Lloyd v. J.P. Morgan Chase & Co.
791 F.3d 265
| 2d Cir. | 2015Background
- Former Chase Financial Advisors (plaintiffs) sued Chase for unpaid overtime under NYLL, NJSWHL, and FLSA (collective action). Plaintiffs signed Chase employment agreements and FINRA Form U4s.
- Chase moved to compel arbitration under an employment arbitration clause that incorporated the FINRA Code and stated claims "required to be arbitrated by the FINRA Rules" would be resolved by individual (not class/collective) FINRA arbitration.
- FINRA Rule 13204 (Old Rule) then barred class actions from FINRA arbitration; an amended rule (New Rule) later barred both class and FLSA collective actions.
- Plaintiffs sued before the New Rule took effect; Chase moved to compel arbitration after the New Rule was adopted.
- The district court denied the motion, concluding the arbitration clause incorporated FINRA rules (including Rule 13204) and thus precluded FINRA arbitration of the putative class and collective claims; the Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Chase arbitration clause incorporates FINRA Rule 13204 (scope limitation) | Clause limits arbitration to claims "required to be arbitrated by the FINRA Rules," so class/collective claims are not arbitrable | Clause simply requires that employment-related claims be arbitrated under FINRA procedure; "required to be arbitrated" modifies only "your employment" (last antecedent) | Held: Clause modifies the whole category "any claim or controversy"; it incorporates FINRA Rules and their arbitrability limits, so class/collective claims precluded from FINRA arbitration |
| Whether the clause incorporates amendments to FINRA rules (Old vs New Rule 13204) | Agreement to arbitrate "in accordance with" FINRA Rules includes later amendments; parties assumed forum-rule changes risk | Chase: applying New Rule retroactively is improper; the parties agreed under Old Rule scope | Held: Clause incorporates FINRA Rules as amended; New Rule's prohibition on collective actions applies (affirming district court) |
| Effect of phrase "individual (not class or collective) arbitration" | Confirms FINRA's limits and supports that only FINRA-arbitrable claims proceed individually | Defendant says this language independently requires individual arbitration of employment claims | Held: Language mirrors FINRA Rule 13204 and does not override FINRA's prohibition on arbitrating putative class/collective claims |
| Whether presumption of arbitrability compels arbitration | Plaintiffs: clause is best read to exclude class/collective claims; presumption not triggered | Chase: ambiguous language should be resolved in favor of arbitration (presumption of arbitrability) | Held: Under Granite Rock presumption is a tool for genuine ambiguity; here clause best read to limit arbitration to claims FINRA requires, so presumption doesn't mandate arbitration |
Key Cases Cited
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (presumption of arbitrability applies only to genuine ambiguity)
- Specht v. Netscape Commc’ns Corp., 306 F.3d 17 (2d Cir.) (standard of review for arbitration clause interpretation)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (arbitration agreements interpreted as contracts reflecting parties’ intent)
- Barnhart v. Thomas, 540 U.S. 20 (principle of last antecedent and limits on its application)
- Dejesus v. HF Mgmt. Servs., LLC, 726 F.3d 85 (2d Cir.) (treatment of complaint allegations at motion-to-compel stage)
- Allstate Ins. Co. v. Mun, 751 F.3d 94 (2d Cir.) (usage of presumption of arbitrability in ambiguity situations)