In Re: American Express Finance Advisors Securities Litigation, No. 10-3399 (2d Cir. 2011)
Annotate this Case
Justia Opinion Summary
Want to stay in the know about new opinions from the Second Circuit US Court of Appeals?
Sign up for free summaries delivered directly to your inbox. Learn More ›
You already receive new opinion summaries from Second Circuit US Court of Appeals. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here.
Appellants brought various claims before Financial Industry Regulatory Authority (FINRA) arbitrators against Ameriprise, a financial-services company, for, inter alia, breach of fiduciary duty, breach of contract, fraud, and negligent misrepresentation related to the decline in value of various financial assets owned by appellants and managed by Ameriprise. Ameriprise answered appellants' FINRA complaint by asserting, principally, that appellants released their claims by operation of a settlement agreement in a class-action agreement suit that had proceeded between 2004 and 2007 in the United States District Court for the Southern District of New York. After FINRA arbitrators denied Ameriprise's motion to stay appellants' arbitration, Ameriprise moved in the district court, in which the class action had been litigated and settled, for an order to enforce the settlement agreement that would enjoin appellants from pressing any of their claims before FINRA arbitrators. The district court concluded that the class settlement barred all of appellants' arbitration claims and therefore granted Ameriprise's motion and ordered appellants to dismiss their FINRA complaint with prejudice. The court held that the district court had the power to enter such an order and that several of appellants' arbitration claims were barred by the 2007 class-action settlement. Therefore, the court affirmed in part. But because the court concluded that appellants' arbitration complaint plead claims that were not, and could not have been, released by the class settlement, the court vacated in part the district court's judgment, and remanded the case for the entry of an order permitting the non-Released claims to proceed in FINRA arbitration. The court dismissed as moot appellants' appeal from the district court's denial of their motion for reconsideration.
Download PDF
10-3399 Ameriprise Financial Services, Inc. v. Beland 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2011 4 (Argued: May 26, 2011 Decided: November 3, 2011) 5 Docket No. 10-3399 6 ------------------------------------- 7 IN RE AMERICAN EXPRESS FINANCIAL ADVISORS SECURITIES LITIGATION 8 ------------------------------------- 9 10 11 12 13 CAROL M. ANDERSON, LEONARD D. CALDWELL, DONALD G. DOBBS, KATHIE KERR, SUSAN M. RANGELEY, PATRICK J. WOLLMERING, NARESH CHAND, on behalf of himself and all others similarly situated, JOHN B. PERKINS, ELIZABETH FLENNER, GALE D. CALDWELL, RICHARD T. ALLEN, individually and on behalf of all others similarly situated, 14 Plaintiffs, 15 16 AMERICAN EXPRESS COMPANY, AMERICAN EXPRESS FINANCIAL CORPORATION, AMERICAN EXPRESS FINANCIAL ADVISORS, INC., JAMES M. CRACCHIOLO, 17 Defendants, 18 AMERIPRISE FINANCIAL SERVICES, INC., 19 Defendant Appellee, 20 - v - 21 JOHN BELAND, ELAINE BELAND, 22 Class Members Appellants.* 23 ------------------------------------- * The Clerk of Court is directed to amend the official caption as set forth above. 1 2 Before: POOLER, SACK, and LYNCH, Circuit Judges. Appeal from a judgment entered by the United States 3 District Court for the Southern District of New York (Deborah A. 4 Batts, Judge) in favor of the defendant appellee Ameriprise 5 Financial Services, Inc. 6 Industry Regulatory Authority, the appellants -- a married couple 7 -- brought claims against the defendant appellee for, inter alia, 8 breach of fiduciary duty, breach of contract, fraud, and 9 negligent misrepresentation related to the decline in value of In an arbitration before the Financial 10 various personal financial assets managed by the 11 defendant appellee. 12 district court, which had retained exclusive jurisdiction over a 13 2007 class-action settlement, to enforce that settlement 14 agreement against the couple and order them to withdraw their 15 pending arbitration claims. 16 defendant appellee's motion, determined that the appellants, who 17 had been class members in the prior class action, had expressly 18 released all of their arbitration claims by virtue of their 19 failure to timely opt out of the class-action settlement. 20 the appellants' arbitration claims include "suitability" claims 21 that are preserved by a carve-out clause in the settlement 22 agreement, in addition to other claims falling outside the bounds 23 of the class settlement and release; therefore, the district 24 court erred in directing the appellants to withdraw their entire 25 arbitration complaint. The defendant appellee then moved before the The court, granting the 2 But 1 Accordingly, we AFFIRM in part and VACATE in part the 2 judgment of the district court, and we REMAND in part to the 3 district court for resolution consistent with this opinion. 4 5 6 DAVID A. GENELLY, Vanasco Genelly & Miller (James E. Judge, of counsel), Chicago, Illinois, for Appellants. 7 8 9 10 11 DAVID W. BOWKER, Wilmer Cutler Pickering Hale and Dorr LLP (Sue-Yun Ahn, of counsel), Washington, D.C., for Appellee. SACK, Circuit Judge: 12 This appeal requires us to address several unsettled 13 issues concerning the effect of a class-action settlement on an 14 individual class member's preexisting right to arbitrate certain 15 claims. 16 brought various claims before Financial Industry Regulatory 17 Authority ("FINRA") arbitrators against Ameriprise Financial 18 Services, Inc. ("Ameriprise"), a financial-services company, for, 19 inter alia, breach of fiduciary duty, breach of contract, fraud, 20 and negligent misrepresentation related to the decline in value 21 of various financial assets owned by the Belands and managed by 22 Ameriprise. 23 to adhere to the Belands' conservative investment strategy and 24 its "steering" of the Belands' assets into mutual funds that 25 allowed Ameriprise to collect excessive fees. 26 27 The appellants, John and Elaine Beland (the "Belands"), The claims are based on Ameriprise's alleged failure Ameriprise answered the Belands' FINRA complaint by asserting, principally, that the Belands released their claims by 3 1 operation of a settlement agreement in a class-action suit that 2 had proceeded between 2004 and 2007 in the United States District 3 Court for the Southern District of New York. 4 class members in the class action, but -- in part, they allege, 5 on the advice an Ameriprise financial advisor -- they took no 6 action at the time of the settlement, failing to either opt out 7 of the class or submit a claim to share in the settlement funds. 8 By the terms of the settlement agreement, the district court 9 (Deborah A. Batts, Judge) had retained exclusive jurisdiction 10 11 The Belands were over disputes arising from the class litigation. After FINRA arbitrators denied Ameriprise's motion to 12 stay the Belands' arbitration, Ameriprise moved in the United 13 States District Court for the Southern District of New York, in 14 which the class action had been litigated and settled, for an 15 order to enforce the settlement agreement that would enjoin the 16 Belands from pressing any of their claims before FINRA 17 arbitrators. 18 settlement barred all of the Belands' arbitration claims, and 19 therefore granted Ameriprise's motion and ordered the Belands to 20 dismiss their FINRA complaint with prejudice. 21 The district court concluded that the class We conclude that the district court had the power to 22 enter such an order and that several of the Belands' arbitration 23 claims were barred by the 2007 class-action settlement. 24 therefore affirm in part. 25 Belands' arbitration complaint pleads claims -- including so- We But because we conclude that the 4 1 called "suitability claims" -- that were not, and could not have 2 been, released by the class settlement, we vacate in part the 3 district court's judgment, and we remand the case for the entry 4 of an order permitting the non-Released claims to proceed in 5 FINRA arbitration. 6 we dismiss as moot the Belands' appeal from the district court's 7 denial of their motion for reconsideration. 8 In light of our disposition of this appeal, BACKGROUND The In re AEFA Class-Action Complaint 9 10 Between March 4, 2004, and May 4, 2004, various persons 11 who had had dealings with Ameriprise1 (the "Class Plaintiffs") 12 brought a total of five separate class-action lawsuits before the 13 United States District Court for the Southern District of New 14 York against several Ameriprise affiliates. 15 asserted various federal- and common-law claims based on 16 Ameriprise's alleged conflicts of interest, misrepresentations 17 and omissions, biased and "canned" financial advice and advisory 18 services, failure to disclose financial incentives and fees, and 19 so-called "steering" of clients' money into investments that 20 benefited the defendants without regard to their clients' best 21 interests. The Class Plaintiffs On June 25, 2004, the district court consolidated the 1 On August 1, 2005, American Express Financial Corporation and American Express Financial Advisors officially changed their names to, respectively, Ameriprise Financial, Inc. and Ameriprise Financial Services, Inc. On September 30, 2005, these two entities became independent from the American Express Company. 5 1 five class actions into In re American Express Financial Advisors 2 Securities Litigation ("In re AEFA"), No. 04 Civ. 1773 (S.D.N.Y., 3 consolidated June 25, 2004). 4 The Second Consolidated Amended Class Action Complaint 5 (the "Class Complaint"), dated September 29, 2005, described the 6 class action as "arising out of the failure of American Express 7 to disclose an unlawful and deceitful course of conduct they 8 engaged in that was designed to improperly financially advantage 9 Defendants to the detriment of [Class] Plaintiffs and other 10 members of the Class." Class Complaint ¶ 1, In re AEFA, No. 04 11 Civ. 1773 (S.D.N.Y. Sept. 29, 2005), ECF No. 119. 12 Plaintiffs alleged that "instead of offering fair, honest and 13 unbiased recommendations to Plaintiffs and other investors, 14 American Express 'financial advisors' gave pre-determined 15 recommendations, pushing clients into a pre-selected, limited 16 number of mutual funds in order to reap millions of dollars in 17 secret kickbacks from the Shelf Space Funds and millions more 18 from sales of American Express Proprietary Funds."2 19 They alleged further that the defendants "had an undisclosed, 20 material conflict of interest that made it impossible for them to 21 render impartial advice." Id. ¶ 10. 2 The Class Id. ¶ 2. Based on those allegations, The Shelf Space Funds were mutual funds sold by companies who made undisclosed payments to American Express in order to promote their mutual funds; these payments were "referred to as buying 'shelf space' at American Express." Class Complaint ¶ 1. The Proprietary Funds were owned and operated by American Express itself. Id. 6 1 the Class Plaintiffs brought claims for violations of the 2 Securities Act of 1933, the Securities Exchange Act of 1934 and 3 various Rules promulgated thereunder, the Investment Advisers Act 4 of 1940, and assorted state-law claims including for breach of 5 fiduciary duty, deceptive trade practices, and unjust enrichment. 6 The Class Period was defined as March 10, 1999, to April 1, 2004, 7 and was later extended to April 1, 2006. In January 2007, the lead plaintiffs in In re AEFA 8 9 moved for provisional certification of a settlement class and 10 preliminary approval of a settlement agreement pursuant to 11 Federal Rule of Civil Procedure 23. 12 Settlement ("Class Settlement" or "Settlement Agreement"), Lead 13 Pls.' Notice of Mot. for Prelim. Approval of Settlement Exh. 2, 14 In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Jan. 18, 2007), ECF No. 15 135-3. 16 Settlement of Class Action (the "Class Notice") to the court. 17 February 15, 2007, the district court provisionally certified the 18 class and approved the Class Notice. 