In the recent decision, Goldman Sachs & Co. v. Golden Empire Sch. Fin. Auth., 764 F.3d 210 (2d Cir. 2014), the Second Circuit held that nearly-identical forum selection clauses in broker-dealer agreements between the broker-dealers/underwriters of auction rate securities ("ARS") and the public financing authorities who issued the ARS superseded the Financial Industry Regulatory Authority, Inc. ("FINRA") rule mandating arbitration between a customer and member. In so holding, the Second Circuit potentially has opened an avenue for firms seeking to litigate - rather than arbitrate - customer disputes subject to FINRA's mandatory arbitration rule.
In Golden Empire, the Second Circuitdecided two district court cases, Goldman Sachs & Co. v. Golden Empire Sch. Fin. Auth., 922 F. Supp. 2d 435 (S.D.N.Y. 2013) and Citigroup Global Mkts. Inc. v. N.C. E. Mun. Power Agency, No. 13 CV 1703 (S.D.N.Y. May 10, 2013). In those cases, the parties' broker-dealer agreements ("BDAs") included a forum selection clause providing that, "all actions and proceedings arising out of this [BDA] or any of the transactions contemplated hereby shall be brought in the United States District Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court." In 2012, the municipal authorities instituted separate FINRA...
