Bass, Berry & Sims attorney Chris Lazarini examined a case in which the plaintiff filed a FINRA arbitration against his broker alleging suitability, breach of fiduciary duty, fraud, failure to supervise, and other claims. The plaintiff simultaneously sued companies that issued and/or distributed the annuities in which he had invested asserting the same causes of actions on the same facts. The court granted defendants’ motion to stay pending the outcome of the FINRA arbitration since the same operative facts and same claims exist in both proceedings.
Chris provided the analysis for Securities Online Litigation Alert (SOLA). 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 SOLA, please visit the SOLA website to sign up for the newsletter.
Lagrasso vs. The Prudential Ins. Co., of America, No. 18-11497 (E.D. Mich., 7/12/18)
Where non-arbitrable issues are intertwined with arbitrable issues, such as where the same operative facts and same claims exist in both proceedings, a Court may stay the litigation of the non-arbitrable issues pending the outcome of the arbitration.
Plaintiff purchased several annuities in his IRA account through non-party Marcum, a registered representative of Allstate Financial Services. Plaintiff later filed a FINRA arbitration against Marcum and Allstate, alleging suitability, breach of fiduciary duty, fraud, failure to supervise, and other claims. Plaintiff simultaneously sued Defendants, companies that issued and/or distributed the annuities, in this Court, asserting the same causes of action on the same facts and seeking the same relief as in the arbitration. Defendants moved to stay pending the outcome of the arbitration.
Exercising its discretion under the FAA, the Court grants the motion. First, it points out, Plaintiff’s claims here are inseparable from those made in the arbitration. Second, if this action proceeds, Plaintiff must prove Marcum’s alleged misconduct. This, the Court explains, would subvert the arbitration agreement and undermine federal policy favoring arbitration. In contrast, the stay preserves those factors, as well as the Court’s and the parties’ resources, and mitigates the risk of inconsistent rulings. Third, the delay in litigation does not unduly prejudice Plaintiff. Finally, the Court rejects Plaintiff’s request to compel Defendants to arbitrate, finding no contract compelling Defendants to do so.
The other Defendants are Pruco Life Insurance Company, Prudential Annuities Distributors, Inc., Voya Insurance and Annuity Company, and Voya Retirement Insurance and Annuity Corporation.