No. 14-

IN THE

Supreme Court of the United States

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

A(800) 274-3321 • (800) 359-6859

PETITION FOR A WRIT OF CERTIORARI

254854

CITY OF RENO,

Petitioner,

v.

GOLDMAN, SACHS & CO.,

Respondent.

ADAM B. WOLF

Counsel of RecordPEIFFER ROSCA WOLF ABDULLAH CARR & KANE, L.L.P.Four Embarcadero Center, Suite 1400San Francisco, CA 94111(415) 766-3545awolf@prwlegal.com

JASON W. BURGE

ALYSSON L. MILLS

FISHMAN HAYGOOD PHELPS WALMSLEY WILLIS & SWANSON, L.L.P.201 St. Charles Ave., Suite 4600New Orleans, LA 70170(504) 586-5241

Attorneys for Petitioner

JOSEPH C. PEIFFER

PEIFFER ROSCA WOLF ABDULLAH CARR & KANE, LLC201 St. Charles Ave., Suite 4610New Orleans, LA 70170(504) 523-2434

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QUESTION PRESENTED

The Federal Arbitration Act, 9 U.S.C. § 2, is “a congressional declaration of a liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983). Consistent with that policy, this Court’s precedent mandates that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or a like defense to arbitrability.” Id. at 24-25 (emphasis added). This has been referred to as “the presumption of arbitrability.” AT&T Tech., Inc. v. Cmmc’n Workers of Am., 475 U.S. 643, 650 (1986).

Here, Respondent Goldman Sachs entered into a broad arbitration agreement. As is common, it then executed with Petitioner City of Reno a separate contract that included a forum selection clause, which specifi ed a venue for court actions. This case arises from the purported confl ict between the arbitration agreement and the later-enacted forum selection clause. When the broad arbitration agreement and the subsequent forum selection clause employ different language, leaving the parties unsure of whether arbitration has been waived, how does a court reconcile the two agreements? More specifi cally, when interpreting the two contracts, should courts apply a presumption in favor of arbitration?

The question presented is: Whether a presumption of arbitrability applies when a broad arbitration agreement allegedly is waived through a subsequently enacted forum selection clause that does not reference arbitration and

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that covers an arguably narrower scope of claims (as the Second, Third, and Fifth Circuits have held), or whether there is no presumption in favor of arbitration in these circumstances (as the Ninth Circuit held).

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TABLE OF CONTENTS

Page

QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . iii

TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . . . . .v

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . vi

PETITION FOR WRIT OF CERTIORARI. . . . . . . . . .1

OPINIONS BELOW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

STATU TORY PROV ISION A ND RULE INVOLVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . .5

A. Legal Background. . . . . . . . . . . . . . . . . . . . . . . . . .5

B. Factual Background . . . . . . . . . . . . . . . . . . . . . . . .6

C. The District Court Upholds the Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

D. A Divided Ninth Circuit Panel Refuses to Honor the Arbitration Agreement . . . . . . . . . . .10

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Table of Contents

Page

E. The Ninth Circuit Dissent . . . . . . . . . . . . . . . . . .14

REASONS FOR GRANTING THE PETITION. . . . .15

I. THE NINTH CIRCUIT’S OPINION C R E A T E S A C I R C U I T S P L I T REGARDING THE PRESUMPTION O F A R B I T R A B I L I T Y W H E N I N T E R P R E T I N G M U L T I P L E

CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

II. THE NINTH CIRCUIT’S OPINION C O N F L I C T S D I R E C T LY A N D EXPLICITLY WITH THE FOURTH CIRCUIT’S DECISION ON IDENTICAL

FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

III. THE DECISION BELOW IS CONTRARY TO THIS COURT’S PRECEDENT AND THE PRO-ARBITRATION POLICIES

OF THE FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

IV. THE QUESTION PRESENTED IS IMPORTANT . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

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TABLE OF APPENDICES

Page

APPENDIX A — ORDER OF THE UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT, FILED MAY 9, 2014 . . . . . . . . .1a

APPENDIX B — OPINION OF THE UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT, FILED MARCH 31, 2014. . . . .3a

A P P E N DI X C — O R D E R O F T H E UNITED STATES DISTRICT COURT FOR T HE DISTRICT OF NEVA DA ,

FILED NOVEMBER 26, 2012 . . . . . . . . . . . . . . . . .48a

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TABLE OF CITED AUTHORITIES

Page

CASES

Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013). . . . . . . . . . . . . . . . . . . . . . . . . . .2

Applied Energetics, Inc. v. NewOak Capital Markets, LLC,

645 F.3d 522 (2d Cir. 2011) . . . . . . . . . . . . . . . . . . . . .21

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) . . . . . . . . . . . . . . . . . . . . . . . 24-25

AT&T Tech., Inc. v. Cmmc’n Workers of Am., 475 U.S. 643 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Bank Julius Baer & Co., Ltd. v. Waxfi eld Ltd., 424 F.3d 278 (2d Cir. 2005) . . . . . . . . . . . . . . .19, 20, 21

Bathurst v. City of Niagara Falls, 748 N.Y.S.2d 127 (N.Y. App. Div. 2002) . . . . . . . . . . .13

Bd. of Ed. of Enlarged Ogdensburg City Sch. Dist. v. Wager Const. Corp.,

333 N.E.2d 353 (N.Y. 1975) . . . . . . . . . . . . . . . . . . . . .13

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Century Indem. Co. v. Certain Underwriters at Lloyd’s, London, subscribing to Retrocessional Agreement Nos. 950548, 950549, 950646,

584 F.3d 513 (3d Cir. 2009) . . . . . . . . . . . . . . . . . . . . .16

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Cited Authorities

Page

Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) . . . . . . . . . . . . . . . . . . . . . . . . . .3, 27

Gulfstream Aerospace Corp. v. Mayacamas Corp.,

485 U.S. 271 (1988). . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Int’l Union of Operating Engineers, Local No. 463 v. City of Niagara Falls,

743 N.Y.S.2d 236 (N.Y. Sup. Ct. 2002) . . . . . . . . . . . .13

J. Brooks Sec., Inc. v. Vanderbilt Sec., Inc., 484 N.Y.S.2d 472 (N.Y. Sup. Ct. 1985) . . . . . . . . . . . .13

Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . .26, 27

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp.,

460 U.S. 1 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . passim

Palese v. Tanner Bolt & Nut, Inc., 985 F. Supp. 2d 372 (E.D.N.Y. 2013). . . . . . . . . . .16, 21

viii

Cited Authorities

Page

Patten Securities Corp. v. Diamond Greyhound & Genetics, Inc.,

819 F.2d 400 (3d Cir. 1987) . . . . . . . . . . . . . . . . . . 16, 17

Personal Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002) . . . . . . . . . . . . . . 17-18, 19

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Smoothline Ltd. v. N. Am. Foreign Trading Corp., 249 F.3d 147 (2d Cir. 2001) . . . . . . . . . . . . . . . . . . . . . .4

UBS Financial Services, Inc. v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013) . . . . . . . . . . . . . . 22, 23, 24

UBS Sec. LLC v. Allina Health Sys., No. 12-2090, 2013 WL 500373 (D. Minn. Feb. 11, 2013). . . . . . . . . . . . . . . . . . . . . . . .30

Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ.,

489 U.S. 468 (1989). . . . . . . . . . . . . . . . . . . . . . . . . . . .27

WorldCrisa Corp. v. Armstrong, 129 F.3d 71 (2d Cir. 1997) . . . . . . . . . . . . . . . . . . . . . .20

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Cited Authorities

Page

STATUTES AND OTHER AUTHORITIES

9 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

15 U.S.C. § 78o(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

15 U.S.C. § 78o(b)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

15 U.S.C. § 78o-3(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

28 U.S.C. § 1254(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

N.Y. Const. art. VI, § 7 . . . . . . . . . . . . . . . . . . . . . . . . . . .13

NASD Code § 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

NASD Rule 10301 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

FINRA Rule 12200 . . . . . . . . . . . . . . . . . . . . . . . . . passim

Catherine Moore, The Effect of the Dodd-Frank Act on Arbitration Agreements: A Proposal for Consumer Choice, 12 PEPP. DISP.

RESOL. L. J. 503 (2012). . . . . . . . . . . . . . . . . . . . . . . . . .6

Order Approving Consolidation of NASD and NYSE, Exchange Act Release No. 34-56145,

72 Fed. Reg. 42169, 42170 (July 26, 2007) . . . . . . . . . .5

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PETITION FOR WRIT OF CERTIORARI

Petitioner City of Reno, Nevada respectfully petitions this Court for a writ of certiorari to review a judgment of the United States Court of Appeals for the Ninth Circuit.

OPINIONS BELOW

The opinion of the court of appeals (App. 3a) is reported at 747 F.3d 733 (9th Cir. 2014). The order of the district court denying Goldman Sachs’ motion to enjoin arbitration (App. 48a) is unreported, but is available at 2012 WL 5944966.

JURISDICTION

The judgment of the court of appeals was entered on March 31, 2014. App. 3a. An order denying the City’s timely motion for rehearing en banc was denied on May 9, 2014. App. 1a. This court’s jurisdiction rests on 28 U.S.C. § 1254(1).

STATUTORY PROVISION AND RULE INVOLVED

Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2, provides in pertinent part:

A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, . . . or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid,

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irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

FINRA Rule 12200 provides in pertinent part:

Parties must arbitrate a dispute under the Code if:

• Arbitration under the Code is either:

(1) Required by a written agreement, or

(2) Requested by the customer;

• The dispute is between a customer and a member or associated person of a member; and

• The dispute arises in connection with the business activities of the member or the associated person . . . .

INTRODUCTION

Congress enacted the Federal Arbitration Act (“FAA”) “in response to widespread judicial hostility to arbitration.” Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2308-09 (2013). Yet since the FAA’s enactment, this Court has been required to intervene repeatedly to overcome judicial resistance to arbitration agreements. In particular, the Court has noted on numerous occasions that there is a “presumption of arbitrability . . . where a validly formed and enforceable arbitration agreement is

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ambiguous about whether it covers the dispute at hand.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 301 (2010).

The question here is whether that presumption should apply when addressing disputes involving multiple contracts—one contract that includes a broad arbitration provision and another, subsequent agreement that provides that any judicial proceeding must be brought in a particular district court. This situation has become quite common in a variety of standard commercial transactions, when multiple contracts cover different aspects of a transaction. From municipal fi nance, the specifi c context at issue here, to real estate development, to numerous kinds of fi nancial and consumer transactions, one or more contracts call for arbitration while other contracts in the arrangement do not address arbitration. When a dispute arises, one side seeks to arbitrate and the other does not, and the court is called upon to reconcile the terms of the various contracts. The party that does not prefer arbitration argues that the contracts that do not require arbitration or that specify a different forum supersede or revoke or waive the arbitration provisions. The other party argues that arbitration should be available based upon precedent applying a presumption in favor of arbitration.

This Court has instructed that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem’l Hosp. 460 U.S. at 24-25 (emphasis added). When interpreting multiple contracts, the Second, Third, and Fifth Circuits apply the presumption in favor of

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arbitration and look for a construction that will preserve the right to arbitrate. But now the Ninth Circuit has espoused an opposite rule, that the presumption is not applicable in this situation.

In this case, a divided panel of the Ninth Circuit acknowledged that had it applied the presumption in favor of arbitration, it would have compelled arbitration. Instead, it refused to apply the presumption and held that the parties’ forum selection clause revoked the parties’ broad arbitration agreement, even though the forum selection clause was facially narrower and did not mention arbitration.

The Ninth Circuit’s decision creates uncertainty for many arbitration agreements because it encourages parties seeking to avoid arbitration to argue that a separate agreement or an amendment that does not mention arbitration has caused the arbitration agreement to be waived or revoked. In an environment where parties routinely engage in “herculean efforts to avoid resolution of disputes through arbitration,”1 this Court’s intervention is required to reaffi rm the FAA’s “statutory policy of rapid and unobstructed enforcement of arbitration agreements”2 and to ensure that lower courts uniformly and properly apply the presumption in favor of arbitration once again.

1. Smoothline Ltd. v. N. Am. Foreign Trading Corp., 249 F.3d 147, 148 (2d Cir. 2001).

2. Moses H. Cone Mem’l Hosp., 460 U.S. at 23.

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STATEMENT OF THE CASE

A. Legal Background

The Financial Industry Regulatory Authority (“FINRA”) is the comprehensive self-regulatory organization governing the securities industry.3 FINRA was created in 2007 through the consolidation of the National Association of Securities Dealers, Inc. (“NASD”) and New York Stock Exchange Regulation, Inc., the regulatory arm of the New York Stock Exchange. FINRA, as the newly formed joint entity, is “responsible for regulatory oversight of all securities firms that do business with the public; . . . [and] arbitration and mediation . . . .” Order Approving Consolidation of NASD and NYSE, Exchange Act Release No. 34-56145, 72 Fed. Reg. 42169, 42170 (July 26, 2007).

Membership in FINRA is necessary to participate in the securities industry. 15 U.S.C. § 78o(b)(1), (8). By registering as a FINRA member, entities gain the right to conduct business trading securities, but they also must satisfy regulatory requirements and obligations to their customers. One of those obligations includes submitting to arbitration when demanded by a customer.

FINRA, like its predecessor institutions, requires its members to arbitrate disputes arising in connection with the members’ business activities, so long as the members’

3. FINRA was established under § 15A of the Exchange Act, which requires the formation of a “national securities association” to regulate the securities industry. 15 U.S.C. § 78o-3(b)(2).

