923 F.3d 558
9th Cir.2019Background
- BOKF, NA is a federally chartered bank with an Institutional Investment Department (IID) registered as a municipal securities dealer and a Corporate Trust Department (CTD) that is not registered.
- The CTD acted as indenture trustee and dissemination agent for conduit municipal bonds (financing senior-living projects); it did not underwrite, buy, or sell the bonds for its own account.
- The SEC brought a fraud action concerning those bonds and BOKF entered a consent decree (no admission, monetary remedies).
- A group of bondholders filed arbitration before FINRA asserting claims (fiduciary duty breach, fraud, negligence) and relied on MSRB Rule G-35 to compel arbitration against BOKF/CTD.
- BOKF sought a preliminary injunction in federal court to enjoin the FINRA arbitration; the district court denied relief and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BOKF or its CTD is a “municipal securities dealer” subject to mandatory FINRA arbitration under MSRB rules | Bondholders: MSRB Rules (G-35, D-8, G-1) treat units that perform listed “municipal securities dealer activities” as bank dealers subject to arbitration even if they do not trade for their own account | BOKF: statutory definition controls — a municipal securities dealer must buy/sell municipal securities for its own account; CTD did not trade and thus is not a dealer | Held: CTD (and BOKF as whole) is not a municipal securities dealer because it did not trade for its own account; MSRB rules cannot override the statutory definition |
| Whether MSRB Rule G-1’s list of "municipal securities dealer activities" converts any bank unit performing listed activities into a municipal securities dealer | Bondholders: the G-1 activity list defines dealer activities and thus suffices to designate a unit a dealer | BOKF: G-1 defines separately identifiable departments/divisions, not the statutory term ‘‘municipal securities dealer;’’ MSRB lacks authority to change the statute | Held: G-1 is a definition of ‘‘separately identifiable department/division’’ and presupposes a unit that already conducts dealer business; it does not replace the statutory requirement of trading for own account |
| Whether preliminary injunction relief was otherwise warranted (irreparable harm, balance, public interest) | BOKF: arbitration would cause irreparable harm and other equities favor injunction | Bondholders: district court had found BOKF did not show those factors | Held: Because BOKF is likely to prevail on the dealer-status issue, the case is remanded for the district court to re-evaluate irreparable harm, balance of equities, and public interest in the first instance |
Key Cases Cited
- Barnhart v. Thomas, 540 U.S. 20 (2003) (canon that a limiting clause normally modifies the nearest preceding noun or phrase)
- Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914 (9th Cir. 2003) (standard of review for preliminary injunction is abuse of discretion)
- Toyo Tire Holdings of Am. v. Cont’l Tire N. Am., Inc., 609 F.3d 975 (9th Cir. 2010) (four-factor preliminary injunction test)
- Winter v. Nat’l Res. Def. Council, Inc., 555 U.S. 7 (2008) (plaintiff must show likelihood of success and irreparable harm for preliminary injunction)
- All. for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) (sliding-scale approach to injunction where serious questions exist)
- Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989 (9th Cir. 2011) (remand appropriate to allow district court to make factual findings on injunction factors)
- eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (preliminary injunctions require case-specific equitable analysis)