19 the parties mailed the Class Notice to roughly 2.8 million 20 potential class members. 21 22 23 24 25 26 27 See Stipulation of They simultaneously submitted a draft Notice of Proposed In February and March 2007, The Class Notice served several functions. described the lawsuit in general terms: In their lawsuits, the investors complain that they were sold financial plans and/or advice that, instead of being tailored to their individual circumstances, contained standardized recommendations designed to 7 On First, it 1 2 3 4 5 6 7 8 9 10 11 12 steer them into investing in Defendants' proprietary mutual funds and other proprietary investment products [(the Proprietary Funds)] and certain nonproprietary "Preferred" or "Select" mutual funds [(the Shelf Space Funds)]. . . . Plaintiffs claim that the conflicts of interest inherent in Defendants' financial plans and/or financial advisory services, and the compensation arrangements between Defendants and the Preferred Funds, were inadequately disclosed to investors. . . . 13 Class Notice at 1, Decl. of Jennifer M. Keough in Supp. of Final 14 Approval of Settlement Exh. 1, In re AEFA, No. 04 Civ. 1773 15 (S.D.N.Y. May 29, 2007), ECF No. 143-2. 16 Second, the Class Notice explained the options 17 available to potential class members in acting on the Class 18 Settlement. 19 stated: 20 member of the class, and that means that if the settlement is 21 approved, you will release all 'Released Claims' against the 22 'Released Persons,' and you will be prohibited from bringing or 23 participating in any other cases concerning the 'Released Claims' 24 against the 'Released Persons.'" 25 also included a description of "Released Claims" and "Released 26 Persons" taken from the Settlement Agreement. 27 Released Claims included, inter alia, 28 29 30 31 32 33 In particular, as relevant here, the Class Notice "Unless you exclude yourself, you will continue to be a Id. at 7. The Class Notice The definition of any and all claims, debts, demands, rights or causes of action or liabilities whatsoever . . . , whether based on federal, state, local, statutory or common law or any other law, rule or regulation, . . . including both known claims and Unknown 8 1 2 3 4 5 6 7 8 9 10 Claims . . . that (i) have been asserted in this Action by the Plaintiffs . . . or (ii) could have been asserted in any forum by the Plaintiffs or Class Members . . . against any of the Released Persons; including claims that arise out of or are based upon (a) the allegations, transactions, facts, matters or occurrences, representations or omissions alleged, involved, set forth, or referred to in the [Class Complaint] . . . . 11 Id. at 8. 12 stated that "'Released Claims' shall not include suitability 13 claims unless such claims are alleged to arise out of the common 14 course of conduct that was alleged, or could have been alleged, 15 in the Action, as more fully described herein."3 16 Importantly for present purposes, the Class Notice Id. The Class Notice further explains that releasing claims 17 "will prevent you from suing Defendants over claims that arise 18 from or are based on the offer and sale of financial planning 19 services or financial advice provided to you by Defendants, 20 including claims to recover the fees you paid for financial 21 advisory services or advice and claims that you were 'steered' 3 The phrase "common course of conduct" is not defined in the Class Settlement; neither is "suitability claim." However, a suitability claim, generally, is a claim that a "broker knew or reasonably believed that the securities he recommended to the customer were unsuitable in light of the customer's investment objectives but that he recommended them anyway." Murray v. Dominick Corp. of Can., 117 F.R.D. 512, 516 (S.D.N.Y. 1987). Suitability claims -- sometimes called "unsuitability claims" -are often brought "as a distinct subset" of section 10(b) claims under the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b). Dodds v. Cigna Sec., Inc., 12 F.3d 346, 351 (2d Cir. 1993), cert. denied, 511 U.S. 1019 (1994); see Brown v. E.F. Hutton Grp., Inc., 991 F.2d 1020, 1031 (2d Cir. 1993) (discussing the elements of a federal unsuitability claim). 9 1 toward particular investments that were more profitable for 2 [Ameriprise]." 3 under the heading "EXCLUDING YOURSELF FROM THE SETTLEMENT," that 4 if "you want to retain any right to sue or continue to assert any 5 of the Released Claims on your own against any Defendant or other 6 Released Person, then you must take steps to get out of the 7 class." 8 of the Class Settlement and the consequences of "do[ing] 9 nothing"). 10 Id. It also warned potential class members, Id.; see id. at 8 9, 11 (explaining how to "opt[] out" On July 18, 2007, the district court issued an Order 11 and Final Judgment in In re AEFA approving the Class Settlement, 12 dismissing all class members' claims with prejudice, and barring 13 and enjoining class members from asserting Related Claims against 14 Released Persons. 15 jurisdiction . . . over the Parties and the Class Members for all 16 matters relating to this Action and the Settlement, 17 including . . . [the] interpretation, effectuation, or 18 enforcement of the [Settlement Agreement] and this Order and 19 Final Judgment." 20 04 Civ. 1773 (S.D.N.Y. July 18, 2007), ECF No. 170. The court retained "[e]xclusive Order and Final Judgment at 10, In re AEFA, No. 21 The Belands 22 John and Elaine Beland are a retired married couple 23 living on a 4.1-acre parcel of farmland in New Lenox, Illinois, 24 that, together with a much larger tract, had been in John's 25 family for more than a century. For many years, John, whose 10 1 formal education ended in eighth grade, "farmed the family 2 homestead" for the Pesters, his aunt and uncle. 3 Arbitration Before FINRA ("FINRA Complaint") (filed Feb. 17, 4 2009) ¶ 1, Decl. of David W. Bowker in Supp. of Ameriprise Fin. 5 Servs., Inc.'s Mem. of Law in Supp. of Mot. to Enforce In re AEFA 6 Settlement and Inj. ("Bowker Decl.") Exh. 6, In re AEFA, No. 04 7 Civ. 1773 (S.D.N.Y. Mar. 9, 2010), ECF No. 193-7. 8 death of his uncle, John continued to farm the land for his aunt, 9 Hazel Pester. 10 Claim in After the According to the Belands, in 1995, acting on the 11 financial advice of Ronald Miller -- an Ameriprise financial 12 consultant based in Joliet, Illinois -- Hazel sold a large 13 portion of the family farm for approximately $2.6 million. 14 proceeds of the sale were immediately deposited into two 15 different trusts -- a charitable trust worth $1.757 million and a 16 revocable trust worth $886,000. 17 lifetime beneficiary, and she held a life estate in the revocable 18 trust. 19 revocable trust, while various local churches and charities, as 20 residuary beneficiaries, received the assets in the charitable 21 trust. 22 revocable trust into an Ameriprise investment account, jointly 23 held by the Belands and managed by Miller. 24 25 In 2004, Hazel died. The Hazel was the charitable trust's John Beland took the corpus of the John, allegedly on Miller's advice, then converted the The Belands' FINRA Complaint asserts that Ameriprise and Miller agreed to invest the Belands' funds "in a conservative 11 1 fashion, preserving capital and obtaining income from which the 2 life beneficiaries could receive a return." 3 the Belands allege, "[a] conservative asset allocation approach 4 was not taken." 5 express two main grievances: (1) "Miller and Ameriprise invested 6 in many house American Express mutual funds including various 7 high yield junk bond funds, as well as risky small cap or start- 8 up funds";4 and (2) "Ameriprise invested in many risky small-cap 9 technology stocks which led to huge, significant losses over Id. ¶ 13. Id. ¶ 9. However, In the FINRA Complaint, the Belands 10 time."5 11 "allocat[ed] the trust assets inappropriately which left the 12 Trusts exposed to greater than expected losses." Appellants' Br. 13 at 7; see FINRA Complaint ¶ 27. 14 Id. ¶¶ 14 15. They similarly contend that Ameriprise The Belands state that their combined account balances 15 dwindled from more than $2.6 million at inception in 1995 to 16 approximately $800,000 in early 2009. 17 admits that he did not review the account statements until after 18 Hazel's death, when he noticed the "precipitous[]" drop. FINRA Complaint ¶ 7. John Id. 4 The Belands allege that "[t]hese 'house' mutual funds were purchased not because they fit the preservation of capital and income approach (with growth only a secondary feature), but because they generated fees for Ameriprise." FINRA Complaint ¶ 14. 5 These "'tech' heavy stock" stocks included: Check Point Software; Flextronics; Analog Devices; Applied Microcircuits; Brocade Communications; Ciena Corp.; Enron Corp.; I 2 Technologies, Inc.; Maxim Integrated Products; Selectron Corp.; and Univision Communications. FINRA Complaint ¶ 16. 12 1 ¶¶ 18 19. 2 about the accounts' declining assets, "Miller set a course of 3 cover-up, lies and deceit in order to obscure the mishandling" of 4 the accounts, providing false justifications for investment 5 decisions and shielding the truth about Ameriprise's motives and 6 conflicts of interest. 7 reasons for the losses were the September 11 terrorist attacks 8 and that the charitable trust was intended to diminish in value 9 "by design." 10 The Belands allege that when they confronted Miller Id. ¶ 20. Among the allegedly false Id. ¶¶ 21 24 (internal quotation marks omitted). Over time, the Belands received notices of myriad 11 class-action lawsuits against or involving various companies in 12 which Ameriprise and Miller had invested on the Belands' behalf. 13 In addition, John Beland conceded that in early 2007 he received 14 multiple notices relating to the In re AEFA action. 15 John Beland ¶ 5, Reply in Supp. of Mot. for Ltd. Disc. Exh. A, In 16 re AEFA (S.D.N.Y. June 22, 2010), ECF No. 204-2. 17 found the notices, including the In re AEFA notices, "complex and 18 confusing," he asked Miller for advice. 19 John, "Miller told [the Belands] to do nothing about these 20 notices and [they] followed his advice." 21 their failure to take any action with respect to the In re AEFA 22 Class Settlement, the Belands did not share in its proceeds.6 6 Id. ¶ 6. Id. Decl. of Because he According to As a result of The Belands did receive a $25 payment from an SEC disgorgement and restitution fund related to its investigation into Ameriprise's investment-advisory activities. 13 1 The Belands' FINRA Action 2 In late 2008, the Belands sought legal advice regarding 3 their accounts' declining values, and on February 17, 2009, they 4 filed an arbitration complaint with FINRA. 5 (collectively, the "FINRA Claims") against Miller and Ameriprise 6 for: (1) breach of fiduciary duty for "failing to manage the 7 trusts according to their investment objectives, and by self- 8 dealing," FINRA Complaint ¶ 31; (2) breach of contract for 9 "mishandling the [Belands'] assets and . . . covering up the They made claims 10 mishandling," id. ¶ 35; (3) common-law fraud for "mak[ing] 11 material misstatements of fact" regarding the reasons for the 12 assets' decline in value, among other things, id. ¶ 39; and (4) 13 negligent misrepresentation, id. ¶ 44. 14 45. 15 $1,500,000 for 'well managed' account damages . . . , for 16 punitive damages[,] and [for] their costs and fees of [the FINRA] 17 action." 18 See generally id. ¶¶ 29- The Belands sought an arbitration award of "not less than Id. at 11. In response before the FINRA arbitrators, Miller and 19 Ameriprise (collectively, the "FINRA Defendants") filed a 20 Statement of Answer, Defenses and Affirmative Defenses on 21 September 18, 2009. 22 before the arbitrators to stay the arbitration proceedings on the 23 basis that, as members of the In re AEFA class, the Belands had 24 "released Ameriprise Financial and its agents and affiliates for" 25 the Released Claims defined in the Class Settlement and Class At the same time, the FINRA Defendants moved 14 1 Notice. 2 Stay") at 2, Bowker Decl. Exh. 7, In re AEFA, No. 04 Civ. 1773 3 (S.D.N.Y. Mar. 9, 2010), ECF No. 193-8. 