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customers request arbitration.4 FINRA Rule 12200. This rule gives customers of FINRA members the option to demand arbitration, even if they have not signed a pre-dispute arbitration agreement with the FINRA member. Courts uniformly hold that FINRA Rule 12200 creates an “agreement in writing” under the FAA.5

At all times relevant to this case, Goldman has been a FINRA member, bound by FINRA Rule 12200 or its similar, predecessor provisions to arbitrate disputes if demanded by a customer.

B. Factual Background

In 2005 and 2006, the City engaged Goldman to assist with bond transactions to raise funds for municipal projects. Goldman recommended that the City issue auction rate security bonds (“ARS”), a type of variable-rate bonds that bear an interest rate set in periodic auctions.

The City accepted Goldman’s advice and issued ARS in 2005 and 2006. Goldman served as the underwriter

4. The NASD initially codifi ed this rule in § 12 of the NASD Code, which was subsequently recodifi ed into NASD Rule 10301. For a full discussion of the history of § 12, see Catherine Moore, The Effect of the Dodd-Frank Act on Arbitration Agreements: A Proposal for Consumer Choice, 12 PEPP. DISP. RESOL. L. J. 503, 508-09 (2012).

5. See, e.g., Pet. App. 12a n.1 (citing cases). Although it previously asserted that the City somehow was not its “customer” under Rule 12200—a position rejected by every court that has considered this argument—Goldman has never disputed that Rule 12200 is an “agreement in writing” for purposes of the FAA.

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on each transaction and as the broker-dealer for the subsequent auctions of the ARS. The City paid Goldman for its advice and assistance during the structuring process for these bond transactions. The City also paid Goldman for underwriting the transactions (buying the bonds from the City and selling them to investors in the market) and made payments to Goldman on an ongoing basis during the life of the bond issuances for serving as the broker-dealer for the City’s ARS auctions.

In connection with each bond transaction, the City and Goldman executed two principal agreements: a Contract of Purchase, which governed Goldman’s obligations in connection with the initial underwriting of the bonds, and a Broker-Dealer Agreement, which governed Goldman’s obligations in connection with serving as broker-dealer for the City’s auctions.

The Contract of Purchase contained no venue provision or forum selection clause, but it did contain a “Governing Law” clause providing that “[t]he validity, interpretation and performance of this Contract shall be governed by the laws of the State of Nevada.”

The Broker-Dealer Agreement contained the following section:

Section 5.09. Governing Law; Jurisdiction; Waiver of Trial by Jury. This Broker-Dealer Agreement shall be governed by and construed in accordance with the laws of the State of New York (including, without limitation, Section 5-1401 of the New York General Obligations Law or any successor to such statute), provided

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that the due organization and power and authority of the City to enter into this Broker-Dealer Agreement shall be governed by the laws of the State of Nevada. The parties agree that all actions and proceedings arising out of this Broker-Dealer Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the District of Nevada and that, in connection with any such action or proceeding, the parties shall submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Broker-Dealer Agreement or the transactions contemplated hereby.

Unbeknownst to Reno, the ARS market historically had functioned only because broker-dealers like Goldman propped up auctions for ARS by submitting in nearly every auction a “cover bid.” In February 2008, less than three years after the City issued its ARS, Goldman suddenly stopped submitting cover bids in ARS auctions. The ARS market collapsed. Consequently, the City’s ARS bonds began clearing at high interest rates, sometimes up to 15%, over fi ve times the prevailing rate for similarly rated variable-rate bonds. The City was forced to refi nance its ARS bonds quickly, at considerable cost.

The damages the City sustained from Goldman’s recommendation to issue ARS have directly reduced the City’s ability to serve its residents’ needs.

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Seeking to recover its damages, the City filed a Statement of Claim in FINRA arbitration against Goldman. The City alleged that Goldman fraudulently withheld material information about ARS and breached its fi duciary duties to the City, which duties arose from Goldman’s paid role assisting the City in structuring the transaction.

C. The District Court Upholds the Arbitration Agreement

Goldman fi led a lawsuit in U.S. District Court for the District of Nevada to enjoin the arbitration. Goldman argued that the City was not entitled to arbitrate principally because the forum selection clause in the parties’ Broker-Dealer Agreement required the City to bring any disputes with Goldman before the district court, not before FINRA.

The district court denied Goldman’s motion for preliminary injunction. Rejecting Goldman’s argument about the forum selection clause, the court noted that there is not “any express waiver of arbitration.” App. 56a.6 Instead, the “exclusive forum selection clauses in the Broker–Dealer Agreements do not touch upon arbitration or arbitrability directly, but rather only control the forum of a court action apart from, or in review of, arbitration.”

6. The district court also rejected Goldman’s argument that the City was not Goldman’s “customer” pursuant to Rule 12200. The court found that the City was Goldman’s customer because “the FINRA member has provided more than fi nancial advice, but rather has provided services directly related to the securities, i.e., facilitation of auctions of the securities themselves.” App. 57a. To counsel’s knowledge, no court has ever ruled to the contrary.

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App. 56a. The court held that a forum selection clause that did not even mention arbitration should not “prevent arbitration if arbitration is otherwise required.” App. 56a.

The parties agreed that the district court’s holding was dispositive to the case. Accordingly, they stipulated that there was nothing left to litigate, and the court issued a fi nal judgment in favor of the City.

D. A Divided Ninth Circuit Panel Refuses to Honor the Arbitration Agreement

On Goldman’s appeal, a divided panel of the Ninth Circuit reversed. Admittedly creating a circuit split, the panel majority held that the City had waived its right to arbitration through the forum selection clause in the Broker-Dealer Agreement.7

The panel majority acknowledged there is an available reading of the forum selection clause (previously adopted by the Fourth Circuit and the District of Minnesota) that would harmonize it with the broad arbitration agreement of Rule 12200. Because arbitration awards are not self-enforcing and the forum selection clause could require that any judicial proceeding collateral to arbitration (such as a motion to enforce an arbitration award) be brought in federal court, the district court’s interpretation of the forum selection clause—to require that judicial proceedings be fi led in the District of Nevada—was a

7. Before reaching the arbitrability issue, the panel had “little diffi culty” agreeing with the district court—and all other courts to consider this—that the City was Goldman’s “customer” within the meaning of FINRA Rule 12200. App. 4a.

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possible interpretation. Indeed, the panel noted that it would have harmonized the clauses accordingly if it had applied the presumption in favor of arbitration:

[A] reading [of the forum selection clauses that upholds Goldman’s obligation to arbitrate] is available here. Arbitration awards are not self-enforceable. Accordingly, we could require Goldman to arbitrate at Reno’s request and then require Reno to enforce the arbitration award, if any, in the District of Nevada, thereby harmonizing Goldman’s default obligation to arbitrate with the forum selection clauses. The fl aw in this argument is that it erroneously assumes that the presumption in favor of arbitrability applies.

App. 28a.

However, the panel elected not to apply the presumption in favor of arbitration, and thus did not adopt this harmonizing interpretation of the arbitration agreement and forum selection clause. Rather than apply the presumption and render harmony between Rule 12200 and the forum selection clause, the panel majority found that “the mere availability of an alternative reading of the forum selection clauses is beside the point.” App. 29a.

The majority acknowledged the general rule that a presumption of arbitration should apply when parties contest the scope of an arbitration agreement, and the presumption should not apply when the parties challenge the existence of an arbitration agreement. Here, the court concluded, the parties were debating the existence, not

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the scope, of an arbitration agreement. According to the Ninth Circuit majority, the potential waiver of a broad arbitration agreement by a subsequently enacted forum selection clause questions the existence of the arbitration agreement. This, despite the facts that (1) the forum selection clause does not explicitly waive arbitration; (2) the clause, on its face, is differently worded—and narrower—than the broad arbitration agreement; and (3) the Second, Third, and Fifth Circuits have concluded otherwise.

The panel majority then considered the contractual language without any attending presumption of arbitration. The majority acknowledged that “the question is a close one.” App. 22a. Indeed, it recognized that the Fourth Circuit and the District of Minnesota had resolved the same question in favor of arbitration, each court holding that an identical forum selection clause did not bar arbitration under FINRA Rule 12200. Nonetheless, the panel majority chose to reject those courts’ analyses—explicitly “disagree[ing]” with those courts, App. 26a, 28a—and instead followed the analysis of the Southern District of New York, which had found that an identical forum selection clause did waive arbitration.

Pitting the broad agreement to arbitrate “all disputes” against the forum selection clause’s language that “all actions and proceedings arising out of this Broker-Dealer Agreement . . . shall be brought in the United States District Court,” the panel majority found that the forum selection clause superseded the arbitration agreement because an arbitration is an “action or a proceeding.”8

8. The panel majority was unconvinced that New York law, which governs the Broker-Dealer Agreement, provides that

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Therefore, the court held, the parties “have agreed to bring their claims in a judicial action in the District of Nevada, even if those same claims might otherwise have been raised in an arbitral forum in the absence of the forum selection clauses agreed to by the parties.” App. 27a.9

actions and proceedings are two types of judicial actions and do not encompass arbitrations. New York law, which applies here, previously recognized arbitration as a “proceeding,” but that designation was removed in 1962, with the passage of the New York Civil Practice Law and Rules (“CPLR”). See Bd. of Ed. of Enlarged Ogdensburg City Sch. Dist. v. Wager Const. Corp. 333 N.E.2d 353, 356 (N.Y. 1975). Under current New York law, “an arbitration is no longer classifi ed as a ‘special proceeding’ as it was under the former Civil Practice Act.” Id.; see also J. Brooks Sec., Inc. v. Vanderbilt Sec., Inc., 484 N.Y.S.2d 472, 474 (N.Y. Sup. Ct. 1985) (“An arbitration is not an action or a proceeding . . . , that status having terminated with the adoption of the CPLR.”); Int’l Union of Operating Engineers, Local No. 463 v. City of Niagara Falls, 743 N.Y.S.2d 236, 238 (N.Y. Sup. Ct. 2002), aff’d sub nom. Bathurst v. City of Niagara Falls, 748 N.Y.S.2d 127 (N.Y. App. Div. 2002) (“An arbitration is not considered an action or a proceeding.”).

Interpreting “action and proceeding” as two forms of judicial proceeding is also consistent with the New York Constitution, which often uses the phrase “actions and proceedings” to defi ne the scope of judicial jurisdiction. See, e.g. N.Y. Const. art. VI, § 7 (“If the legislature shall create new classes of actions and proceedings, the supreme court shall have jurisdiction over such classes of actions and proceedings.”).

9. While the Ninth Circuit remanded the case for further proceedings concerning the remaining preliminary injunction factors, both parties agreed in a subsequent fi ling with the district court that the arbitrability issue presented here is dispositive to the case. Accordingly, the parties consented to a stay in the district court until resolution of this Petition by the Court.

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E. The Ninth Circuit Dissent

District Judge Battaglia, sitting by designation, dissented from the majority’s opinion. He noted that the panel majority failed to recognize the distinction between the language of FINRA Rule 12200, which applies to “all disputes,” and the Jurisdiction clause, which references only “actions and proceedings.” Thus, “[e]nforcement of both [provisions] is possible as the two provisions may be read as complementary.” App. 41a.

Further, the dissent noted that the language of the forum selection clause was not “suffi ciently specifi c to impute to the contracting parties the reasonable expectation that they are superseding, displacing, or waiving the arbitration obligation created by FINRA Rule 12200,” because the clause “made no suggestion of the parties’ intent to supersede, displace, or waive the right to FINRA arbitration.” App. 42a. Ultimately, Judge Battaglia agreed with the Fourth Circuit that “it would never cross a reader’s mind that the [forum selection] clause provides that the right to FINRA arbitration was being superseded or waived.” App. 46a.

The Ninth Circuit denied rehearing en banc. Pet. App. 1a. The City then fi led this timely Petition.

The parties have since stipulated there would be no factfi nding on remand if this Petition is denied—instead, the district court would simply enter a permanent injunction and a judgment. The parties have explicitly agreed that the Ninth Circuit’s remand is not grounds for denying this Petition and would not be relevant at the merits stage.

15

REASONS FOR GRANTING THE PETITION

This Petition seeks review of an opinion from the Ninth Circuit that confl icts with opinions from the Second, Third, and Fifth Circuits. The Ninth Circuit’s opinion also explicitly and admittedly confl icts with an opinion from the Fourth Circuit, which, presented with the precise circumstances here, held that the parties must arbitrate their dispute. These other circuits, but not the Ninth Circuit, faithfully applied this Court’s precedent and heeded the nation’s policy that favors arbitration.

If allowed to stand, the Ninth Circuit’s refusal to apply a presumption of arbitrability when interpreting whether the City’s claims were waived by subsequent agreement would have far-reaching consequences. The ruling would undermine arbitration agreements, not only in a substantial number of fi nancial services contracts, but also in commercial contracts more generally, where the parties often execute multiple subsequent agreements and a court is called upon to harmonize the provisions.

A ruling from this Court would provide necessary clarity for how courts should address this important and recurring issue: whether a presumption in favor of arbitration—or any such deference to an arbitration agreement—attaches when a party previously agreed to arbitrate disputes, but then seeks to use a clause in a subsequently-executed agreement to avoid arbitration.

16

I. THE NINTH CIRCUIT’S OPINION CREATES A C I R C U I T S PL I T R E G A R DI NG T H E PRESUMPTION OF ARBITRABILITY WHEN INTERPRETING MULTIPLE CONTRACTS.

