13-3963-cv
Lloyd v. J.P. Morgan Chase & Co.


                             UNITED STATES COURT OF APPEALS

                                     FOR THE SECOND CIRCUIT

                                              August Term, 2014

                      (Argued: October 8, 2014                   Decided: June 29, 2015)

                                            Docket No. 13-3963-cv

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

JEFFREY LLOYD, on behalf of himself and those
similarly situated, ELLEN SZYMKIEWICZ, on
behalf of herself and those similarly situated,
GRAEME PATEY, PETER PICCOLI, SCOTT
VANHOOGSTRAAT, JOSHUA STROUSE,
JENNIFER ZAAT-HETELLE, ROBERT M.
JOHNSON, SAMIR MAKAR,
                    Plaintiffs,

LAWRENCE R. KAUFMANN, SUSAN HYMAN,
ALAN B. KRICHMAN, JEFFREY LAMMERT,

                            Plaintiffs-Appellees,

                  - v.-

J.P. MORGAN CHASE & CO., CHASE
INVESTMENT SERVICES CORP.,
                            Defendants-Appellants.*

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

         Before:            JACOBS, SACK, and DRONEY, Circuit Judges.

         J.P. Morgan Chase & Co. and Chase Investment Services Corp. appeal from

an order of the United States District Court for the Southern District of New York

(Swain, J.), denying their motion to compel arbitration. We conclude that the

district court correctly read the arbitration agreement to incorporate the rules of

the Financial Industry Regulatory Authority (“FINRA”), which bar FINRA

arbitrators from hearing claims that have been brought as putative class or

collective actions. Affirmed.

         Judge Sack concurs dubitante in a separate opinion.

                                                        SAM S. SHAULSON (Thomas A. Linthorst,
                                                        on the brief), Morgan, Lewis & Bockius
                                                        LLP, New York, New York, for Defendants-
                                                        Appellants.

                                                        RACHEL M. BIEN (Adam T. Klein and
                                                        Deirdre Aaron, on the brief), Outten &
                                                        Golden LLP, New York, New York, for
                                                        Plaintiffs-Appellees.



    *
     The Clerk of Court is respectfully directed to amend the official caption in
this case to conform with the caption above.

                                                            2
                                        LEAH M. NICHOLLS, Public Justice, P.C.,
                                        Washington, D.C., for Amicus Curiae
                                        Public Justice, P.C.

DENNIS JACOBS, Circuit Judge:

      Former employees of Chase Investment Securities Corp. (now J.P. Morgan

Securities, LLC) filed a putative class and collective action against J.P. Morgan

Chase & Co. and Chase Investment Services Corp. (collectively, “Chase”) for

violations of state and federal overtime laws. Chase moved to compel arbitration

pursuant to an arbitration clause in the plaintiffs’ employment contracts. The

United States District Court for the Southern District of New York (Swain, J.)

denied the motion. The court interpreted the clause to cover only claims or

controversies “required to be arbitrated by the FINRA Rules,” ruled that it thus

incorporated the arbitrability restrictions of the FINRA Code of Arbitration

Procedure for Industry Disputes (“FINRA Rules”), and applied the current

version of FINRA Rule 13204, which prohibits arbitration of claims brought as

putative class or collective actions.

      On appeal, Chase contends that the arbitration clause incorporates FINRA

Rules that govern arbitration procedure, but not rules (like Rule 13204) that

govern the scope of arbitrable issues. Chase argues that the district court erred


                                          3
by: (1) construing the arbitration clause to incorporate Rule 13204, and

(2) applying the amended version of Rule 13204 in effect at the time of Chase’s

motion, rather than the earlier version that was in effect when plaintiffs entered

into their contracts. We affirm.




                                   BACKGROUND

      The following facts are drawn from plaintiffs’ First Amended Class Action

Complaint, which we presume to be true at this juncture. See, e.g., DeJesus v. HF

Mgmt. Servs., LLC, 726 F.3d 85, 87 (2d Cir. 2013).

      Chase employs Financial Advisors to sell financial products at its

numerous branch locations.1 Chase classifies these employees as overtime-

exempt and does not pay them for hours worked in excess of forty per week.

Plaintiffs Lawrence R. Kaufmann, Susan Hyman, Alan B. Krichman, and Jeffrey

Lammert, who were employed as Financial Advisors in New York and New

Jersey, contend that Chase’s practices violate the overtime provisions of the New



  1
      The term “Financial Advisors” covers job titles that include “Personal
Financial Advisors, Independent Financial Advisors, Financial Advisor
Associates, Senior Financial Consultants, Investment Sales Representatives,
and/or RIS Team Leaders.”

