Posts tagged with "Southern District of Texas"

Employer May Not Compel FINRA Arbitration of Gender Discrimination and Retaliation Claims

Employer May Not Compel FINRA Arbitration of Gender Discrimination and Retaliation Claims

Joni D. Ffrench, v.PricewaterhouseCoopers Corporate Finance, LLC, et al., 2012 WL 1900930 (S.D. Tex. May 24, 2012)

In a recent case before the Southern District of Texas, PricewaterhouseCoopers Corporate Finance LLC (“PwCCF”) filed a motion to compel Joni Ffrench (“Ffrench”), a former employee, to arbitrate gender discrimination and retaliation claims pending before the federal court. PwCCF also filed a motion to stay federal court proceedings until arbitration by the Financial Industry Regulatory Authority (“FINRA”) was complete. The court denied both motions.

Ffrench was employed by PwCCF from 1999 until her termination in 2009. She alleged that she was terminated in retaliation for complaints about the substantial compensation disparities between her and her male counterparts. In accordance with FINRA rules, PwCCF filed a Uniform Termination Notice for Securities Industry Registration (“Form U-5”) stating the basis for her termination. Ffrench alleged that the U-5 filed by PwCCF in October 2009 contained improper disparaging remarks and filed a claim with FINRA for “Libel and Slander on Form U-5.” The parties agreed to hold the FINRA arbitration in late October 2011; however, Ffrench later moved for a continuance of the arbitration hearing, which was granted.

In addition to the FINRA arbitration hearing, Ffrench filed a charge of gender discrimination and retaliation against PwCC with the Equal Employment Opportunity Commission and the Texas Workforce Commission Civil Rights Division. After receiving her “right to sue” letter, Ffrench filed a lawsuit against PwCCF and its parent company in state court, which PwCCF removed to federal district court. PwCCF moved to compel arbitration and stay federal court proceedings, asserting that the same claims are at issue in both the FINRA arbitration case and the federal court case.

Courts follow a two-step inquiry to determine whether parties should be compelled to arbitrate. First, the court must determine whether the parties agreed to arbitrate the dispute. The party seeking to compel arbitration must establish by a preponderance of the evidence that such an agreement exists. Once the court has determined that such agreement exists, the burden shifts to the party opposing arbitration to show either that the agreement is not enforceable or that the subject dispute does not come within the scope of the agreement.

The Federal Arbitration Act (“FAA”) provides a mandatory stay of proceedings in federal district courts when the issue can be referred to arbitration. 9 U.S.C. § 3. However, pursuant to FINRA Rule 13201, claims alleging employment discrimination in violation of a statute are not required to be arbitrated, and may be arbitrated only if the parties have agreed. The court found Ffrench’s signature on her Uniform Application for Securities Industry Registration or Transfer (“U-4 Form”) to be insufficient to constitute such an agreement because this agreement only encompassed “any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of [FINRA].” The court also found Ffrench’s initiation of FINRA proceedings to be insufficient to constitute an agreement to submit her gender discrimination and retaliation claims to arbitration. Based on Ffrench’s Statement of Claim and the composition of the arbitration panel, the court determined that she only agreed to submit her defamation claim regarding Form U-5 to FINRA arbitration.

Because the court determined that the parties did not agree to arbitrate Ffrench’s gender discrimination and retaliation claims, the PwCCF motion to compel arbitration and stay proceedings in federal court was denied.

Should you have any questions relating to FINRA, arbitration or employment issues, please do not hesitate to contact Attorney Joseph C. Maya in the firm’s Westport office in Fairfield County, Connecticut at 203-221-3100 or at JMaya@Mayalaw.com.

