Cohen v. UBS Fin. Servs., Inc.

• Citation: 799 F.3d 174
• Decision Date: 30 June 2015
• Docket Number: Docket No. 14–781–cv.
• Parties: Eliot COHEN, on behalf of himself and all others similarly situated, Plaintiff–Appellant, David Hale, Charles Shoemaker, on behalf of themselves and all others similarly situated, Philip Ricasata, Stan Sklenar, Plaintiffs, v. UBS FINANCIAL SERVICES, INC., UBS AG, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

799 F.3d 174

Eliot COHEN, on behalf of himself and all others similarly situated, Plaintiff–AppellantDavid Hale, Charles Shoemaker, on behalf of themselves and all others similarly situated, Philip Ricasata, Stan Sklenar, Plaintiffs

v.UBS FINANCIAL SERVICES, INC., UBS AG, Defendants–Appellees.

Docket No. 14–781–cv.

United States Court of Appeals, Second Circuit.

Argued: Jan. 30, 2015.

Decided: June 30, 2015.

Alexander H. Schmidt (Jeffrey G. Smith, Robert Abrams, and Matthew M. Guiney, on the brief), Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, for Plaintiff–Appellant.

Mark A. Perry (Eugene Scalia, Paul Blankenstein, and Rachel E. Mondl, on the brief), Gibson, Dunn & Crutcher LLP, Washington, D.C., for Defendants–Appellees.

Before JACOBS, WESLEY, and CARNEY, Circuit Judges.

Opinion

DENNIS JACOBS, Circuit Judge:

Eliot Cohen, a financial advisor employed by UBS Financial Services, Inc. (“UBS”), consented by contract to arbitrate “claims concerning compensation, benefits or other terms or conditions of employment” before the Financial Industry Regulatory Authority (“FINRA”), and to waive “any right to commence, be a party to or an actual or putative class member of any class or collective action arising out of or relating to [his] employment with UBS.”

Cohen nevertheless initiated a putative class and collective action against UBS, asserting wage-and-hour claims under the Fair Labor Standards Act (“FLSA”) and California law, including claims under California's Labor Code Private Attorneys General Act (“PAGA”). UBS moved to stay the action and compel arbitration. Without disputing that the arbitration agreement covered his claims, Cohen argued that enforcement of it was barred by Rule 13204 of the FINRA Code of Arbitration Procedure for Industry Disputes (“Industry Code”). The district court granted UBS's motion and denied Cohen's motion for reconsideration.

On appeal, Cohen argues that Rule 13204 must be treated as a “contrary congressional command” that overrides the enforceability of the arbitration agreement under the Federal Arbitration Act (“FAA”). See CompuCredit Corp. v. Greenwood, ––– U.S. ––––, 132 S.Ct. 665, 669, 181 L.Ed.2d 586 (2012) (internal quotation marks omitted). We need not consider whether Rule 13204 is a “congressional” command because we conclude that it is not “contrary.” The Rule does not prohibit a pre-dispute waiver of class and collective action procedures, and permits FINRA arbitration of individual wage-and-hour claims.

Cohen argues that, under California law, his PAGA claims cannot be arbitrated. See Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129, 145 (2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 1155, 190 L.Ed.2d 911 (2015). We need not consider that argument because Cohen's PAGA claims are in any event time-barred.

We affirm.

BACKGROUND

The decisive facts are undisputed.

Cohen, a resident of California, was employed by UBS as a financial advisor. He entered into a contract (the “Compensation Plan”), which provided as follows:

[Y]ou and UBS agree that any disputes between you and UBS including claims concerning compensation, benefits or other terms or conditions of employment ... including but not limited to, claims arising under the Fair Labor Standards Act ..., or any other federal, state or local employment ... laws, rules or regulations, including wage and hour laws, will be determined by arbitration as authorized and governed by the arbitration law of the state of New York. Any such arbitration will be conducted under the auspices and rules of [FINRA] .... By agreeing to the terms of this Compensation Plan, you waive any right to commence, be a party to or an actual or putative class member of any class or collective action arising out of or relating to your employment with UBS.

A. 48 (emphases added).¹

FINRA is a self-regulatory organization that (among other things) sponsors an arbitration forum. See generally Securities and Exchange Commission Release No. 34–56145, 72 Fed.Reg. 42169, 42188–89 (Aug. 1, 2007). Use of that forum to adjudicate disputes between FINRA members and “associated persons” is governed by the Code of Arbitration Procedure for Industry Disputes (“Industry Code”). See FINRA Rule 13200(a). UBS is a FINRA member, and Cohen (a financial advisor registered with FINRA) is an associated person. See FINRA Rule 13100(a), (o ), (r).

