N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
M OR GAN STANLEY & C O. LLC ; M OR GAN STANLEY SM ITH B AR NEY, LLC , Pla i ntiffs-Appe lle e s,
v. DAVID C OUC H,

De fe nda n t-Appe l la

nt. No. 15-17092

D.C . No. 1:15-c v-01291-LJO-JLT M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Ea ste rn Distric t of C a lifornia Lawre nc e J. O’ Ne ill, C hie f Distric t Judge , Pre siding Argue d a nd Subm itte d

June 17, 2016 San Fran c isc o , C a lifornia B e fore : SC HR O EDER , TASHIM A, a nd OW ENS, C irc uit Judge s. In 2007, Pla intiffs M orga n Sta nle y & C o. LLC an d M orga

n Sta n le y Sm ith B arne y , LLC (toge t

he r, “ M orga

n Sta nle y ” ) hire d De fe n da

nt Da vid C o uc h a s a fina nc ia l a d visor. Upon his hiring, C ouc h signe d a n e m ploy m e nt c ontra c t

tha t 

# FIL ED AUG 11 2016 M OLLY C. DW Y ER, CLERK U
. S
. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.inc l ude d a

n a gre e m e nt to a

rbitrate “ any

c ontrove rsy

or c la im ” arising out of his
e m ploy m e nt, “ e x c luding sta

tutory e m ploy m e nt c l a im s.” In 2013, M o rga

n Sta nle y fire d C ouc h . C ouc h

sue d M orga

n Stanle y , ple a ding viola

tions of theC a lifornia

La bor C ode and e c onom ic inte rfe re nc e unde r C a lifornia c om m on la w. The pa

rtie s proc e e de d to litiga

te C ouc h’ s c la im s on the
m e rits for ove r a

y e ar. In 2015, a fte r disc ove ry ha d c lose d a

nd m e re da

y s be fore
sum m ary judgm e nt m otions we re due , C ouc h file d a se pa ra te se t of c la i m s with the Fina nc ia l Industry

R e gula t ory Authority

(“ FINR A” ), a se lf-re gula

tory orga niz a tion that ofte n se rve s a s a

n a rbitration forum

for fina n c i a l se c tor dispute s. In re sponse , M orga n Sta nle y file d this a c tion for de c la ra t ory re lie f, arguing tha

t by inc l uding the e c onom ic inte rfe re n c e c la im s in his c o m pla int, a nd the n litiga

ting those c la im s for m ore tha

n a y e ar, C ouc h ha d wa ive d his a rbitration rights unde

r the
e m ploy m e nt c ontra c t. M orga

n Sta nle y m ove d to e njoin pre lim ina rily any furthe r FINR A proc e e dings, pe nding re solution of its de c l ara tory judgm e nt a c t ion. The distric t c o urt gra

n te d the m o tion. C ouc h a ppe a ls. He argue s tha

t (1) the distric t c ourt la c ke d jurisdic tion to
e nte rta in M orga

n Sta nle y ’ s suit; (2) the

arbitrator, not thec ourt, should de c i de whe the r C ouc h wa ive d his right to a rbitrate ; a nd (3) the distric t

c o urt a buse d its disc re tion in gra

nting thepre lim ina

ry injunc tion.
2W e have jurisdic tion unde r 28 U.S.C . § 1292(a )(1), a nd we a ffirm the distric t c o urt’ s pre lim ina

ry injunc tion orde r. 1. C ouc h c ha lle nge s the distric t c ourt’ s jurisdic t ion to e n te rta i n M orga n Stan le y ’ s de c la

ra tory judgm e nt a c tion. TheDe c la ra tory Judgm e nt Ac t, 28 U.S.C
. § 2201(a ), doe s not itse lf c onfe r jurisdic tion ove r a c la i m ; rathe r, the Ac t

