Christopher Laver v. Credit Suisse Securities (Usa) ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER M. LAVER, on behalf No. 18-16328
of himself and others similarly
situated, D.C. No.
Plaintiff-Appellant, 3:18-cv-00828-
WHO
v.
CREDIT SUISSE SECURITIES (USA), OPINION
LLC,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
William Horsley Orrick, District Judge, Presiding
Argued and Submitted February 13, 2020
San Francisco, California
Filed September 18, 2020
Before: Ronald M. Gould and Mary H. Murguia, Circuit
Judges, and Gary Feinerman, * District Judge.
Opinion by Judge Feinerman
*
The Honorable Gary Feinerman, United States District Judge for
the Northern District of Illinois, sitting by designation.
2 LAVER V. CREDIT SUISSE SECURITIES (USA)
SUMMARY **
Arbitration
The panel affirmed the district court’s dismissal of a
putative class action suit against Credit Suisse Securities,
USA in favor of arbitration.
Plaintiff worked as a financial advisor at Credit Suisse
Securities, USA (“CSSU”), and brought this putative class
action alleging he was owed deferred compensation. CSSU
moved to dismiss based on an arbitration clause and general
class waiver set forth in an Employee Dispute Resolution
Program. The Financial Industry Regulatory Authority
(“FINRA”) is a securities industry self-regulatory
organization that imposes rules regulating the conduct of its
broker-dealer members. CSSU is a FINRA member.
Plaintiff argued that FINRA Rule 13204(a)(4) barred CSSU
from compelling arbitration of his claims.
The panel rejected plaintiff’s contention that Rule 13204
invalidated the Employee Dispute Resolution Program’s
class waiver. Because the class waiver survived, the panel
held that plaintiff relinquished his right to bring class claims
in any forum. Because plaintiff was left with only individual
claims, Rule 13204(a)(4)’s prohibition on enforcing
arbitration agreements directed at putative or certified claims
had no application here. In accord with the Second Circuit’s
decision in Cohen v. UBS Fin. Servs., Inc., 799 F.3d 174 (2d
Cir. 2015), the panel held that the district court correctly
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
LAVER V. CREDIT SUISSE SECURITIES (USA) 3
ordered the parties to arbitrate plaintiff’s remaining
individual claims.
COUNSEL
Roger N. Heller (argued) and Robert J. Nelson, Lieff
Cabraser Heimann & Bernstein LLP, San Francisco,
California; Taras Kick, The Kick Law Firm APC, Los
Angeles, California; Jeffrey K. Riffer and Julie Z. Kimball,
Elkins Walt Weintraub Reuben Gartside LLP, Los Angeles,
California; for Plaintiff-Appellant.
David Jacobs (argued), Edward J. Loya Jr., Deanna L.
Ballesteros, and David M. Prager, Epstein Becker & Green,
Los Angeles, California, for Defendant-Appellee.
OPINION
FEINERMAN, District Judge:
The district court dismissed Christopher Laver’s putative
class action suit against Credit Suisse Securities, USA
(“CSSU”) in favor of arbitration. 2018 WL 3068109 (N.D.
Cal. June 21, 2018). Laver appeals, arguing that Financial
Industry Regulatory Authority (“FINRA”) Rule 13204(a)(4)
bars CSSU from compelling arbitration of his claims. We
affirm.
I
Laver worked as a financial adviser in CSSU’s “Private
Banking Division.” Form contracts governing the
employment of CSSU financial advisers entitled them to
4 LAVER V. CREDIT SUISSE SECURITIES (USA)
“deferred compensation” unless they resigned or were
terminated for cause. A “Change in Control” provision in
the contracts provided that certain corporate acquisitions
would allow the advisers to retain their entitlement to certain
unvested deferred compensation.
In October 2015, CSSU announced that it had entered
into a “recruiting agreement” with Wells Fargo and would
shut down its financial advisory operations. The agreement
stated that Wells Fargo would recruit former CSSU financial
advisers but would not be required to offer them
employment. Laver alleges that CSSU entered into the
agreement to circumvent the “Change in Control” provision
and avoid paying its financial advisers millions of dollars in
deferred compensation. CSSU ultimately paid deferred
compensation only to those advisers hired by Wells Fargo,
and not to advisers—including Laver—whom Wells Fargo
did not hire.