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Federal Court Enforces FINRA Arbitration Award Based Solely on the Plain Language of the Award Because the Award was not “Patently Ambiguous”

Federal Court Enforces FINRA Arbitration Award Based Solely on the Plain Language of the Award Because the Award was not “Patently Ambiguous”

Luby’s Restaurants Limited Partnership v. Credit Suisse Securities (USA) LLC, 2011 WL 1740196 (S.D. Tex. May 5, 2011)

In a case before the United States District Court for the Southern District of Texas, Luby’s Restaurants Limited Partnership (“Luby’s”) sought to confirm a Financial Industry Regulatory Authority (“FINRA”) arbitration award pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 9. In its petition, Luby’s also sought a court ruling to interpret the arbitration award as requiring Credit Suisse Securities (USA) LLC (“Credit Suisse”) to recompense an additional $186,000 in damages. Luby’s originally filed the petition in state court, but Credit Suisse removed to federal court. The federal district court confirmed the arbitration award in Luby’s favor and denied Luby’s petition to order Credit Suisse to pay the additional sum.

The underlying dispute in this case is based on Luby’s purchase of over $30 million in auction rate securities from Credit Suisse. Credit Suisse had falsely represented that these securities were suitable to Luby’s investment goals because they were equivalent to money market funds, highly liquid, and safe investments for short term investing. In October 2008, when Luby’s filed arbitration proceedings, the company had redeemed all but $8.9 million worth of the securities, which could not be sold at par value. In September 2009, after proceedings had been initiated but before the arbitration hearings had begun, Luby’s redeemed one of the remaining securities for less than par value, sustaining a $186,000 loss. In May 2010, the FINRA arbitration panel ruled that Credit Suisse was liable to Luby’s for the re-purchase of the disputed auction rate securities at par value, and that Credit Suisse was also liable to Luby’s for interest on the par purchase price of these securities from a specific date after the arbitration award through the date the award was paid in full.

Pursuant to the terms of the arbitration award, Credit Suisse purchased all of Luby’s remaining securities at par value and paid the required interest. Neither party contested the award and both parties sought its confirmation. However, Luby’s and Credit Suisse disputed whether the award included the $186,000 loss that Luby’s sustained when it sold securities for less than par value after filing for arbitration. Luby’s did not request the court to modify or correct the award, but to confirm the award as written and interpret the writing as including the additional loss. In raising this issue, neither Luby’s nor Credit Suisse argued that FINRA arbitration did not fully resolve their dispute, nor did they assert that the language of the arbitration award created a collateral dispute.

Courts are required to enforce arbitration awards only as written by the arbitrator; therefore, if an arbitration award is ambiguous, it is unenforceable and must be remanded to the arbitrator with instructions to clarify the particular ambiguities. Brown v. Witco Corp., 340 F.3d 209, 216 (5th Cir. 2003) (citing Oil, Chem. & Atomic Workers Int’l Union Local 4–367 v. Rohm & Haas, Tex., Inc., 677 F.2d 492, 495 (5th Cir. 1982). Remand is only appropriate where: (1) an arbitration award is patently ambiguous; (2) the issues submitted to arbitration were not fully resolved; or (3) the language of the arbitration award created a collateral dispute. Oil, Chem. & Atomic Workers, 677 F.2d at 495.

Although both Luby’s and Credit Suisse argued different interpretations of the FINRA arbitration award, the district court did not find that the award itself was patently ambiguous. The plain language of the award makes no mention of additional damages sustained by Luby’s during the pendency of the arbitration hearings. Credit Suisse could clearly not purchase back the securities that were sold because they were no longer in Luby’s possession. The award clearly denied any relief other than that which was expressly granted in its plain language. Additionally, during the arbitration hearings, Luby’s presented this loss as a claim distinct from the claim to buy back the auction rate securities at par. The arbitrators did not include this relief in the arbitration award, thereby effectively denying such relief. Therefore, because the federal district court found the arbitration award to be unambiguous, it confirmed and enforced the award as written.

The court ordered that the final FINRA arbitration award in Luby’s favor be confirmed and adopted as the judgment of the court. Luby’s petition to order Credit Suisse to make additional payment of $186,000 was denied as not having been ordered in the final award of the arbitration panel.

Should you have any questions relating to FINRA or arbitration issues, please do not hesitate to contact Attorney Joseph C. Maya in the firm’s Westport office in Fairfield County, Connecticut at 203-221-3100 or at JMaya@Mayalaw.com.

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