Murray v. UBS Securities, LLC et al
OPINION AND ORDER. For the reasons in this Opinion and Order, Defendants' June 14, 2013 motion to compel arbitration and to stay this proceeding is GRANTED. The Clerk of Court is directed to terminate Docket Entry No. 27, and to place the case on the suspense calendar. Re: 27 MOTION to Compel Arbitration filed by UBS Securities, LLC, UBS AG. (Signed by Judge Katherine Polk Failla on 1/27/2014) (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UBS SECURITIES, LLC and UBS AG,
DOC #: _________________
12 Civ. 5914 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
On August 2, 2012, Plaintiff Trevor Murray filed this action against
Defendants UBS Securities, LLC (“UBS Securities”), and UBS AG (“UBS”)
(collectively, “Defendants”) under 15 U.S.C. § 78u-6(h), the anti-retaliation
provision (the “Anti-Retaliation Provision”) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, Pub. L. No. 111-203, 124 Stat.
1376 (“Dodd-Frank”). Specifically, Plaintiff alleged that Defendants violated the
Anti-Retaliation Provision in terminating Plaintiff’s employment after, and as a
result of, Plaintiff making certain disclosures protected under Section 806 of
the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745
Defendants have moved pursuant to the Federal Arbitration Act (the
“FAA”), 9 U.S.C. §§ 1-14, to compel Plaintiff to arbitrate the claim he raises in
this action. For the reasons set forth in the remainder of this Opinion,
Defendants’ motion to compel is granted and the instant action is stayed.
FACTUAL BACKGROUND 1
Plaintiff’s Employment With UBS Securities
According to his Complaint, Plaintiff was first employed by UBS
Securities, a broker-dealer registered with the United States Securities and
Exchange Commission (the “SEC”), from approximately May 2007 to September
2009, at which time Plaintiff was laid off. (Compl. ¶ 8). 2 Thereafter, in early
2011, UBS Securities solicited Plaintiff to return to work for the company. (Id.
at ¶ 10). In or around May 2011, Plaintiff rejoined UBS Securities as a Senior
Commercial Mortgage-Backed Security (“CMBS”) Strategist and Executive
Director. (Id. at ¶ 11). In that position, Plaintiff was “responsible for
performing research and creating reports about CMBS products that were
distributed to Defendants’ current and potential clients, and in which UBS
Securities held trading positions.” (Id. at ¶ 2).
Plaintiff’s Agreements to Arbitrate with Defendants
Plaintiff’s Employment Agreement
When Plaintiff rejoined UBS Securities, he received a formal offer letter
dated April 26, 2011 (the “Employment Agreement”), signed by Katie Dresch,
then a Director in UBS’s Human Resources Department. (Compl. ¶ 11; Mara
The facts contained in this Opinion are drawn from Plaintiff’s Complaint (“Compl.”)
(Dkt. #1) and the Declaration of Aidan Mara (“Mara Decl.”) (Dkt. #29), including the
In this Opinion, Defendants’ Memorandum of Law in Support of Their Motion to Compel
Arbitration is referred to as “Def. Br.”; Plaintiff’s Memorandum of Law in Opposition to
Defendants’ Motion to Compel Arbitration is referred to as “Pl. Opp.”; and Defendants’
Reply in Support of Their Motion to Compel Arbitration is referred to as “Def. Reply.”
UBS Securities is a wholly-owned subsidiary of UBS, a Swiss corporation that conducts
business and has offices in New York. (Compl. ¶¶ 6-7).
Decl., Exh. A). Plaintiff, by his signature, “[a]ccepted and agreed to” the
Employment Agreement on May 2, 2011, and returned it to UBS. (Mara Decl.
¶ 5 and Exh. A).
The Employment Agreement “incorporates UBS’s standard terms,
conditions, and policies of employment as they existed on May 2, 2011, and
which UBS, at that time, incorporated into all offer letters in the course of
business.” (Mara Decl. ¶ 4; see also Mara Decl., Exh. A (reciting that the
Agreement “shall be governed, construed and enforced in accordance with the
law of the State of Connecticut”)). As relevant to the instant case, the
Employment Agreement includes an agreement to arbitrate that provides:
[Plaintiff] and [UBS Securities] hereby knowingly and voluntarily
agree that any dispute, controversy or claim (including but not
limited to those arising out of or relating to this Agreement, the
employment relationship between [Plaintiff] and [UBS Securities] or
the termination thereof) will be settled by final and binding
arbitration, unless prohibited by applicable law. The parties’
agreement to arbitrate disputes includes, but is not limited to …
any  statutory or common law claims. Arbitration under this
agreement will be conducted pursuant to [UBS Securities’]
employment arbitration procedures in effect at the time of the filing
of a claim. A copy of the employment arbitration procedures as
currently in effect is attached hereto as Exhibit A.
(Mara Decl., Exh. A).
UBS’s employment arbitration procedures (the “Arbitration Procedures”)
reiterated the parties’ agreement to arbitrate “any employment-related disputes
between [Plaintiff] and [UBS Securities].” (Mara Decl., Exh. A). The Arbitration
Procedures provided, however, that “[c]laims arising under the Sarbanes-Oxley
Act of 2002 … are not covered by these procedures and will continue to be
addressed in accordance with applicable law.” (Id.). The Arbitration
Procedures further required that the “arbitration … be conducted pursuant to
the JAMS Employment Arbitration Rules & Procedures … then in effect.” (Id.).
The arbitration procedures in effect at the time Plaintiff filed the Complaint
included these same provisions. (Mara Decl., Exh. B).
Plaintiff’s Form U-4
As part of his employment with UBS Securities, Plaintiff also executed a
Form U4 Uniform Application for Securities Industry Registration or Transfer
(“Form U-4”) on June 2, 2011, pursuant to which Plaintiff agreed
to arbitrate any dispute, claim or controversy that may arise
between [Plaintiff] and [UBS Securities], or a customer, or any
other person, that is required to be arbitrated under the rules,
constitutions, or by-laws of the [self-regulatory organizations, or
“SROs”] indicated in Section 4 (SRO Registration) as may be
amended from time to time and that any arbitration award
rendered against me may be entered as a judgment in any court of
(Mara Decl. ¶ 8 and Exh. C). Plaintiff identified, among others, the Financial
Industry Regulatory Authority (“FINRA”) as an applicable SRO. (Id. at Exh. C).