Does a presumption of arbitrability apply when a broad arbitration agreement allegedly is waived through a subsequent agreement that does not reference arbitration and that covers an arguably narrower scope of claims? The Ninth Circuit is not the fi rst court to confront this issue. Directly at odds with the Ninth Circuit’s divided opinion, the Second, Third, and Fifth Circuits have concluded that the presumption of arbitrability should apply in this circumstance. This Petition should be granted because the majority’s decision below creates a clear confl ict among the circuits.

1. The Third Circuit has applied the presumption of arbitrability to harmonize a broad agreement to arbitrate and a forum selection clause that does not reference arbitration explicitly and that employs language that is different from the arbitration agreement. In Patten Securities Corp. v. Diamond Greyhound & Genetics, Inc., 819 F.2d 400 (3d Cir. 1987),10 a company fi led a claim in arbitration against the broker-dealer it employed as the underwriter for the sale of certain securities. Id. at

10. Patten was abrogated on other grounds by Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 287 (1988). As the abrogation was on other grounds, Patten is considered controlling authority within the Third Circuit and is cited in other circuits. See, e.g., Century Indem. Co. v. Certain Underwriters at Lloyd’s, London, subscribing to Retrocessional Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 554 (3d Cir. 2009); Palese v. Tanner Bolt & Nut, Inc., 985 F. Supp. 2d 372, 377 (E.D.N.Y. 2013).

17

402. The broker-dealer, as a member of the NASD (the predecessor to FINRA), operated under the same broad arbitration agreement that applies to Goldman. Id. Like Goldman, the broker-dealer in Patten fi led a complaint in district court to enjoin the arbitration because its Underwriting Agreement included a forum selection clause that specifi ed “controversies” should be litigated in a New Jersey court. Id. at 403, 407 n.3.

The Third Circuit unanimously framed the issue as “whether a forum selection clause is a waiver of NASD arbitration.” Id. at 406. Because the waiver of arbitration is disfavored, the Third Circuit correctly applied the presumption of arbitration to the assessment of the arbitrability of the dispute. Id. at 407 (citing cases).

Against the backdrop of the presumption of arbitration, the Third Circuit then set out to interpret the arbitration agreement and the forum selection clause. Because the forum selection clause did not reference arbitration and used language different from the arbitration agreement, it was “at least ambiguous” whether it waived arbitration. Id. Finally, applying the presumption that “if doubts arise as to whether this dispute is arbitrable or not, such doubts must be resolved in favor of arbitrability,” the Third Circuit found that both the arbitration agreement and the forum selection clause should be given effect: “the forum selection clause would appear to dictate the location of any action to enforce the [arbitration] award.” Id.

2. The Fifth Circuit also has applied the presumption in favor of arbitration to give effect to a broad agreement to arbitrate, despite a forum selection clause that provided for judicial resolution of “suits or proceedings.” Personal

18

Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002). In that case, the parties entered into a Product Development Agreement, which included a broad commitment to arbitrate all disputes related to that agreement, and a Stock Purchase Agreement, which included a forum selection clause that stated that “any suit or proceeding brought hereunder shall be subject to the exclusive jurisdiction of the courts located in Texas.” Id. at 392, 395.

The Fifth Circuit conceded that, “[s]tanding alone, one could plausibly read the forum selection clause to mean that Texas courts have the exclusive power to resolve all disputes arising under Stock Purchase Agreement.” Id. at 395. But the forum selection clause did not stand alone; it was part of a larger contractual arrangement, including an agreement to arbitrate that reached all aspects of the transaction. Id.

Attempting to reconcile the arbitration agreement and forum selection clause, the Fifth Circuit applied the presumption in favor of arbitration. Id. at 392, 396 & n.11. It undertook to “interpret the forum selection provision in the Stock Purchase Agreement in a manner that is consistent with the arbitration provision”:

[W]e interpret the forum selection clause to mean that the parties must litigate in Texas courts only those disputes that are not subject to arbitration—for example, a suit to challenge the validity or application of the arbitration clause or an action to enforce an arbitration award. Rather than covering all “disputes” or all “claims” like the arbitration provision in the

19

Product Development Agreement, the forum selection clause confers “exclusive jurisdiction” on Texas courts only with respect to “any suit or proceeding.” This limitation suggests that the parties intended the clause to apply only in the event of a non-arbitrable dispute that must be litigated in court.

Id. at 395-96 (footnote omitted).

3. The Second Circuit applied the presumption in favor of arbitration to give effect to a broader, preexisting obligation to arbitrate in Bank Julius Baer & Co., Ltd. v. Waxfi eld Ltd., 424 F.3d 278 (2d Cir. 2005). In that case, the parties entered into an agreement that included a “general obligation” to arbitrate any dispute. Id. at 282. They later executed a separate agreement that included both a merger clause and a forum selection clause whereby they submitted to the jurisdiction of New York courts. Id. The defendant argued that the subsequent agreement’s merger and forum clauses vitiated the parties’ preexisting agreement to arbitrate. The Second Circuit disagreed.11

11. The Second Circuit declined to construe the merger clause in that case, which stated that the parties’ subsequent agreement “supersedes all prior agreements,” to repudiate all prior agreements between the parties. “Rather, and consistent with New York law, we read the Merger Clause as providing that the Pledge Agreements supersede any previous agreements only to the extent that they confl ict.” Id. at 283.

The Second Circuit also noted that the merger clause should not be read as a repudiation in light of an incorporation clause providing “all the rights and remedies . . . are cumulative and not exclusive of any rights or remedies provided under any other agreement.” Id. Importantly, the court considered the

20

First, the court explained that the presumption in favor of arbitration applied: “Under our cases, if there is a reading of the various agreements that permits the Arbitration Clause to remain in effect, we must choose it: ‘[T]he existence of a broad agreement to arbitrate creates a presumption of arbitrability . . . .’” Id. at 284 (quoting WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997)).

The Second Circuit then set out to apply the presumption in favor of arbitration, noting that the arbitration agreement would be rescinded “only if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Id. In view of the presumption in favor of arbitration, because the forum selection clause was at least ambiguous, it must read as complementary to, and not at odds with, the obligation to arbitrate:

It may be read, consistent with the Arbitration Agreement, in such a way that the Bank and Waxfi eld are required to arbitrate their disputes, but that to the extent the Bank fi les a suit in court in New York—for example, to enforce an arbitral award, or to challenge the validity or application of the arbitration agreement—Waxfield will not challenge either jurisdiction or venue. In addition, the Forum Selection Clause makes no reference to

incorporation clause’s effect only on the merger clause, which the court furthermore held could have been decided on an independent contract interpretation basis. The existence of this clause was not dispositive to the portion of the holding relevant for the circuit split discussed in this Petition. See id. at 283-85.

21

arbitration, and so is at least ambiguous. That being so, doubts about arbitrability should be resolved in favor of coverage.

Id. at 285 (internal brackets and quotation marks omitted); see also, e.g., Palese, 985 F. Supp. 2d at 377 (applying Bank Julius).12

4. In contrast to the decisions of the Second, Third, and Fifth Circuits, the Ninth Circuit refused to invoke the presumption in favor of arbitrability. The Ninth Circuit majority grounded its analysis in its conclusion that the case concerned the “existence,” rather than the “scope,” of an obligation to arbitrate. But the matter is analytically

12. In Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522 (2d Cir. 2011), the Second Circuit cited its analysis in Bank Julius with approval, but concluded nonetheless that the presumption of arbitrability did not apply where the parties’ arbitration agreement and their subsequently executed forum selection clause used identical language—both applied to “all disputes.” In that situation, of course the scope of both provisions is necessarily the same. Id. at 525 (“Both provisions are all-inclusive, both are mandatory, and neither admits the possibility of the other.”). Accordingly, the Second Circuit found that the presumption of arbitrability would not apply because the question at issue was the existence of an arbitration agreement, not the scope of a broader arbitration agreement. Id. at 526.

Unlike in Applied Energetics, here the forum selection clause employs different language from that in the arbitration agreement. Further, given that the Applied Energetics court cited Bank Julius with approval, the Second Circuit did not overrule its Bank Julius precedent that courts should apply the presumption in favor of arbitrability in determining whether a subsequent forum selection clause, using different language from the arbitration agreement, supplants a prior agreement to arbitrate.

22

indistinguishable from the opinions of these other circuits, which view the issue as a waiver of arbitration to which a presumption of arbitration applies.

As a result of the confl ict created by the Ninth Circuit, parties to arbitration agreements within that circuit will discover that contractual provisions that do not mention arbitration and are narrower than their arbitration agreements may nonetheless displace their arbitration agreements without regard to the federal policy in favor of arbitration.

II. THE NINTH CIRCUIT’S OPINION CONFLICTS DIRECTLY AND EXPLICITLY WITH THE FOURTH CIRCUIT’S DECISION ON IDENTICAL FACTS.

In addition to creating a circuit split with the Second, Third, and Fifth Circuits, the Ninth Circuit panel majority explicitly recognized that its decision confl icted with the Fourth Circuit’s resolution of the exact same issue of contractual interpretation. The panel majority not only opened up a second circuit split—on the issue of whether a forum selection clause cabined to “actions and proceedings” will supersede a prior agreement to arbitrate “all disputes.” In so doing, the panel majority ignored a reasonable interpretation of the City’s contracts that would have left intact the City’s option to arbitrate.

1. In UBS Financial Services, Inc. v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013), an ARS issuer fi led a FINRA arbitration against its underwriter raising claims nearly identical to those in the present case. The underwriter in Carilion moved to enjoin the arbitration, arguing that

23

the issuer had waived arbitration based on a clause in its Broker-Dealer Agreement that was materially identical to the Jurisdiction clause in the present case.13

The Fourth Circuit stated that this question came down “to a straightforward issue of contractual interpretation.” Id. at 329. The court of appeals began by noting that the forum selection clause did not necessarily preclude arbitration: “one would reasonably expect that a clause designed to supersede, displace, or waive arbitration would mention arbitration.” Id. The Fourth Circuit then noted that when the forum selection clause is read in context with the remaining portions of the provision’s reference to “jury trials,” it is more plausible that the phrase “actions and proceedings” was used as a “term of art” to refer to judicial proceedings. Id. at 329-30. This understanding was consistent with the use of the term “actions and proceedings” in the Federal Rules of Civil Procedure and the New York Civil Practice Law and Rules, both of which use “actions and proceedings” to refer to “judicial disputes, not to arbitration.” Id. at 330 (emphasis in original); see also supra n.8. The Fourth Circuit concluded:

We fi nd it a more natural reading of the forum selection clause to require that any litigation arising out of the agreement would have to be brought in the United States District Court in New York County and that as to any such action

13. In Carilion, the parties’ forum selection clause provided that “all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the County of New York.” 706 F.3d at 329.

24

or proceeding, a jury trial would be waived. And we believe that it would never cross a reader’s mind that the clause provides that the right to FINRA arbitration was being superseded or waived. No word even suggesting supersedence, waiver, or preclusion exists in the sentence.

706 F.3d at 330.

2. The Ninth Circuit panel majority noted that it “disagree[d]” with its sister circuit’s analysis. App. 26a, 28a. This is relevant not only because the Ninth Circuit created a direct circuit split, but because the existence of the Fourth Circuit’s contrary contractual interpretation demonstrates that this is a case where the presumption of arbitrability would have been dispositive. In fact, the Ninth Circuit acknowledged that it would have held that the City had not waived its option to arbitrate, if only the court had applied a presumption of arbitrability.

III. THE DECISION BELOW IS CONTRARY TO THIS COURT’S PRECEDENT AND THE PRO-ARBITRATION POLICIES OF THE FAA.

The decisions of the Second, Third, Fourth, and Fifth Circuits discussed above were animated by the federal policy in favor of arbitration, established by the FAA and elaborated upon by this Court’s FAA jurisprudence. The Ninth Circuit’s opinion is at odds with the FAA and this Court’s precedent.

1. “The FAA was enacted in 1925 in response to widespread judicial hostility to agreements to arbitrate.” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745

25

(2011); Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2008); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). The federal statute sought to counter that trend by establishing an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985).

One of the most common circumstances where this federal policy is implicated is when a court is called upon to determine whether parties agreed to arbitrate a dispute. Such a decision is governed by “the federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Mem’l Hosp., 460 U.S. at 24. This Court has noted accordingly:

[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. . . . The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.

Id. at 24–25 (emphasis added). While the interpretation of contracts remains a question of the parties’ intent, “those intentions are generously construed as to issues of arbitrability.” Mitsubishi Motors Corp., 473 U.S. at 626.

This case turns on issues of contractual interpretation and waiver of arbitration: the effect of the parties’

26

subsequent agreement that “actions and proceedings arising out of the Broker-Dealer Agreement . . . shall be brought in District Court” on the City’s option to arbitrate “all disputes” arising in connection with Goldman’s business activities. Long ago, in Moses H. Cone, and ever since, this Court held that a presumption of arbitration applies to resolve such questions concerning the “construction of the contract language” itself and waiver of arbitration. 460 U.S. at 25. By refusing to apply such a presumption, the Ninth Circuit departed markedly from this Court’s FAA jurisprudence.

2. This Court confronted the specific issue of resolving confl icts between broad arbitration agreements and contractual provisions that restrict arbitration in Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995). That case concerned a contract between the parties that contained both an arbitration provision calling for NASD arbitration and a choice-of-law clause specifying the application of New York law. The Court ultimately applied a presumption of arbitration when the choice-of-law clause created ambiguity about whether an arbitration agreement covered a disputed issue. Id. at 62.

