Goldman Sachs & Co. v. City of Reno

Summarized by:

  • Court: 9th Circuit Court of Appeals Archives
  • Area(s) of Law: Arbitration
  • Date Filed: 03-31-2014
  • Case #: 13-15445
  • Judge(s)/Court Below: Circuit Judge Bybee for the Court; Circuit Judge Schroeder; Dissent and Concurrence by District Judge Battaglia
  • Full Text Opinion

A city may be a customer under the Financial Industry Regulation Authority and therefore is entitled to arbitration, however, when a city agrees to a forum selection clause they waive their right to arbitration.

In 2005 and 2006 the City of Reno (“Reno”) entered into a Broker-Dealer agreement with Goldman, Sachs & Co (“Goldman”), issuing approximately $211 million in securities and employment. The agreement included a forum selection clause. Years later, Reno’s financing collapsed and the city initiated arbitration before the Financial Industry Regulation Authority (FINRA) to resolve claims arising from their contract with Goldman. Goldman filed an action to enjoin the arbitration arguing the city of Reno was not entitled to arbitration because (1) Reno was not a customer of Goldman, and (2) Reno had disclaimed any right to arbitrate by agreeing on a forum selection clause. The district court found that the FINRA had the right to determine arbitrability and denied Goldman injunctive relief. On appeal, the panel found that Reno was a customer under FINRA Rule 12200 because Reno is not a broker or dealer who is purchases commodities or services from a FINRA member in the course of the members regulated business activities. However, the panel also held that Reno did disqualify its right to FINRA arbitration by agreeing to a forum selection clause in the agreement. Because the parties agreed to take contractual claims arising out of their agreement to the District of Nevada, Reno had no right to arbitrate under FINRA. The panel remanded the case to the district court to determine whether a preliminary injunction is warranted. REVERSED and REMANDED

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