                                         4
York Labor Law (“NYLL”), the New Jersey State Wage and Hour Law

(“NJSWHL”), and the Fair Labor Standards Act (“FLSA”). They plead: (1) NYLL

claims on behalf of a putative Rule 23 class of current and former Financial

Advisors employed in New York; (2) NJSWHL claims on behalf of a putative

Rule 23 class of current and former Financial Advisors employed in New Jersey;

and (3) FLSA claims as part of a 29 U.S.C. § 216(b) collective action of current

and former Financial Advisors employed nationwide.2

      Chase is registered with FINRA, a self-regulatory organization that adopts

and enforces rules for its member firms. See Securities and Exchange

Commission Release No. 34–56145, 72 Fed. Reg. 42169, 42170 (Aug. 1, 2007). As

licensed securities representatives employed by Chase, plaintiffs registered with

FINRA and executed the Uniform Application for Securities Industry

Registration or Transfer (“Form U4”), under which they agreed to arbitrate any

disputes with Chase that are required to be arbitrated by the FINRA Rules.

      In addition to the Form U4, plaintiffs executed an employment agreement

(the “Chase Agreement”) that contains the following arbitration clause:

  2
      Kaufmann and Lammert are members of the putative New York class,
while Hyman and Krichman are members of the putative New Jersey class. All
four plaintiffs are members of the FLSA collective action.

                                         5
            Any claim or controversy concerning you arising out of or in
            connection with the business activities of [Chase], your
            activities and/or your appointment as a registered
            representative or your employment and/or the termination
            thereof required to be arbitrated by the FINRA Rules shall be
            resolved by individual (not class or collective) arbitration in
            accordance with the Code of Arbitration Procedure of the
            FINRA . . . , and in accordance with applicable law. . . .
            Further, no claims shall be arbitrated on a class or collective
            action or collective or class-wide basis.

(emphases added).

      The arbitration clause thus incorporates the FINRA Rules, but with

disputed effects. The issues are (1) whether the clause incorporates FINRA Rule

13204 at all, and (2) whether the parties agreed to apply (a) the version of Rule

13204 in effect at the time they entered into the Chase Agreement or (b) the

current, amended version that took effect before Chase filed its motion to

compel. The earlier version refused FINRA arbitration of class action claims,

while the current version refuses FINRA arbitration of collective action claims as

well. The difference between the two versions is thus potentially decisive as to

plaintiffs’ FLSA claims, which are brought as a collective action.

      At the time plaintiffs signed the Chase Agreement,3 FINRA Rule 13204

  3
      Other members of the putative class and collective action--including Jeffrey
Lloyd, the lead plaintiff below--either did not execute or executed a different

                                         6
provided:

            (a) Class action claims may not be arbitrated under the Code.

            (b) Any claim that is based upon the same facts and law, and
            involves the same defendants as in a court-certified class
            action or a putative class action, . . . shall not be arbitrated
            under the Code, unless the party bringing the claim files with
            FINRA [a notice of non-participation or withdrawal from the
            class].

            ...

            (d) A member or associated person may not enforce any
            arbitration agreement against a member of a certified or
            putative class action with respect to any claim that is the
            subject of the certified or putative class action until:

            •     The class certification is denied;

            •     The class is decertified;

            •     The member of the certified or putative class is
                  excluded from the class by the court; or

            •     The member of the certified or putative class elects not
                  to participate in the class or withdraws from the class
                  according to conditions set by the court, if any.

            This paragraph does not otherwise affect the enforceability of
            any rights under the Code or any other agreement.

FINRA Rule 13204 (effective Dec. 15 2008 to July 8, 2012) (“Old Rule 13204”). In


version of the Chase Agreement, and are not parties to this appeal.

                                         7
2012, FINRA relabeled the existing sections and added a new one:

            (b) Collective Actions

            (1) Collective action claims under the Fair Labor Standards
            Act . . . may not be arbitrated under the Code.

            (2) Any claim that involves plaintiffs who are
            similarly-situated against the same defendants as in a
            court-certified collective action or a putative collective action,
            or that is ordered by a court for collective action at a forum
            not sponsored by a self-regulatory organization, shall not be
            arbitrated under the Code, if the party bringing the claim has
            opted-in to the collective action.

            ...

            (4) A member or associated person may not enforce an
            agreement to arbitrate in this forum against a member of a
            certified or putative collective action with respect to any claim
            that is the subject of the certified or putative collective action
            until the collective action certification is denied or the
            collective action is decertified.

FINRA Rule 13204 (effective July 9, 2012) (“New Rule 13204”). Thus, following

the 2012 amendment, neither class nor collective action claims can be arbitrated

under the FINRA Rules.

