JPMorgan Chase & Co. on Wednesday asked the Second Circuit to force into individual arbitration a class of financial advisers suing the bank for allegedly failing to pay them overtime, claiming such collective actions claims are barred by applicable Financial Industry Regulatory Authority rules.
During oral arguments, [a] JPMorgan attorney ... argued that the district court erred in applying current FINRA rules, which preclude the arbitration of class and collective actions claims at this stage, because the rule changes went into effect after the ex-financial advisers signed their employment agreements.
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The bank is appealing an order from U.S. District Judge Laura Taylor Swain, who determined last year that the financial advisers, led by named plaintiff Jeffrey Lloyd, presented sufficient evidence to the court to have their claims conditionally certified as a collective action. In the same order, Judge Swain likewise refused the bank’s request to compel arbitration.
Lloyd brought the class action against Chase in December 2011, alleging FLSA violations for unpaid overtime. He sought a nationwide class of JPMorgan financial advisers under the FLSA, along with state classes under the employment laws of New York and New Jersey.
Judge Swain's order did dismiss the claims of five financial advisers who opted into the suit, finding that they entered into a binding arbitration agreement that required all of the agreements' covered claims be settled through arbitration as opposed to civil litigation, but left the claims of four others intact.
An attorney for the financial advisers, Rachel Megan Bien of Outten & Golden LLP told the three-judge appellate panel that the retroactivity analysis doesn’t come into play, because FINRA made it clear that the revisions to apply to contracts executed before the amendments became effective.
“There’s no retroactivity argument here. Chase did not contract around FINRA rules, it explicitly invoked them,” Bien said. “Here the district court denied Chase’s motion because the rules in the arbitration agreements preclude arbitration at this stage of the case.”
Bien further argued that the language of the employment agreements clearly evokes the rules of FINRA, whether or not those rules were in effect when the agreements were executed.
“The intent of the parties is to apply the rules as they exist,” she said. “Here there was no judicial class action waiver in the agreement, which is what FINRA requires.”
Circuit Judges Robert D. Sack, Dennis Jacobs and Christopher F. Droney sat on the panel for the Second Circuit.
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The plaintiffs are represented by Adam T. Klein, Deirdre A. Aaron, Justin M. Swartz, Ossai Miazad and Rachel M. Bien of Outten & Golden LLP; John Halebian and Adam C. Mayes of Lovell Stewart Halebian Jacobson LLP; Edward P. D'Alessio of Winne Banta Hetherington Basralian & Kahn PC; and Kenneth K. Lehn of Greenberg Margolis PC.
The cases are Lloyd et al. v. JPMorgan Chase & Co. et al. and Ciullo v. JP Morgan Chase & Co. et al., case numbers 1:11-cv-09305 and 1:12-cv-02197, in the U.S. District Court for the Southern District of New York.