“ m e re ly provide s a

n a dditiona l re m e dy in c a se s whe re jurisdic t ion is otherwise
e sta blishe d.” Staac k

ev . U.S. Se c ’yof Labor , 841 F.2d 278, 280 (9th C ir. 1988). He re , it is undispute d tha

t the pa rtie s a re dive rse from

one anothe r an d the am ount in c o ntrove rsy

in the unde rly ing dispute e xc e e ds $75,000, e xc lusive of inte re st a nd
c osts. Thus, the

distric t c ourt ha d fe d e ra l subje c t m a tte r jurisdic tion to a djudic a t e M orga n Sta nle y ’ s c la im s . 28 U.S.C . § 1332(a ); se e also Budge t Re n t-A-C

ar, Inc
. v . Higashiguc hi , 109 F.3d 1471, 1474 (9th C ir. 1997) (holding tha t a c la im
satisfy ing dive rsity re quire m e nts sa tisfie s jurisdic tiona l re quire m e nts for de c la ra tory judgm e n t ). 1 2. C ouc h ne xt c onte n ds tha t the FINR

A a rbitrator, rathe r tha

n the distric t
c ourt, should ha

ve de c ide d w h e the r C ouc h wa ive d his right to a rbitrate . It is

1 C ouc h c onte nds tha t be c a use the arbitrat ion a gre e m e nt wa s “ se lfe xe c uting,” the re wa s no Artic le III c a se or c ontrove rsy for the distric t c ourt to a djudic a te . This a

rgum e nt fa i ls. The pa

rtie s disputethe e nforc e a

bility of the arbitration c la

use , a n d thus thea c tion m e e ts jurisdic tiona l re quire m e nts. Se e Goldman Sac hs v . C

ity of Re no , 747 F.3d 733, 737-38 (9th C ir. 2014).

3pre s um

ptive l y for the distric t c ourt to de c ide whe the r a pa rty wa ive d its a rbitration rights by litiga ting othe rwise -arbitra

ble c la im s. Se e C

ox v . Oc e a n Vie w Hote l C orp. , 533 F.3d 1114, 1121 (9th C ir. 2008). Thepre sum ption tha t a c ourt should de c ide issue s of wa i ve r by litiga tion c onduc t m ay

be re butte d by

a showing of

“ c l e ar and unm ista

ka ble e v i de nc e ” that the pa

rtie s inte nde d to submi t the issue to
arbitration. K

rame r v . Toy ota Motor C

orp. , 705 F.3d 1122, 1127 (9th C ir. 2013). The arbitration c la

use a t issue in this c a se sta te s tha t “ any dispute a s to the
arbitra bility of a pa rtic ula r issue or c la im

pursua nt to this a

rbitra tion provision is to be re solve d in a

rbitration.” This la

ngua ge , re quiring tha

t the arbitra

bility of individua l issue

s or c laims be re solve d by the arbitrator, doe s not e n c om pa s s dispute s ove r whe the r the c la use re m a ins va lid in light of the pa rtie s ’ litiga

tion
c onduc t. C

f. Momot v . Mastro , 652 F.3d 982, 988 (9th C ir. 2011) (holding la ngua ge “ d e le gating to the arbitra tors the a uthority to de te rm i ne ‘ t

he v alidity or
a pplic a tion of a

ny of the provisions of’ the arbitration c la use ” wa s c le a

r a nd
unm ista ka ble e vide n c e tha

t pa rtie s inte nde d a

rbitrators to de c ide arbitra b i lity (e m pha sis a dde d )). The arbitration c la use is not c le a

r a nd unm ista

ka ble e vide nc e that the pa rtie s inte n d e d for a

n a rbitrator to de c ide c la im s of wa ive r by litiga tion. B e c a use the arbitration a gre e m e nt e xplic itly inc orporate d the FINR

A rule s , those rule s m ay

a lso re b ut the pre sum

ption tha t the c ourt should de c ide issue s of
4wa ive r by

litiga tion. Se e Orac le Am., Inc . v . My riad Grp. A.G. , 724 F.3d 1069, 1071 (9th C ir. 2013). C ouc h c ite s two rule s de sc ribing (1) how to tra nsfe r
arbitra ble c la im s to a c o urt of c om pe te nt jurisdic tion, a

n d (2) the proc e dure s for obta ining a

“ te m pora ry injunc tive orde r” onc e the pa rtie s ha ve subm i tte d a

n issue to a rbitra tion. FINR

A R ule s 13803–04. The se rule s de sc ribe ste ps the pa rtie s m ay take onc e arbitration proc e e dings ha ve be gun. The y

are sile n t a s to whe the r the distric t c o urt or the arbitra t or should de c ide gate way que stions of a