4 the FINRA Defendants listed eighteen separate Ameriprise account 5 numbers as to which, they contended, the Belands' allegations 6 were barred by the Class Settlement.7 7 stated in their motion that "[u]nless Claimants withdraw their 8 Released Claims in this action, Respondents will be forced to 9 protect their rights by filing a Motion to Enforce Class Action 10 Settlement as to the Released Claims," and that, therefore, "a 11 stay of th[e FINRA] action as it pertains to the released claims 12 is appropriate." 13 filed an opposition to the FINRA Defendants' Motion to Stay, 14 arguing that the "class action specifically excluded the causes 15 of action the Belands assert" in the FINRA arbitration. 16 Claimants' Opp'n to Resp'ts' Mot. to Stay Arbitration at 2, 17 Bowker Decl. Exh. 4, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Mar. 18 9, 2010), ECF No. 193-5. 19 20 Mot. to Stay Arbitration of Released Claims ("Motion to Id. at 4. In the Motion to Stay, The FINRA Defendants On October 27, 2009, the Belands A three-member FINRA arbitration panel held a telephonic hearing regarding the Motion to Stay on January 5, 7 In a July 28, 2009 letter, the FINRA Defendants requested that the Belands "withdraw their claims related to" the eighteen accounts listed. Letter from Ameriprise Counsel to Belands at 2, Mem. in Supp. of Mot. for Reconsideration ("Mot. for Reconsideration") Exh. D, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Aug. 17, 2010), ECF No. 209-5. The Belands have identified seven of their Ameriprise accounts that were not listed in the July 28 letter or the Motion to Stay. 15 1 2010. After the hearing, the panel issued an order denying the 2 Motion to Stay "without prejudice." 3 Supp. of Mot. for Reconsideration ("Mot. for Reconsideration") 4 Exh. F, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Aug. 17, 2010), 5 ECF No. 209-5. 6 for March 20108 to try the issues raised in the Belands' FINRA 7 Complaint and the FINRA Defendants' answer. FINRA Order at 1, Mem. in The panel then scheduled an arbitration hearing 8 9 10 Ameriprise's Motion to Enforce the Class Settlement in the S.D.N.Y. and Belands' Cross-Motion to Clear Technical Defaults and for Limited Discovery 11 Before the scheduled arbitration hearing could be held, 12 however, the FINRA Defendants filed a "Motion to Enforce"9 the In 13 re AEFA Settlement Agreement before the district court, which had 8 The Belands represent that the FINRA arbitrators originally set the arbitration hearing for March 2010; however, the hearing was eventually rescheduled to take place in August 2010. [Blue 14; A329.] It was thereafter postponed indefinitely pending the resolution of the parties' litigation before the district court. 9 In Martens v. Thomann, 273 F.3d 159 (2d Cir. 2001), we noted that "there is nothing in the Federal Rules of Civil Procedure styled a 'motion to enforce.' Nor is there approval for such a motion to be found in this Circuit's case law, except in situations inapposite to the case before us." Id. at 172. In Martens, we did "not ourselves define the nature of this motion because the district court's failure to state its reasons for denying it [wa]s sufficient to warrant reversal." Id. From time to time, however, we have reviewed districtcourt judgments that ruled on purported motions to enforce. See, e.g., Vemics, Inc. v. Meade, 371 F. App'x 181 (2d Cir. 2010) (summary order); Surac v. Cavalry Portfolio Servs., LLC, 357 F. App'x 344 (2d Cir. 2009) (summary order). Because we conclude that the district court's judgment in this case presents an appealable question to this Court, we choose to ignore any potential error of terminology here. 16 1 retained jurisdiction over the In re AEFA class litigation. 2 their March 9, 2010 Motion to Enforce, the FINRA Defendants 3 requested that the court "order[] the Belands to dismiss with 4 prejudice their pending FINRA action against Ameriprise."10 5 in Supp. of Ameriprise's Mot. to Enforce In re AEFA Settlement 6 and Inj. ("Motion to Enforce") at 2, In re AEFA, No. 04 Civ. 1773 7 (S.D.N.Y. Mar. 9, 2010), ECF No. 192. 8 response, file a direct opposition to the motion. 9 filed a cross-motion, styled as a "Motion to Clear Technical In Mem. The Belands did not, in Instead, they 10 Defaults [and] for Limited Discovery," seeking to litigate the 11 issue of whether the Class Settlement's definition of Released 12 Claims covered all of the claims that the Belands asserted in 13 their FINRA Complaint. 14 depositions should be taken to determine whether evidence 15 supported their assertion that "Miller's conduct . . . deprived 16 them of any meaningful opportunity to opt out of the class 17 action," as well as to determine which of their investments did Specifically, the Belands argued that 10 The Belands argue that the FINRA Defendants qualitatively altered their position in the Motion to Enforce vis-à -vis the In re AEFA Class Settlement's effect on the Belands' FINRA Complaint because that document represented "the first time" that Ameriprise had argued "that all claims and facts alleged in the Illinois Arbitration were of the same 'course of conduct' alleged in the New York Class Action." Appellants' Br. at 15 (emphasis in original). The Belands also characterize the Motion to Enforce as misleading because it argued that the Belands sought a "double recovery" despite the fact that they had not received any payments from the Class Settlement, and because it did not indicate that the FINRA panel had denied the FINRA Defendants' Motion to Stay. Id. (internal quotation marks omitted). 17 1 "not fall within the ambit of the" Class Settlement. 2 Clear Technical Defaults, for Ltd. Disc. and to Set Briefing 3 Schedule at 2, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Mar. 30, 4 2010), ECF No. 196. 5 briefing schedule that would culminate in an evidentiary hearing 6 before the district court. 7 cross-motion by arguing, principally, that even the facts as 8 alleged by the Belands would not, under the "excusable neglect" 9 standard, justify their failure to opt out of the Class 10 The Belands proposed a deposition and The FINRA Defendants opposed the Settlement. 11 12 Mot. to The Belands filed a reply, arguing that the district court 13 14 15 16 17 18 19 20 21 22 should allow the arbitration to proceed for two reasons: first, because the issues of Miller's breach of fiduciary duty and misrepresentation go well beyond any issue that was or could have been raised in the Class Action; and second, because the arbitration panel is uniquely positioned to make factual determinations as to which accounts may or may not be encompassed within this Court's Confirmation Order. 23 Reply in Supp. of Mot. for Ltd. Disc. at 1 2, In re AEFA, No. 04 24 Civ. 1773 (S.D.N.Y. June 22, 2010), ECF No. 204. 25 FINRA Defendants filed, together, a reply in support of their 26 Motion to Enforce and a sur-reply in opposition to the Belands' 27 cross-motion. 18 Finally, the 1 The District Court's Order Enforcing the Settlement 2 In a seven-page order dated August 11, 2010 (the 3 "Enforcement Order"), the district court granted the FINRA 4 Defendants' Motion to Enforce and ordered the Belands to dismiss 5 with prejudice their pending FINRA Complaint against Ameriprise 6 and Miller. 7 within the definition of 'Released Claims' barred by the Court's 8 July 18, 2007 Order." 9 04 Civ. 1773 (S.D.N.Y. Aug. 11, 2010), ECF No. 206. 10 The court concluded that the Belands' claims "f[ell] Enforcement Order at 1 2, In re AEFA, No. The court characterized the Belands' FINRA Claims thus: 11 12 13 14 15 16 17 18 19 Here, the Belands claim that rather than managing their accounts in a conservative, minimal risk manner as promised, Miller and Ameriprise invested in many house American Express mutual funds including various high yield junk bond funds, as well as risky small cap or start-up funds in order to generate fees for Ameriprise and promote in-house mutual funds of American Express. 20 Id. at 2 (brackets and internal quotation marks omitted). 21 court concluded that those "allegations arise from the same 22 transactions, facts, matters, occurrences, and representations as 23 the claims of the [Class Complaint]." 24 The Id. The district court further determined that the Belands 25 could not "satisfy the standard for 'excusable neglect'" to 26 excuse their failure to opt out of the Class Settlement. 27 3. 28 Miller's advice may have played a role in the Belands' decision 29 not to opt out of the class, the Belands should have known from Id. at In arriving at that conclusion, the court stated that "while 19 1 the plain English of the [Class] Notice that Miller's 2 recommendation that they 'do nothing' would lead to no payment 3 from the settlement and the release of future claims." 4 The court also found that "not until after Ameriprise moved to 5 enjoin [the Belands'] FINRA claims on March 9, 2010" did the 6 Belands "argue before this Court that they should be excused from 7 failing to opt out of the settlement" -- a delay that was, in the 8 court's view, "inexcusably long." 9 Id. at 5. Id. at 6. After the district court issued the Enforcement Order, 10 the Belands filed a Motion for Reconsideration, making several 11 arguments. 12 "simply overlooked material language in the Release which exempts 13 claims like the Belands['] which do not relate to the allegations 14 of the Class Action . . . but instead raise independent 15 suitability claims."11 16 Federal Arbitration Act ("FAA") required that the FINRA 17 Defendants arbitrate the coverage of the Class Settlement before 18 the arbitrators. 19 of "excusable neglect" that would free their claims from the 20 Class Settlement even if those claims were Released Claims. 21 district court denied the Motion for Reconsideration in a two- 22 sentence order dated August 20, 2010. First, they contended that the Enforcement Order Second, the Belands argued that the Third, the Belands further elaborated a theory 11 The Ameriprise contends that this argument, and others in the Belands' Motion for Reconsideration, were made "[f]or the first time" in that motion. Appellee's Br. at 17. 20 1 The Belands' Appeal 2 The Belands filed a Notice of Appeal on August 23, 3 2010. The same day, the district court granted a stay of its 4 Enforcement Order pending the appeal to this Court. 5 remains in effect. 6 The stay DISCUSSION 7 I. Overview 8 On appeal, the Belands argue that the district court 9 erred in several respects. Principally, they assert that the 10 court "failed to compare" the substance of the claims alleged in 11 their FINRA Complaint -- "which feature unsuitability, lack of 12 asset allocation and speculative 'tech' stock investing" -- with 13 the Released Claims in the Class Settlement. 14 19. 15 claims regarding "the sale of fee-based, 'standardized' 16 investment adviser plans which steered customers to 'proprietary' 17 or 'preferred' mutual funds for which Ameriprise received 18 'kickbacks.'" 19 Class Settlement that they contend exempts at least some of their 20 FINRA Claims. 21 at least some of their arbitration claims are not Released 22 Claims, and that the district court erred in requiring the 23 Belands to dismiss those unreleased claims. 24 25 Appellants' Br. at In the Belands' view, the Class Settlement only released Id. Id. They also point to a "carve[]-out" in the For these reasons, the Belands contend that Alternatively, the Belands argue: (1) that Ameriprise chose to defend the Belands' claims before FINRA arbitrators and, 21 1 therefore, the district court erred in "derail[ing]" the pending 2 FINRA arbitration; (2) that questions concerning the scope of the 3 Settlement Agreement were for the FINRA arbitrators to decide, 4 and that the arbitrators indicated their intent to decide them; 5 (3) that the Release contained in the Class Settlement should not 6 be applied against the Belands because their failure to opt out 7 of the class action was the product of "excusable neglect"; and 8 (4) that the district court erroneously denied their motion for 9 reconsideration. 10 Id. at 19 22. The FINRA Defendants (also collectively "Ameriprise") 11 argue that the Class Settlement's release of "'suitability 12 claims' arising out of the common course of conduct alleged in In 13 re AEFA" precludes the entirety of the Belands' arbitration 14 claims. 