The Termination of Plaintiff’s Employment
According to Plaintiff, during his second stint with UBS Securities, senior
personnel involved in CMBS trading and commercial mortgage origination
made a “concerted effort” to influence Plaintiff “to skew his published research
in ways designed to support UBS Securities’ ongoing CMBS trading and loan
origination activities.” (Compl. ¶¶ 2, 13). As examples, Plaintiff detailed a
series of interactions with individuals responsible for CMBS trading, during
which, among other things, those individuals instructed Plaintiff (i) “not to
publish anything negative” about investments or areas in which UBS Securities
had exposure and (ii) to “write what the business line wanted.” (Id. at ¶¶ 1516, 20). Plaintiff further claimed that he was “pressured to produce ostensibly
objective research reports about [UBS Securities’] securities products that
were … false or misleading, and intended to favor UBS Securities’ products and
trading positions, in violation of federal laws.” (Id. at ¶ 19).
According to Plaintiff, he refused to publish any material that conflicted
with his research, and “repeatedly told his superiors at UBS Securities” about
these encounters. (Compl. ¶ 18). Specifically, in or around December 2011,
Plaintiff told his manager about the negative response he had received to his
research, including criticisms that Plaintiff’s published articles were “too
bearish” and “off message with the strategy of the trading desk and overall
commercial mortgage group.” (Id.). Plaintiff also alleged that in or around
January 2012, he informed a Managing Director of UBS Securities that the
head of CMBS trading and commercial mortgage originations had “only
interacted with Plaintiff to criticize his research and attempt to manipulate his
On February 6, 2012, UBS Securities advised Plaintiff that he was
terminated. (Compl. ¶ 22). In the Complaint, Plaintiff notes his “impeccable
record,” and claims that his termination was motivated, at least in part, by
Plaintiff informing his superiors about the attempts by others at UBS
Securities to skew Plaintiff’s published research. (Id. at ¶¶ 22, 24). Proceeding
from this premise, Plaintiff claims that his termination violated the Anti-
Retaliation Provision because the disclosures that he made to his superiors
were protected by Sarbanes-Oxley.
The Instant Litigation
Plaintiff filed the Complaint on August 2, 2012. (Dkt. #1). That same
day, Plaintiff separately “submitted a Complaint to the United States
Department of Labor, charging that Defendants’ termination of Plaintiff also
violated [Sarbanes-Oxley] and 12 U.S.C. § 5567,” 3 the latter of which was
another Dodd-Frank provision. (Compl. ¶ 1, n.1).
On September 21, 2012, Defendants moved to dismiss Plaintiff’s
Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim. (Dkt. #13). On May 21, 2013, the Court denied Defendants’ motion.
See Murray v. UBS Sec., LLC, No. 12 Civ. 5914 (JMF), 2013 WL 2190084
(S.D.N.Y. May 21, 2013).
On June 14, 2013, Defendants answered Plaintiff’s Complaint, asserting,
as an affirmative defense, that “Plaintiff’s claims may not be brought in this
Court because they are subject to compulsory arbitration pursuant to the
parties’ employment agreement and … [the] Form U-4.” (Dkt. #26). On that
same day, Defendants filed the instant motion to compel arbitration.
(Dkt. #27). Plaintiff filed his opposition on July 19, 2013 (Dkt. #34), and
Defendants submitted their reply on August 2, 2013 (Dkt. #35). In light of the
The Complaint states that “[i]f no decision is reached on Plaintiff’s claims under
[Sarbanes-Oxley] within 180 days [i.e., January 29, 2013], and under 12 U.S.C. § 5567
within 210 days [i.e., August 2, 2012], Plaintiff will seek to amend the instant
Complaint to include these claims, pursuant to 18 U.S.C. § 1514A(b)(1)(B) and 12
U.S.C. § 5567(c)(4)(D)(i).” (Compl. ¶ 1, n.1). Plaintiff has not sought to amend his
Complaint, and the Court is unaware of the status of the administrative action. The
status of that action, however, has no bearing on the resolution of the instant motion.
motion practice to date, the Court has not conducted an initial pretrial
conference, nor has it endorsed a case management plan or formal discovery
The FAA “‘creates a body of federal substantive law of arbitrability
applicable to arbitration agreements … affecting interstate commerce.’” Ragone
v. Atl. Video of Manhattan Ctr., 595 F.3d 115, 121 (2d Cir. 2010) (quoting
Alliance Bernstein Inc. Research & Mgmt., Inc. v. Schaffran, 445 F.3d 121, 125
(2d Cir. 2006)). “[E]nacted in 1925[,] in response to widespread judicial
hostility to arbitration agreements,” AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 1740, 1745 (2011), the FAA provides, in relevant part:
A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or
transaction ... shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of
9 U.S.C. § 2.
The Supreme Court and the Second Circuit have consistently recognized
that the FAA embodies a “liberal federal policy favoring arbitration
agreements.” CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012); see
also AT&T Mobility LLC, 131 S. Ct. at 1750 (“[O]ur cases place it beyond
dispute that the FAA was designed to promote arbitration”; noting that the Act
“embod[ies] a national policy favoring arbitration, and a liberal federal policy
favoring arbitration agreements, notwithstanding any state substantive or
procedural policies to the contrary” (internal citations and quotation marks
omitted)); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 295 (2d Cir. 2013)
(“In analyzing this provision of the FAA, the Supreme Court has remarked on
several occasions that it establishes a liberal federal policy favoring arbitration
agreements.” (internal quotation marks omitted)). Central to this policy is the
tenet that “any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.” Guyden v. Aetna, Inc., 544 F.3d 376, 382 (2d
Cir. 2008). This tenet remains true “even when the claims at issue are federal
statutory claims, unless the FAA’s mandate has been ‘overridden by a contrary
congressional command.’” CompuCredit Corp., 132 S. Ct. at 669 (quoting
Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987)).
It is well settled that “arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he has not
agreed so to submit.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83
(2002). “The question whether the parties have submitted a particular dispute
to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for judicial
determination unless the parties clearly and unmistakably provide otherwise.’”
Schneider v. Kingdom of Thailand, 688 F.3d 68, 71 (2d Cir. 2012) (quoting
Howsam, 537 U.S. at 83 (emphasis in original)). To that end, Section 4 of the
FAA allows “a party to an arbitration agreement [to] petition a United States
district court for an order directing that ‘arbitration proceed in the manner
provided for in such agreement.’” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,
559 U.S. 662, 682 (2010) (quoting 9 U.S.C. § 4).
“In the context of motions to compel arbitration … the court applies a
standard similar to that applicable for a motion for summary judgment.”
Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003); accord Hines v.
