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When a nonprofit demanded arbitration under FINRA against J.P. Morgan, and filed a declaratory action in federal court to compel it, J.P. Morgan sought to litigate the matter out in a different court.
According to the bank, despite the fact that FINRA Rule 12200 is clear that customers have a right to arbitrate FINRA claims, the forum selection clause in its contract trumps the federal regulation. Unfortunately for the bank, both the federal district, and now Third Circuit Court of Appeals, didn't see it that way, and have ordered the bank to arbitrate the claims.
The Answer Is No
The court certified the following question: is a district court required "to enforce a forum selection clause by transferring a declaratory action seeking to compel arbitration, even if the district court determines that the forum selection clause does not cover the underlying arbitration that the plaintiff seeks to compel."
The court answered this question rather simply, after nearly 20 pages of exposition, with four words: "No it does not."
The appellate court then went into further detail as to why, basically explaining that if the forum selection clause doesn't specifically waive the right to arbitration. The appellate court describes the circuit split on the issue, where the Second and Ninth Circuits have both ruled that a forum selection clause supersedes FINRA arbitration, while the Fourth Circuit has found that the FINRA arbitration is not waived by a forum selection clause, especially if it is not specifically called out.
It is anticipated that J.P. Morgan will seek to be reheard en banc, or a petition for cert. filed (given the circuit split).