15 district court properly rejected the Belands' "excusable neglect" 16 argument, and that "the district court ha[d] exclusive 17 jurisdiction to enforce the [Class] Settlement." 18 The FINRA Defendants therefore contend that the district court 19 acted properly in directing the Belands to dismiss all of their 20 arbitral claims. 21 Appellee's Br. at 18. Ameriprise also responds that the Id. at 18 19. This appeal presents at least one unresolved legal 22 issue about which the parties are in agreement. 23 Belands nor Ameriprise appear to dispute the general principle 24 that federal courts are vested with power under the FAA to enjoin 25 a pending arbitration where appropriate. 22 Neither the But this question has 1 never been explicitly resolved by this Court,12 and we, 2 therefore, address it in the course of our analysis. 3 reiterate this Court's recent holding that FINRA-membership 4 constitutes an agreement to arbitrate disputes under FINRA's 5 rules, see UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., --- F.3d 6 ----, 2011 WL 4389991, at *5, 2011 U.S. App. LEXIS 19420, at *15 7 (2d Cir. Sept. 22, 2011), a proposition neither of the parties 8 contests. 9 10 We also II. Arbitrability of the Belands' Claims A. Background Arbitration Law 11 The FAA creates a "body of federal substantive law of 12 arbitrability, applicable to any arbitration agreement within the 13 coverage of the Act." 14 Constr. Corp., 460 U.S. 1, 24 (1983). 15 arbitration provision in "a contract evidencing a transaction 16 involving commerce . . . shall be valid, irrevocable, and 17 enforceable, save upon such grounds as exist at law or in equity 18 for the revocation of any contract." 19 FAA "establishes a national policy favoring arbitration when the 20 parties contract for that mode of dispute resolution" and Moses H. Cone Mem'l Hosp. v. Mercury 12 The FAA provides that an 9 U.S.C. § 2. Further, the Recently, in Wachovia Bank, Nat'l Ass'n v. VCG Special Opportunities Fund, --- F.3d ----, 2011 WL 5110122, 2011 U.S. App. LEXIS 21885 (2d Cir. Oct. 28, 2011), in a dispute involving FINRA arbitrability, we remanded for the district court to "enjoin[ the defendant] from proceeding with its FINRA arbitration," but we did not address the procedural propriety of such an order. Id. at *9, 2011 U.S. App. LEXIS 21885, at *25. 23 1 "supplies not simply a procedural framework applicable in federal 2 courts" but "also calls for the application, in state as well as 3 federal courts, of federal substantive law regarding 4 arbitration." 5 Preston v. Ferrer, 552 U.S. 346, 349 (2008). "[T]he FAA's primary purpose [is to] ensur[e] that 6 private agreements to arbitrate are enforced according to their 7 terms." 8 Jr. Univ., 489 U.S. 468, 479 (1989). 9 federal policy favoring arbitration agreements," Moses H. Cone, 10 460 U.S. at 24, "arbitration is a matter of contract and a party 11 cannot be required to submit to arbitration any dispute which he 12 has not agreed so to submit," Howsam v. Dean Witter Reynolds, 13 Inc., 537 U.S. 79, 83 (2002) (quoting Steelworkers v. Warrior & 14 Gulf Navigation Co., 363 U.S. 574, 582 (1960)) (internal 15 quotation marks omitted); see also Volt, 489 U.S. at 479 16 ("Arbitration under the [FAA] is a matter of consent, not 17 coercion, and parties are generally free to structure their 18 arbitration agreements as they see fit."). "[A]s with any other 19 contract, the parties' intentions control." Stolt-Nielsen S.A. 20 v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1774 (2010) 21 (internal quotation marks omitted). 22 Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Despite the "liberal However, "any doubts concerning the scope of arbitrable 23 issues should be resolved in favor of arbitration." Moses H. 24 Cone, 460 U.S. at 24 25. 25 us to construe arbitration clauses as broadly as possible." "Accordingly, federal policy requires 24 1 Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 19 2 (2d Cir. 1995) (brackets and internal quotation marks omitted). 3 Therefore, we will compel arbitration "unless it may be said with 4 positive assurance that the arbitration clause is not susceptible 5 of an interpretation that covers the asserted dispute." 6 Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650 7 (1986). 8 9 AT & T In this Circuit, courts follow a two-part test to determine the arbitrability of claims. In deciding whether 10 claims are subject to arbitration, a court must consider (1) 11 whether the parties have entered into a valid agreement to 12 arbitrate, and, if so, (2) whether the dispute at issue comes 13 within the scope of the arbitration agreement. 14 Overseas Ltd. v. Cent. United Life Ins. Co., 307 F.3d 24, 28 (2d 15 Cir. 2002); accord John Hancock Mut. Life Ins. Co. v. Olick, 151 16 F.3d 132, 137 (3d Cir. 1998). 17 inquiry, we must also determine who -- the court or the 18 arbitrator -- properly decides the issue. 19 Ecuador v. Chevron Corp., 638 F.3d 384, 393 (2d Cir. 2011). 20 B. Existence and Scope of Ameriprise's Consent to Arbitrate 21 ACE Capital Re Before addressing the second See Republic of Because our review of the district court's Enforcement 22 Order requires that we evaluate not only the existence but also 23 the scope of any such agreement, we must identify first that 24 agreement's form, and then its contours. 25 1 Ameriprise does not dispute that, by virtue of its 2 membership in FINRA, it has consented to arbitrate with its 3 customers.13 4 Customer Disputes ("FINRA Code") § 12200 ("Parties must arbitrate 5 a dispute under the [FINRA] Code if" arbitration is "[r]equested 6 by the customer; [t]he dispute is between a customer and a 7 [FINRA] member or associated person of a member; and [t]he 8 dispute arises in connection with the business activities of the 9 member or the associated person . . . ."); cf. John Hancock Life See FINRA Code of Arbitration Procedure for 10 Ins. Co. v. Wilson, 254 F.3d 48, 58 (2d Cir. 2001) (explaining 11 that the defendant "concede[d] that it agreed by virtue of its 12 membership in the NASD[, the predecessor to FINRA,] to arbitrate 13 all disputes contemplated under" a rule analogous to FINRA Rule 14 12200). 15 claims constitute claims "aris[ing] in connection with [its] 16 business activities" within the meaning of FINRA Rule 12200. 17 This Court has recently stated that FINRA membership constitutes 18 an agreement to "adhere to FINRA's rules and regulations, 19 including its Code and relevant arbitration provisions contained 20 therein." UBS Fin. Servs., 2011 WL 438991, at *5; see also Nor does Ameriprise dispute that all of the Belands' 13 We note that such consent may not be reciprocal. Though the FINRA Rules bind Ameriprise to arbitrate disputes with its customers upon request, it does not appear that Ameriprise can require its customers to arbitrate disputes with it on the basis of its FINRA membership alone. Hence, for example, the In re AEFA litigation, which proceeded in federal court, not in FINRA arbitration. 26 1 Wachovia Bank, 2011 WL 5110122, at *6-7, 2011 U.S. App. LEXIS 2 19420, at *15 (stating that "interpretation of arbitration rules 3 of an industry self-regulatory organization. . . such as FINRA is 4 similar to contract interpretation" and concluding, in that case, 5 that the matter was not arbitrable under FINRA's rules). 6 therefore conclude that all of the Belands' FINRA Claims against 7 Ameriprise are arbitrable in the absence of any subsequent 8 agreement revoking or otherwise limiting the scope of 9 Ameriprise's consent to arbitrate. 10 11 12 We III. Binding Nature of the Class Settlement on the Belands We next turn to the parties' relationship to the Class 13 Settlement. Absent a violation of due process or excusable 14 neglect for failure to timely opt out, a class-action settlement 15 agreement binds all class members who did not do so. 16 Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 115 (2d 17 Cir. 2005) (stating that a class member "was required to opt out 18 at the class notice stage if it did not wish to be bound" by a 19 class settlement agreement), cert. denied, 544 U.S. 1044 (2005); 20 County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 21 1302 (2d Cir. 1990) (stating that if a party "could not have 22 properly opted out of the mandatory class, it is bound by the 23 class settlement if it is upheld, as are all other members of the 24 class"); see also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 25 811 13 (1985); In re: PaineWebber Ltd. P'ships Litig., 147 F.3d 27 See, e.g., 1 132, 138 39 (2d Cir. 1998). 2 contract that is interpreted according to general principles of 3 contract law." 4 443 (2d Cir. 2005). 5 And a "settlement agreement is a Omega Eng'g, Inc. v. Omega, S.A., 432 F.3d 437, Rule 6 of the Federal Rules of Civil Procedure permits 6 a court to extend the time during which an act must be done "on 7 motion made after the time has expired if the party failed to act 8 because of excusable neglect." 9 Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 Fed. R. Civ. P. 6(b)(1)(B). In 10 U.S. 380 (1993), the Supreme Court set forth four factors to be 11 considered in connection with an assertion of "excusable neglect" 12 as justification for a missed judicial deadline: (1) "the danger 13 of prejudice" to the party opposing the extension; (2) "the 14 length of the delay and its potential impact on judicial 15 proceedings"; (3) "the reason for the delay, including whether it 16 was within the reasonable control" of the party seeking the 17 extension; and (4) whether the party seeking the extension "acted 18 in good faith." 19 focus of the inquiry, the ultimate determination depends upon a 20 careful review of "all relevant circumstances." 21 re: PaineWebber Ltd. P'ships Litig., 147 F.3d at 135 ("To 22 establish excusable neglect, . . . a movant must show good faith 23 and a reasonable basis for noncompliance."). 24 25 Id. at 395. While those factors are the central Id.; accord In Because the Belands have not argued that due process was denied them with respect to the Class Settlement, we turn to 28 1 whether the district court erred when it rejected their 2 "excusable neglect" argument. 3 ruling for abuse of discretion, see id. at 135, we will reverse 4 only if we have "a definite and firm conviction that the court 5 below committed a clear error of judgment in the conclusion that 6 it reached upon a weighing of the relevant factors," Silivanch v. 7 Celebrity Cruises, Inc., 333 F.3d 355, 362 (2d Cir. 2003), cert. 8 denied, 540 U.S. 1105 (2004). 9 conviction here, we do not disturb the district court's On review of the district court's Because we have no such clear 10 conclusion that the Belands failed to demonstrate "excusable 11 neglect." 12 In analyzing the issue, the district court relied on 13 admonitions and warnings under boldface, capitalized headings in 14 the Class Notice -- which the Belands received -- about the 15 consequences of taking no action. 16 Belands should have known from the plain English of the Notice 17 that Miller's recommendation that they 'do nothing' would lead to 18 no payment from the settlement and the release of future claims." 19 Enforcement Order at 5. 20 failed to read the notice, even after Miller's alleged advice, 21 they did so unreasonably. 22 delay on the Belands' part in seeking relief under the "excusable 23 neglect" standard, even after they became aware of their possible 24 error in failing to opt out of the Class Settlement. The court concluded that "the It also determined that if the Belands The court further noted a significant 29 1 We conclude that the court's decision in this regard 2 did not constitute an abuse of its discretion. The Class Notice 3 is a reasonably straightforward document that contains a list of 4 readable questions and answers discussing the content of the 5 Class Action and the consequences of taking, or not taking, 6 action in response. 7 a class "[n]otice is adequate if it may be understood by the 8 average class member" (internal quotation marks omitted)). 