706 F.3d 562
4th Cir.2013Background
- Morgan Keegan is a FINRA member; defendants sued seek to arbitrate under Rule 12200.
- Defendants allegedly purchased Regions Morgan Keegan Funds via Legg Mason, not directly from Morgan Keegan.
- Defendants claim they were Morgan Keegan customers through Legg Mason and Morgan Keegan materials.
- District court enjoined arbitration, siding with Morgan Keegan that defendants were not customers.
- This appeal reviews whether defendants were customers under Rule 12200 and thus subject to FINRA arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants were Morgan Keegan customers under Rule 12200 | Defendants are not customers of Morgan Keegan | Defendants were customers via Legg Mason and Morgan Keegan materials | No; defendants were not customers under Rule 12200. |
| If not customers, whether arbitration was mandatory anyway | Arbitration not mandatory since no customer relationship | Arbitration should be allowed if customer status existed | Arbitration not mandatory because no customer relationship. |
Key Cases Cited
- Washington Square Securities, Inc. v. Aune, 385 F.3d 432 (4th Cir. 2004) (federal arbitration policy not controlling; focus on customer status under Rule 12200)
- UBS Financial Services, Inc. v. W. Va. Univ. Hospitals, Inc., 660 F.3d 643 (2d Cir. 2011) (defined customer scope under Rule 12200; investment banking/securities business context)
- Bensadoun v. Jobe-Riat, 316 F.3d 171 (2d Cir. 2003) (limits on broad interpretations of customer status; requires business relationship with broker)