This month, we discuss In re American Express Financial Advisors Securities Litigation,1 in which the U.S. Court of Appeals for the Second Circuit affirmed in part and reversed in part a district court’s order enjoining a FINRA arbitration on the grounds that the claims were released by a prior class action settlement. The court’s opinion, written by Judge Robert Sack and joined by Judge Rosemary Pooler and Judge Gerard Lynch, considered whether a court has the authority under the Federal Arbitration Act to enjoin an arbitration, a previously unsettled issue in the Second Circuit.
Background
Between March 4, 2004, and May 4, 2004, various people who had dealings with Ameriprise Financial Services Inc.2 brought putative class actions in the U.S. District Court for the Southern District of New York. The class plaintiffs asserted various federal and common law claims based on Ameriprise’s alleged “canned” financial advice and advisory services, the pushing of clients into certain mutual funds in order to reap secret kickbacks, and the steering of clients into in-house mutual funds. The class actions were consolidated as In re AEFA, and in January 2007, the district court certified a class and approved a settlement.3
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