Opinion ID: 2812923
Heading Depth: 4
Heading Rank: 2

Heading: Collective Actions

Text: (1) Collective action claims under the Fair Labor Standards Act . . . may not be arbitrated under the Code. (2) Any claim that involves plaintiffs who are similarly‐situated against the same defendants as in a court‐certified collective action or a putative collective action, or that is ordered by a court for collective action at a forum not sponsored by a self‐regulatory organization, shall not be 11 arbitrated under the Code, if the party bringing the claim has opted‐in to the collective action. . . . (4) A member or associated person may not enforce an agreement to arbitrate in this forum against a member of a certified or putative collective action with respect to any claim that is the subject of the certified or putative collective action until the collective action certification is denied or the collective action is decertified. These subparagraphs [(a) and (b)] do not otherwise affect the enforceability of any rights under the Code or any other agreement. Id.5 Subsections (a)(1) and (b)(1) have no application here. They make the FINRA arbitration forum unavailable for class and collective action claims; but UBS does not seek to compel class or collective arbitration of Cohen’s claims. Subsections (a)(2) and (b)(2) are likewise inapplicable. They bar FINRA arbitration of claims that are the subject of parallel proceedings in judicial or other (i.e. non‐FINRA) arbitral fora. Here, there is no risk of duplicative proceedings: UBS seeks FINRA arbitration in lieu of federal litigation. 5 The current version of Rule 13204 took effect in 2012; an earlier version did not explicitly cover collective actions. See FINRA Regulatory Notice 12‐28. Neither version bars enforcement of the arbitration agreement in this case. 12 Cohen rests entirely on subsections (a)(4) and (b)(4), which bar the enforcement of arbitration agreements under certain circumstances. He contends that these subsections render unenforceable the agreement to arbitrate and the class and collective action waivers. Cohen conflates an agreement to arbitrate with a waiver of the right to assert claims in class or collective form. Subsections (a)(4) and (b)(4) bar the enforcement of arbitration agreements under certain circumstances; but neither subsection has anything to say about the enforceability of the waivers. Although such waivers are often found in arbitration agreements (and are so incorporated in this case), the two contract terms are conceptually distinct.6 A class or collective action waiver is a promise to forgo certain procedural mechanisms in court. See Italian Colors, 133 S. Ct. at 2309; Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 & n.6 (2d Cir. 2013). An agreement to arbitrate, on the other hand, is a promise to have a dispute heard in some forum other than a court. Rule 13204 restricts the latter, but not the former. As the FINRA Board of Governors has 6 At oral argument, Cohen’s counsel suggested that, under state law, class and collective action waivers are enforceable only when incorporated into an arbitration agreement. We decline to consider this argument, which was not raised in Cohen’s appellate briefs. Allianz Ins. Co. v. Lerner, 416 F.3d 109, 114 (2d Cir. 2005). 13 observed, “there are no restrictions upon firms regarding the content of predispute arbitration agreements with employees.” In re Dep’t of Enforcement v. Charles Schwab & Co., No. 2011029760201, 2014 WL 1665738, at  (FINRA Bd. of Governors Apr. 24, 2014). Cohen argues that subsection (a)(4)’s use of the word “withdraws” implies that class and collective action waivers are enforceable only when made after a dispute arises, and that pre‐dispute waivers are unenforceable. However, the Rule also provides that parties in Cohen’s position may “elect[]” not to participate in a class and collective action; clearly, one may “elect” to forgo a procedural right before a dispute arises.7 Next, Cohen relies on a 2012 FINRA guidance letter stating that “any language in a member firm’s employment agreement that requires employees to waive their right to file or participate in a collective action against a member firm in any other fora is contrary to the provisions of the Industry Code.” Add. 42. But the Board of Governors expressed the contrary view in Schwab. So whatever deference that letter may 7 Similarly, one may “select” a forum or “choose” a jurisdiction’s law in advance of any litigation. 14 have elicited when it was issued, see Gomez v. Brill Sec., Inc., No. 10 Civ. 3503 (JSR), 2010 WL 4455827, at  (S.D.N.Y. Nov. 2, 2010), it is entitled to none now.    For the foregoing reasons, we conclude that Rule 13204 does not prohibit the enforcement of pre‐dispute waivers of class and collective action procedures.