Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, December 16, 2010

Judge Rakoff Orders Arbitration of Brokers' FLSA Collective Action

There is no arrogance quite like that of a federal district judge, and  Judge Jed Rakoff' provides an excellent example in Gomez v. Brill Securities, Inc., 10 Civ. 3503 (JSR) (S.D.N.Y. Nov. 2, 2010).  Plaintiffs, brokers formerly employed at defendant securities firm, brought a FLSA collective action seeking unpaid overtime compensation.  Defendants made a motion to compel arbitration; plaintiffs resisted, citing FINRA's Rule 13204, which closes the FINRA forum to class actions, thus permitting class actions to be brought in court.  FINRA staff have previously issued opinion letters that the Rule applied to FLSA collective actions.  Judge Rakoff, however, found the Rule inapplicable and granted defendant's motion.

Judge Rakoff found that the staff opinion letters were not entitled to judicial deference, in part because they did not contain the sort of detailed analysis that he might find persuasive.  Declining to provide that sort of analysis himself, he simply notes that there are "significant differences" between an "opt-out class action" and an "opt-in FLSA collective action."  Accordingly, plaintiffs' action must be arbitrated before the FINRA forum.   He also directs the parties to report to him, every three months, on the status of the arbitration.

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