Overstock.com, Inc., 380 F. App’x 22, 24 (2d Cir. 2010) (summary order). “The
party seeking to stay the case in favor of arbitration bears an initial burden of
demonstrating that an agreement to arbitrate was made.” Hines, 380 F. App’x
at 24. Conversely, “[a] party to an arbitration agreement seeking to avoid
arbitration generally bears the burden of showing the agreement to be
inapplicable or invalid.” Harrington v. Atl. Sounding, Co., Inc., 602 F.3d 113,
124 (2d Cir. 2010).
Defendants Did Not Waive Any Right to Arbitrate
Before addressing the arbitrability of Plaintiff’s claim, the Court must
first resolve the threshold issue of whether Defendants have waived any right
they may have to arbitrate this dispute as a result of their conduct in this
litigation. Plaintiff contends that Defendants’ waiver is evidenced by their
actions in filing in the first instance a motion to dismiss, and in not moving to
compel arbitration until “nearly ten and a half months after this action began.”
(Pl. Opp. 8). Plaintiff also claims prejudice in the expenditure of time and
resources in defending against Defendants’ motion to dismiss — which
expenditures, he claims, he will be forced to duplicate when Defendants make
the same arguments in arbitration. (Id.). Defendants respond that moving to
dismiss Plaintiff’s Complaint, without more, does not result in waiver. (Def.
“A party is deemed to have waived its right to arbitration if it engages in
protracted litigation that results in prejudice to the opposing party.” S & R Co.
of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 (2d Cir. 1998) (internal
quotation marks omitted). 4 The Second Circuit has established a three-part
test to determine whether a party has waived its right to arbitrate that
considers “[i] the time elapsed from when litigation was commenced until the
request for arbitration; [ii] the amount of litigation to date, including motion
practice and discovery; and [iii] proof of prejudice.” Louis Dreyfus Negoce S.A.
v. Blystad Shipping & Trading, Inc., 252 F.3d 218, 229 (2d Cir. 2001). In this
context, delay alone does not establish waiver. PPG Indus., Inc. v. Webster Auto
Parts, Inc., 128 F.3d 103, 108 (2d Cir. 1997). Rather, any delay must be
considered “in conjunction with  the amount of litigation that occurred during
that period,” and any proof of prejudice suffered by the party seeking to avoid
Plaintiff is correct that Defendants did not move to compel arbitration
until approximately ten and one-half months after Plaintiff filed his Complaint.
However, the parties’ litigation efforts during that time period were modest, and
Because Defendants have engaged in “prior litigation” on this dispute, the issue of
waiver may be properly decided by the Court. S & R Co. of Kingston, 159 F.3d at 83
(“[T]he district court could properly decide the question [of waiver] when the party
seeking arbitration had already participated in litigation on the dispute.”); see also Bell
v. Cendant Corp., 293 F.3d 563, 569 (2d Cir. 2002) (same); Doctor’s Assocs., Inc v.
Distago, 66 F.3d 438, 456 n.12 (2d Cir. 1995) (“[W]e are bound to hold that a district
court may reach the question of waiver whenever a party seeking arbitration has
engaged in any prior litigation.”).
focused largely (if not exclusively) on Defendants’ motion to dismiss. No initial
pretrial conference was held, nor was any case management plan or discovery
schedule entered. The motion to dismiss was fully briefed approximately four
and one-half months after the case was filed and, except for the submission of
supplemental authority to support said motion, the case remained dormant
until the motion to dismiss was decided, after which time Defendants promptly
(indeed, within one month) filed their motion to compel arbitration along with
an answer that interposed, as an affirmative defense, Plaintiff’s obligation to
“The key to a waiver analysis is prejudice.” Thyssen, Inc. v. Calypso
Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002); Leadertex v. Morganton
Dyeing & Finishing Corp., 67 F.3d 20, 26 (2d Cir. 1995) (“[T]here can be no
waiver unless that conduct resulted in prejudice to the other party.”). The
Second Circuit recognizes two kinds of prejudice — substantive prejudice and
prejudice due to excessive cost and time delay. Thyssen, 310 F.3d at 105;
Kramer v. Hammond, 943 F.2d 176, 179 (2d Cir. 1991). The former can arise
“when a party loses a motion on the merits and then attempts, in effect, to
relitigate the issue by invoking arbitration,” while the latter can arise “when a
party too long postpones his invocation of his contractual right to arbitration,
and thereby causes his adversary to incur unnecessary delay or expense.”
Thyssen, 310 F.3d at 105.
The prejudice argued by Plaintiff is more apparent than real. Plaintiff
first argues that Defendants are attempting to relitigate their motion to dismiss
by moving to compel arbitration. (Pl. Opp. 12). They are not. Although
Defendants may raise a similar defense in arbitration as they did when moving
to dismiss Plaintiff’s Complaint, as Plaintiff contends (see id.), that similarity
alone does not establish the requisite prejudice to support a finding of waiver.
See Jung v. Skadden, Arps, Slate, Meagher & Flom, LLP, 434 F. Supp. 2d 211,
216 (S.D.N.Y. 2006) (“[Plaintiff] may face similar challenges to the amended
complaint in arbitration, just as [Plaintiff] may face another Rule 12(b)(6)
motion in response to the amended complaint in proceedings before this court,
but such a situation is not relitigation.”).
Plaintiff’s reliance on Kramer v. Hammond, 943 F.2d 176 (2d Cir. 1991),
to support his substantive prejudice argument is similarly unavailing. (See,
e.g., Pl. Opp. 11-14). What animated the Kramer Court’s finding of waiver was
not, as Plaintiff suggests, the mere filing of a motion to compel after a motion to
dismiss, but rather the fact that the defendant in that case had “engage[ed] in
extensive pre-trial litigation for over four years” in multiple forums. Id. at 178.
Here, in sharp contrast, as a result of Defendants’ motion to dismiss, Plaintiff
has been provided with a preview of what to expect during arbitration, as well
as a detailed decision from the Court finding certain issues resolved in his
Plaintiff’s related argument that Defendants’ initial decision to file a
motion to dismiss is itself a sufficient basis on which to find waiver (see Pl.
Opp. 10-11) is soundly refuted by Second Circuit precedent to the contrary.
See, e.g., Rush v. Oppenheimer & Co., 779 F.2d 885, 888 (2d Cir. 1985)
(“Rather than immediately seeking arbitration in response to [Plaintiff’s]
complaint, defendants moved to dismiss. Such a motion alone, however, does
not waive the right to arbitrate.”); Sweater Bee by Banff, Ltd. v. Manhattan
Indus., Inc., 754 F.2d 457, 463 (2d Cir. 1985) (holding that a defendant’s filing
of a motion to dismiss, “specifically permitted by Fed. R. Civ. P. 12(b) to be filed
before [an] answer,” does not result in waiver); Mahmoud Shaban & Sons Co. v.