rbitra bility . In the a bse nc e of a

ny e vide nc e de m onstra

t ing the pa

rtie s’ inte nt to thec ontra

ry , the distric t c o urt c orre c tly de t e rm ine d tha t it ha d the a

uthority to de c ide whe t

he r C ouc h
wa ive d his rights to a

rbitra tion through his litiga

tion c onduc t. 3. Fina lly , C ouc h c onte nds tha t the distric t c ourt e rre d in gra nting M orga n Sta nle y ’ s m otion for pre lim ina ry injunc tion. To obta

i n a pre lim ina

ry injunc tion, a pla intiff m

ust de m onstra

te tha t: (1) it “ is like l y

to suc c e e d on the
m e rits” ; (2) it “ is like ly

to suffe r irre pa

ra ble ha rm in the a bse n c e of pre lim ina

ry re lie f” ; (3) “ t

h e ba la nc e of e quitie s tips in [its] fa v or” ; a nd (4) “ an injunc tion is in the p ublic inte re s t.” W

inte r v . N at. Re s. De f . C ounc il, Inc
. , 555 U.S. 7, 20 (2008). W e re vie wthe distric t c ourt’ s gra nt of a pre lim i na

ry injunc tion for a

buse of disc re tion. Boardman v . Pac
. Se afood Grp. , 822 F.3d 1011, 1017 (9th C ir. 2016).

5On the m e rits, M o rgan Sta nle y a lle ge s tha

t C ouc h wa ive d his right to
arbitration by

litiga ting his non-sta

t utory c la im s in distric t c ourt. An a gre e m e nt to
arbitrate is de e m e d wa ive d upon a showing of “ (1) knowle dge of a n e xisting right to c o m pe l a rbitration; (2) a c ts inc onsiste nt with tha t e xisting right; a

nd (3) pre judic e to the pa

rty opposing a

rbitration re sulting from

suc h inc onsiste nt
a c ts.” Gutie rre

z v . W e lls Fargo Bank

, N A , 704 F.3d 712, 720-21 (9th C i r. 2012) (c ita tion om itte d). C o u c h doe s not dispute tha t he wa s a ware of his right to
arbitrate non-sta

tutory e m ploy m e nt c la im s unde r his e m ploy m e nt c o ntra c t. The distric t c ourt re a sone d tha t C ouc h’ s inc lusion of two e c onom i c inte rfe re nc e c la i m s 2 in his origina l c om pla i nt – a nd subse que n t litiga

tion of those
c la im s to the e v e of sum

m ary judgm e nt – wa s inc onsiste n t with his a rbitration right. This wa s not a

n a buse of disc re tion. Se e Van N e ss Tow nhouse

s v . Mar Indus. C orp. , 862 F.2d 754, 759 (9th C ir. 1988). Fina lly , the distric t c ourt de te rm ine d tha t pre judic e re sulte d from

C ouc h’ s 13-m onth de la

y in a sse rting his rights; the c osts inc urre d in de fe n ding the
arbitra ble c la im s on the m e rits in the distric t c ourt; a nd the a c c e s s to disc ove ry

2 C a lifornia

c la ssifie s e c onom ic inte rfe re nc e c la im s a s tort la w c la im s. Se e , e .g. , K ore a Supply

C o . v . Loc k he e d Martin C

orp. , 63 P.3d 937, 950 (C a l. 2003). Thus, the

c la i m s we re non-sta

t utory and fe ll within the

sc ope of the arbitration provision. 6de vic e s, like de p ositions a nd inte rroga torie s, tha

t litiga tion a fforde d him , a

nd whic h would not ha

ve be e n av a ila ble in a rbitration. This is suffic ie nt to de m onstra

te pre judic e unde r our c a se la

w. Se e Martin v . Yasuda , 2016 W L 3924381, a

t *6 (9th C ir. July

21, 2016) (holding tha

t spe nding 17 m onths litiga ting the c a se in distric t c ourt wa s “ c onduc t inc o nsiste nt with [de fe nda nts’ ] right to
arbitrate ” and sa

tisfie d the e le m e nt of pre

judic e ); Van N

e ss , 862 F.2d a

t 759 (finding pre

judic e whe re pa

rty litiga te d m a tte r through ple a dings, m otions, a nd pre -tria l c onfe re nc e orde r, de spite a via ble right to a

