Metro. Life Ins. Co. v. Bucsek

• Decision Date: 22 March 2019
• Docket Number: August Term, 2017,Docket No. 17-881
• Citation: 919 F.3d 184
• Parties: METROPOLITAN LIFE INSURANCE CO., Plaintiff-Appellee, v. John BUCSEK, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

919 F.3d 184

METROPOLITAN LIFE INSURANCE CO., Plaintiff-Appellee,

v.John BUCSEK, Defendant-Appellant.

Docket No. 17-881

August Term, 2017

United States Court of Appeals, Second Circuit.

Argued: February 28, 2018

Decided: March 22, 2019

Jack A. Gordon (Joshua Katz, on the brief ), Kent, Beatty & Gordon, LLP, New York, NY, Christopher C. Coss, Coss & Momjian, LLP, Bala Cynwyd, PA, for Plaintiff-Appellant.

Kenneth J. Turnbull (Rudolph J. Burshnic II, on the brief ), Morgan, Lewis & Bockius LLP, New York, NY, for Defendant-Appellee.

Before: KATZMANN, Chief Judge, LEVAL, Circuit Judge, and CARTER, District Judge.^*

LEVAL, Circuit Judge:

Defendant John Bucsek, a former employee of Plaintiff Metropolitan Life Insurance Company ("MetLife"), appeals from an order of the United States District Court for the Southern District of New York (Paul A. Engelmayer, J. ) granting MetLife’s motion for a preliminary injunction barring Bucsek from pursuing claims against MetLife in arbitration, rather than in court. Bucsek had instituted an arbitration before the Financial Industry Regulatory Authority ("FINRA"), the successor to the National Association of Securities Dealers ("NASD"). MetLife had been a member of the NASD during the early part of Bucsek’s employment. MetLife argues that it has no obligation to arbitrate Bucsek’s claims because they are based on events that occurred long after MetLife and Bucsek ceased to have any connection with the NASD. The District Court ruled in MetLife’s favor, staying arbitration of Bucsek’s claims. We affirm.

BACKGROUND

In 2002, Bucsek joined MetLife’s retail distribution channel, which later became known as the MetLife Premier Client Group. He served as Co-Managing Partner and was registered with the NASD as a securities industry representative of MetLife. During the first several years of Bucsek’s employment at MetLife, until 2011, MetLife was a member of the NASD.

As an NASD member, MetLife was subject to the NASD Code of Arbitration Procedure ("NASD Code"), which required arbitration of disputes between members and "person[s] associated with a member." Rule 10201, NASD Code. Bucsek, then a registered representative of a member, was a "person associated with a member," as defined in the NASD Bylaws. See NASD Bylaws, Art. I (rr).

Bucsek, upon joining MetLife, was required to sign a Form U-4, "Uniform Application for Securities Industry Registration or Transfer," which contained an agreement to arbitrate. It provided:

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm ... that is required to be arbitrated under the rules, constitutions, or by-laws of [the NASD] ... as may be amended from time to time ....¹ App. 97–98.

On July 9, 2007, MetLife terminated its membership in the NASD. On July 30, 2007, the NASD merged with parts of the New York Stock exchange to form FINRA and the NASD code was replaced by the FINRA Code. MetLife never became a member of FINRA.

Bucsek’s employment at MetLife continued for nine years after MetLife severed its connection with the NASD, until July 1, 2016, when Massachusetts Mutual Life Insurance Company acquired the MetLife Premier Client Group.

On July 11, 2016, Bucsek filed a Statement of Claim in arbitration before FINRA, asserting claims related to unfair compensation, including breach of contract, fraud, negligence, and violation of the New Jersey Wage Payment Law, N.J.S.A §§ 34.11–4.1 et seq. His claims relate to his employment by MetLife during the period from 2011 (four years after MetLife’s 2007 withdrawal from the NASD) until the end of his employment at MetLife in 2016.

MetLife submitted a letter-motion to FINRA seeking dismissal of Bucsek’s claims, arguing that it was not required by the Code to arbitrate this dispute. By order of the Director of the FINRA Office of Dispute Resolution on December 1, 2016, FINRA denied MetLife’s application for dismissal.

On February 2, 2017, MetLife filed this this action in the United States District Court for the Southern District of New York seeking a preliminary and permanent injunction barring Bucsek from pursuing the arbitration. The district court found that MetLife had shown probability of success on the merits and granted a preliminary injunction staying the arbitration. Bucsek brought this appeal.