At the time, New York law did not permit arbitrators to award punitive damages. Id. at 55. In the NASD arbitration, the parties disagreed whether the arbitrators had authority to grant punitive damages under the contract signed by the parties. Id. at 54-55. After the NASD panel awarded punitive damages to the claimant, the lower courts vacated the award, fi nding that the panel exceeded its powers by awarding punitive damages despite the choice-of-law clause. Id. at 55.

27

This Court reversed. It concluded that the question was one of contractual interpretation and that this interpretation must account for the federal policy favoring arbitration. Id. at 62. The Court stated that “when a court interprets such provisions in an agreement covered by the FAA, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration.” Id. (citing Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476 (1989)). While the Court then acknowledged that the choice-of-law clause could introduce “an ambiguity into an arbitration agreement that would otherwise allow punitive damages,” it noted that the two provisions could—and thus should—be harmonized by reading the choice-of-law clause to “encompass substantive principles that New York courts would apply, but not to include special rules limiting the authority of arbitrators.” Id. at 62, 64. Relying in part on the presumption in favor of arbitration, this Court therefore found that the choice-of-law clause did not divest the arbitrators of authority to award punitive damages. Id.

Mastrobuono thus counsels how courts should interpret a broad arbitration clause when the parties also execute a choice-of-law or forum selection clause that creates ambiguity about whether a particular dispute is subject to the arbitration clause. The Mastrobuono analysis shows due regard to the federal policy in favor of arbitration by construing ambiguities in favor of arbitration if there is a reasonable reading of the contracts that allows for arbitration of a dispute. Cf. Granite Rock, 561 U.S. at 301 (noting the “presumption of arbitrability . . . where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand”).

28

3. In the present case, the Ninth Circuit majority disregarded this Court’s guidance and refused to interpret the parties’ contractual language in light of the federal policy in favor of arbitration. As a result of this error, the panel majority found that a provision in one contract without any reference to arbitration entirely displaced a broad arbitration agreement encompassing “all disputes” between the parties. Likewise, without the presumption in favor of arbitration, the panel majority rejected a reading of the contracts that would have harmonized the forum selection clause with the arbitration clause, giving force to both.

This Court should grant certiorari to reinforce the FAA’s pro-arbitration policy and to reaffi rm this Court’s precedent requiring courts to interpret parties’ contractual language with a “healthy regard for the federal policy in favor of arbitration.” Moses H. Cone Mem’l Hosp., 460 U.S. at 24.

IV. THE QUESTION PRESENTED IS IMPORTANT.

If left to stand, the Ninth Circuit panel majority’s decision will introduce uncertainty into millions of arbitration agreements. In both sophisticated transactions and form consumer contracts alike, parties routinely enter into multiple agreements, or subsequent versions, amendments or revisions of their agreements. Those subsequent agreements or amendments very often include forum selection clauses that, if subject to the Ninth Circuit’s decision, could revoke an arbitration provision between the parties sub silentio.

29

1. The Ninth Circuit panel majority recognized that the specifi c contractual interpretation issue it confronted “has been the subject of litigation in federal courts around the country.” App. at 22a. This is because the forum selection clause in this case is a standard form provision, one commonly used in securities-related agreements. The interpretation of that standard forum selection clause, referring to “actions and proceedings,” is now subject to different standards across the country. This Court’s guidance is needed by fi nancial institutions and their customers to clarify this now-murky situation.

2. The Ninth Circuit panel majority’s opinion is plainly not limited to the specifi c contractual language at issue, and its holding will be invoked to govern a broad range of contractual arrangements, whenever a party wants to avoid arbitration. This ruling is likely to have a pernicious effect on arbitration clauses in a substantial number of consumer contracts and sophisticated transactions alike.

In consumer and financial services agreements, customers routinely agree to lengthy form contracts and, subsequently, to multiple other provisions over the course of several years. The panel majority’s decision provides a blueprint for parties wishing to avoid arbitration agreements to argue that a clause in one of many versions of the parties’ agreements waives arbitration, even if that clause does not reference arbitration. The decision will thus encourage litigation seeking to derail, delay, or frustrate arbitration, undermining the national policy in favor of arbitration and nullifying one of its benefi ts. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967) (noting “the unmistakably clear congressional purpose [of the FAA] that the arbitration

30

procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts”).

***

In transactions across a broad range of industries, parties often sign multiple agreements that together form an integrated deal. Some of those agreements may contain an arbitration clause, while others may contain forum selection clauses.14 Under the Ninth Circuit’s opinion, any such forum selection clause may preempt the arbitration agreement, permitting a party to assert claims in court it agreed to arbitrate. Application of the presumption of arbitration, consistent with the FAA, this Court’s instructions, and other circuit precedent, would ensure that arbitration agreements in such transactions are enforced with a due regard for the federal policy that favors arbitration.

In view of the manifest error of the Ninth Circuit, this Court may wish to consider summary reversal.

14. See, e.g., UBS Sec. LLC v. Allina Health Sys., No. 12-2090, 2013 WL 500373, *2 (D. Minn. Feb. 11, 2013) (describing a transaction in which the parties’ Bond Purchase Agreement provided that all disputes would be settled by AAA arbitration, and the parties’ Broker-Dealer Agreement provided that “all actions and proceedings” shall be brought in court in New York).

31

CONCLUSION

The petition for a writ of certiorari should be granted. The Court may also wish to consider summary reversal.

Respectfully submitted,

Attorneys for Petitioner

August 7, 2014

ADAM B. WOLF

Counsel of RecordPEIFFER ROSCA WOLF ABDULLAH CARR & KANE, L.L.P.Four Embarcadero Center, Suite 1400San Francisco, CA 94111(415) 766-3545awolf@prwlegal.com

JASON W. BURGE

ALYSSON L. MILLS

FISHMAN HAYGOOD PHELPS WALMSLEY WILLIS & SWANSON, L.L.P.201 St. Charles Ave., Suite 4600New Orleans, LA 70170(504) 586-5241

JOSEPH C. PEIFFER

PEIFFER ROSCA WOLF ABDULLAH CARR & KANE, LLC201 St. Charles Ave., Suite 4610New Orleans, LA 70170(504) 523-2434

APPENDIX

Appendix A

1a

APPENDIX A — ORDER OF THE UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT, FILED MAY 9, 2014

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

No. 13-15445

GOLDMAN, SACHS & CO.,

Plaintiff-Appellant,

v.

CITY OF RENO,

Defendant-Appellee.

D.C. No. 3:12-cv-00327-RCJ-WGCDistrict of Nevada, Reno

ORDER

Before: SCHROEDER and BYBEE, Circuit Judges, and BATTAGLIA, District Judge.*

Judge Bybee voted to deny the petition for rehearing en banc. Judge Schroeder recommended denying the petition for rehearing en banc. Judge Battaglia recommended granting the petition for rehearing en banc.

* The Honorable Anthony J. Battaglia, District Judge for the U.S. District Court for the Southern District of California, sitting by designation.

Appendix A

2a

The full court has been advised of the petition for rehearing en banc, and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35.

Appellee’s petition for rehearing and petition for rehearing en banc, fi led April 14, 2014, is DENIED.

Appendix B

3a

APPENDIX B — OPINION OF THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT, FILED MARCH 31, 2014

UNITED STATES COURT OF APPEALS NINTH CIRCUIT

No. 13-15445

GOLDMAN, SACHS & CO.,

Plaintiff-Appellant,

v.

CITY OF RENO,

Defendant-Appellee.

September 9, 2013, Argued and Submitted, San Francisco, California

March 31, 2014, Filed

OPINION

BYBEE, Circuit Judge:

In 2005 and 2006, the City of Reno issued approximately $211 million in complex securities and employed Goldman, Sachs & Co. (“Goldman”) as its sole underwriter and broker-dealer. Years after Reno’s fi nancing collapsed, Reno initiated an arbitration before the Financial Industry Regulatory Authority (“FINRA”) to resolve its

Appendix B

4a

claims against Goldman arising out of their contractual relationship. Goldman then fi led this action to enjoin the FINRA arbitration, arguing that (1) Reno was not a “customer” entitled to arbitrate under FINRA Rule 12200 and (2), at any rate, Reno had disclaimed any right to arbitrate by agreeing to forum selection clauses in the contracts between the parties. Reno responded that FINRA had the right in the fi rst instance to determine arbitrability. The district court agreed with Reno and disagreed with Goldman. It therefore denied Goldman’s motion for injunctive relief and entered fi nal judgment in favor of Reno.

We have little diffi culty determining that Reno was Goldman’s “customer” under the FINRA Rules. However, the second question—whether the forum selection clauses superseded Goldman’s obligation to arbitrate under FINRA Rule 12200—has been the subject of litigation in multiple circuits, with decidedly mixed results. The Fourth Circuit and the District of Minnesota have held that an identical forum selection clause does not supersede a FINRA member’s obligation to arbitrate under the FINRA Rules, see UBS Fin. Servs., Inc. v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013); UBS Sec. LLC v. Allina Health Sys., No. 12-2090, 2013 U.S. Dist. LEXIS 17799, 2013 WL 500373 (D. Minn. Feb. 11, 2013), while two judges within the Southern District of New York have held that materially identical forum selection clauses trump FINRA Rule 12200 such that the customer must bring its claims in federal court, see Goldman, Sachs & Co v. N.C. Mun. Power Agency No. One, No. 13-CV-1319, 2013 U.S. Dist. LEXIS 172994, 2013 WL 6409348, at *7 (S.D.N.Y. Dec. 9,

Appendix B

5a

2013); Goldman, Sachs & Co. v. Golden Empire Schools Fin. Auth., 922 F. Supp. 2d 435 (S.D.N.Y. 2013). Because we fi nd that the forum selection clauses in the parties’ contracts superseded any right to FINRA arbitration, we reverse the district court’s order and fi nal judgment, and remand for further proceedings consistent with this opinion.

I. BACKGROUND

In 2005, Reno undertook a series of city projects. To fi nance these projects, Reno chose to issue municipal bonds. Reno approached Goldman to discuss fi nancing options, and Goldman advised Reno to issue the debt in the form of auction rate securities (“ARS”).

ARS are long-term, variable-rate instruments with interest rates that reset at periodic auctions. At each auction, ARS investors submit a bid setting forth the number of ARS that they wish to purchase, hold, or sell, and the lowest interest rate that they will accept. The lowest interest rate at which the entire issue can be sold at par establishes the new interest rate to be paid until the next auction. This new interest rate is known as the “clearing rate.” If there are insuffi cient bids to cover the bonds available for sale at the auction, however, the auction “fails,” and the interest rate is set at a contractual “maximum rate” until the next auction.

With Goldman’s assistance, Reno issued $73.45 million in ARS in October 2005 (the “2005 Bonds”). At that time, Reno and Goldman entered into two written agreements

Appendix B

6a

that governed their relationship: (1) an underwriter agreement that outlined Goldman’s duty to purchase and offer the 2005 Bonds (the “2005 Underwriter Agreement”) and (2) a separate, but contemporaneously executed, broker-dealer agreement that outlined Goldman’s duty to manage the auctions for the 2005 Bonds (the “2005 Broker-Dealer Agreement). The contracts were entered into after arm’s-length negotiations in which both parties were represented by counsel.

For purposes of our analysis, the 2005 Broker-Dealer Agreement contains two signifi cant clauses. First, it contains a forum selection clause providing that:

The parties agree that al l actions and proceedings arising out of this Broker-Dealer Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the District of Nevada and that, in connection with any such action or proceeding, the parties shall submit to the jurisdiction of, and venue in, such court.

Second, the 2005 Broker-Dealer Agreement contains a merger clause providing that:

This Broker-Dealer Agreement, and the other agreements and instruments executed and delivered in connection with the issuance of the ARS, contain the entire agreement between the parties relating to the subject matter hereof, and there are no other representations,

Appendix B

7a

endorsements, promises, agreements or understandings, oral, written or inferred, between the parties relating to the subject matter hereof.

Reno and Goldman entered into substantially identical contracts in 2006 (the “2006 Underwriter Agreement” and the “2006 Broker-Dealer Agreement”) when Reno fi nanced a new city project by issuing $137.43 million in ARS (the “2006 Bonds”).

Reno compensated Goldman for its services under each of these four agreements. Pursuant to the 2005 and 2006 Underwriter Agreements, Goldman received an underwriter’s discount by purchasing the 2005 and 2006 Bonds for less than their face value. In addition, pursuant to the 2005 and 2006 Broker-Dealer Agreements, Goldman received annual broker-dealer fees in exchange for its management of the ARS auctions.

In 2008, the ARS market collapsed, and Reno’s ARS auctions began to fail. As a result, Reno was forced to refi nance the 2005 and 2006 Bonds at considerable cost. According to Reno, these costs should be attributed to Goldman’s conduct. Specifi cally, Reno alleges that, where Goldman served as underwriter, it had a general practice of placing support bids in ARS auctions to ensure that these auctions did not fail; that Goldman did not disclose this general practice to Reno before Reno issued the 2005 and 2006 Bonds; that, consistent with Goldman’s general practice, it placed support bids in Reno’s ARS auctions until 2008; that Goldman’s decision to stop placing support

Appendix B

8a

bids in 2008 caused Reno’s ARS auctions to fail; and that, if Goldman had told Reno about this general practice, Reno would not have issued ARS to fi nance its city projects. Based on these allegations, Reno claims that Goldman’s conduct breached its fi duciary duty, amounted to fraud and negligent misrepresentation, violated the Securities Exchange Act of 1934, violated the Nevada Securities Act, and violated Municipal Securities Rulemaking Board and FINRA Rules.

