Arnold & Porter Gains Major Arbitration Waiver Ruling Before FINRA

March 12, 2013

San Francisco, March 12, 2013 -- Arnold & Porter LLP recently won a closely-watched decision before a hearing panel of the Financial Industry Regulatory Authority, which held that the agency cannot block an investment firm from including class action waivers in its customer arbitration agreements. The client in this case, Charles Schwab & Co., had amended its customer agreements to include such waivers in October 2011, soon after the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that a California restriction on class action waivers ran afoul of the Federal Arbitration Act. Although the FINRA panel on February 21 found that the client's waivers may have violated FINRA's own rules, it concluded that the agency could not enforce those rules because they are preempted by the FAA.

In the client's briefs before the panel, an Arnold & Porter legal team led by Gilbert R. Serota argued that the preemption reasoning articulated by the Supreme Court in Concepcion should apply to FINRA regulations because they were not accompanied by Congressional intent to bar class action waivers in arbitration agreements.  The briefs also referenced academic studies and cited cases with tens of millions of dollars in unclaimed winnings to argue that class actions have become counter-productive efforts in which "the interest of individual class members are often sacrificed for inordinate amounts of attorney fees." Other members of the Schwab legal team included Arnold & Porter associates Julian Waldo, Deborah Schlosberg, and Patrick Conti, as well as Lowell Haky of Schwab's legal department.

Serota, who was a partner at Howard Rice Nemerovski Canady Falk & Rabkin before it merged with Arnold & Porter last year, has represented Schwab in numerous matters since 1988, including arbitrations, class actions, and regulatory proceedings. For his lead role and what it called a "major victory" in the Schwab ruling, the Am Law Litigation Daily online newspaper named Serota "Litigator of the Week."  The case is Department of Enforcement v. Charles Schwab & Co., Inc., disciplinary proceeding number 2011029760201, in the Financial Industry Regulatory Authority.


Gilbert Serota
Gilbert R. Serota
Senior Counsel
San Francisco

Email Disclaimer