Broker-Dealer Litigation - Greenberg Traurig LLP

court found that an arbitral panel was responsible for determining all of the financial advisor’s
remaining claims and it dismissed the action for arbitration.
Velez v. Perrin Holden & Davenport Capital Corp., 769 F. Supp.2d 445 (S.D.N.Y. 2011).
A stock broker, on behalf of himself and other similarly situated stock brokers, sued a
brokerage firm for its alleged failure to pay overtime, commissions, and timely wages.
Additionally, the stock broker asked the court to designate his claims as a collective action
pursuant to the Fair Labor Standards Act (“FLSA”) and as a class action under the federal rules
for his state law claims. The brokerage firm moved to dismiss or, alternatively, to compel
arbitration based on an arbitration clause in the broker’s employment agreement. The stock
broker argued that his claims fell within an exception of the FINRA arbitration rules, which
prohibited arbitration of class action claims. The court agreed that the broker’s state law class
action claims fell within the exception, but held that the broker’s FLSA collective action was
distinguishable from a class action and not subject to the exception to arbitration. The court
focused on a key distinction between class actions and collective actions: that members must optin
to collective actions whereas class actions require class members to opt-out. The court also
noted that every other court to address whether an FLSA claim is arbitrable under the FINRA
rules has found in favor of arbitrability. As a result, the court compelled the parties to submit to
arbitration on the broker’s FLSA claims and stayed the proceedings on the class action claim
while arbitration was pending.
Bayme v. GroupArgent Secs., LLC, 2011 WL 2946718 (S.D.N.Y. July 19, 2011)
A former employee brought a FINRA arbitration action against a broker-dealer for
damages arising out of claims for compensation and expenses paid during his employment. The
broker-dealer defended the arbitration on the basis that FINRA lacked jurisdiction to hear the
matter because the broker-dealer was not the entity for which the employee had worked. After a
hearing on the issue, the arbitral panel determined that it lacked jurisdiction over the matter and
dismissed the case. The employee sought to vacate the award, arguing that FINRA did not have
the authority to decide the question of jurisdiction. The court denied the employee’s petition
because the arbitration agreement gave the panel the right to consider the issue of arbitrability
and, in considering that issue, the arbitral panel acted properly. The court considered the facts
that the arbitral panel held a hearing, allowed both sides to argue, and evaluated testimonial and
documentary evidence in deciding that the panel properly decided the issue of arbitrability. Even
though the Director of FINRA gave an opinion that FINRA had jurisdiction, the court ruled that
the Director’s opinion was not binding. The court confirmed the award because the record
supported the panel’s decision.
R.
R.
452