Alleging that he is owed deferred compensation, Laver
filed this putative class action suit, which alleges breach of
contract and other state law claims. CSSU moved to dismiss
the suit in favor of arbitration. CSSU premised its motion
on an arbitration clause and a general class waiver set forth
in an Employee Dispute Resolution Program (“EDRP”)
agreed to by Laver and the other financial advisers. The
arbitration clause states: “The three steps of the [EDRP] are
. . . the only means by which [CSSU] employees located in
the United States are able to seek resolution of employment-
related claims of the type covered by the [EDRP]. They may
not sue in court as to these claims.” The class waiver states:
“An employee’s agreement to abide by the terms of the
[EDRP] includes an agreement not to serve as a class
representative or class member or act as a private attorney
general in any dispute with [CSSU].” (Laver contends that
LAVER V. CREDIT SUISSE SECURITIES (USA) 5
the 2015 version of the EDRP governs, and we assume
without deciding that he is correct.)
Laver argued to the district court that FINRA Rule
13204(a)(4) bars CSSU, a FINRA member, from compelling
arbitration of his claims. The district court disagreed,
reasoning that Rule 13204 does not bar CSSU from
enforcing the EDRP’s class waiver and that, because the
waiver renders Laver unable to pursue a class action in any
forum—including arbitration—the Rule’s prohibition
against the compelled arbitration of putative class actions
does not apply to his claims. 2018 WL 3068109, at *7–10.
II
“We review de novo the district court’s decisions about
the arbitrability of claims.” Brennan v. Opus Bank, 796 F.3d
1125, 1128 (9th Cir. 2015) (internal quotation marks
omitted).
A
FINRA is a securities industry self-regulatory
organization registered with the Securities and Exchange
Commission under Section 15A of the Securities Exchange
Act of 1934, 15 U.S.C. § 78o-3. As a condition of its
registration, FINRA must impose rules regulating the
conduct of its broker-dealer members and other participants.
Id. § 78o-3(b)(6)–(8). “Upon joining FINRA, a member
organization agrees to comply with FINRA’s rules.” UBS
Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643,
648 (2d Cir. 2011). A “FINRA member, therefore, . . . is
bound to adhere to FINRA’s rules and regulations, including
its Code and relevant arbitration provisions contained
therein.” Id. at 649; see also Goldman, Sachs & Co. v. City
of Reno, 747 F.3d 733, 737 (9th Cir. 2014) (Battaglia, J.,
6 LAVER V. CREDIT SUISSE SECURITIES (USA)
concurring) (“To exercise [its] oversight, FINRA has
instituted rules with which its members … agree to
comply.”). CSSU is a FINRA member.
FINRA Rule 13204(a) provides in relevant part:
(a) Class Actions
(1) Class action claims may not be
arbitrated under the [FINRA] Code [of
Arbitration Procedure for Industry Disputes].
(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) a copy of a notice filed with the
court in which the class action is pending
that the party will not participate in the
class action or in any recovery that may
result from the class action, or has
withdrawn from the class according to
any conditions set by the court; or
(B) a notice that the party will not
participate in the class action or in any
recovery that may result from the class
action.
LAVER V. CREDIT SUISSE SECURITIES (USA) 7
(3) The Director will refer to a panel any
dispute as to whether a claim is part of a class
action, unless a party asks the court hearing
the class action to resolve the dispute within
10 days of receiving notice that the Director
has decided to refer the dispute to a panel.
(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 the
class by the court; or
• The member of the certified or
putative class elects not to participate
in the class or withdraws from the
class according to conditions set by
the court, if any.
***
These subparagraphs do not otherwise affect
the enforceability of any rights under the
Code or any other agreement.
FINRA, Rule 13204 (2012).