Mediterranean Shipping Co., S.A., No. 11 Civ. 6322 (TPG), 2013 WL 5303761, at
*2 (S.D.N.Y. Sept. 20, 2013) (“[I]t is well established that [a third-party
defendant’s] choice to file a motion to dismiss before moving to compel
arbitration does not itself waive [a third-party defendant’s] right to enforce the
arbitration clause after the motion to dismiss is resolved.”); Jung, 434 F. Supp.
2d at 218 (holding that a motion to dismiss the complaint did not waive a
defendant’s right to arbitration); Becker v. DPC Acquisition Corp., No. 00 Civ.
1035 (WK), 2002 WL 1144066, at *13 (S.D.N.Y. May 20, 2002) (holding that
“Defendants did not waive their right to arbitration by litigating their motions
to dismiss or requesting extensions of time in which to brief those motions,”
and recognizing that “the Second Circuit has held that a party litigating a
motion to dismiss ‘does not waive the right to arbitrate’” (quoting Rush, 779
F.2d at 888)); Scott v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 89 Civ.
3749 (MJL), 1992 WL 245506, at *3 (S.D.N.Y. Sept. 14, 1992) (“[Defendant’s]
motion to dismiss the complaint does not waive [its] right to arbitration.”); cf.
Chatham Shipping Co. v. Fertex S. S. Corp., 352 F.2d 291, 293 (2d Cir. 1965)
(recognizing that the “earliest point at which [a party may have waived its right
to arbitration] may be found  when [that] party files an answer on the merits”).
Undaunted, Plaintiff maintains that the holdings in two of these
decisions, Rush and Sweater Bee, are limited to situations involving complaints
that contain both arbitrable and non-arbitrable claims. (Pl. Opp. 13-14).
Those cases, however, have not been construed so narrowly. See, e.g., Jung,
434 F. Supp. 2d at 218 n.5 (“That Sweater Bee involved a complaint containing
both arbitrable and nonarbitrable claims … does not suggest a different result.”
(internal citation omitted)). Indeed, Rush virtually compels the conclusion that
Defendants have not waived their right to arbitrate, inasmuch as the Second
Circuit held that a finding of waiver could not be found on facts demonstrating
more efforts toward litigating the case than are present before this Court:
Thus, none of the individual aspects of the pretrial proceedings
conducted by the defendants — the eight-month delay, the motion
to dismiss, the conduct of discovery, and the answer — prejudiced
[Plaintiff] in any sense that would support a conclusion of waiver
by defendants of their contractual right to arbitrate. Neither does
the combination of defendants’ activities, taken as a whole, justify
such a conclusion.
779 F.2d at 889. For all of these reasons, the Court finds that Defendants
have not waived their right to arbitrate.
Plaintiff’s Claim Should Be Submitted to Arbitration
Broadly speaking, in order to determine whether a claim should be
submitted to arbitration, a court must assess (i) whether the parties had an
agreement to arbitrate; (ii) the scope of that agreement; (iii) if federal statutory
claims are asserted, whether Congress intended those claims to be
nonarbitrable; and (iv) if some, but not all, of the claims are subject to
arbitration, whether to stay the balance of the proceedings pending arbitration.
Guyden, 544 F.3d at 382; JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163,
169 (2d Cir. 2004); Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d
Cir. 1998). Plaintiff does not challenge that he has valid agreements to
arbitrate with Defendants. (See Pl. Opp. 16). Instead, the parties’ disputes
concern (i) whether Congress intended to proscribe arbitration of Plaintiff’s
specific claim and (ii) the scope of the parties’ arbitration agreements.
As noted infra in this section, the parties’ arbitration agreements are
expansive, and appear to accord to the arbitrator the responsibility for
determining all issues of arbitrability. As broad as these agreements are,
however, the parties have also expressly contracted that “[c]laims arising under
the Sarbanes-Oxley Act of 2002 … are not covered by these procedures and will
continue to be addressed in accordance with applicable law.” (Mara Decl.,
Exh. A). The parties do not, however, address the breadth of the arbitration
agreements in their briefs, and instead frame the issues in a manner that seeks
to have this Court decide certain disputes about arbitrability. The argument
could be made that the Court should refrain from resolving these disputes and
simply grant the motion to compel. After considering what the parties have
agreed to arbitrate, and what they have specifically excepted from arbitration,
the Court has decided to address only the issues of the precise claim advanced
by Plaintiff, and the degree to which that claim falls within the specific
exception for Sarbanes-Oxley claims discussed above. See Howsam, 537 U.S.
at 83-84 (recognizing that a court should decide an arbitrability issue “where
contracting parties would likely have expected a court to have decided the
gateway matter, where they are not likely to have thought that they had agreed
that an arbitrator would do so, and, consequently, where reference of the
gateway dispute to the court avoids the risk of forcing parties to arbitrate a
matter that they may well have not agreed to arbitrate”).
Plaintiff’s Claim Arises Under Dodd-Frank’s
Dodd-Frank was enacted in the wake of the 2008 financial crisis. The
text of the statute describes it as “[a]n Act [t]o promote the financial stability of
the United States by improving accountability and transparency in the
financial system, to end ‘too big to fail’, to protect the American taxpayer by
ending bailouts, to protect consumers from abusive financial services practices,
and for other purposes.” Pub. L. No. 111-203, 124 Stat. 1376 (2010). Among
many other things, the legislation amended discrete provisions of alreadyexisting legislation. As relevant here, Section 922(a) of Dodd-Frank amended
the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78a78ll, by creating the Anti-Retaliation Provision, thereby providing a private right
of action against an employer who retaliates against a statutorily defined
“whistleblower” for engaging in three categories of protected activity, one of
which is “making disclosures that are required or protected under [SarbanesOxley].” 15 U.S.C. § 78u-6(h). Separately, Congress amended 18 U.S.C.
§ 1514A, which was the private right of action against retaliation that had been
enacted by Sarbanes-Oxley, by “adding at the end” a prohibition against
predispute arbitration agreements (sometimes referred to as an “antiarbitration provision”) for claims arising under the earlier statute:
(1) Waiver of rights and remedies. -- The rights and remedies
provided for in this section may not be waived by any agreement,
policy form, or condition of employment, including by a predispute
(2) Predispute arbitration agreements. -- No predispute arbitration
agreement shall be valid or enforceable, if the agreement requires
arbitration of a dispute arising under this section.
