On June 29, 2015, in the case of Lloyd v. J.P. Morgan Chase & Co., Judge Dennis Jacobs of the United States Court of Appeals for the Second Circuit denied Defendants’ appeal from an order of the United States District Court for the Southern District of New York denying their motion to compel arbitration. Defendants moved to compel arbitration because of an arbitration clause found in the plaintiffs’ employment contracts.
This suit was filed on December 9, 2011 on behalf of Plaintiffs and all other similarly situated current and former Financial Advisors employed at J.P. Morgan Chase & Co. and Chase Investment Services Corp. (collectively, “Chase”) in New York and New Jersey. The complaint alleges that Chase classifies Financial Advisors as overtime exempt and does not pay them for hours worked in excess of forty per workweek. Plaintiffs contend this practice violates the overtime provisions of the New York Labor Law (“NYLL”), the New Jersey State Wage and Hour Law (“NJSWHL”), and the Fair Labor Standards Act (“FLSA”).
Chase is registered with FINRA, a self-regulatory organization that adopts and enforces rules for its member firms. As licensed securities representatives employed by Chase, plaintiffs registered with FINRA and executed the Uniform Application for Securities Industry Registration or Transfer (“Form U4”), under which they agreed to arbitrate any disputes with Chase that are required to be arbitrated by the FINRA Rules. In addition, plaintiffs signed an employment agreement that contains the following arbitration clause:
“Any claim of controversy concerning you arising out of or in connection with the business activities of [Chase], your activities and/or your appointment as a registered representative or your employment and/or the termination thereof required to be arbitrated by the FINRA Rules shall be resolved by individual (not class or collective) arbitration in accordance with the Code of Arbitration Procedure of the FINRA . . . , and in accordance with applicable law. . . . Further, no claims shall be arbitrated on a class or collective action or collective or class-wide basis.”
However, the “Old” FINRA Rule 13204 states that class action claims may not be arbitrated and the “New” FINRA Rule 13204 (effective July 9, 2012) states collective action claims may not be arbitrated under FINRA Rules.
Defendants filed the motion to compel arbitration on January 14, 2013, and the district court denied the motion, holding that the arbitration clause requires arbitration “of only those claims required to be arbitrated under the FINRA Rules and that, under New Rule 13204, Plaintiffs’ claims cannot be arbitrated. The Court of Appeals for the Second Circuit affirmed the holding of the district court, finding that the phrase in the arbitration clause “required to be arbitrated by the FINRA Rules” meant that plaintiffs’ class and collective action claims were precluded from arbitration.
Additionally, the court held that the arbitration clause incorporated both the Old Rule 13204 (effective when plaintiffs entered the employment agreement) and New Rule 13204 (which became effective prior to Chase’s motion to compel and remains the current rule).The employment lawyers at Fitapelli & Schaffer, LLP are strongly committed to protecting the rights of hard working employees. If you believe you have a potential claim, please call the employment lawyers at Fitapelli & Schaffer, LLP at (212) 300-0375 or visit our website at www.fslawfirm.com.