In order to resolve these claims through arbitration, Reno filed a Statement of Claim against Goldman before FINRA on February 10, 2012. FINRA is a self-regulatory organization that has “the authority to exercise comprehensive oversight over ‘all securities fi rms that do business with the public.’” UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648 (2d Cir. 2011) (quoting 72 Fed. Reg. 42169, 42170 (Aug. 1, 2007)). To exercise this oversight, FINRA has instituted rules with which its members, including Goldman, agree to comply. See FINRA Bylaws, art. IV, § 1(a). And one of these rules provides that FINRA members and their customers “must arbitrate a dispute . . . [i]f [a]rbitration . . . [is] [r]equested by the customer; [t]he dispute is between a customer and a member . . . ; and [t]he dispute arises in connection with the business activities of the member . . . .” FINRA Rule 12200.

In response to Reno’s Statement of Claim, Goldman fi led this action in the United States District Court for the District of Nevada, seeking a declaratory judgment that FINRA lacks jurisdiction over the dispute and

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an injunction against the arbitration proceedings. In Goldman’s motion for preliminary injunction, fi led shortly after its complaint, Goldman argued that Reno was not a “customer” entitled to arbitrate under FINRA Rule 12200 and that, at any rate, Reno had disclaimed any right to arbitrate by agreeing to the forum selection clauses in the 2005 and 2006 Broker-Dealer Agreements.

The district court denied Goldman’s motion for preliminary injunction. Goldman, Sachs & Co. v. City of Reno, No. 3:12-CV-00327, 2012 U.S. Dist. LEXIS 167902, 2012 WL 5944966 (D. Nev. Nov. 26, 2012). In so doing, the district court reached three legal conclusions that are at issue on appeal. First, the district court found that FINRA had jurisdiction to decide the arbitrability of Reno’s claims. Second, the district court determined that Reno was a “customer” under FINRA Rule 12200. And third, the district court found that the forum selection clauses in the 2005 and 2006 Broker-Dealer Agreements did not supersede Reno’s right to FINRA arbitration. Accordingly, the district court ruled that Goldman was not likely to succeed on the merits.

Following the district court’s ruling, the parties agreed that there was nothing further to litigate, and the district court entered fi nal judgment in favor of Reno. Goldman then fi led this appeal.

II. STANDARD OF REVIEW

In order to obtain a preliminary injunction, Goldman must demonstrate that (1) it is likely to succeed on the

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merits, (2) it is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest. Winter v. NRDC, Inc., 555 U.S. 7, 20, 129 S. Ct. 365, 172 L. Ed. 2d 249 (2008).

We review the district court’s denial of a preliminary injunction for an abuse of discretion, its factual fi ndings for clear error, and its conclusions of law de novo. See Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1157 (9th Cir. 2007).

III. DISCUSSION

There are three issues on appeal. First, we address whether FINRA must determine the arbitrability of this matter in the fi rst instance. Because we conclude that we, rather than FINRA, have jurisdiction to determine arbitrability, we reach the remaining two issues. Second, we consider whether Reno was a “customer” of Goldman, giving it the right to invoke arbitration under the FINRA Rules. Third, we examine whether Reno and Goldman contracted around FINRA Rule 12200 through forum selection clauses and agreed to litigate any claims in the United States District Court for the District of Nevada.

A. Jurisdiction to determine arbitrability

Both the arbitrability of the merits of a dispute and the question of who has the primary power to decide arbitrability depend on the agreement of the parties. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943,

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115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995). “But, unlike the arbitrability of claims in general, whether the court or the arbitrator decides arbitrability is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” Oracle Am., Inc. v. Myriad Group A.G., 724 F.3d 1069, 1072 (9th Cir. 2013) (internal quotation marks and citations omitted). Thus, “there is a presumption that courts will decide which issues are arbitrable.” Id.

The district court concluded that, because Goldman is a FINRA member, it has agreed to FINRA arbitration on the issue of arbitrability itself. As support for this conclusion, the district court relied on FINRA Rule 12203(a), which states that “[t]he Director may decline to permit the use of the FINRA arbitration forum if the Director determines that . . . the subject matter of the dispute is inappropriate, or that accepting the matter would pose a risk to the health or safety of arbitrators, staff, or parties or their representatives.”

This legal conclusion was incorrect. FINRA Rule 12203(a) does not provide “clear and unmistakable” evidence that FINRA members like Goldman have consented to FINRA determination of the issue of arbitrability. Instead, FINRA Rule 12203(a) simply describes certain circumstances under which the FINRA Director may deny access to the FINRA arbitration forum. Furthermore, neither the underwriter nor the broker-dealer agreements provide “clear and unmistakable” evidence that the parties intended that FINRA would determine the issue of arbitrability. The presumption that

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the court will decide which issues are arbitrable remains unrebutted, and we must make the call.

B. Reno as Goldman’s “Customer”

“[A]rbitration is a matter of contract,” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 130 S. Ct. 2772, 2776, 177 L. Ed. 2d 403 (2010), and there is “a liberal federal policy favoring arbitration agreements.”1 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). “In line with these principles, courts must place arbitration agreements on an equal footing with other contracts, and enforce them according

1. The Federal Arbitration Act (“FAA”) provides that:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. FINRA Rule 12200 constitutes an “agreement in writing” under the FAA, and, assuming Reno is a customer, it is entitled to invoke FINRA Rule 12200 as an intended third-party benefi ciary in its dispute with Goldman. See Kidder, Peabody & Co. v. Zinsmeyer Trusts P’ship, 41 F.3d 861, 863-64 (2d Cir. 1994); see also Waterford Inv. Servs., Inc. v. Bosco, 682 F.3d 348, 353 (4th Cir. 2012); MONY Sec. Corp. v. Bornstein, 390 F.3d 1340, 1342 (11th Cir. 2004).

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to their terms.” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745, 179 L. Ed. 2d 742 (2011) (internal citations omitted).

Here, the relevant arbitration provision is FINRA Rule 12200, which requires FINRA members like Goldman to arbitrate disputes arising out of their business activities at the request of a “customer.” Goldman denies any obligation to arbitrate under this rule because Reno was not a “customer” as that term is used in the FINRA Rules.

The FINRA Rules defi ne “customer” only in the negative: “A customer shall not include a broker or dealer.” FINRA Rule 12100(i). This defi nition does not tell us what a “customer” is, and because Reno is neither a broker nor a dealer, the FINRA Rules’ defi nition, standing alone, cannot tell us whether Reno fi ts the bill.

Goldman argues that Reno was not a “customer” because their relationship did not relate directly to investment or brokerage services. As support for this narrow defi nition, Goldman cites the Eighth Circuit’s decision in Fleet Boston Robertson Stephens, Inc. v. Innovex, Inc., 264 F.3d 770 (8th Cir. 2001). In Fleet Boston, the court considered whether “a ‘customer’ is everyone who is not a broker or dealer.” Id. at 772. Rejecting this broad defi nition, the court explained that “the [FINRA] Rules were [not] meant to apply to every sort of fi nancial service a [FINRA] member might provide, regardless of how remote that service might be from the investing or brokerage activities, which [FINRA] oversees.” Id. The

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court then held that “[FINRA] Rules support a general defi nition of ‘customer’ as one who receives investment and brokerage services or otherwise deals more directly with securities than what occurred here.” Id. (emphasis added). Although the court said it was a “close call,” the Eighth Circuit held that where the purported customer “only received fi nancial advice,” it did not qualify as a “customer” entitled to arbitration. Id. at 773.

Other circuits have refi ned the defi nition of “customer” in the years following Fleet Boston. See Carilion Clinic, 706 F.3d at 325; W. Va. Univ. Hosps., Inc., 660 F.3d at 651. In Carilion Clinic, UBS and Citigroup sought to enjoin arbitration under the FINRA Rules, contending that Carilion Clinic was not a “customer.” 706 F.3d at 321. The Fourth Circuit rejected this contention. In so doing, the court looked to other provisions of the FINRA Rules to provide context for the defi nition of “customer.” Id. at 324-25. Specifi cally, the court noted that FINRA Rule 12200 provides that arbitrable disputes must arise in connection with the “business activities” of the FINRA Member, suggesting that a person must be a customer of a FINRA member’s business activities to obtain arbitration; that FINRA Rule 12100(r) suggests that the business activities of a FINRA member involve “investment banking or securities business”; and that FINRA’s mission, among other things, is “[t]o promote through cooperative effort the investment banking and securities business, to standardize its principles and practices, to promote therein high standards of commercial honor, and to encourage and promote among members observance of federal and state securities laws.” Restated Certifi cate

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of Incorporation of Financial Industry Regulatory Authority, Inc. § 3 (July 2, 2010).

Subject to the scope indicated by the FINRA Rules, however, the court reasoned that “the term ‘customer’ in Rule 12200 still retains its generally accepted meaning—’one that purchases a commodity or service.’” Carilion Clinic, 706 F.3d at 325 (quoting Merriam Webster’s Collegiate Dictionary 308 (11th ed. 2007)). The court concluded that a “customer” is “one, not a broker or dealer, who purchases commodities or services from a FINRA member in the course of the member’s business activities insofar as those activities are covered by FINRA’s regulation, namely the activities of investment banking and the securities business.” Id; see also W. Va. Univ. Hosps., Inc., 660 F.3d at 650. Thus, because UBS and Citigroup had provided a variety of services to Carilion Clinic in connection with the issuance of ARS bonds, Carilion Clinic was their “customer.” Carilion Clinic, 706 F.3d at 327-28.

Similarly, in UBS Financial Services, Inc. v. West Virginia University Hospitals, West Virginia University Hospitals (“WVUH”) issued $329 million in bonds, a portion of which were issued as ARS. 660 F.3d at 645. UBS served as “both the lead underwriter and the main broker-dealer responsible for facilitating the Dutch auctions in which WVUH’s bonds were resold and their interest rates set.” Id. Like Reno and Goldman, WVUH and UBS entered into underwriter and broker-dealer agreements. UBS facilitated the auctions, for which it was paid a fee, and was permitted to purchase the ARS

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at a discount rate. Id. The Second Circuit concluded that “[t]he term ‘customer’ includes at least a non-broker or non-dealer who purchases, or undertakes to purchase, a good or service from a FINRA member.” Id. at 650. On that basis, “WVUH was UBS’s customer because WVUH purchased a service, specifi cally auction services, from UBS.” Id.

We fi nd the Second and Fourth Circuits’ analysis persuasive. Accordingly, we conclude that a “customer” is a non-broker and non-dealer who purchases commodities or services from a FINRA member in the course of the member’s FINRA-regulated business activities, i.e., the member’s investment banking and securities business activities.

With this defi nition in mind, we fi nd that Reno easily qualifi es as Goldman’s “customer.” To fi nance a series of city projects, Reno issued approximately $211 million in ARS bonds. Pursuant to the 2005 and 2006 Underwriter and Broker-Dealer Agreements, Goldman served as the underwriter for the 2005 and 2006 Bonds and as the broker-dealer for the ARS auctions; sold Reno interest rate swaps to protect the fi nancing structure; acted as Reno’s agent in dealing with the rating agencies; conducted discussions with bond insurers on Reno’s behalf; and provided monitoring and advisory services for the 2005 and 2006 Bonds and the interest rate swaps. Goldman provided these services in the course of its securities business activities, and Reno compensated Goldman in the form of underwriter’s discounts and annual broker-dealer fees. Accordingly, under both the 2005 and 2006

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Underwriter and Broker-Dealer Agreements, Reno was Goldman’s “customer.” And because Goldman’s customer has requested arbitration, FINRA Rule 12200 requires Goldman to arbitrate unless Reno has disclaimed its right to arbitrate through contract.

C. Forum Selection Clauses

Goldman argues that, even if Reno is its customer, Goldman may enjoin the ongoing FINRA arbitration because Reno disclaimed its right to arbitrate by agreeing to the forum selection clauses in the 2005 and 2006 Broker-Dealer Agreements. These forum selection clauses recite that “all actions and proceedings . . . shall be brought in the . . . District of Nevada.” As a threshold matter, we agree with Goldman that a contract between the parties can supersede the default obligation to arbitrate under the FINRA Rules. See, e.g., Carilion Clinic, 706 F.3d at 328; Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522, 525 (2d Cir. 2011). The question, then, is whether the forum selection clauses at issue here suffi ciently demonstrate the parties’ intent to do so. We conclude that they do. Goldman had a default obligation to arbitrate with its customers under the FINRA Rules, but Goldman was free to make alternative arrangements with each individual customer when the parties formed or modifi ed their contractual relationship. Here, at the time the contracts were negotiated, Goldman and Reno agreed to forum selection clauses which clearly indicate that the parties never agreed to arbitrate claims arising out of their contractual relationship. Instead, from the beginning of this relationship, Goldman and Reno agreed to bring

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such claims in the District of Nevada. We therefore hold that these forum selection clauses superseded Goldman’s default obligation to arbitrate under the FINRA Rules.

1. Legal Standards

The Supreme Court has emphasized that the “fi rst principle” of its arbitration decisions is that “[a]rbitration is strictly a matter of consent and thus is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 130 S. Ct. 2847, 2857, 177 L. Ed. 2d 567 (2010) (internal quotation marks and citations omitted). When determining whether parties have agreed to submit to arbitration, “we apply ‘general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor of arbitration.’” Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044 (9th Cir. 2009) (quoting Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 1996)). This policy, however, “is merely an acknowledgment of the FAA’s commitment to ‘overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts.’” Granite Rock, 130 S. Ct. at 2859 (emphasis added) (quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989)). Accordingly, the Supreme Court “[has] never held that this policy overrides the principle that a court may submit to arbitration ‘only those disputes . . . that the parties have

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agreed to submit.’ Nor [has the Court] held that courts may use policy considerations as a substitute for party agreement.” Id. (citations omitted) (quoting First Options of Chi., 514 U.S. at 943).

