McLeod v. BTIG, LLC

NOT TO BE PUBLISHED

San Francisco City & County Super. Ct. No. CGC-19-576499

SANCHEZ, J.

BTIG, LLC (BTIG) appeals from an order denying its motion to compel arbitration as to three of the four causes of action alleged in a complaint filed by BTIG's former employee, respondent Matthew McLeod. The three claims, which allege claims for retaliation, wrongful termination, and injunctive relief, are based on respondent's contention that BTIG retaliated against him for reporting acts of discrimination in violation of the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.).^[1] BTIG contends that respondent's claims must be submitted to arbitration even though the parties' arbitration agreement excludes claims that allege "employment discrimination . . . in violation of a statute." The trial court concluded that the three claims are not arbitrable because they fall within this exclusion. We affirm.

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I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant is a global financial services firm that specializes in institutional trading, investment banking, research, and related brokerage services. It is a registered member of the Financial Industry Regulatory Authority (FINRA), ^[2] and is subject to regulations promulgated by FINRA. Pursuant to these FINRA regulations, BTIG requires all employees hired to perform regulated activities, such as investment banking services, to fill out and sign a "Uniform Application for Securities Industry Registration or Transfer Form," otherwise known as a "Form U-4."^[3]

In November 2014, BTIG hired respondent as an investment banker. As a condition of his employment, he completed and signed a Form U-4. The form included a provision requiring him to consent to the following language: "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,

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constitutions, or bylaws of the SROs^[4] indicated in Section 4 (SRO REGISTRATON) as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction." In section 4 of his Form U-4, respondent registered with FINRA.

According to respondent, during his tenure with BTIG "he witnessed blatant religious, racial and gender discrimination." For example, he observed a managing director making anti-Semitic comments regarding a key client of BTIG. That same manager also directed BTIG staff to screen out female and African-American job applicants. Respondent complained directly to BTIG executives about this discrimination, but the company reportedly "did not investigate, and instead reprimanded [respondent] for making things 'awkward.' Shortly thereafter, despite never having received a negative performance review or feedback, [respondent] was fired."

In June 2019, respondent filed a complaint against BTIG stating causes of action for retaliation in violation of the FEHA, wrongful termination in violation of public policy, injunctive relief, and unfair business practices. He alleged that in addition to being wrongfully terminated, BTIG submitted fraudulent information to FINRA resulting in a damaging designation on his publicly available FINRA profile.

BTIG filed a petition to compel FINRA arbitration and stay this lawsuit. BTIG asserted that by signing the Form U-4, respondent had agreed to arbitrate any controversy arising between him and BTIG involving his employment and its termination. Respondent filed an opposition contending

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that his claims were exempt from arbitration. Alternatively, he argued that the parties' arbitration agreement was void as unconscionable.

In September 2019, the trial court rejected respondent's unconscionability argument and granted BTIG's petition to compel arbitration of his unfair business practices claim. The court denied the petition as to respondent's claims for retaliation and wrongful termination, concluding those claims were exempt from arbitration under FINRA's arbitration rules because the rules expressly exclude claims" 'alleging employment discrimination, including a sexual harassment claim, in violation of a statute.'" The court also denied the petition as to the claim for injunctive relief because that claim "is best characterized as part of [respondent's] FEHA retaliation claim." The court stayed the case pending completion of arbitration on the unfair business practices claim. This appeal followed.

II. DISCUSSION

A. Standard of Review

" 'There is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court's denial rests solely on a decision of law, then a de novo standard of review is employed. [Citations.]' [Citation.] Interpreting a written document to determine whether it is an enforceable arbitration agreement is a question of law subject to de novo review when the parties do not offer conflicting extrinsic evidence regarding the document's meaning." (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 60.) Here, the parties offered no conflicting extrinsic

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evidence on the meaning of the arbitration provisions at issue. We therefore apply the de novo standard of review.

B. Applicable Legal Principles

The Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) applies to employee disputes with FINRA member firms. (Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 633-634; see also Valentine Capital Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 613 (Valentine Capital).) "Courts interpret the FINRA arbitration rules the same way they interpret contracts, giving effect to the parties' intent as expressed by the plain and ordinary meaning of the language they used." (Ronay Family Limited Partnership v. Tweed, supra, 216 Cal.App.4th at pp. 841-842.) As BTIG correctly observes, federal and state public policy strongly favors arbitration and seeks to ensure that" 'private agreements to arbitrate are enforced according to their terms.'" (Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. (2010) 559 U.S. 662, 664; see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) However, "' "there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate . . . ." '" (Victoria v. Superior Court (1985) 40 Cal.3d 734, 744; accord, Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 855.)" '[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he [or she] has not agreed so to submit.'" (AT&T Technologies, Inc. v. Communications Workers (1986) 475 U.S. 643, 648; see also Cohen, at pp. 855, 857-858.)

The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement, while the party opposing the petition bears the burden of establishing a defense to the agreement's enforcement. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) Doubts

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regarding the validity of an arbitration agreement generally are resolved in favor of arbitration. (Valentine Capital, supra, 174 Cal.App.4th at p. 613; Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

C. Form U-4 Arbitration Clause

Respondent signed Form U-4, agreeing "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 bylaws of the SROs . . . as may be amended from time to time . . . ." FINRA's Code of Arbitration for Industries Disputes (FINRA Code) provides that "[e]xcept as otherwise provided in the Code, 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." (FINRA Code, rule13200(a).) FINRA Code rule 13201(a) (Rule 13201(a)) carves out an exception to the arbitration of such claims. It provides in relevant part: "A claim alleging employment discrimination, including sexual harassment, in violation of a statute, is not required to be arbitrated under the Code. Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose."

The foregoing language is clear and unambiguous. Under the FINRA provision quoted above, the parties agreed to arbitrate all disputes arising out of business activities between a FINRA member (BTIG) and an associated person (respondent), except for claims "alleging employment

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discrimination . . . in violation of a statute."^[5] Although the FINRA rules permit the arbitration of statutory employment discrimination claims if the parties privately agree to doing so, BTIG does not identify any such agreement between the parties here. Accordingly, the question presented in this appeal is whether the three causes of action for retaliation, wrongful termination, and injunctive relief allege claims of employment discrimination in violation of a statute. If they do, those claims cannot be arbitrated pursuant to the unambiguous terms of the parties' arbitration agreement.

D. Respondent's Claims

i. Retaliation

In the complaint's first cause of action, respondent alleges that he was terminated in retaliation for reporting unlawful discrimination on the basis of religion, sex, and race. To state a claim for retaliation under the FEHA, a plaintiff must show that "(1) he or she engaged in a 'protected activity,' (2) the employer...