18 U.S.C. § 1514A(e).
Of critical importance to the pending motion is the absence of an
analogous prohibition in the Anti-Retaliation Provision itself. The Exchange
Act, Sarbanes-Oxley, and Dodd-Frank are separate pieces of federal legislation,
each of which provides a party with distinct rights and responsibilities. For
instance, in order for a party to bring an improper retaliation claim in federal
court under Sarbanes-Oxley, the party must first file a complaint with the
Occupational Safety and Health Administration of the Department of Labor
(“OSHA”), the agency vested with authority to receive such complaints. 29
C.F.R. § 1980.103(c); 18 U.S.C. § 1514A(b)(1)(A). A federal court may not hear
a Sarbanes-Oxley claim that is not first submitted to OSHA. Wong v. CKX, Inc.,
890 F. Supp. 2d 411, 417 (S.D.N.Y. 2012). In contrast, and as particularly
probative here, a party may commence suit under the Anti-Retaliation
Provision without complying with a similar administrative exhaustion
In addition, the remedies available under the Anti-Retaliation Provision
surpass those available under Sarbanes-Oxley. A plaintiff bringing a claim
under Sarbanes-Oxley may obtain “the amount of back pay, with interest,”
while a claim under the Anti-Retaliation Provision allows a plaintiff to receive “2
times the amount of back pay otherwise owed to the individual, with interest,”
and, further, can enable a plaintiff, in certain circumstances, to qualify for an
“award” of between 10 and 30 percent of the total monetary sanction imposed
by the government in a successful enforcement action based on information
disclosed by the plaintiff. Compare 18 U.S.C. § 1514A(c), with 15 U.S.C. § 78u6(b), (h)(1)(C).
Plaintiff’s contention that his claim is nonarbitrable is premised entirely
on his assertion that his Complaint asserts a “claim arising under” SarbanesOxley because the disclosures that he made (which were the ostensible
predicates for his termination) were protected under Sarbanes-Oxley. (Pl.
Opp. 18). Not surprisingly, Plaintiff seeks to benefit from the prohibition of
predispute arbitration agreements for claims arising under Sarbanes-Oxley.
Defendants maintain otherwise, contending that Plaintiff states a claim only
under the Anti-Retaliation Provision (Def. Reply 7), and that “Plaintiff cannot
avoid arbitration on the ground that his Dodd-Frank claim is premised on
activity purportedly protected by [Sarbanes-Oxley]” (Def. Br. 12 n.7).
The Court agrees with Defendants. Plaintiff cannot recast his claim to
arise under Sarbanes-Oxley in order to benefit from the prohibition of
predispute arbitration agreements afforded under that statute. Cf. Bassett v.
Mashantucket Pequot Tribe, 204 F.3d 343, 348 (2d Cir. 2000) (“[A] ‘suit arises
under the law that creates the cause of action.’” (quoting T.B. Harms Co. v.
Eliscu, 339 F.2d 823, 826 (2d Cir. 1964)). For starters, Plaintiff cannot credibly
dispute that his claim arises under the Anti-Retaliation Provision; the plain text
of the Complaint recites a violation of the Anti-Retaliation Provision, and makes
no similar claim regarding Sarbanes-Oxley. (Compl. ¶¶ 1, 28). Similarly, the
Complaint states that the Court’s jurisdiction arises under the Anti-Retaliation
Provision, and the demand provisions recite the enhanced remedy under that
provision of “two times the amount of back pay he is owed.” (Id. at ¶ 3).
Further evidence that Plaintiff’s Complaint does not state a claim under
Sarbanes-Oxley is found in the statute itself. As discussed, unlike the AntiRetaliation Provision, Sarbanes-Oxley requires that a party seeking relief under
that statute exhaust his administrative remedies before proceeding to court.
29 C.F.R. § 1980.103(c); 18 U.S.C. § 1514A(b)(1)(A). Plaintiff’s claim before this
Court has not been submitted to OSHA; as such, if indeed he were making a
claim under Sarbanes-Oxley, the claim would not be ripe for review. Plaintiff
concedes this point in his Complaint when he identifies that he submitted an
administrative complaint under Sarbanes-Oxley at the same time he filed the
instant action, and that he would seek to amend the Complaint if the
administrative action were not timely resolved. (Compl. ¶ 1, n.1).
In short, although Plaintiff may have a claim under Sarbanes-Oxley, that
is not the claim presently pending before this Court, and the Court cannot
allow Plaintiff to convert his claim in an effort to thwart his agreement to
arbitrate his dispute with Defendants. Am. Exp. Co. v. Italian Colors
Restaurant, 133 S. Ct. 2304, 2309 (2013) (“[C]onsistent with [the FAA], courts
must ‘rigorously enforce’ arbitration agreements according to their terms.”
(quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985)). Only
one tenable conclusion flows from these facts — Plaintiff’s Complaint states a
claim under the Anti-Retaliation Provision, not Sarbanes-Oxley.
Plaintiff’s Claim Is Not Within the Exception to the
Parties’ Arbitration Agreements
Because Plaintiff’s claim arises under Dodd-Frank, it does not by its
terms fall within the exception to which the parties agreed for “[c]laims arising
under the Sarbanes-Oxley Act of 2002.” (Mara Decl., Exh. A). It bears noting
that, to the extent this exception was informed by Congressional intent to
proscribe predispute arbitration agreements for certain claims under SarbanesOxley, the Court’s construction of Plaintiff’s claim in the instant litigation also
accords with the relevant case law, discussed in the remainder of this
A court’s “‘duty to enforce arbitration agreements is not diminished when
a party bound by an agreement raises a claim founded on statutory rights.’”
Guyden, 544 F.3d at 382 (quoting McMahon, 482 U.S. at 226), superseded on
other grounds by statute as stated in Wong v. CKX, Inc., 890 F. Supp. 2d at 421.
When statutory rights are implicated, “a party can prevent enforcement of the
arbitration agreement only by showing that Congress intended to preclude a
waiver of judicial remedies for the statutory rights at issue.” Id. (internal
quotation marks omitted). “Proof of that intent could ‘be discoverable in the
text of the statute, its legislative history, or an inherent conflict between
arbitration and the statute’s underlying purposes.’” Id. (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)).
In the only decision found by the Court on this issue, the district court
concluded that Sarbanes-Oxley’s anti-arbitration provision does not apply to
the Anti-Retaliation Provision:
Plaintiffs must arbitrate their claims brought pursuant to 15
U.S.C. 78-u because the Dodd-Frank act does not render predispute arbitration agreements invalid or unenforceable for actions
brought pursuant to this section. The Dodd-Frank act contains
three sections creating rules to protect whistleblowers to be
inserted into three different sections of the United States Code.