      Plaintiffs commenced suit on December 19, 2011. On January 14, 2013,

Chase moved to compel arbitration based on the Chase Agreement’s arbitration

clause. The district court denied the motion, reasoning that the arbitration

                                         8
clause requires arbitration of only those claims required to be arbitrated under

the FINRA Rules and that, under New Rule 13204, Plaintiffs’ claims cannot be

arbitrated. We affirm.4




                                    DISCUSSION

       “A district court’s denial of a motion to compel arbitration is reviewed de

novo.” Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 26 (2d Cir. 2002).




                                           I

       Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a

contract . . . to settle by arbitration a controversy thereafter arising out of such

contract . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. In

interpreting a validly formed arbitration agreement, we apply a “presumption of

arbitrability” if the “arbitration agreement is ambiguous about whether it covers

the dispute at hand.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287,



   4
       Because we conclude that the district court correctly interpreted the
arbitration clause to incorporate the FINRA Rules, we do not consider the
argument--advanced by amicus curiae Public Justice, P.C.--that FINRA members
cannot contractually avoid the FINRA Rules.

                                           9
301 (2010); see also Goldman, Sachs & Co. v. Golden Empire School Fin. Auth.,

764 F.3d 210, 215 (2d Cir. 2014).

      However, this “policy favoring arbitration” is “merely an acknowledgment

of the FAA’s commitment to overrule the judiciary’s longstanding refusal to

enforce agreements to arbitrate and to place such agreements upon the same

footing as other contracts.” Granite Rock, 561 U.S. at 301-02 (internal quotation

marks omitted). Construction of an arbitration agreement is a matter of contract

interpretation, and “as with any other contract, the parties’ intentions control.”

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) (internal

quotation marks omitted).

      So if an arbitration clause is best construed to express the parties’ intent not

to arbitrate certain disputes, that intent controls and cannot be overridden by the

presumption of arbitrability. Granite Rock, 561 U.S. at 302; see also Allstate Ins.

Co. v. Mun, 751 F.3d 94, 97 (2d Cir. 2014). The presumption is a soft one, and has

effect “only where it reflects, and derives its legitimacy from, a judicial

conclusion that arbitration of a particular dispute is what the parties intended

because their express agreement to arbitrate . . . [is] best construed to encompass

the dispute.” Granite Rock, 561 U.S. at 303 (emphasis added). The presumption


                                          10
may tip the scale if an agreement is truly ambiguous, see Allstate, 751 F.3d at 97,

but it does not alter the controlling question: is the arbitration agreement “best

construed to encompass the dispute”?

      Citing cases from the Supreme Court and this Circuit, Chase urges that,

under the presumption, an arbitration agreement must be interpreted to cover a

dispute if the agreement is “susceptible” of such an interpretation, even if the

contrary one may be considerably more plausible. Chase further argues that the

presumption of arbitrability can be rebutted only by “positive assurances” that a

dispute is non-arbitrable.

      Most of the cases on which Chase relies were decided in the peculiar and

exceptional context of collective bargaining agreements. See Wright v. Universal

Mar. Serv. Corp., 525 U.S. 70, 78 (1998) (cautioning against extending “positive

assurances” language in AT&T Techs., Inc. v. Commc’ns Workers of Am., 475

U.S. 643, 650 (1986), to other contexts). Moreover, every case cited by Chase

predates Granite Rock, which made clear that the presumption of arbitrability is

a tool for resolving genuine ambiguity, not a bias in favor of arbitration. 561 U.S.

at 301-02.

      We thus review the district court’s interpretation under Granite Rock: does


                                         11
the Chase Agreement reflect the parties’ intent to arbitrate plaintiffs’ claims?




                                           II

      The disputed phrase in the arbitration clause is “required to be arbitrated

by the FINRA Rules,” and the principal interpretive issue is what words that

phrase is intended to modify in the following sentence:

             Any claim or controversy concerning you arising out of or in
             connection with the business activities of [Chase], your
             activities and/or your appointment as a registered
             representative or your employment and/or the termination
             thereof required to be arbitrated by the FINRA Rules shall be
             resolved by individual (not class or collective) arbitration in
             accordance with the Code of Arbitration Procedure of the
             FINRA . . . , and in accordance with applicable law.

(emphasis added).

      Since class and collective action claims cannot be arbitrated under New

Rule 13204, the question becomes whether the phrase “required to be arbitrated

by the FINRA Rules” applies to the whole category of claims and controversies

(in which case plaintiffs’ claims cannot be arbitrated), or only to claims arising

out of plaintiffs’ employment (in which case plaintiffs’ claims may be arbitrated

as claims arising out of Chase’s business activities or plaintiffs’ activities as



                                           12
registered representatives).