Guided by this fi rst principle, we do not apply the socalled “presumption in favor of arbitrability” in every case. Where the arbitrability of a dispute is contested, we must decide whether the parties are contesting the existence or the scope of an arbitration agreement. If the parties contest the existence of an arbitration agreement, the presumption in favor of arbitrability does not apply. If the parties contest the scope of an arbitration agreement, we must determine whether the scope of the agreement covers the relevant dispute. The presumption in favor of arbitrability applies only where the scope of the agreement is ambiguous as to the dispute at hand, and we adhere to the presumption and order arbitration only where the presumption is not rebutted. Granite Rock, 130 S. Ct. at 2858-60; AT&T Technologies, Inc. v. Communications Workers of America., 475 U.S. 643, 650, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986) (“[W]here the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” (internal quotation marks, brackets, and citation omitted)); Mundi, 555 F.3d at 1044-45 (“The presumption in favor of arbitration . . . does not apply if contractual language is plain that arbitration of a particular controversy is not within the

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scope of the arbitration provision.” (internal quotation marks and citation omitted)); Bank Julius Baer & Co. v. Waxfi eld Ltd., 424 F.3d 278, 281 (2d Cir. 2005).

Consistent with this analytical framework, we must decide whether Goldman contests the existence or scope of a valid arbitration agreement. Goldman and Reno did not include an express arbitration clause in the Underwriter or Broker-Dealer Agreements. Instead, as a FINRA member, Goldman had a default obligation to arbitrate at the request of a “customer.” And as a “customer,” Reno stood to benefi t from this default obligation, provided that the parties did not contract around it. According to Goldman, however, that is precisely what occurred when the parties agreed to the forum selection clauses: Reno disclaimed any right to arbitrate that it might otherwise have had. If Goldman is correct that the forum selection clauses superseded its default obligation under the FINRA Rules, Goldman and Reno agreed not to arbitrate any claims that might arise out of their contractual relationship at the very time this relationship was formed. Goldman thus contests the existence, rather than the scope, of an arbitration agreement, and, therefore, the presumption in favor of arbitrability does not apply in this case.

The Second Circuit reached the same conclusion on similar facts in Applied Energetics, 645 F.3d at 526. There, the parties included an arbitration clause in an “Engagement Agreement.” That clause, however, was allegedly superseded by a forum selection clause in a subsequent “Placement Agreement.” Id. at 523. The

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court noted that “while doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made.” Id. at 526. Consequently, because the question of whether the Placement Agreement had superseded the Engagement Agreement was a dispute over the existence, rather than the scope, of the agreement to arbitrate, “the presumption in favor of arbitrability [did] not apply.” Id.

Because we likewise conclude that the presumption in favor of arbitrability does not apply here, we use general state-law principles of contract interpretation to decide whether a contractual obligation to arbitrate exists, see Mundi, 555 F.3d at 1044: If the parties’ agreement is clear on its face, we must enforce it as written. See Greenfi eld v. Philles Records, Inc., 98 N.Y.2d 562, 780 N.E.2d 166, 170, 750 N.Y.S.2d 565 (N.Y. 2002) (“[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.”); accord Canfora v. Coast Hotels & Casinos, Inc., 121 Nev. 771, 121 P.3d 599, 603 (Nev. 2005) (“[W]hen a contract is clear on its face, it will be construed from the written language and enforced as written.” (internal quotation marks and citation omitted)). Accordingly, to avoid arbitration, the forum selection clauses to which Goldman and Reno agreed need only be “suffi ciently specifi c to impute to the contracting parties the reasonable expectation that they are superseding, displacing, or waiving the arbitration obligation created by FINRA Rule 12200.” Carilion Clinic, 706 F.3d at 328.

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2. Application

With this standard in mind, we turn to the text of the forum selection clauses and conclude that Reno has clearly and unambiguously disclaimed any right it might otherwise have had to FINRA arbitration. As previously mentioned, the forum selection clauses provide that “all actions and proceedings . . . shall be brought in the . . . District of Nevada.” Reno argues that the phrase “all actions and proceedings” refers only to judicial proceedings and is not incompatible with Reno enforcing its rights under FINRA Rule 12200.

We are not writing on a blank slate. Although the precise question is new in our court, it has been the subject of litigation in federal courts around the country. The Fourth Circuit and the District of Minnesota have held that the phrase “all actions and proceedings” is in fact limited to judicial proceedings, see Carilion Clinic, 706 F.3d at 329-30; Allina Health Sys., 2013 U.S. Dist. LEXIS 17799, 2013 WL 500373, at *6 , while the Southern District of New York has held that the very same phrase, “by its plain terms, encompasses arbitration,” Golden Empire, 922 F. Supp. 2d at 443; see also N.C. Mun. Power Agency, 2013 U.S. Dist. LEXIS 172994, 2013 WL 6409348, at *6.2 We have benefi tted from the thoughtful opinions of these courts and recognize that the question is a close one. For the reasons that follow, we agree with the Southern District of New York that the parties have

2. We note that Golden Empire is on appeal to the Second Circuit and will be heard on April 4, 2014.

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agreed to resolve their contractual disputes in federal court in Nevada.

First, noting that the forum selection clauses make no reference to arbitration, Reno argues that if Goldman had intended to contract out of its duty to arbitrate, it could have and should have included an express waiver of arbitration in the parties’ agreements. While this certainly would be an easier case if the parties had included an express waiver, we know of no requirement that they do so. Rather, because the presumption in favor of arbitrability does not apply here, the forum selection clauses need only be suffi ciently specifi c to impute to the contracting parties the reasonable expectation that they would litigate any disputes in federal court, thereby superseding Goldman’s default obligation to arbitrate under FINRA Rule 12200. See Applied Energetics, 645 F.3d at 525-26. Thus, although an express waiver might be preferable, we decline to impose formal incantations when applying general state-law principles of contract interpretation. But see Carilion Clinic, 706 F.3d at 329 (“[O]ne would reasonably expect that a clause designed to supersede, displace, or waive arbitration would mention arbitration.”).

Second, Reno points out that the forum selection clauses require only that “actions and proceedings” be brought in federal court in Nevada. Reno contends that the New York Civil Practice Laws and Rules3 (“N.Y.

3. The 2005 and 2006 Broker-Dealer Agreements stipulate that they “shall be governed by and construed in accordance with the laws of the State of New York . . . .”

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C.P.L.R.”) do not consider arbitrations to be “actions” or “proceedings” and that, as a result, the forum selection clauses do not encompass arbitration. See N.Y. C.P.L.R. § 103 (defining civil judicial disputes as “actions” or “special proceedings”); id. § 304 (“An action is commenced by fi ling a summons and complaint or summons with notice . . . . A special proceeding is commenced by fi ling a petition . . . .”). In Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, the Southern District of New York found that this argument “strains reason,” noting that “the Forum Selection Clause negotiated between [the ARS issuer] and Goldman makes no mention of the C.P.L.R. and suggests no such limitation.” 922 F. Supp. 2d at 442. The same is true here; there is no evidence the parties intended the phrase “actions and proceedings” to have a technical meaning limited by the N.Y. C.P.L.R. In common parlance, an arbitration is certainly an action or a proceeding. The United States Supreme Court, our court, and New York state courts routinely refer to arbitrations as “actions” or “proceedings.” See, e.g., 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 269, 129 S. Ct. 1456, 173 L. Ed. 2d 398 (2009) (referencing an “arbitral body conducting a proceeding” (emphasis added) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 634, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985)); Sacks v. Dietrich, 663 F.3d 1065, 1066-67 (9th Cir. 2011) (discussing “a securities arbitration proceeding to be administered by [FINRA]” (emphasis added)); City of New York v. Uniformed Fire Offi cers Ass’n, Local 854, 263 A.D.2d 3, 7, 699 N.Y.S.2d 355 (N.Y. App. Div. 1999) (“Normally, a party to a valid arbitration agreement is required to submit to arbitration and to defer any challenge to the proceeding until an

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award is rendered.” (emphasis added) (internal quotation marks and citation omitted)). Similarly, the FINRA Rules repeatedly refer to arbitrations held under their authority as “proceedings.” See, e.g., FINRA Rule 12400 (discussing “the selected hearing location for each proceeding” (emphasis added)). What is more, Reno itself refers to the FINRA arbitration as a “proceeding[]” and an “action” in its Statement of Claim. In light of these ubiquitous references to arbitration as an action or proceeding, it is of little signifi cance that the N.Y. C.P.L.R. contemplate “actions” or “proceedings” in the civil judicial context.4

Third, Reno asserts that if the term “actions and proceedings” included arbitration, the forum selection clauses would make no sense. The Fourth Circuit endorsed this argument in Carilion Clinic. There, the

4. Reno and the dissent contend that the forum selection clauses at issue here are narrower than the provision covering “any dispute” in Applied Energetics, where the Second Circuit found that a similar forum selection clause had displaced an earlier agreement to arbitrate. 645 F.3d at 525. According to Reno and the dissent, because the forum selection clauses here do not purport to address “any dispute,” they should be limited to judicial proceedings arising under the agreements between the parties. Dis. Op. at 35-37. This argument assumes that the term “dispute” is necessarily broader than the term “actions and proceedings.” We cannot see why this would be so. The fact that the term “dispute” includes arbitration does not mean that the term “actions and proceedings” does not. To the contrary, we now follow the Supreme Court, our own precedents, New York state courts, the FINRA Rules, and Reno itself in concluding that the term “actions and proceedings,” by its plain meaning, encompasses arbitration.

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court reasoned that if “actions and proceedings” included arbitration, the forum selection clauses would have to be read with the following substitution: “all proceedings, including arbitration . . . shall be brought in [federal court].” Carilion Clinic, 706 F.3d at 329 (omission in original) (emphasis added). The court rejected this reading:

In whatever way that sentence could be read, it could not be read to preclude arbitration; to the contrary, it presumes its availability but localizes it, albeit to a forum where it could not be pursued . . . . Regardless of how one might explain the commitment of an arbitration proceeding to a court, the sentence surely cannot be read to preclude or waive arbitration.

Id.; see also Dis. Op. at 41-42. We respectfully disagree.5 An arbitration is an alternative to a civil action in federal court, not an alternative remedy.6 By their nature,

5. As the Golden Empire court explained, the same logical conclusion would follow from the analogous substitution of “actions in the Nevada state courts” since actions in the Nevada state courts cannot be brought in the District of Nevada; “[n]evertheless, it can hardly be argued that such a dispute would fall outside the heading of ‘actions and proceedings.’” 922 F. Supp. 2d at 442.

6. We use the term “arbitration” to refer both to a particular kind of proceeding and to an alternative forum. Thus, we may speak of “commencing an arbitration” rather than “commencing a lawsuit.” We also may say that we are “going to arbitration” instead of “going to court.” The point of the forum selection clauses is that “all actions and proceedings” must be pursued in a particular

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arbitrations are brought in lieu of a federal lawsuit. An arbitration may be enforced in federal court, 9 U.S.C. § 9, but federal courts do not conduct the arbitrations themselves. We thus agree with the Fourth Circuit that it makes no sense to read these forum selection clauses as obligating the parties to bring their arbitrations to federal court, but we reach the opposite conclusion from this premise: the parties have agreed to litigate their disputes in federal court, and that is incompatible with any prior obligation to arbitrate such disputes in another forum. In other words, the question is not whether an arbitration can be brought in federal court. The question is whether, by defi nition, the term “arbitration” falls under the broad umbrella of “all actions and proceedings.” Because we fi nd that it does, Goldman and Reno have agreed to bring their claims in a judicial action in the District of Nevada, even if those same claims might otherwise have been raised in an arbitral forum in the absence of the forum selection clauses agreed to by the parties.

Fourth, Reno argues that if the term “actions and proceedings” included arbitration, the portion of the forum selection clauses that waives “all right to trial by jury” would become nonsensical. The Fourth Circuit also endorsed this argument in Carilion Clinic, reasoning that, because there is no right to trial by jury, “[t]he

forum, federal district court in Nevada. Because arbitration is an “action” or “proceeding,” and “all actions and proceedings” must be brought in federal district court, Goldman and Reno have agreed to resolve all of their disputes in judicial proceedings rather than arbitrations. Even if we think of an arbitration as a forum, it is an alternative forum to the forum agreed upon by the parties.

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more reasonable construction would take the references to ‘court’ and ‘jury trials’ as limiting what is meant by ‘actions and proceedings.’” 706 F.3d at 329-30; see also Dis. Op. at 40-41. Again, we respectfully disagree. The waiver of the right to jury in the forum selection clauses “merely states the obvious, that certain ‘actions and proceedings’ would allow for jury trials, and then clarifi es that the jury right is forfeited in those instances.” Golden Empire, 922 F. Supp. 2d at 442. The forum selection clauses thus commit the parties to federal court, where they consent to a bench trial.