8 LAVER V. CREDIT SUISSE SECURITIES (USA)
Section 2 of the Federal Arbitration Act (“FAA”)
provides in relevant part:
A written provision in any maritime
transaction or a contract evidencing a
transaction involving commerce to settle by
arbitration a controversy thereafter arising
out of such contract or transaction . . . 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. A court 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
(2010) (quoting First Options of Chi., Inc. v. Kaplan,
514 U.S. 938, 943 (1995)). “As with any other contract, the
parties’ ‘intentions control.’” Stolt-Nielsen S.A. v.
AnimalFeeds Int’l Corp., 559 U.S. 662, 664 (2010) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 626 (1985)).
Although the FAA imposes “a liberal federal policy
favoring arbitration agreements” that “requires courts to
enforce agreements to arbitrate according to their terms,” its
mandate can be “overridden by a contrary congressional
command.” CompuCredit Corp. v. Greenwood, 565 U.S.
95, 98 (2012) (quoting Shearson/Am. Express Inc. v.
McMahon, 482 U.S. 220, 226 (1987)). To defeat arbitration,
Laver must therefore establish that Rule 13204(a)(4) is
“contrary” to the EDRP’s arbitration agreement, such that it
bars CSSU from enforcing it against him, and that the Rule
is a “congressional command” that overrides the FAA.
Cohen v. UBS Fin. Servs., Inc., 799 F.3d 174, 176 (2d Cir.
2015). “We need not consider whether Rule 13204 is a
LAVER V. CREDIT SUISSE SECURITIES (USA) 9
‘congressional’ command because we conclude that it is not
‘contrary’” to the EDRP’s arbitration agreement. Id.
B
At the outset it is important to understand that
“[a]lthough [class action] waivers are often found in
arbitration agreements (and are so incorporated in this case),
the two contract terms are conceptually distinct.” Id.
(emphasis added); see also Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. 63, 70 (2010) (“[A]s a matter of
substantive federal arbitration law, an arbitration provision
is severable from the remainder of the contract.” (quoting
Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440, 445
(2006))). A class action waiver is a promise to forgo a
procedural right to pursue class claims. Am. Exp. Co. v.
Italian Colors Restaurant, 570 U.S. 228, 234 (2013). By
contrast, an agreement to arbitrate “is a promise to have a
dispute heard in some forum other than a court.” Cohen,
799 F.3d at 179. Rule 13204 restricts the latter, but not the
former. Id.
CCSU is not seeking to arbitrate Laver’s class action
claims. Rather, it seeks to dismiss Laver’s class action
claims under the EDRP’s class action waiver and then to
compel arbitration of his individual claims under the
EDRP’s arbitration agreement. Laver does not dispute that
if CSSU may enforce the EDRP’s class waiver, then he may
pursue only individual claims. In that case, Rule
13204(a)(4), which prohibits the compelled arbitration only
of claims that are the subject of a certified or putative class
action, would not preclude CSSU from enforcing the
EDRP’s arbitration agreement against his remaining
individual claims. Laver contends, however, that Rule
13204(a)(4) bars CSSU from enforcing the EDRP’s class
waiver in any forum. If Laver is right, he can pursue class
10 LAVER V. CREDIT SUISSE SECURITIES (USA)
claims against CSSU in any forum, which means that Rule
13204(a)(4) could bar CSSU from enforcing the EDRP’s
arbitration agreement against him altogether.
Laver’s contention fails to persuade. If Rule 13204 were
read to bar class waivers, it would, when enforced along with
the Rule’s prohibition against the compelled arbitration of
class claims, entirely bar the enforcement of agreements to
arbitrate claims that could be maintained as part of a putative
or certified class action. Although reading Rule 13204 to bar
class action waivers might not, on its face, expressly
interfere with arbitration, the Supreme Court’s decision in
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011),
makes clear that a rule not expressly targeting arbitration—
like a rule restricting the availability of class waivers—can
interfere with arbitration in a manner that impermissibly
conflicts with the FAA. Specifically, AT&T Mobility held
that California’s judge-created Discover Bank rule barring
class action waivers “interfere[d] with fundamental
attributes of arbitration and thus create[d] a scheme
inconsistent with the FAA” by “[r]equiring the availability
of classwide arbitration.” Id. at 344.