      The district court held that the arbitration clause requires individual

arbitration only to the extent such arbitration is “required . . . by the FINRA

Rules.” Since, as discussed, plaintiffs’ class and collective action claims are

precluded from arbitration by FINRA Rule 13204, they fall outside the scope of

the arbitration clause. We agree.5

      The arbitration clause begins with two nouns (“claim or controversy”)

followed by three modifiers:

             •     “concerning you”;

             •     “arising out of or in connection with the business
                   activities of [Chase], your activities and/or your
                   appointment as a registered representative or your
                   employment and/or the termination thereof”; and

             •     “required to be arbitrated by the FINRA Rules.”

The natural reading of this sentence is that each modifier modifies “claim or


  5
      We decline plaintiffs’ invitation to accord collateral estoppel effect to the
Ninth Circuit’s decision in Alakozai v. Chase Inv. Servs. Corp., 557 F. App’x 658
(9th Cir. 2014), which also interpreted the Chase Agreement. Offensive collateral
estoppel is inappropriate “in cases where a plaintiff could easily have joined in
the earlier action,” but declined to do so in favor of a “wait and see” approach.
Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330 (1979). Since plaintiffs opposed
consolidation with Alakozai in the proceedings below, they cannot now benefit
from a favorable ruling in Alakozai.

                                          13
controversy,” so that only a claim or controversy that satisfies each of the three

criteria “shall be resolved by . . . arbitration.”

      That reading is grammatically sound and makes substantive sense. The

arbitration clause requires the whole category of claims arbitrable under the

Chase Agreement to be arbitrated “in accordance with” the FINRA Rules. It is

therefore logical that the clause also incorporates the limitations of the FINRA

Rules as to the scope of arbitrable claims. If the universe of arbitrable claims

consists solely of claims “required to be arbitrated by the FINRA Rules,” then

such claims may always be arbitrated “in accordance with” the FINRA Rules.

      Chase’s competing interpretation is both ungrammatical and substantively

flawed. Chase argues that the absence of a comma before the phrase “required to

be arbitrated by the FINRA Rules” compels the conclusion that it modifies only

the immediately preceding words, “your employment and/or the termination

thereof.” This result is required, Chase argues, by the rule of the last antecedent,

which provides that “a limiting clause or phrase . . . should ordinarily be read as

modifying only the noun or phrase that it immediately follows,” Barnhart v.

Thomas, 540 U.S. 20, 26 (2003). See also Am. Int’l Grp. v. Bank of Am. Corp. 712

F.3d 775, 781-82 (2d Cir. 2013).


                                            14
       Fastidious use of punctuation is a virtue in a drafter and often commands

respect, but here, the absence of the comma does not support Chase’s position.

First, while the last antecedent rule can be useful, it “is not an absolute and can

assuredly be overcome by other indicia of meaning.” Barnhart, 540 U.S. at 26.

Second and more importantly, courts have applied the rule only when the last

antecedent can grammatically be modified by the limiting phrase. Hence, in

Barnhart, the Supreme Court read the phrase “which exists in the national

economy” to modify the immediately preceding noun “work.”6 Id. Likewise, in

United States v. Kerley, we read the restrictive phrase “pursuant to the law of a

State or of an Indian tribe” as applicable only to the immediately preceding noun,

“administrative process.” 416 F.3d 176, 179 (2d Cir. 2005) (interpreting “any

amount determined under a court order or an order of an administrative process

pursuant to the law of a State or of an Indian tribe” (emphasis added)).

       In this case, the restrictive phrase “required to be arbitrated by the FINRA

Rules” follows two other restrictive phrases that unquestionably modify the only


   6
       The statute in Barnhart read: “‘An individual shall be determined to be
under a disability only if . . . he is not only unable to do his previous work but
cannot, considering his age, education, and work experience, engage in any other
kind of substantial gainful work which exists in the national economy . . . .’” 540 U.S.
at 23 (quoting 42 U.S.C. § 423(d)(2)(A)) (emphasis modified).

                                           15
available antecedent: “claim or controversy.” The phrase “your employment

and/or the termination thereof” is integral to the phrase “arising out of . . . your

employment and/or the termination thereof,” which in turn modifies “claim or

controversy.” The last antecedent rule does not apply because there is only one

antecedent to which all of the modifiers must refer: “claim or controversy.”

