Bass, Berry & Sims attorney Chris Lazarini discussed the case in which the plaintiff attempted to avoid the parties’ pre-dispute arbitration agreement by bringing his claims before the Commodity Futures Trading Commission (CFTC). The court, relying on the Federal Arbitration Act (FAA), enforced the parties’ agreement and enjoined plaintiff from prosecuting his case before the CFTC.

Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.

Leong vs. Goldman Sachs Group, Inc., No. 13-CV-8655 (S.D. N.Y., 5/2/16) 

Under the Federal Arbitration Act, courts should enforce the parties’ agreement to arbitrate, even if that means staying one arbitration proceeding in favor of another. 

In 2013, Plaintiff, a Singaporean billionaire, filed this action against Defendant, alleging fraud and related torts with respect to a series of failed foreign-exchange transactions. Plaintiff had signed a Client Agreement obliging him to arbitrate disputes in London, England, under the rules of the London Court of International Arbitration. Rather than file arbitration in England, Plaintiff commenced actions in Singapore and in New York state court, the latter of which was removed to this Court. Both the Singapore court and this Court ruled that the parties were bound by the arbitration agreement. In 2014, the Court stayed the case pending arbitration in England.

Continuing to resist arbitration, Plaintiff filed a reparations proceeding with the CFTC against Defendant and two affiliates and Defendant filed the present motion to enjoin Plaintiff from prosecuting the CFTC proceeding. Plaintiff opposed, arguing that the CFTC was a “legitimate alternative forum” having “exclusive” jurisdiction over his Commodity Exchange Act (“CEA”) claims and citing CFTC regulations that provide that certain agreements must preserve the reparations procedure as an alternative to arbitration.

The Court rejects each of these arguments. First, whether the CFTC is a “legitimate alternative forum” does not affect whether the CFTC proceeding is barred by the parties’ arbitration agreement. Second, Plaintiff’s reliance on CFTC regulations is misplaced because Plaintiff, who had more than $10 million invested on a discretionary basis, is not a “customer” under the regulations. Rather, he is an “eligible contract participant” to whom the regulation does not apply and who may therefore enter into a private dispute resolution agreement that precludes the administrative proceeding. Finally, the CEA states that the CFTC’s jurisdiction is not exclusive.

Next, the Court examines traditional injunctive relief standards. It finds that subjecting Defendant to the CFTC reparations procedure will cause irreparable harm that cannot be rectified by monetary damages. Moreover, the balancing of the hardships and public interest favor Defendant. Any harm suffered by Plaintiff, the Court notes, is of his own doing in flagrantly violating the parties’ arbitration agreement. In contrast, the harm to Defendant is real because it would be forced to expend money and resources arbitrating the dispute in a forum other than the one in which it had agreed. The public interest is served by enforcing parties’ agreements to arbitrate according to their terms.

Finally, the Court finds that Defendant’s affiliates, although not parties to this case, are similarly entitled to protection against the CFTC proceeding because the terms of the parties’ agreement captures affiliates and because the potential collateral estoppel effects of the CFTC proceeding could undermine the relief being granted. For all of these reasons, the Court enjoins Plaintiff from proceeding with the CFTC reparations proceeding.