In 2011, Cohen sued UBS and its parent company, UBS AG, in the United States District Court for the Central District of California, asserting wage-and-hour claims under the FLSA and California state law. The case was transferred to the Southern District of New York, and the complaint was amended to add plaintiffs, each of whom had also entered into the Compensation Plan.

Following amendments, the operative complaint alleged: (1) an FLSA overtime claim on behalf of a putative nationwide collective of current and former UBS financial advisors, see 29 U.S.C. § 216(b), and (2) claims under the California Labor Code (“CLC”) and the California Unfair Competition Law on behalf of a putative California-wide Rule 23 class, seeFed.R.Civ.P. 23. The CLC claims sought civil penalties under California's Labor Code Private Attorneys General Act (“PAGA”). See Cal. Lab.Code § 2699 (permitting “aggrieved employee[s]” to bring claims for civil penalties on behalf of state labor regulators).

The defendants moved to stay the case and compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2 et seq., arguing that the claims were covered by the arbitration agreements executed by each of the plaintiffs. In opposition, the plaintiffs argued that Rule 13204 of the Industry Code prohibited UBS from enforcing those arbitration agreements during the pendency of a putative class or collective action.² The district court (Jones, J.) granted the defendants' motion and stayed the case pending FINRA arbitration. The plaintiffs' motion for reconsideration was denied (Schofield, J. ).

To facilitate appeal, the parties agreed to dismissal of the case with prejudice and stipulated that the plaintiffs would not pursue FINRA arbitration. See 9 U.S.C. § 16. Cohen then appealed the district court orders compelling arbitration and denying reconsideration.³

DISCUSSION

We review de novo the grant of a motion to compel arbitration, Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 364 (2d Cir.2003) ; denial of a motion for reconsideration is reviewed for abuse of discretion, RJE Corp. v. Northville Indus. Corp., 329 F.3d 310, 316 (2d Cir.2003).

I

Under the FAA, “[a] written provision in ... a contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Courts may compel arbitration of “only those disputes ... that the parties have agreed to submit,” Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 302, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (internal quotation marks omitted), and “as with any other contract, the parties' intentions control,” Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (internal quotation marks omitted). If the parties intended to arbitrate a dispute, courts are generally required to “enforce [such] agreements ... according to their terms.” CompuCredit Corp. v. Greenwood, ––– U.S. ––––, 132 S.Ct. 665, 669, 181 L.Ed.2d 586 (2012). However, enforceability can be “overridden by a contrary congressional command.” Id. (internal quotation marks omitted).

Cohen does not dispute that he entered into an arbitration agreement that covers all of his claims; nor does he dispute that he consented to “waive any right to commence, be a party to or an actual or putative class member of any class or collective action.”⁴ His argument is that Rule 13204 of the FINRA Industry Code is a “contrary congressional command” that bars UBS from enforcing the arbitration agreement and his waiver of class and collective action procedures.

Cohen must therefore establish both that enforcement of the arbitration clause (including the class and collective action waivers) would be “contrary” to Rule 13204, and that Rule 13204 qualifies as a “congressional” command. CompuCredit, 132 S.Ct. at 669. We reject the first premise and need not reach the second.

II

Enforcement of the UBS Compensation Plan would not be “contrary” to Rule 13204 because the Rule bars neither the enforcement of pre-dispute waivers of class and collective action procedures nor the arbitration of Cohen's individual claims.

A

Rule 13204 says nothing about class action and collective action waivers, and cannot be read to bar enforcement of them. True, the Rule bars arbitration of a claim so long as it is embedded in a class action or collective action; but it does not preserve the right to assert a claim in class or collective form notwithstanding a contractual waiver. Section (a) of the Rule, which governs class actions, provides in relevant part:

(a) Class Actions

(1) Class action claims may not be arbitrated under the Code.

(2) Any claim that is based upon the same facts and law, and involves the same defendants as in a court-certified class action or a putative class action, or that is ordered by a court for class-wide arbitration at a forum not sponsored by a self-regulatory organization, shall not be arbitrated under the Code, unless the party bringing the claim files with FINRA one of the following: [a notice of non-participation or withdrawal from the class].

...

(4) A member or associated person may not enforce any arbitration agreement against a member of a certified or putative class action with respect to any claim that is the subject of the certified or putative class action until:

• The class certification is denied;

• The class is decertified;

• The member of the certified or putative class is excluded from

...