      Chase’s interpretation is also substantively flawed. As discussed, the

arbitration clause unquestionably requires arbitrable claims to be resolved before

FINRA and “in accordance with the FINRA Rules.” But it is impossible to

arbitrate plaintiffs’ class and collective action claims before FINRA, since New

Rule 13204 prevents FINRA arbitrators from entertaining class and collective

action claims. See FINRA Rule 13203(a) (“The Director [of FINRA Dispute

Resolution] may decline to permit the use of the FINRA arbitration forum if the

Director determines that, given the purposes of FINRA and the intent of the

Code, the subject matter of the dispute is inappropriate.”). Again, the district

court’s reading obviates this interpretive problem: if the only claims that are

arbitrable under the Chase Agreement are those that are “required to be

arbitrated by the FINRA Rules,” then every arbitrable claim may be resolved by

FINRA arbitrators.


                                          16
       That the arbitration clause calls for “individual (not class or collective)

arbitration” does not assist Chase. That language simply echoes New Rule 13204,

which prohibits individual arbitration of claims that are the subject of putative

class or collective actions, unless the party asserting those claims declines to

proceed on a class or collective basis or the court decertifies (or declines to

certify) the class or collective action.7 New Rule 13204(a)(2), (b)(2).

       Finally, we are unpersuaded by Chase’s argument that interpreting the

arbitration clause to incorporate the FINRA Rules would violate the interpretive

canon against surplusage. It is true that plaintiffs separately signed Form U4

agreeing to arbitrate claims required to be arbitrated by the FINRA Rules, but

there is nothing unusual about an employer’s conforming its in-house documents

to requirements that already exist in standard FINRA forms. In any event, the

surplusage canon does not apply because the Chase Agreement and Form U4 are

not provisions of a single contract. Cf. Int’l Multifoods Corp. v. Commercial



   7
       The Chase Agreement contains no waiver of plaintiffs’ right to participate
in class and collective action lawsuits. Cf. Cohen v. UBS Fin. Servs., Inc., No. 12
Civ. 2147 (BSJ) (JLC), 2012 WL 6041634, at *1 (S.D.N.Y. Dec. 4, 2012) (“[Y]ou
waive any right to commence, be a party to or an actual or putative class member
of any class or collective action arising out of or relating to your employment.”
(emphasis added)).

                                          17
Union Ins. Co., 309 F.3d 76, 86 (2d Cir. 2002) (“We disfavor contract

interpretations that render provisions of a contract superfluous.”).

      Accordingly, we hold that the district court correctly interpreted the

arbitration clause to require arbitration of only those claims “required to be

arbitrated by the FINRA Rules.”




                                         III

      We next consider whether the arbitration clause incorporates Old Rule

13204 (which was effective when plaintiffs entered into the Chase Agreement) or

New Rule 13204 (which became effective prior to Chase’s motion to compel and

remains the current rule). The former barred FINRA arbitration of class action

claims, while the latter added a parallel provision concerning collective actions.

      As the district court observed, the arbitration clause contains no wording

on the effect (if any) of amendments to the FINRA Rules. However, as discussed

supra, the arbitration clause requires that arbitrable claims be resolved “in

accordance with” the FINRA Rules; and New Rule 13204 expressly provides that

any claim that is part of a pending class or collective action suit “shall not be

arbitrated under the Code.” New Rule 13204(a)(2), (b)(2). It cannot be disputed


                                          18
that New Rule 13204 governs FINRA arbitrators. So unless the arbitration clause

tracks amendments to the FINRA Rules, some claims arbitrable under the clause

(in this case, FLSA collective action claims) would be required to be arbitrated

before a body that does not entertain them. See FINRA Rule 13203(a) (“The

Director [of FINRA Dispute Resolution] may decline to permit the use of the

FINRA arbitration forum if the Director determines that, given the purposes of

FINRA and the intent of the Code, the subject matter of the dispute is

inappropriate.”).

      We think that the parties could not have intended to arbitrate claims before

an arbitral body that, under its own rules, cannot hear them. As the district court

concluded: the parties must have intended the FINRA Rules (as they may be

amended) to govern both the scope of arbitrability and the manner of arbitrating

claims between Chase and its employees.

      Chase argues that the district court’s ruling raises a problem of

retroactivity. However, contracts can and often do contain terms that are subject

to the impact of future developments. A party that agrees to arbitrate before a

particular forum according to the rules of that forum assumes the risk that the

forum’s rules might change.


                                        19
      In any event, the amendment of Old Rule 13204 did not upset expectations.

Since 1999, FINRA has informally taken the position that collective action claims

cannot be arbitrated, even under Old Rule 13204. See FINRA Regulatory Notice

12-28. FINRA amended the rule to make its position explicit only after district

courts refused to apply Old Rule 13204 to FLSA collective actions. Id.; see Velez

v. Perrin Holden & Davenport Capital Corp., 769 F. Supp. 2d 445, 447 (S.D.N.Y.

