Broker-Dealer Litigation - Greenberg Traurig LLP

R. Broker-Dealer Employment Litigation and Arbitration
R.
FleetBoston Fin. Corp. v. Alt, 638 F.3d 70 (1st Cir. 2011).
An investment banking firm and its former employees arbitrated claims brought by the
employees arising from the firm’s alleged failure to pay deferred compensation. The arbitrators
issued an award in favor of the employees. A subset of the employees’ claims were stayed in
federal court during the arbitration. After the district court confirmed the arbitral award, it was
asked to enter summary judgment against the employees on the stayed claims. The essential
question was whether the confirmed arbitral award precluded the employees from pursuing the
stayed claims. The district court decided that the essence of the stayed claims was litigated
during the arbitration and entered judgment against the employees. The employees appealed,
arguing that investment firm’s parent was named in the lawsuit but was not a party to the
arbitration and, as a result, the arbitral panel did not decide the employees’ claims against the
parent company.
The U.S. Court of Appeals for the First Circuit affirmed the district court’s decision. The
First Circuit looked at the scope of the arbitral award to determine whether the claims before the
arbitration panel and the arbitral award itself encompassed the federal stayed claims. The court
concluded that the scope of the stayed claims were the same as the arbitrated claims because the
same underlying conduct was the basis for both claims. The court relied on the fact that (1) the
arbitrators stated they were resolving all claims between the parties; (2) the employees argued
that the claims could be fully resolved without adding the investment firm’s parent to the matter,
because the parent was liable under an alter ego theory and would be subject to the award
without being formally added as a party; (3) the arbitrators’ case summary unambiguously
included the types of claims stayed in federal court; and (4) the arbitrators refused to amend the
award to exclude the investment firm’s parent company. Moreover, because the final arbitral
award did not specify the basis for the amounts awarded, the court could not conclude that the
award excluded damages for the stayed claims. The court noted that the employees could have
pursued many different avenues for clarifying any ambiguity in the award, but instead sought a
“second bite at the apple” by having the district court confirm the award and then relying on the
ambiguity to pursue their stayed federal court claims. The court refused to play this game and
ultimately denied the employees’ appeal under the doctrine of res judicata, explaining that the
judgment confirming the arbitral award had the same force and effect as any other judgment and
that the employees had a full opportunity to litigate the stayed claims before the arbitrators. The
First Circuit affirmed summary judgment on the stayed federal court claims in favor of the
investment firm.
Janvey v. Alguire, 647 F.3d 585 (5th Cir. 2011)
The Securities and Exchange Commission brought suit against an investment company
and related entities for allegedly perpetrating a massive Ponzi scheme. The district court
R.
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