UBS Financial Services Inc. v. WVU Hospitals Inc.

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U.S. Court of Appeals for the Second Circuit

FINRA

Arbitration — Forum Selection

UBS Financial Services Inc. v. WVU Hospitals Inc.
11-235-cv
Judges Raggi, Lohier and Preska

Background: The plaintiff-appellants appealed the denial of their motion for a preliminary injunction that sought to enjoin the defendants from proceeding with arbitration before the Financial Industry Regulatory Authority, and alternatively requiring that the arbitration proceed in New York County. Defendants sought damages for the plaintiffs’ alleged fraud in connection with the defendants’ issuances of auction rate securities. The arbitration took place in West Virginia.

Ruling: The Second Circuit held that the defendants were entitled to arbitration. Under FINRA rules, the defendants became “customers” when they undertook to purchase auction services from the plaintiff. The Second Circuit further held, however, that the enforceability of the forum selection clause was a procedural issue for the FINRA arbitrators to address and the district court lacked jurisdiction to resolve it.

Andrew J. Ceresney of Debevoise & Plimpton LLP for the plaintiffs-appellants; James R. Swanson of Fishman Haygood Phelps Walmsley Willis & Swanson LLP for the defendants-appellees