Fifth, both Reno and the dissent argue that if there is a reading of the forum selection clauses that permits Goldman’s default obligation to arbitrate under the FINRA Rules to remain in effect, we must choose that reading. Dis. Op. at 34. And indeed, such a reading is available here. Arbitration awards are not self-enforceable. Accordingly, we could require Goldman to arbitrate at Reno’s request and then require Reno to enforce the arbitration award, if any, in the District of Nevada, thereby harmonizing Goldman’s default obligation to arbitrate with the forum selection clauses. The fl aw in this argument is that it erroneously assumes that the presumption in favor of arbitrability applies. Where the presumption applies, we compel arbitration “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T Techs., Inc., 475 U.S. at 650 (internal quotation marks and citation omitted). Where, as here, the presumption does not apply, however, we use general state-law principles of contract interpretation to effectuate the intent of the

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parties. As a result, the mere availability of an alternative reading of the forum selection clauses is beside the point.

In light of the foregoing, we will give full effect to the all-inclusive breadth of the forum selection clauses (“all actions and proceedings”), their mandatory nature (“shall”), and their reference to a judicial forum (“the United States District Court for the District of Nevada”). We therefore conclude that the forum selection clauses superseded Goldman’s default obligation to arbitrate under the FINRA Rules and that, by agreeing to these clauses, Reno disclaimed any right it might otherwise have had to the FINRA arbitration forum.

Lastly, Reno contends that, even if the forum selection clauses in the 2005 and 2006 Broker-Dealer Agreements require that Reno bring claims arising out of those agreements in the District of Nevada, Reno’s claims arising solely out of the 2005 and 2006 Underwriter Agreements—which do not contain a forum selection clause—may still proceed in FINRA arbitration. Reno is mistaken on this point, too.

The 2005 and 2006 Broker-Dealer Agreements contain broad merger clauses referencing “the other agreements and instruments executed and delivered in connection with the issuance of the ARS” and stipulating that the Broker-Dealer Agreements “contain the entire agreement between the parties relating to the subject matter hereof.” The “other agreements and instruments executed and delivered in connection with the issuance of the ARS” certainly include the 2005 and 2006 Underwriter

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Agreements. As a result, the forum selection clauses also encompass claims arising out of those agreements.

Moreover, as the Statement of Claim reveals, all of Reno’s claims are inextricably linked to the 2005 and 2006 Broker-Dealer Agreements. The core of Reno’s claims is that, when negotiating with Reno to become both underwriter and broker-dealer for the 2005 and 2006 Bonds, Goldman did not disclose its general practice of placing support bids to prevent ARS auctions from failing. Reno asserts that “[h]ad [it] known that [its ARS] would be wholly-dependent on Goldman’s continued support bidding practice . . . , Reno would never have taken the risk . . . . Instead, Reno could have chosen an alternative structure for the fi nancing.” As damages, Reno seeks, inter alia, “disgorgement of all fees and costs associated with issuing the ARS [and] conducting the auctions,” i.e., both underwriter and broker-dealer fees. Accordingly, all of Reno’s claims arise, at least in part, out of the 2005 and 2006 Broker-Dealer Agreements and are therefore subject to the forum selection clauses that limit jurisdiction to the District of Nevada.

IV. CONCLUSION

We conclude that we, rather than FINRA, must determine the arbitrability of this dispute. Although we agree with the district court that Reno qualifi es as Goldman’s customer under FINRA Rule 12200, we hold that Reno disclaimed its right to FINRA arbitration by agreeing to the forum selection clauses in the 2005 and 2006 Broker-Dealer Agreements. Consequently, we

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reverse the district court’s order and fi nal judgment. And despite Goldman’s “overwhelming likelihood of success on the merits,” we remand this case to the district court to consider the remaining Winter factors consistent with this opinion. Evans v. Shoshone-Bannock Land Use Policy Comm’n, 736 F.3d 1298, 1307 (9th Cir. 2013) (noting that “a preliminary injunction is an extraordinary remedy never awarded as of right” and that “the grant of a preliminary injunction is a matter committed to the discretion of the trial judge” (internal quotation marks, citations, and alterations omitted)).

REVERSED and REMANDED.

CONCUR BY: Anthony J. Battaglia (In Part)

DISSENT BY: Anthony J. Battaglia (In Part)

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DISSENT

BATTAGLIA, District Judge, concurring in part and dissenting in part:

I concur with Parts III-A and III-B of the Majority’s opinion.

I concur that the district court erroneously concluded that Goldman, Sachs & Co. (“Goldman”), as a member of the Financial Industry Regulatory Authority (“FINRA”), agreed to FINRA arbitration on the issue of arbitrability itself. Rather, courts should decide where an agreement does not provide “clear and unmistakable” evidence that the parties intended FINRA would determine the issue of arbitrability. Thus, the district court erred in delegating this matter to FINRA.

I also concur with the Majority’s conclusion that a “customer” is a non-broker and non-dealer who purchases commodities or services from a FINRA member in the course of the member’s FINRA-regulated business activities. The City of Reno (“Reno”), therefore, falls within this defi nition of “customer” under both the 2005 and 2006 Underwriter and Broker-Dealer Agreements.

Finally, I concur with the Majority’s fi nding that parties can supersede, displace, or waive FINRA’s arbitration requirement through a subsequent agreement and that an express waiver of arbitration is unnecessary. The Majority’s adoption of the Fourth Circuit’s “suffi ciently specific” test was appropriate for determining if, in

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fact, the parties superseded, displaced, or waived the arbitration obligation created by FINRA Rule 12200 through the 2005 and 2006 Broker-Dealer Agreements. However, it is here that I diverge from my colleagues and respectfully dissent from the finding that the contracting parties’ forum selection clauses superseded Goldman’s pre-existing obligation to arbitrate under the FINRA Rules. For the following reasons, I would affi rm the district court’s fi nding that: “[t]he exclusive forum selection clauses in the Broker-Dealer Agreements do not touch upon arbitration or arbitrability directly, but rather only control the forum of a court action apart from, or in review of, arbitration.” Goldman, Sachs & Co. v. City of Reno, No. 3:12-CV-00327, 2012 U.S. Dist. LEXIS 167902, 2012 WL 5944966, at *4 (D. Nev. Nov. 26, 2012). As a result, I would affi rm the district court’s denial of Goldman’s motion to preliminarily enjoin the FINRA arbitration.

In UBS Financial Services, Inc. v. Carilion Clinic, the Fourth Circuit held that contracting parties may avoid FINRA arbitration by executing a subsequent agreement that is “suffi ciently specifi c to impute to the contracting parties the reasonable expectation that they are superseding, displacing, or waiving the arbitration obligation created by FINRA Rule 12200.” 706 F.3d 319, 328 (4th Cir. 2013) (emphasis added). As an issue of fi rst impression for the Ninth Circuit, I agree that adoption of this approach is appropriate. This is preferable to a narrower express waiver requirement.1 However, as

1. Similarly, the Second Circuit will fi nd FINRA arbitration waived where contracting parties execute a “subsequent agreement the terms of which plainly preclude arbitration,” but

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stated above, under the facts of the instant case, I do not fi nd the forum selection clauses at issue to have suffi ciently demonstrated the parties’ intent to supersede, displace, or waive arbitration.

I disagree with two aspects of the Majority’s analysis. First, I disagree with the Majority’s heavy reliance on the opinion of the Honorable Richard J. Sullivan in Goldman, Sachs & Co. v. Golden Empire Schools Financial Authority, 922 F. Supp. 2d 435 (S.D.N.Y. 2013). Instead, the Fourth Circuit’s Carilion Clinic is more persuasive. Second, I do not agree with the Majority’s conclusion that the phrase “all actions and proceedings,” in the forum selection clauses of the 2005 and 2006 Broker-Dealer Agreements, is “suffi ciently specifi c” to impute to the contracting parties the reasonable expectation that they are superseding, displacing, or waiving the arbitration obligation under FINRA Rule 12200.

Founded in 2007, FINRA is a self-regulatory organization established under Section 15A of the Securities Exchange Act of 19342 and has the authority to exercise comprehensive oversight over “all securities fi rms that do business with the public.” Sacks v. SEC,

will enforce arbitration if the contractual provision can possibly be read as complementary to FINRA’s arbitration requirement. Applied Energetics, Inc. v. NewOak Capital Mkts, LLC, 645 F.3d 522, 525 (2d Cir. 2011) (citing Bank Julius Baer & Co. v. Waxfi eld Ltd., 424 F.3d 278, 281 (2d Cir. 2005)).

2. 15 U.S.C. § 78o-3; Karsner v. Lothian, 532 F.3d 876, 879 n. 1, 382 U.S. App. D.C. 275 (D.C. Cir. 2008); SEC Release No. 34-56145 (July 26, 2007).

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648 F.3d 945, 948 (9th Cir. 2011) (quoting 72 Fed. Reg. 42170 (Aug. 1, 2007)). FINRA membership constitutes an agreement to “adhere to FINRA’s rules and regulations, including its Code and relevant arbitration provisions contained therein.” UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648-49 (2d Cir. 2011). By becoming a member of FINRA, Goldman agreed to submit to FINRA rules, including Rule 12200, which requires members to arbitrate disputes in connection with their business activities if and when arbitration is requested by a customer or required by a written agreement. See FINRA Rule 12200; Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 32 n.1 (2d Cir. 2010).

Therefore, although a written arbitration agreement between Goldman and Reno does not exist, “FINRA rules may establish the requisite arbitration agreement.” See J.P Morgan Sec. Inc. v. La. Citizens Prop. Ins. Corp., 712 F. Supp. 2d 70, 76-77 (S.D.N.Y. 2010). Moreover, FINRA Rule 12200 constitutes an agreement in writing under the Federal Arbitration Act (“FAA”) and Reno is entitled to invoke FINRA Rule 12200 as an intended third-party benefi ciary. See Kidder, Peabody & Co. v. Zinsmeyer Trusts P’ship, 41 F.3d 861, 863-64 (2d Cir. 1994).3

While this existing obligation to arbitrate under FINRA Rule 12200 exists, Goldman and Reno are nevertheless free to supersede, displace, or waive

3. Though not addressing FINRA rules themselves, Kidder considered the rules and regulations of the National Association of Securities Dealers, Inc. (“NASD”), the predecessor of FINRA.

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arbitration with a subsequent agreement that is “suffi ciently specifi c.” However, even without applying the presumption in favor of arbitration, and instead using general state principles of contract interpretation, the contract language in the forum selection clauses is not “suffi ciently specifi c” to impute to the contracting parties the reasonable expectation they are superseding, displacing, or waiving the arbitration obligation created by FINRA Rule 12200. Carilion Clinic, 706 F.3d at 328.

In applying the standard set by Carilion Clinic, the Majority relies heavily on an opinion from the Southern District of New York, agreeing with the New York district court that the phrase “all actions and proceedings” encompasses arbitration. See Golden Empire, 922 F. Supp. 2d at 443. In my view, this reliance is misplaced for two reasons. First, Golden Empire failed to adhere to Second Circuit precedent directing its courts to enforce an arbitration where a forum selection clause and an agreement to arbitrate may be read as complementary. See Bank Julius Baer & Co. v. Waxfi eld Ltd., 424 F.3d 278, 284 (2d Cir. 2005) (“Under our cases, if there is a reading of the various agreements that permits the Arbitration Clause to remain in effect, we must chose it . . . .”). Second, Golden Empire failed to acknowledge the distinction between the phrase “any dispute” as featured in Applied Energetics and the phrase “all actions and proceedings” in the agreements presented to the district court. Golden Empire, 922 F. Supp. 2d at 443 (citing Applied Energetics Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522, 525 (2011)). This led the New York district court to mischaracterize the agreements as being “all-

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inclusive, . . . mandatory, and neither admits the possibility of the other.” Id.

In Bank Julius, the Second Circuit determined that the existence of a broad arbitration agreement creates a “presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” 424 F. 3d at 284. The parties in Bank Julius, initially agreed to arbitrate “any . . . dispute” arising out of their contractual relationship then subsequently entered into an agreement omitting any mention of arbitration. Id. at 282. The subsequent agreement, however, contained a forum selection clause stating that “any Action” brought by the defendant must be in any New York State or Federal Court sitting in New York City. Id. Furthermore, the subsequent agreement contained a merger clause providing that “[t]his Agreement supersedes all prior agreements and understanding between [the parties]” but also provided that “the rights and remedies provided [herein] are cumulative and not exclusive of any rights or remedies provided under any other agreement or by law or in equity.” Id.

Under these circumstances, the Second Circuit concluded that the forum selection clause in the subsequent agreement could be read as complementary with an initial agreement to arbitrate. Id. at 284. The court noted that a subsequent agreement, such as one containing a forum selection clause and a merger clause, could not nullify an arbitration agreement unless that subsequent contract

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“specifi cally precludes arbitration.” Id. at 284 (citing Personal Sec. & Safety Sys. v. Motorola, 297 F.3d 388, 396 n.11 (5th Cir. 2002)). In analyzing the forum selection clause, the Bank Julius court concluded that “we cannot say that the Forum Selection Clause, which does not even mention arbitration, either ‘specifi cally precludes’ arbitration or contains a ‘positive assurance’ that this dispute is not governed by the Arbitration Agreement.” Id. The court found that there is “nothing inconsistent between the arbitration obligation and the instant forum selection clause. Both can be given effect . . . .” Id.

Thus, “where a Forum Selection Clause can be understood . . . as complementary to an agreement to arbitrate,” a court should enforce the arbitration agreement. Id. Additionally, because the forum selection clause made no reference to arbitration, the Second Circuit in Bank Julius found it to be “at least ambiguous” which requires resolution “in favor of coverage.” Id. at 285 (internal quotations omitted) (citing WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d. Cir. 1997)). Golden Empire did not adhere to this Second Circuit directive and ignored the natural integration of the role and control of the forum court action, apart from, or in review of, arbitration agreements. Under the facts of Golden Empire, as well as in the instant case, the forum selection clause requiring the parties to submit to the jurisdiction of the district court for the District of Nevada “all actions and proceedings” may be read as complementary to FINRA Rule 12200 in that the parties may seek court enforcement of arbitral awards or challenge the validity or application of the arbitration agreement in court.

