NASDAQ OMX, Inc. v. UBS Securities LLC
957 F. Supp. 2d 388
S.D.N.Y.2013Background
- NASDAQ seeks preliminary injunction to enjoin UBS arbitration; UBS cross-moves to dismiss.
- Arises from NASDAQ’s Facebook IPO system failures on May 18, 2012.
- UBS asserted four claims under the Services Agreement and related conduct (breach, indemnification, bad-faith/fair dealing, gross negligence) seeking damages over $350 million.
- NASDAQ’s Answer and Complaint sought declaratory relief and to prevent arbitration.
- The Services Agreement includes an arbitration clause and a detailed NASDAQ OMX Rule framework (Rule 4626) governing liability and accommodations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitrability—who decides arbitrability under the contract | Section 18(A) contains a carve-out, not a blanket arbitration of arbitrability. | Broad clause and AAA rule reference show arbitrators decide arbitrability. | Court will decide arbitrability (not the arbitrator) due to carve-out language. |
| Whether UBS's claims fall within the arbitration provision | UBS claims arise from NASDAQ’s operation as an SRO and fall under Rule 4626, outside the arbitration provision. | Arbitration clause covers all claims; Rule 4626 is a NASDAQ OMX Requirement. | UBS claims not within the arbitration provision; injunction granted. |
| Whether federal Question jurisdiction exists to hear the declaratory action | Underlying dispute implicates NASDAQ’s duties as a national securities exchange under the Exchange Act. | Claims are contractual/state-law claims; no substantial federal question. | Substantial federal questions exist; jurisdiction is proper. |
Key Cases Cited
- Zack v. Facebook, Inc., 922 F.Supp.2d 475 (S.D.N.Y.2013) (federal questions and duties of a national securities exchange involved in IPO Cross)
- Barbara v. New York Stock Exchange, Inc., 99 F.3d 49 (2d Cir.1996) (contractual/disciplinary rules; internal exchange rules are contractual in nature)
- D'Alessio v. New York Stock Exchange, Inc., 258 F.3d 93 (2d Cir.2001) (federal interest in enforcing Exchange Act duties; arbitrability may be court-determined)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir.1996) (broad arbitration language may place arbitrability with the arbitrator)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S.1995) (clear and unmistakable evidence needed to send arbitrability to arbitration)
- Garanti Finansal Kiralama A.S. v. Aqua Marine & Trading Inc., 697 F.3d 59 (2d Cir.2012) (federal questions in declaratory actions involving arbitration)
- Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159 F.3d 1209 (9th Cir.1998) (federal questions involving exchange duties can require federal resolution)
- U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., Ltd., 241 F.3d 135 (2d Cir.2001) (presumption favoring arbitration unless ambiguity about arbitrability)