The Dodd-Frank Act’s whistleblower amendments to the Securities
Exchange Act of 1934 and the Sarbanes-Oxley Act both contain
provisions that render pre-dispute arbitration agreements
unenforceable for claims brought under these two sections. Unlike
these other whistleblower provisions of the Dodd-Frank Act,
Section 78-u contains no such provision. Plaintiffs assert this
omission is a drafting error and suggest that the Court read the
arbitration provision from the Sarbanes-Oxley act into Section 78u. Plaintiffs offer as evidence of the inadvertent omission the
parallels between the three sections, an SEC statement regarding
the implementation of the Securities Exchange Act (not Section 78u), and a claim that having such a provision in Sarbanes–Oxley
but not Section 78-u would be illogical. This is insufficient
evidence for this Court to conclude that Congress unintentionally
omitted this provision from this section of the act. In fact, Congress
proposed amendments to Section 78-u in July 2011, and those
amendments do not include the arbitration restriction Plaintiffs
allege was unintentionally omitted. See H.R. 2483, 112th Cong.
(1st Sess. 2011). Without more, this Court may not read in such a
provision, ignoring the plain language of the statute.
Ruhe v. Masimo Corp., No. SACV 11-00734-CJC (JCG), 2011 WL 4442790, at
*4 (C.D. Cal. Sept. 16, 2011).
Support for the Court’s conclusion is also found in decisions from other
courts that have refused to transplant Sarbanes-Oxley’s anti-arbitration
provisions into other statutes, including those that were amended by Dodd21
Frank, but for which Congress did not include any anti-arbitration provision.
See, e.g., James v. Conceptus, Inc., 851 F. Supp. 2d 1020, 1029 (S.D. Tex.
2010) (“Dodd–Frank’s antiarbitration amendments to other statutes cannot be
extended by implication to the antiretaliation provisions of the False Claims
Act, especially when Dodd-Frank amended other parts of the False Claims Act
but not the provision at issue.”); cf. Holmes v. Air Liquide USA, L.L.C., 498 F.
App’x 405, 407 (5th Cir. 2012) (per curiam) (declining to extend anti-arbitration
provision to non-qualifying claims based on theory that qualifying claims could
have been brought; “Any other decision would lead to the untenable conclusion
that the Act wholesale invalidates all broadly-worded arbitration agreements (of
which there are many) even when plaintiffs bring wholly unrelated claims. We
must interpret the Act in a manner that avoids such unreasonable results.”);
Beard v. Santander Consumer USA, Inc., No. 1:11-cv-11-1815 (LJO-BAM), 2012
WL 1292576, at *6 (E.D. Cal. Apr. 16, 2012) (“Therefore, because the
[Servicemembers Civil Relief Act] does not contain provisions similar to the
anti-arbitration provision found in legislation such as the Dodd-Frank Act, the
Court finds that an arbitration proceeding satisfies the right to a civil action
under the [Servicemembers Civil Relief Act].”).
There is also nothing in the statutory text to indicate that Congress
intended for the Sarbanes-Oxley predispute provisions to apply to the AntiRetaliation Provision. To the contrary, Section 1514A(e) explicitly limits its
applicability to disputes arising under that section. 18 U.S.C. § 1514A(e) (“The
rights and remedies provided for in this section may not be waived by … a
predispute arbitration agreement,” and “[n]o predispute arbitration agreement
shall be valid or enforceable, if the agreement required arbitration of a dispute
arising under this section.” (emphases added)). Perhaps more significantly,
Congress amended Sarbanes-Oxley through Dodd-Frank to include this
prohibition, and yet elected not to include a mirror provision in the AntiRetaliation Provision of Dodd-Frank itself. Consequently, the Court must
interpret this absence to demonstrate Congress’ intent that the Anti-Retaliation
Provision not include any prohibition against predispute arbitration
agreements. Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 174 (2009) (“When
Congress amends one statutory provision but not another, it is presumed to
have acted intentionally.”); cf. Gonzales v. Oregon, 546 U.S. 243, 267 (2006)
(“‘Congress, we have held, does not alter the fundamental details of a
regulatory scheme in vague terms or ancillary provisions — it does not, one
might say, hide elephants in mouseholes.’” (quoting Whitman v. Am. Trucking
Assns., Inc., 531 U.S. 457, 468 (2001))). 5
In this regard, Plaintiff argues that holding his claim not exempt from arbitration would
be inconsistent with Dodd-Frank’s “underlying purpose … to enhance, not limit,
whistleblowers’ protections under [Sarbanes-Oxley].” Worse yet, Plaintiff claims,
adopting Defendants’ position would subject plaintiffs to a “Hobson’s choice” of (i) filing
a claim in court under Sarbanes-Oxley (after exhausting any administrative
requirements) and forgoing the enhanced relief provided under the Anti-Retaliation
Provision, or (ii) filing a claim under the Anti-Retaliation Provision to obtain the
enhanced relief, but waiving right to judicial review of that claim. (Pl. Opp. 23).
Plaintiff’s “Hobson’s choice” argument would appear to fail on its facts, since Plaintiff
himself has pursued claims under both statutes in tandem. In any event, irrespective
of the bind that Plaintiff claims the statutes present, it would not be proper for the
Court to redraft legislation, particularly where Congress’ intent is clear.
The Arbitrator Must Determine Whether Plaintiff’s Claim
Is Within the Scope of the Arbitration Agreements
The remaining issue is whether this dispute is subject to arbitration, i.e.,
“the question of arbitrability.” Schneider, 688 F.3d at 71 (internal quotation
marks omitted). As noted, both parties have proceeded from the premise that
the Court must resolve several questions of arbitrability. That does not appear
to be the case. But cf. Granite Rock Co. v. Int’l Broth. of Teamsters, 130 S. Ct.
2847, 2857 n.5 (2010) (“Because neither party argues that the arbitrator
should decide [whether their ratification dispute was arbitrable], there is no
need to apply the rule requiring clear and unmistakable evidence of an
agreement to arbitrate arbitrability.” (internal quotation marks omitted)).
The “‘[q]uestion of arbitrability’ is a term of art covering ‘disputes about
whether the parties are bound by a given arbitration clause[,’] i.e., formation,
as well as ‘disagreements about whether an arbitration clause in a concededly
binding contract applies to a particular type of controversy[,’] i.e., scope.”
