Broker-Dealer Litigation - Greenberg Traurig LLP

each of fiduciary duty fall within the scope of similar provisions. Citing the proposition that
an order compelling arbitration “should not be denied unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted
dispute[,]” the court found that plaintiffs’ claims fell within the scope of the arbitration
provisions and compelled the matter to arbitration.
Waterford Inv. Servs. v. Bosco, 2011 U.S. Dist. LEXIS 96046 (E.D. Va. July 29, 2011).
Plaintiff sought a declaratory judgment that it had no duty to arbitrate any claim with
defendants, as well as an injunction enjoining the FINRA arbitration already filed by defendants.
The arbitration claims stemmed from defendants’ investment relationship with an investment
advisor who was employed by Community Bankers Securities (“CBS”). Both CBS and plaintiff
were majority-owned by a third entity, AIC, Inc. Plaintiff alleged that it was not subject to
FINRA arbitration because it did not have adequate association with CBS or the investment
advisor at issue. The court disagreed with that contention and held that the investment advisor
was an “associated person” under FINRA Rule 12100 because plaintiff had indirect control over
him. Since FINRA Rule 12200 requires a member to arbitrate with the customer of an
associated person, plaintiff had a duty to submit to arbitration with defendants as customers of
the investment advisor.
Hussain v. Garson, 783 F. Supp. 2d 846 (W.D. La. 2011).
Plaintiff brought this action against defendant, his former broker, arising out of an alleged
“pump and dump” investment fraud scheme. The account applications signed by plaintiff
included a customer agreement containing a pre-dispute arbitration clause. The court held that
even though plaintiff’s complaint centered upon being fraudulently induced into stock purchases
– and thus fraudulently induced into the investment contract – the arbitration clause was
enforceable unless plaintiff was fraudulently induced into signing the arbitration clause itself,
which plaintiff did not allege. Thus, the court held that the arbitration clause was valid and that
the claims brought by plaintiff were reasonably within the broad scope of the arbitration
agreement as they related to defendant’s use of his credential as an investment advisor in the
alleged scheme. Defendant’s motion to stay litigation pending arbitration was granted.
Gordon v. Royal Palm Real Estate Inv. Fund I, LLP, 2011 U.S. Dist. LEXIS 22911 (E.D. Mich.
Mar. 8, 2011).
Plaintiff alleged that defendants committed a variety of violations with respect to
investments in securities recommended and/or managed by defendants. At the time of this
lawsuit, plaintiff had already initiated a FINRA arbitration against defendants. Defendants
argued that the claims in both actions were virtually identical and moved to dismiss this action
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