Variable Annuity Life Insurance Company, The, Valic Financial Advisors Inc. v. Brett Laferrera
680 F. App'x 880
| 11th Cir. | 2017Background
- Plaintiffs VALIC and VFA employed Brett and Jessica Laferrera as registered representatives; the Laferreras also owned Crimson Capital Group LLC (CCG).
- The Laferreras signed Registered Representative Agreements (RRAs) with VFA that required disputes between Registered Representatives and the Broker-Dealer to be arbitrated under FINRA rules; §11(b) expressly reserved all other disputes to court.
- Plaintiffs sued the Laferreras and CCG for breach of contract (against the Laferreras), trade-secret misappropriation (Ala. Code § 8-27-3), and violation of the Computer Fraud and Abuse Act; Plaintiffs sought only temporary/preliminary injunctive relief against the Laferreras and injunctive relief plus damages against CCG.
- Plaintiffs submitted claims against the Laferreras to FINRA; the district court entered preliminary injunctions and the FINRA panel later denied permanent injunctive relief.
- Defendants moved to compel arbitration of all claims and to stay court proceedings; the district court found arbitration of the Laferreras’ claims moot (they were in FINRA) refused to compel arbitration as to CCG (CCG is a non-signatory), and denied a discretionary stay of the CCG claims.
- The Eleventh Circuit affirmed that CCG cannot compel arbitration under Alabama law, vacated the denial of a discretionary stay as an abuse of discretion, and remanded with instructions to stay the claims against CCG; it affirmed denial of a §3 stay as to the Laferreras.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CCG (a non‑signatory) can compel arbitration of claims against it | RRAs limit arbitration to signing parties, so CCG cannot force arbitration | Equitable‑estoppel / "intertwining" allows nonparty to invoke arbitration because claims are intertwined | CCG cannot compel arbitration; RRA language is party‑specific and excludes non‑signatories (affirmed) |
| Whether the district court should have stayed CCG claims pending arbitration of Laferreras | Plaintiffs: CCG is a separate defendant; litigation may proceed in court | CCG liability depends entirely on the Laferreras’ conduct; parallel proceedings would duplicate litigation and risk inconsistent results | Court abused its discretion by refusing a discretionary stay; remanded with instructions to stay CCG claims (vacated in part) |
| Whether a stay under 9 U.S.C. §3 was required for proceedings against the Laferreras | Plaintiffs: temporary injunctive relief was appropriately litigated in court; FINRA rules allow courts to grant temporary injunctive relief | Defendants: once claims sent to arbitration, §3 required a stay of related court proceedings (including injunctive matters) | §3 did not require a stay of temporary injunctive relief; denial of a §3 stay as to the Laferreras was affirmed |
| Appellate jurisdiction to review denial of a discretionary stay | Plaintiffs: discretionary stay denial may be non‑appealable | Defendants: order denying §3 stay is appealable under §16, and pendent jurisdiction permits review of closely related discretionary‑stay denial | Court exercised jurisdiction to review and did so (affirmed reviewability for these intertwined issues) |
Key Cases Cited
- Lawson v. Life of the S. Ins. Co., 648 F.3d 1166 (11th Cir. 2011) (standard of review and rule that arbitration cannot be compelled absent an agreement)
- Klay v. All Defendants, 389 F.3d 1191 (11th Cir. 2004) (discretion to stay non‑arbitrable claims and factors for staying)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (U.S. 1985) (piecemeal litigation acceptable when required by arbitration law)
- Ex parte Stamey, 776 So. 2d 85 (Ala. 2000) (non‑signatory cannot enforce arbitration agreement when parties are described restrictively)
- Smith v. Mark Dodge, Inc., 934 So. 2d 375 (Ala. 2006) (party‑specific arbitration language ends intertwining inquiry)
- United Steel, Paper & Forestry v. Wise Alloys, 807 F.3d 1258 (11th Cir. 2015) (§3 applies only to suits "upon any issue referable to arbitration")
- American Express Financial Advisors, Inc. v. Makarewicz, 122 F.3d 936 (11th Cir. 1997) (district court may grant injunctive relief pending arbitration under agreement)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d 1048 (4th Cir. 1985) (§3 does not preclude preliminary injunction to preserve status quo pending arbitration)