Fifth Third Bank v. Rowlette
2013 Ohio 5777
Ohio Ct. App.2013Background
- James Rowlette was a dual employee of Fifth Third Bank (and Fifth Third Bancorp) and Fifth Third Securities; he signed stock/option agreements with noncompetition clauses with Fifth Third Bank/Bancorp and a Form U4 while at Fifth Third Securities.
- In Feb 2008 Rowlette resigned and affiliated with Wachovia Securities through Rowlette Asset Management; Fifth Third Bank and Fifth Third Bancorp sued in May 2008 alleging removal of confidential customer information, breach of contract, tortious interference, and unfair competition.
- Defendants (Rowlette, Rowlette Asset Management, and Wachovia Securities) moved to dismiss or stay and compel arbitration under FINRA rules and Rowlette’s Form U4.
- The trial court denied the motion, concluding there was no arbitration agreement binding Fifth Third Bank or Fifth Third Bancorp; defendants appealed.
- The central factual/legal dispute: whether FINRA membership and Rowlette’s Form U4 can compel non‑FINRA corporate plaintiffs (Fifth Third Bank and Fifth Third Bancorp) to arbitrate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether appellees must arbitrate claims under FINRA rules/Form U4 | Fifth Third Bank/Bancorp are not FINRA members or signatories and thus not bound to arbitrate | FINRA member (Fifth Third Securities) and Rowlette’s Form U4 mandate arbitration of disputes arising from associated persons/members | Held: No arbitration — Fifth Third Bank and Bancorp are not FINRA members nor parties to Form U4, so not obliged to arbitrate |
| Whether a nonsignatory plaintiff can be compelled to arbitrate via related FINRA membership/real‑party‑in‑interest theory | Bank/Bancorp assert they assert independent contractual claims arising from their stock agreements | Defendants contend Fifth Third Securities is the real party in interest and any damages belong to it, so arbitration is proper | Held: Court applied presumption against compelling arbitration of nonsignatories and found Fifth Third Bank/Bancorp assert independent claims; defendants failed to show they are the same parties to an arbitration agreement |
| Whether joinder or intervention by Fifth Third Securities was required/was a basis to compel arbitration | Plaintiffs maintained defendants never moved to join Fifth Third Securities and plaintiffs pursued their own claims | Defendants argued Fifth Third Securities should be joined or allowed to proceed in arbitration instead | Held: Defendants did not seek joinder under Civ.R. 19; Welch decision supports that the Bank’s claims are sufficiently distinct and cannot be forced into FINRA arbitration |
Key Cases Cited
- ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498 (Ohio 1998) (courts encourage arbitration)
- Preston v. Ferrer, 552 U.S. 346 (U.S. 2008) (Federal Arbitration Act policy applies in state and federal courts)
- Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411 (Ohio 2011) (presumption against arbitration when invoked against nonsignatory)
- West v. Household Life Ins. Co., 170 Ohio App.3d 463 (Ohio Ct. App.) (party cannot compel arbitration absent evidence it is party to arbitration agreement)
- Fiero v. Financial Industry Regulatory Auth., Inc., 660 F.3d 569 (2d Cir. 2011) (describing FINRA as a securities self‑regulatory organization)