2011); Gomez v. Brill Sec., Inc., No. 10 Civ. 3503 (JSR), 2010 WL 4455827, at *2

(S.D.N.Y. Nov. 2, 2010); Chapman v. Lehman Bros., Inc., 279 F. Supp. 2d 1286,

1290 (S.D. Fla. 2003). The 2012 amendment was thus the formal statement of a

longstanding FINRA position.




                                  CONCLUSION

      For the foregoing reasons, we affirm the decision of the district court.




                                         20
13‐3963 
Lloyd v. J.P. Morgan Chase & Co. 
 
SACK, Circuit Judge, concurring dubitante1: 

              I fully agree with the majority insofar as it concludes that the phrase 

ʺrequired to be arbitrated by the FINRA Rulesʺ in the employment agreement 

(the ʺChase Agreementʺ) modifies the phrase ʺ[a]ny claim or controversyʺ such 

that, under the terms of the Chase Agreement, only those claims, if any, that are 

required to be arbitrated under the FINRA Rules are subject to arbitration.  See 

ante at 18.    


              I write to express my concern, however, about the panelʹs conclusion that 

New Rule 13204, which amended Old Rule 13204 (as those terms are defined in 

the majority opinion) by adding collective actions to the list of those not 

arbitrable under FINRA rules, necessarily applied to the instant case even though 




                                                            
    See Bierenbaum v. Graham, 607 F.3d 36, 59 (2d Cir. 2010) (Calabresi, J., concurring 
  1

dubitante); Aurecchione v. Schoolman Transp. Sys. Inc., 426 F.3d 635, 639 (2d Cir. 2005) 
(Kearse, J., concurring dubitante); Feldman v. Allegheny Airlines, Inc., 524 F.2d 384, 390 
(2d Cir. 1975) (Friendly, J., concurring dubitante); see also Debra Cassens Weiss, 7th 
Circuit Judge Writes One‐Sentence ʺMaybeʺ Concurrence; Was it a ʺDubitanteʺ Opinion?, 
ABA JOURNAL (June 3, 2015), http://www.abajournal.com/news/article/7th_cABA 
rcuit_judge_writes_one_sentence_maybe_concurrence_was_it_a_dubitante/?utm_ 
campaign=weekly_email&job_id=150603AT&utm_medium=email&utm_source=maestr
o (suggesting use of the term ʺdubitanteʺ as appropriate for a concurrence that 
concludes the majority may be right). 
                                                                                          13‐3963 
                                                                              Lloyd v. JP Morgan 

at the time that the Chase Agreement was entered into, Old Rule 13204, not New 

Rule 13204, was in effect.2   


              The Majorityʹs Approach.  The parties paid relatively little attention to this 

issue in the district court and on appeal.  That may account for the majorityʹs 

giving it what seems to me to be rather short shrift.  


              In a two‐paragraph analysis addressed to the ʺproblem of retroactivityʺ 

raised by Chase, the majority observes that it is not unusual for contract terms to 

be ʺsubject to the impact of future developments,ʺ and that in this case the future 

developments were a change in ʺthe forumʹs rules.ʺ  Id. at 19.  Moreover, because 

FINRA had already ʺinformally taken the position that collective actions[3] cannot 

be arbitrated, even under Old Rule 13204,ʺ the majority concludes that therefore 

ʺthe amendment of Old Rule 13204 did not upset expectations.ʺ  Id. at 20. 


              Separately, in addressing the intent of the parties at the time the contract 

was signed, the majority asserts that because the arbitrable claims are required to 

be resolved ʺin accordance withʺ the FINRA Rules, and the operative rule 13204 

(New Rule 13204) provides that a collective action ʺshall not be arbitratedʺ by 
                                                            
2 Further complicating matters, Old Rule 13204, arguably permitting collective actions, 
was still in effect even at the time this litigation was commenced.  See ante at 18.   
3  The plaintiffsʹ collective action claims were brought under the FLSA. 

   
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FINRA, the Chase Agreement must therefore be read to incorporate New Rule 

13204.  Id. at 18‐19.  The majority is of the view that to hold otherwise would 

require the Court to find that the parties intended to arbitrate their claims before 

a body that ʺunder its own rules, cannot hear them,ʺ and that ʺthe parties could 

not have intendedʺ such a result.  Id. at 19.  


      I think a more detailed and thorough inquiry would be necessary before I 

could comfortably reach a firm conclusion as to whether or not the provisions of 

New Rule 13204 apply to this dispute.   


      The Relative Importance of the Issue.  I am not sure the majority is wrong.  