rbitra tion, a nd the opposing pa rty re lie d on this a c tivity

to its de trim e nt). Thus, the distric t c ourt did not a

buse its disc re t ion in c onc luding tha t the first W

inte r fa c tor wa s m e t. The distric t c ourt a l so did not a buse its disc re tion in c o n c luding tha t M orga n Stan le y would suffe r irre pa

ra ble ha rm if forc e d to a

rbitrate C ouc h ’ s non-sta

tutory
c la im s. As e xpla ine d a

bove , M orga

n Sta nle y ha s shown a

like lihood of suc c e ss on the m e rits of its c l a im

tha t C ouc h wa ive d his c ontra c tua l right to a rbitrat ion, le aving M orga

n Sta nle y with no duty

to a rbitrate C o uc h’ s non-sta

tutory c la im s.

“ One of the thre a ds running through fe de ra l a rbitration jurisprudenc e is the notion that ‘ arbitra tion is a m a tte r of c ontra c t a nd a pa rty c annot be re quire d to submit to
arbitration a

ny dispute whic h he ha s not a gre e d so to subm

it.’ ” Te x tile Unlimite d, Inc
. v . A.BMH & C

o . , 240 F.3d 781, 786 (9th C i r. 2001) (holding tha t the distric t
7c ourt did not c le arly e rr in finding pa

rty would suffe r irre pa

ra ble ha rm in a b se nc e of sta y of a rbitration) (c ita

tion om itte d). The distric t c o urt wa s thus within its disc re tion to c onc lude tha t forc ing M orga

n Sta nle y to a rbitrate C ouc h’ s c la im s, in the l ike ly a bse nc e of any

c ontra c tua l duty

to do so, would c a

use it irre pa

ra ble ha rm . C f . LAW I/C SA C onsolidators, Inc
. v . W

hole sale & Re tail Food Distribution, Te amste rs Loc al 63 , 849 F.2d 1236, 1241 n.3 (9th C ir. 1988) (“ [Pa rty ] wa s e ntitle d to injunc tive re lie f onc e it e sta b lishe d tha

t it wa s no longe r unde r a c ontra c t ua l duty to a rbitra te .” ). Fina lly , the distric t c ourt did not a b use its disc re tion in c onc luding tha t the ba la nc e of the e quitie s a

nd the public inte re st fa

vor gra nting a pre lim ina

ry injunc tion to M orga

n Sta nle y . If arbitra

tion proc e e dings we re not e njoine d, C ouc h’ s e xte nde d de l ay in a sse rting his a rbitrat ion right would forc e M orga n Stan le y to re -litiga

te c la im s it like ly

ha s no duty to a

rbitrat e a t a ll. Se e C

oope r v . Rimme r , 379 F.3d 1029, 1032 (9th C ir. 2004) (pe r c uriam ) (noting tha t undue de la

y is a prope r c onside ra tion for the ba la nc e of the e quitie s). B y

c ontra st, we se e no re a s on why

pre lim ina

rily e njoining a

rbitration proc e e dings would im pa ir C ouc h’ s c la im s. As for the fourth W

inte r fa c tor, e ve n give n the public polic y ge ne ra lly fa voring a

rbitration, e nforc ing the a gre e m e nt a t this la t e sta ge in the litiga

tion
8would frustra te the public inte re st. “ The ove rarc h i ng purpose of the Fe de ra l Arbitra tion Ac t . . . is to ensure the e nforc e m e nt of a rbitration a gre e m e nts
a c c ording to the ir te rm s so a s to fa c ilita te stre a m line d proc e e dings.” Gutie rre z , 704 F.3d a

t 721 (c ita

tion om itte d). He re , forc ing the pa rtie s to a rbitrate C ouc h’ s non-sta tutory c la im s , whe n it is doubtful tha t M orga n Sta nle y ha s a ny obliga tion to do so, would only

se rve to c om

plic a te and e xte nd the proc e e dings. This doe s not
se rve any public inte re st. Thus, wec o nc lude tha t the distric t c ourt did not a buse its disc re tion whe n

it pre lim ina

rily e njoine d FINR A arbitration proc e e dings. The orde r of the distric t c ourt is AFFIRM E D.

9