9 the Class Notice itself offered advice from class counsel, See Wal-Mart, 396 F.3d at 114 (stating that And 10 providing lawyers' contact information and instructing class 11 members to contact them should the content of the Class Notice be 12 unclear. 13 suffer prejudice if the Belands were permitted to opt out of the 14 Class Settlement three years late, as it would be exposed to 15 liability that it had every reason to think had been foreclosed 16 by the entry of the Settlement Agreement in federal court. 17 There is, moreover, little doubt that Ameriprise would Neither the length of, nor the reasons for, the 18 Belands' delay counsel otherwise. 19 an extended formal education rendered the Class Notice 20 incomprehensible to him, the fact that he brought the document to 21 Miller -- the representative of Ameriprise -- for advice suggests 22 that he had some level of awareness of the Notice's importance. 23 And while the Belands explain their delay by asserting that they 24 had relied on advice from Miller that the Belands should take no 25 action with respect to the class-action lawsuit against 30 Even if John Beland's lack of 1 Ameriprise, we agree with the district court's implicit 2 conclusion that any such reliance was unreasonable. 3 reasoning of a district court in another circuit, "[o]nce [the 4 Belands] knew that there was a legal proceeding pending, it was 5 no longer reasonable [for them] to continue taking legal or 6 investment advice from [Ameriprise] or any of its agents." 7 VMS Sec. Litig., 156 F.R.D. 635, 640 (N.D. Ill. 1994) (internal 8 quotation marks omitted); see also id. ("[R]elying on one's 9 adversaries rather than one's attorney for advice is an error Applying the In re 10 that is to be laid at the feet of the one who made it; such 11 reliance is not reasonable, particularly when the notice 12 instructed class members to consult with their own counsel or 13 class counsel if they had questions." (internal quotation marks 14 omitted)). 15 any action to limit their ability to consult with a lawyer or ask 16 for outside advice. 17 Finally, the Belands do not contend that Miller took We therefore reject the Belands' contention that the 18 district court abused its discretion as to its application of the 19 "excusable neglect" standard to their factual circumstances. 20 follows from that conclusion that the Belands were bound as class 21 members by the In re AEFA Class Settlement. 31 It 1 2 3 IV. Effect of the Class Settlement on the Agreement to Arbitrate A. Question of Arbitrability 4 The Supreme Court has distinguished between 5 "question[s] of arbitrability," which are "issue[s] for judicial 6 determination[, u]nless the parties clearly and unmistakably 7 provide otherwise," AT & T Techs., 475 U.S. at 649; see also 8 First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 45 9 (1995); PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1198 99 (2d Cir. 10 1996), and "other gateway matters, which are presumptively 11 reserved for the arbitrator's resolution," Republic of Ecuador, 12 638 F.3d at 393 (internal quotation marks omitted). 13 "questions of arbitrability" presumptively reserved for a court, 14 the Supreme Court has identified "dispute[s] about whether the 15 parties are bound by a given arbitration clause" and 16 "disagreement[s] about whether an arbitration clause in a 17 concededly binding contract applies to a particular type of 18 controversy."14 Among Howsam, 537 U.S. at 84. 14 On the other hand, "'"procedural" questions which grow out of the dispute and bear on its final disposition' are presumptively not for the judge, but for an arbitrator, to decide." Howsam, 537 U.S. at 84 (emphasis in original) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)). Likewise, "the presumption is that the arbitrator should decide 'allegation[s] of waiver, delay, or a like defense to arbitrability.'" Id. (alteration in original) (quoting Moses H. Cone, 460 U.S. at 24 25). 32 1 The principal issue in this case is whether any of the 2 Belands' FINRA Claims survived the Class Settlement and are thus 3 still subject to arbitration. 4 we must first determine whether the court or the arbitrator 5 should answer that question. 6 a "question of arbitrability" that is reserved to the court. 7 First, the Class Settlement did not merely resolve As a preliminary matter, however, We conclude that such an inquiry is 8 certain claims that class members might have had, thus estopping 9 these class members from arbitrating these claims at a later 10 date. 11 Ameriprise's consent to arbitrate certain claims. 12 therefore is not whether those claims had been settled, thus 13 precluding arbitration, but whether there was a surviving 14 agreement, following the settlement, to arbitrate those claims at 15 all. 16 unmistakably provide otherwise. . . is to be decided by the 17 court, not the arbitrator." AT & T Techs., 475 U.S. at 649. But 18 cf. Republic of Ecuador, 638 F.3d at 393 (observing that "waiver 19 and estoppel generally fall into [the] group of issues 20 presumptively for the arbitrator"). 21 As discussed further below, the Class Settlement revoked The question That question, "[u]nless the parties clearly and Second, Ameriprise's FINRA membership cannot serve as 22 such "clear[] and unmistakabl[e]" evidence of the parties' intent 23 that all future questions of arbitrability be submitted to 24 arbitrators. See Wilson, 254 F.3d at 57 ("[O]ne party's 33 1 membership in an exchange[] is insufficient, in and of itself, to 2 evidence the parties' clear and unmistakable intent to submit the 3 'arbitrability' question to the arbitrators."). 4 Third, the district court explicitly retained 5 jurisdiction over the In re AEFA class action. 6 Final Judgment at 10 (providing that "[e]xclusive jurisdiction is 7 hereby retained over the Parties and the Class Members for all 8 matters relating to this Action and the Settlement" (emphasis 9 added)). 10 See Order and For those reasons, we conclude that determining the 11 scope of the Belands' entitlement to arbitrate (by virtue of 12 Ameriprise's consent through its FINRA membership) is a question 13 for judicial resolution. As such, the district court properly 34 1 undertook it on Ameriprise's motion.15 The question remains 15 The Belands also argue on appeal that Ameriprise "submitted the question of the Class Action Settlement Release to the FINRA arbitrators to decide" by filing an answer in the FINRA arbitration and propounding discovery to the Belands while proceedings were pending in that venue. Appellants' Br. at 36; see also Appellants' Reply Br. at 13. They argue that Ameriprise's participation in the FINRA proceedings definitively precluded it from later resorting to federal court to seek an order of dismissal as to the Belands' FINRA arbitration. In short, the Belands argue waiver. But the actual conduct of Ameriprise in the FINRA proceedings fails to support either the Belands' characterization or their conclusion. In a letter to the Belands' counsel dated July 28, 2009 -- after the Belands filed their FINRA Complaint but before the FINRA Defendants took any action before the arbitrators -- Ameriprise's attorney identified the In re AEFA Settlement and argued that the Belands, as Class Members, had "released Ameriprise . . . and its agents and affiliates for claims relating to the" Belands' Ameriprise investment accounts. Letter from Ameriprise Counsel to Belands at 1, Mem. in Sup. of Mot. for Reconsideration Exh. D, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Aug. 17, 2010), ECF No. 209-5. When the Belands refused to withdraw their FINRA Claims, Ameriprise sought principally to stay the FINRA proceedings while simultaneously filing an Answer to the Belands' FINRA Complaint. See Motion to Stay at 1 4. The Motion to Stay explicitly reserved Ameriprise's right to seek relief in the federal district court pursuant to the In re AEFA Settlement, requesting a stay of the FINRA proceedings in order to avoid "a waste of time and other resources." Id. at 4. In the same document, Ameriprise warned that "[u]nless Claimants withdraw their Released Claims in this action, Respondents will be forced to protect their rights by filing a Motion to Enforce Class Action Settlement as to the Released Claims" in federal court. Id. By simultaneously filing a motion to stay the FINRA proceedings with its answer to the Belands' FINRA Complaint, Ameriprise unambiguously expressed its intention to seek judicial relief and thereby preserved its right to proceed accordingly, notwithstanding its filing of a substantive answer in the FINRA arbitration. See Opals on Ice Lingerie v. Body Lines Inc., 320 F.3d 362, 369 (2d Cir. 2003) (where a party's correspondence with its adversary demonstrates "that it continuously objected to 35 1 whether its ultimate conclusion was correct. 2 B. Scope of Ameriprise's Agreement to Arbitrate 3 We have said that "there is nothing irrevocable about 4 an agreement to arbitrate." Baker & Taylor, Inc. v. 5 AlphaCraze.com Corp., 602 F.3d 486, 490 (2d Cir. 2010) (per 6 curiam) (brackets, ellipsis, and internal quotation marks 7 omitted). 8 arbitrate," Stolt-Nielsen, 130 S. Ct. at 1774, and "[n]othing" 9 prevents parties to an agreement "from excluding . . . claims Parties may "limit the issues they choose to 10 from the scope of an agreement to arbitrate," Mitsubishi Motors 11 Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985). 12 Such limitations and exclusions need not be specified by the 13 initial agreement to arbitrate. 14 this method of settling their differences, and under a variety of 15 circumstances one party may waive or destroy by his conduct his 16 right to insist upon arbitration." 17 490 (internal quotation marks omitted). 18 relevant here, "different or additional contractual arrangements 19 for arbitration can supersede the rights conferred on [a] 20 customer by virtue of [a] broker's membership in a 21 self-regulating organization such as [FINRA]." 22 Co. v. Zinsmeyer Trusts P'ship, 41 F.3d 861, 864 (2d Cir. 1994) "Both of the parties may abandon Baker & Taylor, 602 F.3d at In particular, as Kidder, Peabody & arbitration," those "objections prevent a finding of waiver"). The Belands' waiver argument therefore fails. 36 1 (citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. 2 Georgiadis, 903 F.2d 109, 113 (2d Cir. 1990)). 3 The Class Settlement in this case -- by which, as 4 discussed above, the Belands are bound -- is one such "different 5 or additional contractual arrangement[]." 6 derives his or her powers from the parties' agreement to forgo 7 the legal process and submit their disputes to private dispute 8 resolution." 9 where a party initially consents (in this case, by dint of Id. Stolt-Nielsen, 130 S. Ct. at 1774. "[A]n arbitrator It follows that 10 Ameriprise's FINRA membership) to arbitrate certain types of 11 claims, but later enters into a settlement agreement that 12 releases claims that had been subject to the initial consent to 13 arbitrate, the claims that have been released by such a 14 settlement are no longer subject to arbitration. 15 In the case before us, the Belands failed to opt out of 16 the class, and (as explained above) have not demonstrated 17 "excusable neglect" for that failure. 18 Class Settlement and Release, the Belands may not pursue any 19 Released Claims against Ameriprise and its employees. 20 Class Settlement "supersedes all prior understandings, 21 communications, and agreements with respect to the subject of 22 this Settlement," Settlement Agreement at 34, including the 23 parties' implicit agreement that the Belands had a right to 24 arbitrate certain claims against Ameriprise by virtue of the 37 Therefore, bound by the And the 1 latter's FINRA membership. 2 extinguished not only the ability of Class Members to bring 3 Released Claims against Ameriprise as a matter of substance, but 4 also the Class Members' right to arbitrate those claims. 5 In other words, the Class Settlement We find support for this conclusion in the Tenth 6 Circuit's opinion in Riley Manufacturing Co. v. Anchor Glass 7 Container Corp., 157 F.3d 775 (10th Cir. 1998). 8 clause" in a settlement agreement purported to "cancel[], 9 terminate[] and supersede[] any and all prior representations and There, a "merger 10 agreements relating to the subject matter" of the agreement. Id. 11 at 778. 