Laver’s reading of Rule 13204 to bar class waivers
would interfere with arbitration to an even greater extent by
moving the resolution of class claims out of arbitration
entirely. Accordingly, Rule 13204 can bar class waivers in
arbitration only if that bar is a “contrary congressional
command” that “override[s]” the FAA’s “require[ement]
[that] courts … enforce agreements to arbitrate according to
their terms.” CompuCredit, 565 U.S. at 98; see Cohen,
799 F.3d at 176, 178 (explaining that the plaintiff would
have to establish that Rule 13204 “qualifies as a
congressional’ command,” but declining to decide the issue
“because [the Rule] is not ‘contrary’” to a materially
LAVER V. CREDIT SUISSE SECURITIES (USA) 11
identical class waiver)). For the following reasons, even
assuming Rule 13204 qualifies as a “congressional
command,” the Rule does not bar class waivers with the
clarity necessary to displace the FAA’s instruction that
courts enforce arbitration agreements according to their
terms. The Rule therefore does not bar CSSU from
enforcing the EDRP’s class waiver—and then the EDRP’s
arbitration agreement—against Laver.
1
Laver’s first argument—that where, as here, a class
waiver is included in an arbitration agreement, Rule
13204(a)(4)’s prohibition on enforcing the arbitration
agreement also bars enforcement of the class waiver—
requires little discussion. As is clear from its text, the Rule
does not bar enforcement of all contracts containing an
arbitration agreement, or even of all contracts styled as
arbitration agreements. Rather, the Rule bars enforcement
only of an “agreement to arbitrate.” Laver’s agreement not
to pursue class litigation in any forum, including arbitration,
is not an “agreement to arbitrate.” See Cohen, 799 F.3d
at 179 (“Although [class] waivers are often found in
arbitration agreements (and are so incorporated in this case),
the two contract terms are conceptually distinct.”); cf. Rent-
A-Center, 561 U.S. at 71 (holding that “an arbitration
provision is severable from the remainder of the contract,”
even where the contract containing the arbitration provision
is itself an arbitration agreement (quoting Buckeye, 546 U.S.
at 445)). It follows that Rule 13204 does not bar CSSU’s
enforcement of the EDRP’s class waiver simply because it
is included in a document that also contains an agreement to
arbitrate. See Cohen, 799 F.3d at 178 (“Rule [13204] bars
arbitration of a claim so long as [the claim] is embedded in
a class action or collective action[.] . . . [The Rule] does not
12 LAVER V. CREDIT SUISSE SECURITIES (USA)
preserve the right to assert a claim in class or collective form
notwithstanding a contractual waiver.”).
2
Laver’s second argument—that Rule 13204 bars class
waivers regardless of whether they appear in an arbitration
agreement—also fails to persuade. The standard for
determining whether Rule 13204 is “contrary” to the EDRP,
and thereby overrides the FAA, is difficult to meet. In Epic
Systems v. Lewis, the Supreme Court considered whether
Section 7 of the National Labor Relations Act (“NLRA”)—
which guarantees the right of employees to “engage in . . .
concerted activities for the purpose of collective bargaining
or other mutual aid or protection”—protected the right of
employees to pursue a class action in court despite an
otherwise applicable arbitration agreement, thereby
displacing the FAA. 138 S. Ct. 1612, 1624–26 (2018). The
Court observed that a “party seeking to suggest that two
statutes cannot be harmonized, and that one displaces the
other, bears the heavy burden of showing ‘a clearly
expressed congressional intention that such a result should
follow.’” Id. at 1624 (emphasis added) (quoting Vinmar
Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528,
533 (1995)). The Court added that such an “intention must
be ‘clear and manifest,’” id. (quoting Morton v. Mancari,
417 U.S. 535, 551 (1974)), and that “in approaching a
claimed conflict, we come armed with the ‘stron[g]
presum[ption]’ that repeals by implication are
‘disfavored’[.]” Id. (alterations in original) (quoting United
States v. Fausto, 484 U.S. 439, 452 (1988)). The Court
concluded that Section 7 was not contrary to the arbitration
agreement in that case—and therefore did not displace the
FAA—because it “does not express approval or disapproval
LAVER V. CREDIT SUISSE SECURITIES (USA) 13
of arbitration” or “mention class or collective action
procedures.” Id.