But I see no reason to engage in such a ʺdetailed and thorough inquiryʺ myself in 

order to become more certain than I am, one way or the other, for at least two 

reasons.  First, should I come to a firm view that New Rule 13204 cannot be 

applied here, it will not matter to the parties because a majority of this Court 

holds otherwise; the New Rule will be applied in any event, and the holding will 

remain the same.  Second, and more importantly, were I to reach a contrary view 

that is persuasive, it will be of little use to anyone.  Nearly three years have 

elapsed since the adoption of the New Rule.  Its retroactive effect, if any, should 

become increasingly irrelevant to the resolution of collective actions 


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contractually designated as ʺarbitrable by the FINRA rulesʺ because disputes will 

increasingly arise out of contracts entered into more recently than was the Chase 

Agreement, and after the New Rule 13204, clearly foreclosing collective FINRA 

arbitrations, became effective.   In light of what seems to be the likely limited 

nature of our holding on this point, I write briefly to do no more than articulate 

the basis for my doubt as to the majorityʹs methodology.  


      Another Approach.  In Wong v. CKX, Inc., 890 F. Supp. 2d 411 (S.D.N.Y. 

2012) (Koeltl, J.), the United States District Court for the Southern District of New 

York considered a dispute at least superficially similar to that addressed in the 

case at bar.  The court sought to determine whether Section 22 of the Dodd‐Frank 

Wall Street Reform and Consumer Protection Act (ʺDodd‐Frankʺ), Pub. L. No. 

111‐203, Title IX, §§ 922(b)‐(c), 929A, 124 Stat. 1848, 1852 (2010), which modified 

the arbitration rules outlined in the Sarbanes‐Oxley Act (ʺSarbanes‐Oxleyʺ), 18 

U.S.C. § 1514A(e)(2), was intended to apply retroactively to an employment 

contract containing an arbitration provision that was otherwise governed by 

Sarbanes‐Oxley.  Wong, 890 F. Supp. 2d at 420‐21.  The contract had been entered 

into prior to Dodd‐Frank taking effect.  Before 2010, complaints alleging a 

violation of Sarbanes‐Oxleyʹs whistleblower protection provision could therefore 


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be made subject to mandatory arbitration pursuant to an agreement between the 

parties.   Dodd‐Frank amended that rule:  ʺNo predispute arbitration agreement 

shall be valid or enforceable, if the agreement requires arbitration of a dispute 

arising under [the Sarbanes–Oxley whistleblower protection provision].ʺ  Id. at 

421 (quoting 18 U.S.C. § 1514A(e)(2) (brackets in original)).   


      The defendant in Wong moved to compel arbitration in a ʺwhistleblowerʺ 

suit pursuant to an employment contract that required such arbitration and that 

was entered into before Dodd‐Frank went into effect.  The question before the 

district court was whether the plaintiff could take advantage of the new lawʹs 

prohibition even though it was enacted after she entered into the contract; indeed 

all the relevant behavior of the parties occurred before Dodd‐Frank became law.  

ʺTherefore,ʺ noted the court, ʺthe issue [was] whether to apply the [later] 

amendment to the present dispute.ʺ  Id.   


      The court began its analysis by stating widely accepted general principles.   

      Generally, ʺretroactivity is not favored in the law.  Thus, 
      congressional enactments and administrative rules will not be 
      construed to have retroactive effect unless their language requires 
      this result.ʺ  Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 
      (1988).  However, the Supreme Court has also instructed that there 
      are many situations in which courts must ʺapply the law in effect at 
      the time [they] render[ a] decision.ʺ  Bradley v. Sch. Bd. of City of 
      Richmond, 416 U.S. 696, 711 (1974). 

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Id. 
       The district court then looked to the Supreme Courtʹs decision in 

Fernandez–Vargas v. Gonzales, 548 U.S. 30 (2006), which provides a ʺthree‐step 

process for determining whether a statute should be retroactively applied to 

affect some allegedly vested right that existed prior to a statuteʹs enactment or to 

impose some new burden.ʺ  Wong, 890 F. Supp. 2d at 421 (citing Fernandez–

Vargas, 548 U.S. at 37‐38).   Step one requires a determination as to ʺwhether 

Congress has expressly prescribed the statuteʹs proper reach.ʺ  Fernandez–Vargas, 

548 U.S. at 37.  If the answer is no, the court moves to step two, deciding 

ʺwhether applying the statute to the person objecting would have a retroactive 

consequence in the disfavored sense of affecting substantive rights, liabilities, or 

duties on the basis of conduct arising before its enactment.ʺ  Id. (internal 

quotation marks and brackets omitted).  ʺIf the answer is yes, [the court] then 

appl[ies] the presumption against retroactivity by construing the statute as 

inapplicable to the event or act in question owing to the absence of a clear 

indication from Congress that it intended such a result.ʺ  Id. at 37‐38 (internal 

quotation marks and brackets omitted). 