12 prior right of the parties to demand arbitration on the[] 13 specific topics" that the court concluded were within the bounds 14 of the settlement agreement. 15 (concluding that "the specific releases in" the settlement 16 agreement "waive[d the plaintiff's] right to demand arbitration 17 on the five topics explicitly listed" in the agreement); see also 18 Miller v. Runyon, 77 F.3d 189, 194 (7th Cir. 1996) ("Given the 19 contractual nature of arbitration, it can be argued that the 20 preclusive effect of either a judicial judgment or an arbitration 21 award on a subsequent arbitration should depend on what the 22 parties agreed to. 23 interpretation of the parties' [agreement to arbitrate] whether The court concluded that the merger clause "revoked the Id. at 784; see id. at 782 And then the court will decide as a matter of 38 1 the arbitrators can ignore a prior judicial judgment." (citations 2 omitted)), cert. denied, 519 U.S. 937 (1996). 3 We agree with the Tenth Circuit's approach. We 4 conclude that the Belands' entitlement to arbitrate disputes with 5 Ameriprise, arising out of Ameriprise's FINRA membership and 6 defined by Rule 12200, does not extend to the Released Claims 7 defined by the Settlement Agreement because the Settlement 8 Agreement amended the contours of the parties' agreement to 9 arbitrate all disputes between them before FINRA arbitrators. 10 C. District Court's Retention of Jurisdiction over In re AEFA 11 We do not suggest, however, that in all cases, a 12 settlement agreement revokes a prior agreement or consent to 13 arbitrate by releasing claims that would have been subject to 14 arbitration under the earlier agreement or consent. 15 "[u]nder our cases, if there is a reading of the various 16 agreements that permits the [a]rbitration [c]lause to remain in 17 effect, we must choose it." 18 Ltd., 424 F.3d 278, 284 (2d Cir. 2005).16 19 reading is possible here because the Settlement Agreement Indeed, Bank Julius Baer & Co. v. Waxfield 16 However, no such In Bank Julius, we concluded that a forum-selection clause could "be read, consistent with the [a]rbitration [a]greement, in such a way that the [parties] are required to arbitrate their disputes," with limitations as to available challenges regarding jurisdiction and venue. Bank Julius, 424 F.3d at 285. In short, we found no irremediable conflict between the clauses under analysis in that case. 39 1 explicitly vests the district court with exclusive jurisdiction 2 to enforce its terms. 3 A federal court does not automatically retain 4 jurisdiction to hear a motion to enforce or otherwise apply a 5 settlement in a case that it has previously dismissed. 6 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 380 82 7 (1994). 8 to be litigated in the state courts. 9 where, in a federal court, the court makes "the parties' See Such motions are essentially state-law contract claims See id. at 382. However, 10 obligation to comply with the terms of the settlement 11 agreement . . . part of the order of dismissal -- either by 12 separate provision (such as a provision 'retaining jurisdiction' 13 over the settlement agreement) or by incorporating the terms of 14 the settlement agreement in the order" -- the proper forum for 15 litigating a breach is that same federal court. 16 accord Perez v. Westchester County Dep't of Corr., 587 F.3d 143, 17 151 53 (2d Cir. 2009). 18 retain[s] jurisdiction, it necessarily ma[kes] compliance with 19 the terms of the [settlement] agreement a part of its order so 20 that 'a breach of the agreement would be a violation of the 21 order.'" 22 (quoting Kokkonen, 511 U.S. at 381). 23 said that where "there is ample evidence. . .that the District 24 Court 'intended to place its "judicial imprimatur" on [a] Id. at 381; In cases over which "the district court Roberson v. Giuliani, 346 F.3d 75, 82 (2d Cir. 2003) 40 Further, this Court has 1 settlement,'" the court retains jurisdiction to oversee the 2 enforcement of the agreement. 3 Torres v. Walker, 356 F.3d 238, 244 n.6 (2d Cir. 2004) (dicta)). 4 That policy interest takes on particular importance in Perez, 587 F.3d at 152 (quoting 5 the context of class actions, which are complicated, expensive 6 proceedings involving a multitude of different parties and 7 potential parties but intended ultimately to make enforcement of 8 the rights of all the parties more efficient and less expensive. 9 As a general matter, the more loose ends that remain after the 10 litigation has been resolved, the less successful the process has 11 been. 12 ongoing order against relitigation so as to protect the integrity 13 of a complex class settlement over which it retained 14 jurisdiction." 15 Litig., 261 F.3d 355, 367 68 (3d Cir. 2001); see also In re Gen. 16 Am. Life Ins. Co. Sales Practices Litig., 357 F.3d 800, 803 (8th 17 Cir. 2004) (recognizing "the authority of district courts to 18 enforce by injunction a final judgment embodying the terms 19 settling a class action"). 20 A district court therefore "has the power to enforce an In re Prudential Ins. Co. of Am. Sales Practice In the Enforcement Order requiring the Belands to 21 dismiss their arbitration complaint in its entirety, the district 22 court did not advert to any specific source of its jurisdiction 23 to issue the Enforcement Order. 24 Agreement and dismissing the In re AEFA litigation, though, the In approving the Settlement 41 1 district court had explicitly stated that "[e]xclusive 2 jurisdiction is hereby retained over the Parties and the Class 3 Members for all matters relating to this Action and the 4 Settlement." 5 the fact that the district court did officially "'close[]' and 6 dismiss[] with prejudice" the In re AEFA litigation, Endorsed 7 Letter at 1, In re AEFA, No. 04 Civ. 1773 (S.D.N.Y. Feb. 2, 8 2009), ECF No. 190, the court properly retained jurisdiction to 9 hear the kind of issues relating to the Settlement Agreement's Order and Final Judgment at 10. Therefore, despite 10 Released Claims raised by the Belands in this case. 11 See Perez, 587 F.3d at 151 52. 12 We have found no "reading of the various agreements" at 13 issue in this case that would permit Ameriprise's preexisting and 14 broad consent to arbitrate "to remain in effect," Bank Julius, 15 424 F.3d at 284, in its entirety. 16 we afforded the forum-selection clause and anterior arbitration 17 agreement in Bank Julius, an interpretation of the Settlement 18 Agreement that would permit the Belands to arbitrate Released 19 Claims would run afoul of the district court's Order and Final 20 Judgment. 21 it "with a healthy regard for the federal policy favoring 22 arbitration." 23 resolve "any doubts concerning the scope of arbitrable 24 issues . . . in favor of arbitration," including when "the Unlike the integrated reading We arrive at this conclusion even though we approach Moses H. Cone, 460 U.S. at 24. 42 Though we must 1 problem at hand is the construction of the contract language 2 itself," id. at 24 25; accord WorldCrisa Corp. v. Armstrong, 129 3 F.3d 71, 74 (2d Cir. 1997), we are satisfied that no such doubt 4 exists here. 5 assurance" that Ameriprise's consent to arbitrate as reflected in 6 FINRA Rule 12200 -- subsequent to amendment by the Settlement 7 Agreement -- "is not susceptible of an interpretation that covers 8 the asserted dispute" surrounding the Released Claims. 9 Techs., 475 U.S. at 650. 10 11 12 In other words, "it may be said with positive AT & T V. Settlement Agreement & Released Claims A. Standard of Review In reviewing a district court's interpretation of the 13 terms of a settlement agreement, we review conclusions of law de 14 novo and findings of fact for clear error. 15 Reader's Digest Ass'n, Inc., 131 F.3d 320, 322 (2d Cir. 1997). 16 B. Interpreting Class-Action Settlement Agreements 17 See Ciaramella v. It is elementary that a settlement agreement cannot 18 release claims that the parties were not authorized to release. 19 See Nat'l Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9, 20 19 (2d Cir. 1981). 21 established in this Circuit and others that class action releases 22 may include claims not presented and even those which could not 23 have been presented as long as the released conduct arises out of 24 the 'identical factual predicate' as the settled conduct." At the same time, "[t]he law is well 43 Wal- 1 Mart, 396 F.3d at 107 (quoting TBK Partners, Ltd. v. W. Union 2 Corp., 675 F.2d 456, 460 (2d Cir. 1982)); cf. TBK Partners, 675 3 F.2d at 461 ("[W]here there is a realistic identity of issues 4 between the settled class action and the subsequent suit, and 5 where the relationship between the suits is at the time of the 6 class action foreseeably obvious to notified class members, the 7 situation is analogous to the barring of claims that could have 8 been asserted in the class action. 9 paramount policy of encouraging settlements takes precedence."). 10 Under such circumstances the Indeed, "[c]lass actions may release claims, even if 11 not pled, when such claims arise out of the same factual 12 predicate as settled class claims." 13 And "in order to achieve a comprehensive settlement that would 14 prevent relitigation of settled questions at the core of a class 15 action, a court may permit the release of a claim based on the 16 identical factual predicate as that underlying the claims in the 17 settled class action even though the claim was not presented and 18 might not have been presentable in the class action." 19 Partners, 675 F.2d at 460. 20 C. Overlap of Claims 21 Wal-Mart, 396 F.3d at 108. TBK We begin by noting that the starting point for 22 interpreting settlement agreements is general contract-law 23 principles. 24 25 See, e.g., Omega Eng'g, 432 F.3d at 443. Here, the Class Settlement stated that the definition of Released Claims included, inter alia, 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 any and all claims, debts, demands, rights or causes of action or liabilities whatsoever . . . , whether based on federal, state, local, statutory or common law or any other law, rule or regulation, . . . including both known claims and Unknown Claims . . . that (i) have been asserted in this Action by the Plaintiffs . . . or (ii) could have been asserted in any forum by the Plaintiffs or Class Members . . . against any of the Released Persons; including claims that arise out of or are based upon (a) the allegations, transactions, facts, matters or occurrences, representations or omissions alleged, involved, set forth, or referred to in the [Class Complaint] . . . , [and] (b) the offer and sale of financial advice, financial planning, and/or financial advisory services pursuant to a Financial Advisory Service Agreement, or the SPS, WMS or SMA programs[17] . . . . 22 Settlement Agreement at 7-8. That definition is expansive, but 23 the Settlement Agreement goes on to exclude certain claims from 24 the definition's purview. 25 "'Released Claims' shall not include suitability claims unless 26 such claims are alleged to arise out of the common course of 27 conduct that was alleged, or could have been alleged, in the 28 Action, as more fully described herein." 29 added). The Settlement Agreement states that 17 Id. at 8 (emphases The SPS ("Strategic Portfolio Service"), SMS ("Separately Managed Account"), and WMS ("Wealth Management Service") programs "encompassed all of Ameriprise's managed, fee-for-service accounts or programs in which clients paid a percentage fee for services that included financial advice, financial planning, or other financial advisory services." Appellee's Br. at 21 n.3 (internal quotation marks omitted). 45 1 As we explain above, supra note 3, suitability claims 2 are often brought "as a distinct subset" of section 10(b) claims 3 under the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b). 4 See Dodds, 12 F.3d at 351. 5 not advert to any specific federal statute, or even the term 6 "suitability," in their FINRA Complaint. 7 district court, the Belands explicitly disavowed any reliance on 8 federal securities law. 9 did not "actually assert[] suitability claims before FINRA." Ameriprise argues that the Belands do And indeed, before the Therefore, says Ameriprise, the Belands 10 Appellee's Br. at 26 (emphasis in original) (internal quotation 11 marks omitted). 