Three recent decisions1 from the Southern District of New York have now enjoined a customer from proceeding with arbitration against a member of FINRA on the ground that the combination of a merger clause and a forum-selection clause in a contract between the parties “overrides” or “supplants” the customer’s right to arbitrate under FINRA Rule 12200.2 Passing the question of whether a federal court may ever issue an injunction in a case where a federal statute provides complete relief,3 the decisions in the three cases—Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority (Golden Empire), Citigroup Global Markets v. North Carolina Eastern Municipal Power Agency (Citigroup) and Goldman, Sachs & Co. v. North Carolina Municipal Power Agency No. One (NCMPAI)—raise a fundamental question about how an “agreement in writing for arbitration” is made for purposes of Section 4 of the Federal Arbitration Act when a customer initiates arbitration by “request” under the FINRA Code.
‘Golden Empire’
The facts of Golden Empire serve as a paradigm for all three cases: In Golden Empire, the customer engaged a member of FINRA to raise capital through the issuance of so-called “auction rate securities.” The member acted as an underwriter pursuant to an “underwriting agreement” and also as a broker-dealer pursuant to a “broker-dealer agreement.” Neither agreement contained an arbitration clause, but the broker-dealer agreement did contain a merger clause and a forum-selection clause.
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