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Court to Arbitration Applicant: There’s No Going Back: American Airlines Federal Credit Union v. Fonseca
Posted on Categories Court Decisions, Securities ArbitrationTags , ,

By Burton W. Wiand

The arbitration provision of a second agreement between two parties cannot be applied to an earlier, separate agreement between the same parties unless they expressly agree to arbitrate both agreements.

American Airlines Federal Credit Union vs. Fonseca & Morgan Stanley Smith Barney, LLC, No. 3D16-208 (Fla. App., 3Dist., 10/19/16).

This decision reviews a non-final order from the Eleventh Judicial Circuit Court of Florida compelling arbitration and staying proceedings. Specifically, this decision analyzes whether an arbitration clause in a second agreement between two parties can be extended to a prior, distinct agreement between the same two parties, which does not require arbitration.

Two Agreements

American Airlines Federal Credit Union (“AAFCU”) filed suit against its former employee, Carlos Hernan Fonseca (“Fonseca”), and Morgan Stanley Smith Barney, LLC (“Morgan Stanley”) for allegedly breaching certain non-compete provisions in a 2008 employment agreement between it and Fonseca. In response, Fonseca and Morgan Stanley moved to compel arbitration, relying on an arbitration provision in a 2010 dual employment agreement between Fonseca and AAFCU’s then designated broker-dealer, CUNA Brokerage Services, Inc. While the 2008 employment agreement contained no such provision, the lower court adopted Fonseca’s reasoning that AAFCU’s claims fall within the scope of the arbitration provision contained in the 2010 dual employment agreement.

Appeal Nixes Arbitration Application

Disagreeing with the lower court’s reasoning, the Court of Appeal concludes that all of the claims asserted by AAFCU flow strictly from the 2008 employment agreement. Relying on All American Semiconductor, Inc. v. Unisys Corp., 637 So. 2d 59 (Fla. 3d DCA 1994), the Court determines that “the provisions of a second agreement between two parties, which requires arbitration, cannot be extended to a prior, separate agreement between the same parties unless the parties expressly agree to arbitrate both agreements.” Because there was no express agreement to arbitrate under both the 2008 and 2010 employment agreements, and the “complaint flows from a relationship and agreement outside the scope” of the 2010 employment, the Court concludes that no contract to arbitrate exists between AAFCU and Fonseca. Accordingly, the Court reverses the lower court’s order compelling arbitration and remands for further proceedings.

(B. Wiand: AAFCU is not a member of the Financial Industry Regulatory Authority and, therefore, Fonseca entered into a separate, dual employment agreement with AAFCU’s designated broker-dealer, CUNA, so that he could sell securities and insurance products to AAFCU clients.)

(SLC Ref. No. 2017-06-02)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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