DISCUSSION

Bucsek contends that the District Court erred both in finding that MetLife had shown probability of success as to the non-arbitrability of the dispute, and in ruling on the question of arbitrability, rather than leaving it to the arbitrators.²

The provisions of the arbitration code are central to both of Bucsek’s contentions. It is not entirely clear whether the governing code for this dispute is the NASD Code, to which MetLife and Bucsek were undoubtedly subject from the time Bucsek began his employment at MetLife until MetLife withdrew from membership, or the FINRA Code, which replaced the NASD Code when, subsequent to MetLife’s withdrawal from the NASD, the NASD was replaced by FINRA. For purposes of this dispute at least, the main pertinent provisions of the two Codes are functionally identical, and, to the extent that they differ, the difference would not change our conclusions. We therefore find it unnecessary to decide which of the two Codes governs. Because the parties and the District Court have assumed that the FINRA Code governs, we will focus on its provisions, noting differences from NASD’s Code where appropriate.

FINRA Rule 13200 (which is substantially identical for our purposes to NASD Code Rule 10101) provides:

[A] dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among: Members; Members and Associated Persons; or Associated Persons.

For purposes of this provision, it is undisputed that, until MetLife withdrew from the NASD in 2007, it was a "member" and Bucsek was an "associated person."

FINRA Rule 13413 (which is substantially identical for our purposes to NASD Rule 10324) provides:

The panel has the authority to interpret and determine the applicability of all provisions under the Code. Such interpretations are final and binding upon the parties.

FINRA Rule 13100 defines "member" as:

[A]ny broker or dealer admitted to membership in FINRA, whether or not the membership has been terminated or cancelled. ...

The first clause of this rule, defining a member as "any broker or dealer admitted to membership" is functionally identical to the NASD’s definition of membership set forth in its Bylaws. See NASD Bylaws, Art. I (ee). The second clause (relating to survival of membership after termination or cancellation) was not a part of the NASD’s definition of membership.

Bucsek contends the district court erred in undertaking to decide whether his dispute was subject to the arbitration agreement, rather than referring that issue to the arbitrator. In general, what is determinative for deciding whether the arbitrability of a dispute is to be resolved by the court or by the arbitrator is the arbitration agreement. Just as the parties may elect through their contract to have arbitrators (rather than a court) resolve categories of disputes between them, they may similarly contract to have arbitrators (rather than a court) decide whether a particular dispute is to be arbitrated under the terms of the contract. We refer to the latter issue as the question of "arbitrability" of the dispute. The Supreme Court recently ruled in Henry Schein Inc. v. Archer & White Sales, Inc ., ––– U.S. ––––, 139 S.Ct. 524, 202 L.Ed.2d 480 (2019), that, when the parties have contracted to submit the question of the arbitrability of a dispute to arbitrators, courts must respect and enforce that contractual choice. There are many reasons why the parties to a business relationship might wish to have the arbitrability question, as well as all aspects of future disputes between them, decided by arbitrators, rather than by the courts. They might regard court proceedings as too slow, too expensive, too burdensome, or too public. They might prefer to rely on arbitrators who are familiar with the habits and customs of their area of commerce. They might prefer to have the entire matter heard in one forum, rather than two. Regardless of their reasons (and even in the absence of reasons), parties are free to enter into a binding contract by which either party can compel the other to have every aspect of a future dispute between them, including its arbitrability, determined by arbitrators. See Rent-A-Ctr., W., Inc. v. Jackson , 561 U.S. 63, 66, 69, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (finding that an arbitration agreement giving the arbitrators "exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this contract" empowered the arbitrators to resolve arbitrability of an unconscionability claim).

On the other hand, persons involved in a dispute are ordinarily entitled to have access to a court for the resolution of the dispute. It is a fundamental tenet of law that only by agreeing to arbitrate does a person surrender the right of access to a court for the resolution of a legal dispute that is subject to adjudication. See AT & T Techs., Inc. v. Comms. Workers of America , 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ("[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration." (internal quotation marks and citations omitted)). The right of access to courts is of such importance that courts will retain authority over the question of arbitrability of the particular dispute unless "the parties clearly and unmistakably provide[d]" that the question should go to arbitrators. Howsam...