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Eleventh Circuit Allows Financial Services Company to Avoid Arbitration and Pursue Insurance Agency in Federal Court

Poole Huffman, LLC

Strategic decisions play an important role in any civil lawsuit. There are decisions regarding which claims to bring or not bring. There are decisions about which witnesses to call. There are choices regarding whether to settle or to litigate all the way to judgment. Additionally, you may find yourself in a situation in which you must decide if you prefer to resolve your case through trial or through some form of alternative dispute resolution. Regardless of the reasons why, if you and your Georgia business litigation attorney decide that litigation in court is best, it is important to fight aggressively to avoid having your case sidetracked into arbitration.

A case in which the issue of arbitration versus trial arose was a business dispute between a financial services firm and two of the advisors with whom it had contracted. The advisors involved in this case were both registered investment advisors who sold retirement plans and other investment products to the financial services company’s clients on behalf of that firm. The representatives were also licensed insurance agents, and they operated their own company, which sold property and casualty insurance.

At some point, the financial services company came to suspect that the representatives were engaging in misconduct. Specifically, the representatives’ agreement with the firm indicated that they were only allowed to market and sell the financial services company’s investment products to that company’s clients. The firm, however, believed that the representatives were using its list of potential clients as “leads” for marketing and selling property and casualty insurance on behalf of the agents’ separate entity, a practice known in the industry as “poaching.” Shortly after the representatives ended their relationship with the firm, the firm sued the representatives and their insurance agency for breach of contract and misappropriation of trade secrets.

The firm’s contract with the representatives indicated that, in the event of a dispute between the sides, the matter would be decided by arbitration before the Financial Industry Regulatory Authority. The firm submitted its dispute with the former representatives to a FINRA arbitrator. The former representatives, however, sought to go further. They argued to the trial court that it should issue an order that would compel arbitration of the entire matter, meaning both the firm’s claims against the former representatives and the firm’s claims against the former representatives’ insurance entity. There are many reasons why you, as a plaintiff, might desire to resolve a commercial dispute in a court of law as opposed to arbitration. Perhaps you think that a jury or trial court judge might give your case a fairer hearing, or perhaps you think that a trial might offer you a better chance to obtain a full and fair damages award.

The investment firm was successful in keeping its case against the insurance agency out of arbitration. The courts concluded that it was not required to arbitrate its dispute with the insurance agency. The only basis for compelling arbitration was the arbitration clause in the contracts. The contracts were only between the investment firm and the representatives. The investment firm had no contractual agreement of any kind with the insurance agency. Since the investment firm and the insurance agency had no written contract establishing an agreement to arbitrate disputes between them, the investment firm was not required to arbitrate this part of its action, so it was able to proceed with this action in federal court.

Whether you seek to resolve your case through trial or through alternative dispute resolution like arbitration, it is important to have able counsel who can advocate persuasively for your positions and interests. The skilled Atlanta business litigation attorneys at Poole Huffman, LLC have been working for many years to help their clients defend their rights. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

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