12 definition of the term in the Class Settlement, for the purposes 13 of this appeal we consider "suitability" to serve more as a 14 general description of the character of potential common-law 15 claims (such as breach of fiduciary duty, breach of contract, 16 fraud, and negligent misrepresentation -- all of which the 17 Belands did allege in the FINRA proceedings), rather than a 18 technical term denoting a specific type of section 10(b) claim. 19 See also infra note 17. 20 Belands also disclaim reliance on state securities laws, 21 regulations issued by the State of Illinois -- the state where 22 the Belands filed their FINRA Complaint -- define 23 "unsuitab[ility]" with reference to "fraud[], decepti[on,] [and] 24 manipulati[on]." However, particularly because of the lack of a Furthermore, we note that although the Ill. Admin. Code tit. 14, § 130.853. 46 1 The Belands point to several aspects of their FINRA 2 Claims that demonstrate that not all of them are Released Claims 3 barred by the Class Settlement. 4 claims span a time period matching that of the existence of their 5 trusts -- from 1995 to 2009 -- while the Release covers only 6 claims between 1999 and 2006. 7 while the Class Settlement "plainly relate[s] to [claims 8 involving the] sale and promotion of proprietary and affiliated 9 mutual funds for which [Ameriprise] was receiving kickbacks or 10 promoting in-house," Appellants' Reply Br. at 3, the Settlement 11 Agreement's express exclusion of "suitability claims" covers the 12 substance of many of their FINRA Claims, which allege that "the 13 conservative goal of both the Charitable Remainder and Revocable 14 Trusts was not followed" and "individual speculative 'tech' 15 securities were bought and sold," Appellants' Br. at 27; see also 16 Appellants' Reply Br. at 6 (arguing that the Belands' FINRA 17 Claims include "suitability claims unique to the recommendations 18 of Ameriprise broker Ron Miller -- claims related both to 19 misrepresentation and recommendations having nothing to do with 20 American Express mutual funds and shelf space proprietary 21 products"). 22 First, they argue that their Second, the Belands argue that Ameriprise counters that the Belands' FINRA Claims 23 "fall squarely within the definition of 'Released Claims.'" 24 Appellee's Br. at 20. 25 Ameriprise contends, the FINRA Claims "plainly 'arise from the Regardless of any minor differences, 47 1 same transactions, facts, matters, occurrences, and 2 representations as the claims of the [Class Complaint].'" 3 21 (quoting Order and Final Judgment at 2). 4 rejects the Belands' attempt to rely upon the "suitability 5 claims" carve-out in the Class Settlement, inasmuch as the 6 Belands' FINRA Complaint did not explicitly label or otherwise 7 characterize any of their claims as being "suitability" claims.18 8 9 Id. at Ameriprise also We agree with the Belands, however, that their FINRA Claims and the Released Claims do not -- indeed, cannot -- 10 entirely overlap. First, the Belands' FINRA Complaint 11 unequivocally alleges that Ameriprise and Miller agreed to invest 12 the Belands' funds "in a conservative fashion, preserving capital 13 and obtaining income from which the life beneficiaries could 14 receive a return," FINRA Complaint ¶ 9, but that "[a] 15 conservative asset allocation approach was not taken," id. ¶ 13. 16 That seems to us to be a quintessential suitability claim. 17 Kearney v. Prudential-Bache Sec., Inc., 701 F. Supp. 416, 429 18 See Ameriprise also contends that the Belands' suitabilityclaim argument has been forfeited because they did not raise it until they filed their Motion for Reconsideration before the district court. However, though the Belands do not appear to have specifically referred to the "suitability" carve-out clause before that time, the Belands consistently contended that their FINRA Claims went well beyond any issue that was or could have been raised in the Class Action. We therefore decline to accept Ameriprise's waiver argument regarding the "suitability" carveout clause in the definition of Released Claims. In any event, "[w]e retain 'broad discretion' to consider issues not timely raised below." Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 159 (2d Cir. 2003). 48 1 (S.D.N.Y. 1988) (describing a typical suitability claim as a 2 broker's "invest[ment] in risky transactions contrary either to 3 [an investor's] explicit directions or to her interests"). 4 Second, although the definition of Released Claims does 5 include suitability claims "aris[ing] out of the common course of 6 conduct that was alleged, or could have been alleged, in the [In 7 re AEFA litigation]," Settlement Agreement at 8, we read the 8 "common course of conduct" alleged in the In re AEFA litigation 9 to be, as described by the Belands, Ameriprise's routine practice 10 of "steering American Express clients into Proprietary or Shelf 11 Space funds through one or more of the managed programs at 12 American Express," Appellants' Reply Br. at 4. 13 consisted only of persons who purchased financial plans that 14 invested in the Proprietary or Shelf Space Funds (as well as 15 others who otherwise invested in those Funds). 16 Complaint ¶ 85. 17 involved investors who "were sold financial plans and/or advice 18 that, instead of being tailored to their individual 19 circumstances, contained standardized recommendations designed to 20 steer them into investing in Defendants' proprietary mutual funds 21 and other proprietary investment products and certain non- 22 proprietary 'Preferred' or 'Select' mutual funds." 23 at 1. 24 class action was the notion that "conflicts of interest inherent 25 in Defendants' financial plans and/or financial advisory Indeed, the Class See Class As the Class Notice explains, the class action Class Notice The Class Notice further explained that the basis of the 49 1 services, and the compensation arrangements between Defendants 2 and the Preferred Funds, were inadequately disclosed to 3 investors." 4 their trusts contrary to their instructions and investment goals 5 do not fall within that "common course of conduct." 6 Id. The Belands' claims that Miller mismanaged Third, the Belands' FINRA Complaint is also devoted in 7 part to the allegation that once they confronted Miller about the 8 accounts' declining assets, "Miller set a course of cover-up, 9 lies and deceit in order to obscure the mishandling in the" 10 accounts, providing false justifications for investment decisions 11 and shielding the truth about Ameriprise's motives and conflicts 12 of interest. 13 those allegedly false reasons were the September 11 terrorist 14 attacks and that the charitable trust was set to diminish "by 15 design." 16 Claims dependent upon allegations of this sort were plainly not 17 Released Claims under the In re AEFA Class Settlement. 18 FINRA Complaint ¶ 20; see also id. ¶¶ 25 27. Among Id. ¶¶ 21 24 (internal quotation marks omitted). Fourth, there can be no question that the Belands' 19 claims, to the extent that they involve conduct occurring after 20 the Class Period, cannot be Released Claims.19 19 That said, we do have some doubts about the time period allegedly at issue in the Belands' FINRA Complaint. While they represent that their claims against Ameriprise span from 1995 to 2009, John and Elaine did not become trustees or beneficiaries of the accounts until 2004. While claims predating their inherited interest in the Ameriprise accounts might not be Released Claims, we note that they still might not be valid if the Belands did not acquire an interest in the accounts prior to that time. However, 50 1 To be sure, some -- if not many -- of the allegations 2 in the Belands' FINRA Complaint constitute Released Claims. For 3 example, they allege that "[a]lmost from the start, rather than 4 invest in conservative large cap stocks, paying good dividends as 5 well as substantial bond portfolios, Miller and Ameriprise 6 invested in many house American Express mutual funds including 7 various high yield junk bond funds." 8 (emphasis added). 9 managed [the Belands' accounts] in a fashion . . . designed FINRA Complaint ¶ 14 Similarly, they allege that Ameriprise "has 10 primarily to generate fees and income for Ameriprise. . . [and] 11 to promote in-house mutual funds of American Express." 12 To the extent the FINRA Complaint contains similar claims, the 13 claims are conclusively Released Claims and are, as such, barred. 14 However, the Belands also clearly allege in their FINRA Id. ¶ 13. 15 Complaint that Ameriprise invested in "risky small cap or start- 16 up funds" that "exposed" the Belands' accounts "to tremendous 17 market risk which was unsuitable for the[ir] account objectives." 18 Id. ¶¶ 13 14 (emphasis added). 19 Period lasted from March 10, 1999 to April 1, 2006, the Belands' 20 complaint stretches all the way into 2009. 21 conclude, are not Released Claims and therefore are not barred by 22 the In re AEFA Class Settlement. 23 D. Conclusion And while the In re AEFA Class Those claims, we that is a determination we leave for further factfinding by the arbitrators. 51 1 To summarize: Ameriprise consented to arbitrate 2 disputes with the Belands -- its customers -- by virtue of its 3 membership in FINRA. 4 clearly encompasses the Belands' FINRA Claims, as they 5 indisputably "arise[] in connection with the business activities 6 of" Ameriprise and Miller. 7 a closer question, because the issue would be one of "the 8 construction of the contract language itself," we would "resolve 9 'any doubts concerning the scope of arbitrable issues . . . in FINRA Rule 12200 is a broad provision that FINRA Code § 12200. 10 favor of arbitration. . . .'" 11 Even if it were 393 (quoting Moses H. Cone, 460 U.S. at 24 25) . 12 Republic of Ecuador, 638 F.3d at The scope of an agreement to arbitrate is a "question 13 of arbitrability" within the purview of the court, and therefore 14 we can properly undertake the task of determining the breadth of 15 Ameriprise's consent to arbitrate. 16 Agreement "modif[ied]" Ameriprise's "fundamental and broad 17 commitment," through its FINRA membership, "to arbitrate any 18 dispute," Bechtel do Brasil Construções Ltda. v. UEG Araucária 19 Ltda., 638 F.3d 150, 155 (2d Cir. 2011) (emphasis in original), 20 with the Belands. 21 Ameriprise's prior expansive commitment to arbitrate by removing 22 the Released Claims from the scope of that commitment. 23 24 In our view, the Settlement Specifically, the Settlement Agreement altered We therefore conclude that Ameriprise (1) has not agreed to arbitrate the Released Claims as defined in the 52 1 Settlement Agreement, but (2) that it has agreed to arbitrate any 2 non-Released Claims asserted in the Belands' FINRA Complaint. 3 4 VI. District Court's Remedial Power A. Power to Enjoin Arbitration 5 The question "of whether federal courts have the power 6 to stay arbitration under the FAA (or any other authority) in an 7 appropriate case" is an open one in this Circuit. 8 Ecuador, 638 F.3d at 391 (citing Westmoreland Capital Corp. v. 9 Findlay, 100 F.3d 263, 266 n.3 (2d Cir. 1996), abrogated on other Republic of 10 grounds by Vaden v. Discover Bank, 556 U.S. 49 (2009)). 11 In re U.S. Lines, Inc., 197 F.3d 631, 639 (2d Cir. 1999) ("In the 12 bankruptcy setting, congressional intent to permit a bankruptcy 13 court to enjoin arbitration is sufficiently clear to override 14 even international arbitration agreements."); Video Tutorial 15 Servs., Inc. v. MCI Telecomms. Corp., 79 F.3d 3, 5 (2d Cir. 1996) 16 (per curiam) (failing to reach the issue but noting that "[w]e 17 would be hard-pressed to say that a district court cannot stay 18 arbitration for a short time while familiarizing itself with the 19 issues underlying a proposed motion to stay a suit pending 20 arbitration, or a proposed motion to stay an arbitration"). 21 we find no indication that this issue was contested in the 22 district court proceedings, and it was left unaddressed in both 23 briefing to and oral argument before us. 24 we think we can ignore simply because the parties have not 25 squarely presented it to the Court. 