       The Wong court ultimately reached a decision roughly similar to that 

reached by the majority in this appeal – the new arbitration rules applied to an 

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old arbitration agreement.  The court did so, however, by engaging in step two of 

the prescribed analysis:  It concluded that ʺ[t]he right to have a dispute heard in 

an arbitral forum is a procedural right that affects the forum that will decide the 

substantive rights of the parties.  Therefore, applying the present law to this 

dispute would not have a disfavored retroactive consequence.ʺ  890 F. Supp. 2d 

at 423.   


       Other district courts have considered the issue addressed in Wong.  At 

least one has arrived at the same conclusion; others have not.  Compare Pezza v. 

Investors Capital Corp., 767 F. Supp. 2d 225, 233‐34 (D. Mass. 2011) (concluding 

that Dodd‐Frank § 922 changed only the procedural rights of the parties and 

therefore could be applied retroactively), with Taylor v. Fannie Mae, 839 F. Supp. 

2d 259, 263 (D.D.C. 2012) (ʺthe Court here fails to see how a retroactive 

application would not impair the partiesʹ rights possessed when they actedʺ; 

retroactive effect not given; arbitration compelled) (citing Henderson v. Masco 

Framing Corp., 2011 WL 3022535, 2011 U.S. Dist. LEXIS 80494 (D. Nev. July 22, 

2011)).  Irrespective of their outcomes, though, these courts proceeded as had the 

Wong court by applying the test set forth in Fernandez–Vargas.    




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      To be sure, the case before us is plainly distinguishable from both 

Fernandez–Vargas and Wong, most obviously because FINRA rules, although 

perhaps comparable to the statutes considered by the district courts for present 

purposes, are not federal statutes.   But see Sacks v. S.E.C., 648 F.3d 945, 950 (9th 

Cir. 2011) (applying the retroactivity test articulated in Fernandez–Vargas to 

FINRA Rules).  These decisions do, however, illustrate the complexity involved 

in determining the retroactive application of new rules to existing contracts.  In 

the case at bar, the majority reaches its conclusion without acknowledging or 

grappling with that complexity. 


        Moreover, even assuming arguendo that none of the retroactivity 

principles or frameworks employed by the district courts in the Dodd‐Frank 

cases is applicable in the situation presented here, the majorityʹs approach is not 

free from doubt.  The Chase Agreement presents an issue of contractual 

ambiguity as to the partiesʹ intent with respect to the incorporation of new 

FINRA rules.  When faced with ambiguity, courts ordinarily consider ʺ[e]xtrinsic 

evidence of the partiesʹ intent.ʺ  Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 

569, 780 N.E.2d 166, 170 (2002).  The district court does not appear to have 

engaged in such an inquiry; the majority has largely avoided unpacking the issue 


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by opining that ʺthe parties could not have intended to arbitrate claims before an 

arbitrable body that, under its own rules, cannot hear them.ʺ  Ante at 19.   As 

noted, the majority asserts that a FINRA arbitral body will not hear plaintiffsʹ 

collective action claims because the New Rule 13204 indicates that it should not 

do so.  But I am unaware of an instance in which FINRA arbitrators formally 

declined to ʺgrandfather‐inʺ the parties that were previously subject to the Old 

Rule, which had been read by at least some district courts4 to classify the 

plaintiffsʹ FLSA claims as an arbitrable controversy.   


              If ʺimpossibility of performanceʺ or ʺfrustration of purposeʺ ultimately 

manifests itself, then there is long‐standing precedent to which courts in this 

Circuit can look to address the partiesʹ interests.  See United States v. Gen. Douglas 

MacArthur Senior Vill., Inc., 508 F.2d 377, 381 (2d Cir. 1974).   If it is determined 

that the parties are contractually bound to have collective claims arbitrated by a 

FINRA arbitral body and should that body refuse, courts – including this Court if 

necessary – can then decide how the dispute should be resolved. 


                                                            
4    See e.g., Velez v. Perrin Holden & Davenport Capital Corp., 769 F. Supp. 2d 445, 447 
(S.D.N.Y. 2011) (ʺEvery court to address whether an FLSA collective action is arbitrable 
pursuant to [Old Rule 13204] has found in favor of arbitrability.ʺ).

     
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      Conclusion.  For the foregoing reasons, ʺI join the majorityʹs [decision], 

albeit a mite queasily,ʺ Order Denying Petition for Rehearing, United States v. 

Guevara, 298 F.3d 182 (2d Cir.), on reconsideration, 298 F.3d 124 (2d Cir. 2002) 

(Calabresi, J., concurring dubitante), insofar as it addresses the question of the 

retroactivity of New Rule 13204 and the arbitrability of collective claims.  




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