In Menga v. Clark Dodge & Company, Inc., et al., Index No. 650081/2011, the Supreme Court of the State of New York recently denied a bid to compel arbitration of two stockbrokers’ putative class claims alleging failure to pay overtime and impermissible wage deductions, despite the presence of an arbitration provision in their employment agreements.
Deric Menga and Wildred Ignace (the “Plaintiffs”) are stockbrokers for Clark Dodge & Company (the “Defendants”), a brokerage and wealth management services provider. In their pleading, Plaintiffs allege that the Defendants (1) failed to pay overtime in violation of 12 NYCRR § 142-2.2; (2) took impermissible wage deductions contrary to N.Y. Labor Law § 193; (3) took illegal pay deductions and deductions from wages in violation of N.Y. Labor Law § 198-b; and (4) failed to pay wages and commissions on a timely basis contrary to N.Y. Labor Law § 191.
The Defendants sought to dismiss Plaintiffs’ claims because, among other reasons, Defendants believed Plaintiffs asserted their claims in the wrong forum and should be compelled to arbitrate the dispute before the Financial Industry Regulatory Authority, Inc. (“FINRA”). In support of their argument, the Defendants relied on an agreement signed by the Plaintiffs, which states that Plaintiffs agreed to arbitrate any dispute “that is required to be arbitrated under the rules, constitutions, or by-laws of [FINRA] as may be amended from time to time…”
Defendants’ argument is an attractive one, given the boon employers received under the United States Supreme Court decision AT&T Mobility v. Concepcion, 563 U.S. ___ (2011), which, under limited circumstances, permits employers to force employees to resolve their disputes in arbitration on an individual basis. However, Concepcion concerned the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (the “FAA”). FINRA regulations are not nearly so antagonistic to class proceedings.
It is true, as the Defendants argued, that FINRA Rule 13204(d) prohibits arbitration of class action claims and specifically prohibits enforcement of “any arbitration agreement against a member of a… putative class action with respect to any claim that is the subject of the… class action…” However, that prohibition applies only in an extremely limited set of circumstances: (1) when class certification has been denied; (2) when an existing class has been decertified; or (3) when a member of the certified or putative class has been excluded from the action by either the court or the member’s own determination.
Because none of those conditions had been met with respect to the Plaintiffs, the court denied the Defendants’ attempt to compel arbitration.
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