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ARTICLE · 01 OCTOBER 2014

Second Circuit Holds Forum Selection Clause Supersedes FINRA’s Mandatory Arbitration Rule

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The United States Court of Appeals for the Second Circuit held that a forum selection clause in a broker-dealer agreement superseded FINRA's mandatory arbitration rule.

United StatesLitigation, Mediation & Arbitration
Robert Friedman
Robert Friedman
Manuel Gomez
Manuel Gomez
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In Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, No. 13-797-cv, 2014 WL 4099289 (2d Cir. Aug. 21, 2014), the United States Court of Appeals for the Second Circuit held that a forum selection clause in a broker-dealer agreement superseded FINRA's mandatory arbitration rule.  FINRA Rule 12200 compels members to arbitrate disputes if (1) the customer requests arbitration and (2) the dispute arises in connection with the member's business activities.  In Golden Empire, the Second Circuit ruled that a broad forum selection clause, requiring "all actions and proceedings" related to the parties' transactions to be brought in court, trumped Rule 12200.  As discussed more fully below, Golden Empire marks a growing circuit split over the availability of mandatory FINRA arbitration in light of such a broad, all-inclusive forum selection clause.  It also raises several important issues for future litigation.

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