53 But see But However, it is not one Although it is not a 1 question upon the answer to which our jurisdiction depends, we 2 view it as one we ought to address inasmuch as it implicates "the 3 remedial powers of the court," Steel Co. v. Citizens for a Better 4 Env't, 523 U.S. 83, 90 (1998) (emphasis in original), to issue 5 the Enforcement Order. See AEP Energy Servs. Gas Holding Co. v. 6 Bank of Am., N.A., 626 F.3d 699, 719 (2d Cir. 2010). 7 words of another court, the issue represents "a high order 8 challenge": 9 10 11 12 13 14 15 16 17 18 In the On the one hand, a realistic concern for the finality and integrity of judgments would arise if parties were free to ignore federal court decisions that have conclusively settled claims or issues now sought to be arbitrated. Yet, arbitration is a matter of contract and the FAA only authorizes a limited review of the parties' intent before compelling or enjoining arbitration. Olick, 151 F.3d at 138(internal quotation marks omitted). 19 While the FAA's terms explicitly authorize a district 20 court to stay litigation pending arbitration, see 9 U.S.C. § 3, 21 and to compel arbitration, see id. § 4, nowhere does it 22 explicitly confer on the judiciary the authority to do what the 23 district court's Enforcement Order purported to do here: enjoin a 24 private arbitration. 25 Our decisions do suggest, however, that, at least where 26 the court determines -- pursuant to the first step outlined in 27 ACE Capital, 307 F.3d at 28, discussed above -- that the parties 28 have not entered into a valid and binding arbitration agreement, 29 the court has the authority to enjoin the arbitration 54 1 proceedings. See United States v. Eberhard, No. 03 Cr. 562, 2004 2 WL 616122, at *3, 2004 U.S. Dist. LEXIS 5029, at *10 (S.D.N.Y. 3 Mar. 30, 2004) ("[W]here courts in this Circuit have concluded 4 that § 4 of the FAA permits the issuance of a stay [of a private 5 arbitration], . . . they appear to have done so only in those 6 circumstances where a stay would be incidental to the court's 7 power under the FAA to enforce contractual agreements calling for 8 arbitration . . . ."). 9 Special Opportunities Master Fund Ltd., 598 F.3d 30 (2d Cir. In Citigroup Global Mkts., Inc. v. VCG 10 2010), we affirmed a district court's order preliminarily 11 enjoining a FINRA arbitration from proceeding. 12 that case, the district court had "serious questions" as to 13 whether one party was in fact a "customer" of a FINRA member 14 (which status, as we observed above, would bind the other party 15 to arbitrate). 16 We concurred with that assessment, concluding that the "customer" 17 status of the party was an "issue . . . in sharp dispute." 18 at 39 (internal quotation marks omitted). 19 doubted the existence of a binding agreement to arbitrate in that 20 case. 21 Id. at 40. In Id. at 33 34 (internal quotation marks omitted). Id. In other words, we We have also affirmed a district court's stay of 22 arbitration after determining that the initiation of judicial 23 proceedings in a foreign country constituted a waiver of a 24 plaintiff's right to arbitration, see Zwitserse Maatschappij van 25 Levensverzekering en Lijfrente v. ABN Int'l Capital Mkts. Corp., 55 1 996 F.2d 1478, 1480-81 (2d Cir. 1993) (per curiam), as we have a 2 stay of arbitration over various claims that we held were not 3 within the scope of an arbitration agreement, even while 4 affirming an order compelling arbitration of related validly 5 arbitrable claims, see Collins & Aikman, 58 F.3d at 23. 6 those cases, in addition to Citigroup Global Markets, suggest 7 that a federal court may enjoin an arbitration that the court 8 determines is not otherwise valid. 9 PLC v. ORBCOMM Int'l Partners, L.P., 49 F. Supp. 2d 331, 341 42 Both of See also SATCOM Int'l Grp. 10 (S.D.N.Y. 1999) (enjoining an arbitration in a case arising under 11 the New York Convention, 9 U.S.C. §§ 201-208, after finding that 12 such arbitration was "inappropriate" because the plaintiff had 13 "waived any right it previously had to arbitrate the issues in 14 th[e] case"). 15 The First Circuit's opinion in Societe Generale de 16 Surveillance, S.A. v. Raytheon European Mgmt. & Sys. Co., 643 17 F.2d 863 (1st Cir. 1981), is instructive. 18 considered a party's argument that the FAA "removes the district 19 court's power to enjoin [an] arbitration." 20 court first noted that the FAA "expressly provides federal courts 21 with the power to order parties to a dispute to proceed to 22 arbitration where arbitration is called for by the contract." 23 Id. at 868 (citing 9 U.S.C. § 3). 24 party from arbitrating where an agreement to arbitrate is absent 25 is the concomitant of the power to compel arbitration where it is 56 There, the court Id. at 867. The It inferred that "to enjoin a 1 present." Id. The court concluded that "[t]o allow a federal 2 court to enjoin an arbitration proceeding which is not called for 3 by the contract interferes with neither the letter nor the spirit 4 of" the FAA. 5 F.2d 507, 511 (3d Cir. 1990) ("If a court determines that a valid 6 arbitration agreement does not exist or that the matter at issue 7 clearly falls outside of the substantive scope of the agreement, 8 it is obliged to enjoin arbitration."), overruled by implication 9 on other grounds by Howsam, 537 U.S. 79. Id.; see also PaineWebber Inc. v. Hartmann, 921 10 We confirm and apply those principles here. If the 11 parties to this appeal have not consented to arbitrate a claim, 12 the district court was not powerless to prevent one party from 13 foisting upon the other an arbitration process to which the first 14 party had no contractual right. 15 Court's and this Circuit's cases, "[a]rbitration under the [FAA] 16 is a matter of consent, not coercion." 17 see also Howsam, 537 U.S. at 83 ("[A]rbitration is a matter of 18 contract and a party cannot be required to submit to arbitration 19 any dispute which he has not agreed so to submit." (internal 20 quotation marks omitted)). 21 conclude that district courts lack the authority to order the 22 cessation of an arbitration by parties within its jurisdiction 23 where such authority appears necessary in order for a court to As is clear from the Supreme Volt, 489 U.S. at 479; It makes little sense to us to 57 1 enforce the terms of the parties' own agreement, as reflected in 2 a settlement agreement. We decline to do so here.20 20 We pause to note that we are relying on a reading of the FAA, FINRA Rule 12200, and the Settlement Agreement. The particular circumstances presented in this appeal -- with emphasis on the exclusive nature of the In re AEFA district court's retention of jurisdiction over the Settlement Agreement - persuades us that the district court here could properly enjoin the private arbitration of claims already settled and released by class members such as the Belands. However, the All Writs Act, 28 U.S.C. § 1651(a), authorizes federal courts to issue "all writs necessary or appropriate in aid of their respective jurisdictions." See Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1099 (11th Cir. 2004) ("In allowing courts to protect their 'respective jurisdictions,' the [All Writs] Act allows them to safeguard not only ongoing proceedings, but potential future proceedings, as well as already-issued orders and judgments." (footnotes omitted)). Some courts have explicitly relied upon the All Writs Act in enjoining arbitrations in similar circumstances to those before us in this appeal. See, e.g., In re Y & A Grp. Sec. Litig., 38 F.3d 380, 382, 382 83 (8th Cir. 1994) (relying in part on the All Writs Act in concluding that "[n]o matter what, courts have the power to defend their judgments as res judicata, including the power to enjoin or stay subsequent arbitrations"); Hartley v. Stamford Towers Ltd. P'ship, Nos. 92-16802 & 92-56528, 1994 WL 463497, at *3 *4, 1994 U.S. App. LEXIS 23543, at *12 (9th Cir. Aug. 26, 1994) (unpublished opinion) (noting that the All Writs Act's "grant of authority includes jurisdiction to enforce a class action judgment" by enjoining an arbitration, and one party's "participation in the arbitration process cannot affect the District Court's authority to enforce its judgments"); see also, e.g., Eberhard, 2004 WL 616122, at *3 n.6, 2004 U.S. Dist. LEXIS 5029, at *12 n.6 ("If this Court does not choose to exercise [its] power here, it is not for lack of such power but because the NASD arbitrations have not been shown to interfere with the Court's jurisdiction."). But see Klay, 376 F.3d at 1102 03 ("The simple fact that litigation involving the same issues is occurring concurrently in another forum does not sufficiently threaten the court's jurisdiction as to warrant an injunction under the" All Writs Act.). We thus do not decide whether the dictates of the All Writs Act might, in another case without the type of jurisdictional retention present here, give a district court "the authority to 58 1 2 B. Application to Enforcement Order The Supreme Court has made clear that "[t]he preeminent 3 concern of Congress in passing the [FAA] was to enforce private 4 agreements into which parties had entered, and that concern 5 requires that we rigorously enforce agreements to arbitrate, even 6 if the result is 'piecemeal' litigation." 7 Inc. v. Byrd, 470 U.S. 213, 221 (1985) (emphasis added); see 8 Moses H. Cone, 460 U.S. at 20 ("[F]ederal law requires piecemeal 9 resolution when necessary to give effect to an arbitration Dean Witter Reynolds, 10 agreement." (emphasis in original)); Collins & Aikman, 58 F.3d at 11 20; see also Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 12 532 (3d Cir. 2005) ("When a dispute consists of several claims, 13 the court must determine on an issue-by-issue basis whether a 14 party bears a duty to arbitrate."). 15 for us -- and the district court -- to treat the Belands' 16 Released and non-Released FINRA Claims differently. 17 It is therefore appropriate Because we have concluded that a district court may 18 properly enjoin arbitration proceedings that are not covered by a 19 valid and binding arbitration agreement, and because we have 20 further determined that no such agreement exists in this case as 21 to the Released Claims, we find no error in, and therefore 22 affirm, that portion of the district court's Enforcement Order enjoin arbitration to prevent re-litigation," Kelly v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 985 F.2d 1067, 1069 (11th Cir. 1993), rev'd in part on other grounds by Howsam, 537 U.S. 79. 59 1 that enjoined the Belands' FINRA Arbitration as to the Released 2 Claims. 3 However, as we have also discussed, the Belands' FINRA 4 Complaint contains various claims not encompassed by -- indeed, 5 in certain cases specifically excluded by -- the Release. 6 non-Released Claims include claims based on, inter alia, 7 unsuitable investment in technology stocks, misrepresentations 8 and omissions regarding those investments, and claims involving 9 alleged conduct falling outside the Class Period. Those Because 10 Ameriprise's consent to arbitrate, even as amended (i.e., 11 limited) by the Settlement Agreement, continues to embrace the 12 non-Released Claims, the district court -- to that extent only -- 13 lacked the authority to enjoin the arbitration of the Belands' 14 FINRA Claims. 15 Enforcement Order that purported to enjoin the Belands from 16 presenting those claims to the FINRA arbitrators. 17 matter to the district court for entry of an appropriately 18 limited order enjoining only the arbitration of the Released 19 Claims. 20 21 Therefore, we vacate the portion of the We remand this CONCLUSION For the foregoing reasons, we affirm that portion of 22 the district court's judgment enjoining the Belands from 23 arbitrating their Released Claims before FINRA arbitrators, and 24 we vacate that portion of the court's judgment enjoining 25 arbitration of any non-Released Claims. 60 In light of our 1 disposition of this appeal, we dismiss as moot the Belands' 2 appeal from the district court's denial of their motion for 3 reconsideration. 4 We remand for further proceedings. Each party shall bear his, her, or its own costs. 61
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
