Credit Suisse Securities (USA) LLC v. Tracy
812 F.3d 249
| 2d Cir. | 2016Background
- Five former Credit Suisse employees signed employment agreements requiring employment-related disputes to proceed through the Credit Suisse Employment Dispute Resolution Program (EDRP), which mandates internal grievance, mediation, then binding arbitration before JAMS or AAA.
- Disputes arose relating to Credit Suisse’s Currency Facility and alleged improper solicitation after the employees left for Merrill Lynch; Credit Suisse initiated JAMS proceedings and Employees later filed a FINRA arbitration claim.
- Credit Suisse petitioned the Southern District of New York to stay/dismiss the FINRA arbitration and compel arbitration under the EDRP (JAMS). The district court granted the petition and ordered dismissal of the FINRA arbitration.
- Employees appealed, arguing FINRA Rule 13200 requires arbitration in a FINRA forum and that the rule cannot be waived pre-dispute.
- The Second Circuit consolidated precedent on SRO rules versus specific private agreements and analyzed whether Rule 13200 is inconsistent with the EDRP and whether it is waivable.
Issues
| Issue | Employees' Argument | Credit Suisse's Argument | Held |
|---|---|---|---|
| Whether FINRA Rule 13200 prohibits enforcement of a pre-dispute agreement requiring arbitration outside FINRA | Rule 13200’s language (“must be arbitrated under the Code”) mandates FINRA forum and is not waivable because it supports FINRA/SEC regulation | A pre-dispute arbitration agreement governed by the FAA can waive the FINRA forum; Rule 13200 is a default SRO rule that specific contractual terms can supersede | Rule 13200 does not bar pre-dispute waivers of the FINRA forum; the EDRP’s JAMS/AAA forum provision is enforceable and the district court’s order compelling non-FINRA arbitration was affirmed |
Key Cases Cited
- Ameriprise Fin. Servs., Inc. v. Beland, 672 F.3d 113 (2d Cir. 2011) (SRO arbitration provisions are default rules that can be superseded by specific contractual terms)
- Merrill Lynch, Pierce, Fenner & Smith Inc. v. Georgiadis, 903 F.2d 109 (2d Cir. 1990) (a customer’s specific arbitration agreement can supersede an exchange’s arbitration forum provision)
- Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, 764 F.3d 210 (2d Cir. 2014) (specific forum-selection clause in customer agreement can override FINRA rule requiring FINRA arbitration)
- Cohen v. UBS Fin. Servs., Inc., 799 F.3d 174 (2d Cir. 2015) (FINRA Rule 13204 does not bar enforcement of pre-dispute class-action waivers; contractual waivers can be enforceable)
- Kidder, Peabody & Co. v. Zinsmeyer Trs. P’ship, 41 F.3d 861 (2d Cir. 1994) (different or additional contractual arbitration arrangements can supersede SRO-conferred rights)
- Thomas James Associates v. Jameson, 102 F.3d 60 (2d Cir. 1996) (complete pre-dispute waiver of arbitration in employment context found unenforceable; distinguishes forum waiver from total arbitration waiver)
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (FAA requires enforcement of private arbitration agreements according to their terms; no federal policy favoring a particular procedural arbitration forum)