Sacks v. Dietrich
2011 U.S. App. LEXIS 23382
9th Cir.2011Background
- Sacks contracted with Dang to represent him in a FINRA arbitration; a Uniform Submission Agreement submitted the dispute to FINRA.
- Dang submitted a Statement of Claim and FINRA appointed arbitrators Dietrich and Boesch to hear the claims.
- Sacks, not an attorney, had been barred from the securities industry since 1991; FINRA Rule 13208 governs representation.
- The panel disqualified Sacks from representing Dang, relying on FINRA Rule 13208 and interpreting Rule 13413; one arbitrator did not join the order.
- Sacks sued the arbitrators in state court for intentional and negligent interference with contract and prospective economic advantage; case removed to federal court.
- The district court dismissed, holding arbitral immunity bars the claims and that the court had subject matter jurisdiction; Sacks appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal-question jurisdiction exists | Sacks argued state-law claims predominate; no federal question needed. | Arbitration rules and their interpretation create a federal question. | Yes; substantial federal question governs the action. |
| Whether arbitral immunity bars the claims | Arbitrators exceeded jurisdiction; immunity does not apply. | Arbitrators acted within their jurisdiction and are protected by arbitral immunity. | Yes; arbitral immunity bars the claims. |
| Whether the arbitrators acted within their jurisdiction despite Sacks's non-signatory status | Rule 13208 precludes arbitrators from deciding representational issues; panel exceeded authority. | Arbitrators had jurisdiction to interpret FINRA rules and bind non-signatories under contract principles. | Yes; they acted within their jurisdiction. |
| Whether non-signatories can be bound to arbitration under ordinary contract principles | Sacks was not a party and should not be bound. | Non-signatories may be bound under contract and agency principles; the arbitration agreement binds Sacks through Dang's submission. | Yes; non-signatories may be bound. |
Key Cases Cited
- Sparta Surgical Corp. v. National Association of Securities Dealers, Inc., 159 F.3d 1209 (9th Cir. 1998) (federal question governs state-law claims tied to federal arbitrator rules)
- Wasyl, Inc. v. First Boston Corp., 813 F.2d 1579 (9th Cir. 1987) (arbitral immunity for decisional acts within jurisdiction)
- Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 (10th Cir. 2007) (decisional act vs. non-decisional acts in arbitration immunity analysis)
- Cal. ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831 (9th Cir. 2004) (federal-law requirement for breach of contract claims in some contexts)
- Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185 (9th Cir. 1986) (nonsignatories bound by arbitration agreements under contract principles)