages for breach of contract, breach of an implied duty of good faith and fair dealing, and gross negligence. NASDAQ initiated a declaratory judgment action to preclude UBS from pursuing arbitration. The district court granted a preliminary injunction and UBS appealed. The court concluded that federal jurisdiction is properly exercised in this case; the district court properly decided the question of arbitrability because the parties never clearly unmistakably expressed an intent to submit that question to arbitration, and such an intent cannot be inferred where, as here, a broad arbitration clause contains a carved-out provision that, at least arguably covers the instant dispute; UBS's claims against NASDAQ are not subject to arbitration because they fall within the preclusive language of NASDAQ Rule 4626(a), and the parties specifically agreed that their arbitration agreement was subject to limitations identified in, among other things, NASDAQ Rules; and, therefore, the court affirmed the district court's order preliminarily enjoining UBS from pursuing arbitration against NASDAQ. The court remanded for further proceedings. View "NASDAQ OMX Grp., Inc. v. UBS Sec., LLC" on Justia Law

In each of these appeals, the district court granted a financial services firm's motion to enjoin a FINRA arbitration brought against the firm by a public financing authority. As a preliminary matter, the court concluded that it had jurisdiction in both appeals and the district court had authority to enjoin arbitration in both appeals. On the merits, the court concluded that the FINRA arbitration rules have been superseded by forum selection clauses requiring "all actions and proceedings" related to the transactions between the parties to be brought in court. Accordingly, the court affirmed both appeals.View "Goldman, Sachs & Co. v. Golden Empire Sch. Fin. Auth." on Justia Law

Ghazi Abbar, manager of the Abbar family trusts, lost $383 million invested with a United Kingdom affiliate of Citigroup and seeks to arbitrate his grievances under the rules of FINRA against a New York affiliate. The district court permanently enjoined the arbitration because Abbar is not a "customer" of the New York affiliate. The court held that a "customer" under FINRA Rule 12200 is one who, while not a broker or dealer, either (1) purchases a good or service from a FINRA member, or (2) has an account with a FINRA member. While Abbar was certainly a "customer " of Citi UK, that relationship does not allow Abbar to compel arbitration against its corporate affiliates. Because Abbar was not a customer of Citi NY, a FINRA member, he cannot arbitrate his claims against Citi NY.View "Citigroup Global Markets Inc. v. Abbar" on Justia Law

USPS appealed from the district court's grant of APWU's motion to vacate an arbitral award on the basis that the arbitrator had exceeded his powers under the relevant agreement by applying the doctrine of collateral estoppel against APWU. The court held that the arbitrator's decision to apply collateral estoppel - which was based on his interpretation of particular provisions of the arbitration agreement, and is within an arbitrator's authority to decide under a broad arbitration agreement - did not exceed his powers under the arbitration agreement as would be required to justify vacating the award. Accordingly, the court reversed and remanded. View "Am. Postal Workers Union, AFL-CIO v. U.S. Postal Serv." on Justia Law

Allstate filed suit against defendants, alleging that defendants engaged in insurance fraud. On appeal, defendants challenged the district court's denial of their motion to compel arbitration, arguing that the New York Insurance Law and the contract provision required by that law granted them the right to arbitrate Allstate's claims. The court affirmed the judgment of the district court, concluding that the operative statute, regulation, and contract provision did not provide a right to arbitration in this context. View "Allstate Ins. Co. v. Mun" on Justia Law