Unlike Section 7 of the NLRA, Rule 13204 imposes
explicit limits on arbitration—specifically, a FINRA
member’s ability to enforce an arbitration agreement
directed at claims that are part of a certified or putative class
action. But the Rule does not expressly prohibit, and in fact
does not even mention, class waivers. Under the standard
articulated in Epic Systems, it necessarily follows that the
Rule does not present a sufficiently clear prohibition on class
waivers to be “contrary” to the EDRP, such that it would
displace the FAA’s instruction to enforce arbitration
agreements according to their terms. Therefore, the Rule
does not prohibit CSSU from enforcing the EDRP’s class
action waiver—and, consequently, its arbitration agreement.
See id. at 1632 (holding that where a court can “easily read”
an enactment “to work in harmony” with the FAA, “that is
where [the court’s] duty lies”).
This conclusion is fortified by the final sentence of Rule
13204, which reads: “These subparagraphs do not otherwise
affect the enforceability of any rights under the [FINRA]
Code [of Arbitration Procedure for Industry Disputes] or any
other agreement.” FINRA Rule 13204. Because Rule 13204
specifically bars enforcement of certain arbitration
agreements but does not mention class waivers, that sentence
confirms that the Rule should not be read to prohibit a
FINRA member from enforcing a class waiver—which, as
noted, is an agreement separate from an arbitration
agreement and thereby qualifies as an “other agreement.”
See Cohen, 799 F.3d at 179 (“Although [class] waivers are
often found in arbitration agreements (and are so
incorporated in this case), the two contract terms are
conceptually distinct.”); but cf. Dep’t of Enf’t v. Charles
14 LAVER V. CREDIT SUISSE SECURITIES (USA)
Schwab & Co., 2014 WL 1665738, at *7 n.11 (FINRA Bd.
of Govs. Apr. 24, 2014) (taking the contrary view of the
phrase “any other agreement” in a materially identical
sentence of another FINRA Rule, but erroneously assuming
that a class waiver appearing in the same instrument as an
arbitration agreement is part of, rather than severable from,
the agreement to arbitrate).
Laver offers several other grounds—resting variously on
the Rule’s regulatory history, an SEC order concerning a
predecessor rule, a FINRA letter, a FINRA notice, and a
FINRA Board of Governors decision—to divine a
prohibition on class waivers in Rule 13204. There is no need
to delve into those materials, for the SEC’s or FINRA’s
understanding of a FINRA rule or the rule’s relationship to
the FAA cannot overcome the absence of a “clear and
manifest” prohibition against class waivers in Rule 13204.
Epic Sys., 138 S. Ct. at 1624; see also id. at 1629 (holding
that an agency is owed no deference when it interprets rules
not “in isolation,” but instead “in a way that limits the work
of a second statute, the Arbitration Act,” reasoning that “the
reconciliation of distinct statutory regimes is a matter for the
courts” (quoting Gordon v. N.Y. Stock Exch., Inc., 422 U.S.
659, 685–86 (1975)).
In sum, Laver is wrong to contend that Rule 13204
invalidates the EDRP’s class waiver. Because the class
waiver survives, Laver relinquished his right to bring class
claims in any forum, and because he is left with only
individual claims, Rule 13204(a)(4)’s prohibition on
enforcing arbitration agreements directed at putative or
certified class claims has no application here. It follows that
the district court correctly ordered the parties to arbitrate
Laver’s remaining individual claims. In so holding, we align
ourselves with the Second Circuit’s decision in Cohen v.
LAVER V. CREDIT SUISSE SECURITIES (USA) 15
UBS Financial Services, Inc., supra, the only appeals court
decision to have addressed a materially identical dispute.
AFFIRMED.