Pictet Overseas Inc. v. Helvetia Trust, 905 F.3d 1183

Background

Two investment trusts (Helvetia Trust and AAA Group International Trust) opened custodial accounts at Banque Pictet in Switzerland; the account agreements were governed by Swiss law and Geneva courts.
The trusts hired independent advisor Brian Callahan, who stole about $1.8 million from those Banque Pictet accounts.
The trusts filed a FINRA arbitration against several Pictet-related defendants, including Pictet Overseas, Inc. (a FINRA member and Canadian execution broker) and eight individual partners who owned Banque Pictet.
Pictet Overseas is a FINRA-regulated execution broker (not a custodial broker); Banque Pictet (the custodian) is not a FINRA member; the partners were general partners of Banque Pictet.
Pictet Overseas and the partners sued in federal court for an injunction and declaratory relief to stop the FINRA arbitration; the district court found the trusts’ claims non-arbitrable under FINRA Rule 12200 and permanently enjoined the arbitration.
On appeal the Eleventh Circuit affirmed, holding Rule 12200 does not require arbitration because the dispute did not arise in connection with the defendants’ business activities as a FINRA member or as associated persons of a FINRA member.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Rule 12200 binds Pictet Overseas/partners to FINRA arbitration	Rule 12200 applies because the trusts are "customers" and the dispute concerns activities of defendants who are FINRA member/associated persons	Rule 12200 does not apply because the dispute lacks the required connection to the FINRA member or to associated-person activities performed in that capacity	Held: No — Rule 12200 does not require arbitration because no requisite nexus to member or associated-person activities existed
Whether the trusts were "customers" of Pictet Overseas	Trusts claim they were customers of Pictet Overseas for purposes of Rule 12200	Defendants say trusts were customers only of Banque Pictet (custodian), not Pictet Overseas	Held: District court found trusts were not customers of Pictet Overseas (affirmed implicitly because court resolved on business-activity nexus)
Whether the individual partners were "associated persons" of Pictet Overseas	Trusts contend partners qualify as associated persons, making their conduct arbitrable	Defendants dispute either that partners acted in capacities tied to Pictet Overseas or that any associated-person activities gave rise to the dispute	Held: Court assumed arguendo partners were associated persons but held claims still non-arbitrable because dispute did not arise from associated-person activities performed in that capacity
Scope of "arises in connection with the business activities" in Rule 12200	Any business activity of an associated person brings claims into FINRA arbitration	Only business activities that are connected to the person’s role as an associated person of the FINRA member bring claims into FINRA arbitration	Held: Interpretation limited — disputes must arise in connection with business activities undertaken in the associated-person capacity to be arbitrable under Rule 12200

Key Cases Cited

AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643 (1986) (arbitrability depends on whether parties agreed in advance to submit the dispute to arbitration)
MONY Sec. Corp. v. Bornstein, 390 F.3d 1340 (11th Cir. 2004) (membership in FINRA can constitute agreement to arbitrate under FINRA rules)
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (doubts about scope of arbitrable issues are generally resolved in favor of arbitration)
Multi-Fin. Sec. Corp. v. King, 386 F.3d 1364 (11th Cir. 2004) (contract interpretation and review standards for arbitration rulings)
KH Outdoor, LLC v. City of Trussville, 458 F.3d 1261 (11th Cir. 2006) (plaintiff seeking injunction against arbitration must show actual success on the merits)
UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643 (2d Cir. 2011) (FINRA membership entails agreement to abide by FINRA rules)