Schneider, 688 F.3d at 71 (quoting Republic of Ecuador v. Chevron Corp., 638
F.3d 384, 293 (2d Cir. 2011)). The dispute before the Court is plainly one of
“scope.” Plaintiff maintains that this dispute is not arbitrable because “the
parties’ agreements to arbitrate expressly exempt arbitration of the cause of
action in the Complaint.” (Pl. Opp. 15). As to the Employment Agreement,
Plaintiff points to provisions that exempt from arbitration claims arising under
Sarbanes-Oxley (id. at 17), and those for which arbitration is “prohibited by
applicable law” (id. at 19). As to the Form U-4, Plaintiff argues that it excludes
Plaintiff’s claim because that form requires only that Plaintiff arbitrate “any
dispute, claim, or controversy” that may arise with Defendants “that is required
to be arbitrated under the rules, constitutions, or by-laws of [FINRA],” whereas
FINRA’s rules exempt from arbitration “a dispute arising under a whistleblower
statute that prohibits the use of predispute arbitration agreements.” (Id. at 1920). Although the Court’s holding that a cause of action under the AntiRetaliation Provision is not excluded from arbitration may have the effect of
resolving the issue of the arbitrability of Plaintiff’s claim, in this case, it is not
for the Court to decide the issue of scope.
When assessing arbitrability, “[t]he proper inquiry is whether ‘there is
clear and unmistakable evidence from the arbitration agreement, as construed
by the relevant state law, that the parties intended that the question of
arbitrability shall be decided by the arbitrator[s].’” Alliance Bernstein Inv.
Research and Mgmt, Inc., 445 F.3d at 125 (quoting Contec Corp. v. Remote
Solution, Co., Ltd., 398 F.3d 205, 208 (2d Cir. 2005) (emphasis in original)).
The Second Circuit has concluded that “[w]here ‘parties explicitly incorporate
rules that empower an arbitrator to decide issues of arbitrability, the
incorporation serves as clear and unmistakable evidence of the parties’ intent
to delegate such issues to an arbitrator.’” Schneider, 688 F.3d at 72 (quoting
Contec Corp., 398 F.3d at 208). Whether the relevant state law is that of
Connecticut, which governs the Employment Agreement, or New York, the
forum state, makes no difference; decisions from state courts in both states
espouse rules consistent with Second Circuit precedent on this issue. See,
e.g., Bell, 293 F.3d at 567 (“Under Connecticut law, ‘the arbitrability of a
dispute is a legal question for the court unless the parties have clearly agreed
to submit that question to arbitration.’” (quoting City of Bridgeport v. Bridgeport
Police Local 1159, AFSCME, Council 15, 438 A.2d 1171, 1173 (Conn. 1981)
(emphasis in original)); AFSCME, Council 4, Local 1303-325 v. Town of
Westbrook, 75 A.3d 1, 6 (Conn. 2013) (“The intention to have arbitrability
determined by an arbitrator can be manifested by an express provision or
through the use of broad terms to describe the scope of arbitration, such as all
questions in dispute and all claims arising out of the contract or any dispute
that cannot be adjudicated.” (internal quotation marks omitted)); Contec Corp.,
398 F.3d at 208 n.1 (“New York law … follows the same standard as federal law
which respect to who determines arbitrability: generally, it is a question for the
court unless there is ‘a clear and unmistakable agreement to arbitrate
arbitrability.’” (quoting Shaw Group v. Triplefine Int’l Corp., 322 F.2d, 115, 121
(2d Cir. 2003))); Zachariou v. Manios, 891 N.Y.S.2d 54, 56 (1st Dep’t 2009)
(“Whether a dispute is arbitrable is generally an issue for the court to decide
unless the parties clearly and unmistakably provide otherwise. Where there is
a broad arbitration clause and the parties’ agreement specifically incorporates
by reference the AAA rules providing that the arbitration panel shall have the
power to rule on its own jurisdiction, courts will leave the question of
arbitrability to the arbitrators.” (internal citation and quotation marks
Pursuant to the Employment Agreement, the parties agreed to arbitrate
“any dispute, controversy or claim (including but not limited to those arising
out of or relating to this Agreement, the employment relationship between
[Plaintiff] and [UBS Securities] or the termination thereof) … unless prohibited
by applicable law.” (Mara Decl., Exh. A). The Arbitration Agreement
incorporated JAMS Employment Arbitration Rules & Procedures, under which
[j]urisdictional and arbitrability disputes, including disputes over
the formation, existence, validity, interpretation or scope of the
agreement under which Arbitration is sought, and who are proper
Parties to the Arbitration, shall be submitted to and ruled on by
the Arbitrator. Unless the relevant law requires otherwise, the
Arbitrator has the authority to determine jurisdiction and
arbitrability issues as a preliminary matter.
JAMS Employment Arbitration Rules & Procedures, Rule 11(c). Similarly,
Plaintiff’s Form U-4 requires Plaintiff “to arbitrate any dispute, claim or
controversy that may arise between [Plaintiff] and [UBS Securities] … that is
required to be arbitrated under [FINRA’s] rules.” (Mara Decl., Exh. C). Like the
JAMS rules, FINRA Rule 13413 provides that “[t]he panel has the authority to
interpret and determine the applicability of all provisions under the Code.
Such interpretations are final and binding upon the parties.” 6
The JAMS and FINRA rules, explicitly incorporated into the respective
agreements, empower an arbitrator to decide issues of arbitrability. For this
reason, the Second Circuit has found, addressing both the JAMS and FINRA
rules at issue here, that these rules evidence the parties’ intent to arbitrate the
question of arbitrability. Emilio v. Sprint Spectrum L.P., 508 F. App’x 3, 6 (2d
Cir. 2013) (summary order); Alliance Bernstein Inv. Research and Mgmt., Inc.,
445 F.3d at 127; see also Gibson v. Seabury Transp. Advisor LLC, 936 N.Y.S.2d
Pursuant to the Employment Agreement and Plaintiff’s Form U-4, the arbitration in this
case may be conducted by either JAMS or FINRA. (Def. Br. 10 n.5).
539 (1st Dep’t 2012) (holding that “[t]he arbitration clause in the parties’
agreement evinces a clear and unmistakable agreement to arbitrate
arbitrability,” where the agreement provided that the arbitration would be
conducted under JAMS rules that submitted the issue of arbitrability to the
arbitrator); Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39, 47 (1997)
(“[T]he language of the [FINRA] Code itself commits all issues, including issues
of arbitrability … to the arbitrators.”).
In Emilio, the Court held that “the parties clearly and unmistakably
delegated questions of arbitrability to the arbitrator.” Emilio, 508 F.App’x at 5.
