On June 21, 2018 U.S. District Judge William Orrick (“Orrick”) in San Francisco granted a Motion to Dismiss (“MTD”) in the case Christopher M. Laver v Credit Suisse Securities (USA), LLC. Orrick ruled that the plaintiff Christopher Laver was bound by an agreement to arbitrate employment-related disputes and could not pursue his proposed class action on behalf of roughly 200 brokers.
In the Order Granting the Motion to Dismiss, Orrick wrote the following:
As Laver notes, Regulatory Notice 16-25 characterized as dicta a discussion in a FINRA Board of Governors 2014 enforcement action decision. Regulatory Notice 16-25 at fns. 17, 23 (discussing Board of Governor decision in Dept of Enforcement v. Charles Schwab & Co., 2014 FINRA Discipl. LEXIS 5 (April 24, 2014)). The Cohen court relied on that now-FINRA-disapproved-of-dicta from the Schwab decision suggesting firms could contract around employee rights to a FINRA arbitration (but not consumer rights to FINRA arbitration). However, the fundamental point remains; nothing in Regulatory Notice 16-25 indicates that member firms cannot contract around other, less fundamental provisions of the FINRA Code. Rule 13204 itself provides that its subparagraphs “do not otherwise affect the enforceability of any rights under the Code or any other agreement” indicating that the provisions of this specific rule are subject to waiver by private agreement. See Rule 13204