Broker-Dealer Litigation - Greenberg Traurig LLP

of the class action suit. The district court granted defendant’s motion, ruling that plaintiffs had
expressly released all of their arbitration claims as a result of failing to timely opt-out of the class
action settlement. In determining the scope of the arbitration agreement on appeal, the Second
Circuit agreed with the district court’s decision that defendant is liberated from its requirement to
arbitrate released claims as defined in the class action settlement agreement. However, the
Second Circuit noted that defendant still agreed to arbitrate both non-released claims and claims
expressly excluded from the release, pursuant to the original arbitration agreement. Such claims
were included in the FINRA action. Therefore, the Second Circuit vacated this portion of the
district court’s ruling, holding that the district court may not enjoin plaintiff from arbitrating
these claims before FINRA.
Filho v. Safra Nat’l Bank, 797 F. Supp. 2d 289 (S.D.N.Y. 2011).
Plaintiff alleged that representatives of defendant invested his money inappropriately in
risky securities without his approval. defendant responded with a motion to compel arbitration
pursuant to the arbitration agreement between the parties. Plaintiff contended that defendant
modified the terms and conditions of the account agreement after Plaintiff agreed thereto, and
that he never received nor read the original contract terms and conditions or the terms and
conditions as later modified. The court held that there was a valid “change of terms” clause in
the original agreement and that, if properly implemented and agreed upon, the change was not a
contract modification as contemplated by New York’s General Obligation Law. Therefore, no
additional consideration was required to support the modification to the agreement. The court
further concluded that plaintiff’s allegation that he did not receive or read the contract was
contradicted by the acknowledgement above plaintiff’s signature on the original account
agreement that he received, understood, and agreed to the contract. The court further held that
the issues plaintiff raised were within the scope of the arbitration agreement, and thus granted
defendant’s motion to compel arbitration.
Velez v. Perrin Holden & Davenport Capital Corp., 769 F. Supp. 2d 445 (S.D.N.Y. 2011).
Plaintiff brought an action against Defendants based on alleged violations of the Fair
Labor Standards Act (“FLSA”). The parties did not dispute that Plaintiff signed an employment
agreement providing that all disputes shall be settled and determined by arbitration. Plaintiff
sought designation of this case as a collective action pursuant to FLSA Section 216. Defendants
then moved to dismiss the complaint or, in the alternative, compel arbitration. The trial court
considered the issue of whether these claims were eligible for arbitration based on FINRA Rule
13024, which precludes arbitration of class action claims. The court held that collective actions
are separate and distinct from class actions because they are “opt-in” actions, whereas class
actions require participants to “opt-out.” The court granted defendants’ motion to compel
arbitration on the basis that the FLSA “collective action” is not encompassed within the term
“class action” and therefore was eligible for arbitration under the FINRA rules.
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