In that case, as here, the parties “agreed to arbitrate any and all claims,
controversies or disputes … arising out of or relating to its agreement with
Emilio.” Id. The agreement in Emilio, like the Employment Agreement,
“incorporated by reference JAMS rules, which further provided that
‘jurisdictional and arbitrability disputes … shall be submitted to and ruled on
by the Arbitrator.” Id. at *5-6. Likewise, in Alliance Bernstein, the Court held
that FINRA Rule 13413 “clearly and unmistakably evinces an intent to submit
any disputes over the interpretation of the Code rules to arbitration.” 445 F.3d
at 127 (holding that “the parties agreed, unequivocally, to submit disputes of
this type to arbitration”). That the dispute here concerns the interpretation of
the Code is clear from Plaintiff’s argument that FINRA Rule 13201(b) prohibits
arbitration of his claim — a proposition that Defendant hotly contests. (See Pl.
The parties’ agreements conclusively establish their agreement to submit
the issue of arbtirability to the arbitrator. In this regard, the “general
presumption that the issue of arbitrability should be resolved by the court,”
Contec, 398 F.3d at 208, is overcome on at least two independent grounds. 7
The Court must respect the parties’ intentions, and withhold from addressing
this issue. Consequently, the Court leaves it to the arbitrator to decide
whether Plaintiff’s claim falls within the scope of the parties’ agreements to
Even if JAMS or FINRA rules were not explicitly incorporated, the Employment
Agreement’s broad language expressing the parties’ intent that “any dispute,
controversy or claim … arising out of or relating to” the Employment Agreement be
arbitrated would likely be sufficient evidence, in and of itself, of the parties’ “clear and
unmistakable agreement to arbitrate arbitrability.” Shaw Group, Inc., 322 F.3d at 121
(holding that the parties’ agreement to submit “any disputes concerning or arising out
of” the parties’ agreement evidenced their intent to arbitrate arbitrability); see also
Mehler v. Terminix Intern. Co. L.P., 205 F.3d 44, 49 (2d Cir. 2000) (“The clause provides
for arbitration of ‘any controversy or claim between the parties arising out of or relating
to’ the Agreement. We have previously decided that this is ‘precisely the kind of broad
arbitration clause that justifies a presumption of arbitrability.’” (quoting Oldroyd, 134
F.3d at 76)).
Out of an abundance of caution, the Court notes that had the parties not intended to
arbitrate arbitrability, Granite Rock Co., 130 S. Ct. at 2857 n.5, the end result in this
case would still be the same — the parties would proceed to arbitration. This is
because there appears to be no basis on which to conclude that Plaintiff’s prototypical
employment-related dispute over his termination fell outside the broad scope of the
arbitration agreements to which he assented. See Mehler, 205 F.3d at 49 (“Once the
court has determined the threshold issue of whether an arbitration agreement exists,
and that the agreement is a broad one, as here, the court must compel arbitration
unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.” (internal quotation
marks omitted)); cf. Collins & Aikman Products Co. v. Bldg. Sys., Inc., 58 F.3d 16, 18-20
(2d Cir. 1995) (holding that “the wrongful termination claim [was] squarely within the
scope of the arbitration clauses” that provided for “[a]ny claim or controversy arising out
of or relating to [the parties’] agreement [to] be settled by arbitration”); Hawkins v.
Toussaint Capital Partners, No. 08 Civ. 6866 (PKL), 2010 WL 2158332, at *5 (S.D.N.Y.
May 27, 2010) (holding that employee’s employment-related termination dispute was
within the scope of his Form U-4); French v. Wells Fargo Advisors, LLC, No. 5-11-cv-246
(CR), 2012 WL 479961, at *5 (D. Vt. Feb. 14, 2012) (“Plaintiff’s wrongful termination
claim falls within the scope of [his Form U-4] and the motion to compel arbitration is
This Litigation Will Be Stayed
Defendants request that the Court dismiss Plaintiff’s Complaint or, in the
alternative, stay the matter pending arbitration. (Def. Br. 13). Section 3 of the
FAA provides that where the claims pending before a court are “referable to
arbitration,” the court “shall … stay the trial of the action” until the parties
arbitrate the dispute. 9 U.S.C. § 3. Courts are vested with equal discretion to
dismiss rather than stay a case where, as here, all the claims before the court
must be arbitrated. Arrigo v. Blue Fish Commodities, Inc., 704 F. Supp. 2d 299,
305 (S.D.N.Y. 2010) (“[W]here all of the issues raised in the Complaint must be
submitted to arbitration, the Court may dismiss an action rather than stay
proceedings.”); see also Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90,
92-93 (2d Cir. 2002). 9
When determining whether to stay or to dismiss an action, district courts
must abide by Second Circuit admonitions that they “be mindful of [the] liberal
federal policy favoring arbitration agreements,” and that “[u]nnecessary delay of
the arbitral process through appellate review is disfavored.” Id. at 93. Courts
in this District have generally responded to these admonitions by staying,
rather than dismissing, an action upon compelling a party to arbitrate. See,
e.g., Dixon v. NBCUniversal Media, LLC, No. 12 Civ. 7646 (PAE), 2013 WL
2355521, at *11 (S.D.N.Y. May 28, 2013); Duraku v. Tishman Speyer Properties,
In this regard, the Second Circuit has recognized that whether a matter is stayed or
dismissed may impact the speed with which the matter may be arbitrated. Specifically,
if a matter is dismissed, it is reviewable by an appellate court under § 16(a)(3) of the
FAA. 9 U.S.C. § 16(a)(3); Salim Oleochemicals, 278 F.3d at 93 (“[A] dismissal renders an
order appealable under § 16(a)(3).”). In contrast, “the granting of a stay is an
unappeable interlocutory order under § 16(b).” Id.; see also 9 U.S.C. § 16(b).
Inc., 714 F. Supp. 2d 470, 474-74 (S.D.N.Y. 2010); Douce v. Origin ID TMAA
1404-236-5547, No. 08 Civ. 483 (DLC), 2009 WL 382708, at *5 (S.D.N.Y. Feb.
17, 2009). Seeing no reason to depart from this trend, and in order “[t]o
promote expeditious resolution of this dispute,” the Court will stay this action
pending the resolution of the parties’ arbitration. Douce, 2009 WL 387708, at
For the foregoing reasons, Defendants’ June 14, 2013 motion to compel
arbitration and to stay this proceeding is GRANTED.
The Clerk of Court is directed to terminate Docket Entry No. 27, and to
place the case on the suspense calendar.
January 27, 2014
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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