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Of further concern is Golden Empire’s failure to recognize the distinction between the phrases “all actions and proceedings” and “any dispute.” In Bank Julius, the parties fi rst agreed to arbitrate “any . . . dispute” arising out of their contractual relationship but subsequently executed an agreement in which the defendant agreed to submit “any Action” to a New York state or federal court, creating two complementary and enforceable agreements.4 This subtle, but signifi cant, difference in language was recognized by the Second Circuit in Applied Energetics, Inc. v. NewOak Capital Markets, and was used to distinguish the two agreements presented to the Applied court. 645 F.3d at 525-26.

In Applied Energetics, the parties entered into two agreements during the course of their transaction. The first, the Engagement Agreement, contained an arbitration clause stating, “[e]ach of NewOak and Applied agrees that any dispute arising out of or relating to this letter, the Indemnity Agreement and/or the transactions contemplated hereby or thereby . . . shall be resolved through binding arbitration . . . .” Id. at 523 (emphasis added). The second, the Placement Agreement, contained a clause providing that “[a]ny dispute arising out of this Agreement shall be adjudicated in the Supreme Court, New York County or in the federal district court for the Southern District of New York.” Id. (emphasis added). Because the two agreements used the same phrase “any dispute,” with one requiring arbitration and the other

4. Similarly, the parties in Golden Empire were obligated to arbitrate “a dispute” under FINRA Rule 12200 should Golden Empire, as a customer, so request.

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providing for adjudication in a judicial forum, the Applied Court found the case fell within the scenario contemplated by Bank Julius, “where contracting parties are free to revoke an earlier agreement to arbitrate by executing a subsequent agreement the terms of which plainly preclude arbitration.” Id. at 525. The two provisions at issue in Applied Energetics used parallel language; as a result, the Second Circuit concluded both provisions were “all-inclusive, both mandatory, and neither admits the possibility of the other.” Id.

Thus the Second Circuit in Applied Energetics found the subsequent Placement Agreement specifi cally precluded arbitration. Id. In arriving at this conclusion, the Second Circuit considered two factors equally worthy of analysis here. First, the Applied Court noted that the Engagement Agreement and the Placement Agreement used “parallel language” that stood in “direct confl ict” with each other. Id. As stated above, the two Agreements were all-inclusive, mandatory, and neither admitted the possibility of the other, thereby making it abundantly apparent that the subsequent agreement completely displaced the fi rst. Id. Second, the Placement Agreement used the term “adjudicate” as a clear and unmistakable reference to judicial action. Id. Accordingly, the subsequent Placement Agreement, which completely supplanted the Engagement Agreement, exclusively contemplated judicial proceedings to resolve the parties’ dispute. These two factors were a part of the basis for the Second Circuit’s conclusion. However, these two factors did not exist in Golden Empire, nor do they exist in the instant matter, and the court in Golden Empire failed to recognize these important distinctions.

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Accordingly, I disagree with Golden Empire’s conclusion that FINRA Rule 12200 and the Broker-Dealer Agreements’ forum selection clauses were “all inclusive, . . . mandatory, and neither admits the possibility of the other.” Golden Empire, 922 F. Supp. 2d at 443 (ellipsis in original). Indeed, the contract language at issue in Golden Empire, and substantially the same language at issue here, is more akin to that found in Bank Julius. 424 F.3d at 282. FINRA Rule 12200 provides that a “dispute” must be arbitrated if the customer so requests or is required by writing, whereas the Broker-Dealer Agreements’ forum selection clauses provide that “all actions and proceedings” must be brought in a judicial forum. Enforcement of both is possible as the two provisions may be read as complementary. Next, the Golden Empire court, and the Majority here, concluded that FINRA Rule 12200 and the forum selection clause are both mandatory and neither admits the possibility of the other; I respectfully disagree. Despite the use of the obligatory verb “must” in FINRA Rule 12200, the duty to arbitrate is only triggered when one of two conditions are met, if indeed they are ever met. Yet the court in Golden Empire failed to recognize that the duty to arbitrate may never be triggered if a written agreement does not provide for it or if the customer does not request it. If neither conditions occurs, the parties may proceed in a judicial forum without any obligation to arbitrate. Thus, Golden Empire’s characterization of FINRA Rule 12200 and the forum selection clause as all-inclusive, mandatory, and mutually exclusive was incorrect.

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Moreover, the forum selection clauses contained within the 2005 and 2006 Broker-Dealer Agreements are not suffi ciently specifi c to impute the reasonable expectation that they were intended to supersede, displace, or waive the arbitration obligation created by FINRA Rule 12200. The Fourth Circuit reached the same conclusion in Carilion Clinic when analyzing the language of a forum selection clause nearly identical to the forum selection clauses at issue here. 706 F.3d at 329. The forum selection clause in Carilion Clinic provided that “all actions and proceedings shall be brought in the United States District Court in the County of New York,” then expressly waived the parties’ right to trial by jury. Id. The Fourth Circuit provided a thorough and well-reasoned analysis of the adequacy of the forum selection clause and concluded the clause failed to meet the “suffi ciently specifi c” standard as it made no suggestion of the parties’ intent to supersede, displace, or waive the right to FINRA arbitration. Id. at 330. The Majority here dismisses the Fourth Circuit’s reasoning and instead fully adopts the analysis set forth in Golden Empire.

As a result, the Majority agrees with Golden Empire and fi nds that there is no evidence the parties intended the phrase “actions and proceedings” to have a technical meaning limited to only those actions and proceedings that may be brought in a judicial forum. It is unsurprising that many courts and even FINRA have referred to arbitration as a “proceeding.” It is undeniable that arbitration is referred to as an “action” or a “proceeding” in common parlance. Indeed, there are only so many ways we can refer to a course of events or action. While the Majority

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references to a number of sources that refer to arbitration as an “action” or a “proceeding,” it is also possible to fi nd sources limiting “actions and proceedings” to those brought in a judicial forum.

For instance, an “action” in the legal sense is defi ned as “[a] civil or criminal judicial proceeding.”5 Black’s Law Dictionary 31 (8th ed. 2004); see also Black’s Law Dictionary 28 (6th ed. 1990) (“A lawsuit brought in a court, a formal complaint within the jurisdiction of a court of law . . . that includes all the formal proceedings in a court of justice . . . .”). The phrase “all actions and proceedings” also appears in Rule 1 of the Federal Rules of Civil Procedure, which governs civil actions and proceedings in the United States district courts. Fed. R. Civ. P. 1. Rule 1 explicitly refers to actions and proceedings as those brought in a judicial forum, from which arbitrations are precluded. Section 3 of the Federal Arbitration Act (“FAA”) allows parties with a valid arbitration agreement to apply for a

5. This broad defi nition is supported by the following reason:

An action has been defined to be an ordinary proceeding in a court of justice, by which one party prosecutes another party for the enforcement or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense . . . . More accurately, it is defi ned to be any judicial proceeding, which, if conducted to a determination, will result in a judgment or decree. The action is said to terminate at judgment.

Black’s Law Dictionary 31 (8th ed. 2004) (quoting 1 Morris M. Estee, Estee’s Pleadings, Practice, and Forms § 3, at 1 (Carter P. Pomeroy ed., 3d ed. 1885)).

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stay in “any suit or proceeding” that has been brought into any of the courts of the United States. 9 U.S.C § 3 (emphasis added). Here, the FAA undoubtedly refers to “proceedings” as meaning those proceedings brought in a judicial forum; consequently, “proceedings” under the language of the FAA does not encompass arbitration.

In light of the above ambiguities, it is obvious why the parties have sought judicial resolution on the issue of whether the forum selection clause superseded, displaced, or waived the arbitration requirement under FINRA. While not dispositive, it is important to be mindful of the sophistication of the parties involved, both undoubtedly represented by skilled counsel in negotiating, forming, and executing the Agreements at issue in an arm-length transaction. While it may be that it is “common parlance” to refer to arbitrations as an action or a proceeding, it is equally reasonable to conclude that the parties intended the phrase to denote its technical and legal meaning that excludes arbitration. With two reasonable interpretations possible, we must look to the contract itself to determine the parties’ intent.

“In interpreting a contract, ‘the document must be read as a whole to determine the parties’ purpose and intent, giving a practical interpretation to the language employed so that the parties’ reasonable expectations are realized.’” Queens Best, LLC v. Brazal S. Holdings, LLC, 35 A.D.3d 695, 696-97, 826 N.Y.S.2d 684 (N.Y. App. Div. 2006) (quoting Snug Harbor Square Venture v. Never Home Laundry, Inc., 252 A.D.2d 520, 521, 675 N.Y.S.2d 365 (N.Y. App. Div. 1998)); see also Beal Sav.

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Bank v. Sommer, 8 N.Y.3d 318, 324-25, 865 N.E.2d 1210, 834 N.Y.S.2d 44 (N.Y. 2007) (“Further, a contract should be read as a whole and every part will be interpreted with reference to the whole and if possible it will be so interpreted as to give effect to its general purpose.” (internal quotation marks and citation omitted)).6 After the initial language regarding the District of Nevada as the forum for all actions and proceedings, the forum selection clause goes on to state “[e]ach of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Broker-Dealer Agreement or the transactions contemplated hereby.” Therefore, simply referencing this next sentence suggests that the phrase “all actions and proceedings” refers to only those brought in a judicial forum, the only forum in which a jury may sit. See Carilion Clinic, 706 F.3d at 329-30 (“The more reasonable construction would take the references to ‘court’ and ‘jury trials’ as limiting what is meant by ‘actions and proceedings.’ Thus read in the context of courts and jury trials, the terms ‘actions and proceedings’ would be understood as a term of art . . . .”).

Furthermore, if contract clauses appear to be repugnant to each other, the court should interpret the contract “in a way which reconciles all its provisions, if possible.” Green Harbour Homeowners’ Assn., Inc. v. G.H. Dev. & Constr., Inc., 14 A.D.3d 963, 965, 789 N.Y.S.2d 319 (N.Y. App. Div. 2005). Here, although we are dealing

6. Section 5.09 of the 2005 and 2006 Broker-Dealer Agreements provides that this “Agreement shall be governed by and construed in accordance with the laws of the State of New York . . . .”

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with the specifi c phrase “actions and proceedings” within a forum selection clause, the same principles of contract interpretation are relevant. If “actions and proceedings” includes arbitration, then the provision suggests arbitration remains available but must be brought in court. Such a reading renders the entire sentence contradictory as arbitrations may not be pursued in courts as a general rule. The Fourth Circuit arrived at this same conclusion, noting the “problems inherent in this logical construct.” Carilion Clinic, 706 F.3d at 329. To reconcile the entire sentence, “all actions and proceedings” must be read to mean only judicial actions and proceedings. Moreover, we should not read a contract in a way that would render any portion meaningless. CNR Healthcare Network, Inc. v. 86 Lefferts Corp., 59 A.D.3d 486, 489, 874 N.Y.S.2d 174 (N.Y. App. Div. 2009). Again, the suggestion that “actions and proceedings” includes arbitration results in a nonsensical reading of the remaining portion of the forum selection clause as the language suggests arbitration should be brought in a judicial forum with the parties waiving all rights to a trial by jury in the “action” or “proceeding.” See Carilion Clinic, 706 F.3d at 329. As an arbitration may not be brought in a judicial forum and arbitration does not include a right to a jury trial, an interpretation of “actions and proceedings” as including arbitration results in an illogical reading of the entire provision.

With these considerations in mind, I would agree with the Fourth Circuit in Carilion Clinic that “it would never cross a reader’s mind that the [forum selection] clause provides that the right to FINRA arbitration was being superseded or waived.” Id. at 330. Given the broad right

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a customer has to seek arbitration under FINRA Rule 12200, the forum selection clauses in the Broker-Dealer Agreements falls far short of providing “sufficiently specifi c” language to impute to the contracting parties the reasonable expectation that FINRA’s arbitration requirement has been superseded, displaced, or waived. Accordingly, I would affi rm the district court’s denial of Goldman’s motion for preliminary injunction.

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APPENDIX C — ORDER OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT

OF NEVADA, FILED NOVEMBER 26, 2012

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA

3:12-cv-00327-RCJ-WGC

GOLDMAN, SACHS & CO.,

Plaintiff,

vs.

CITY OF RENO,

Defendant.

November 26, 2012, DecidedNovember 26, 2012, Filed

ORDER

ROBERT C. JONES, District Judge

This case arises out of the City of Reno’s issuance of approximately $210 million of complex securities soon before the real estate and stock market crash of 2008 in order to fund various projects. The City has brought an action against Goldman, Sachs & Co. (“GS”) before the Financial Industry Regulatory Authority (“FINRA”). Pending before the Court is GS’s motion for a preliminary

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injunction against that action. For the reasons given herein, the Court denies the motion.

I. FACTS AND PROCEDURAL HISTORY

In 2005, the City issued approximately $73 million in auction rate securities (“ARS”), in order to fund various projects, to be underwritten and brokered by GS pursuant to an October 19, 2005 agreement (the “2005 Underwriter Agreement”) and an October 26, 2005 agreement (the “2005 Broker—Dealer Agreement”). (Compl ¶¶ 12—13, June 18, 2012, ECF No. 1). In 2006, the City issued approximately $137 million in ARS for similar purposes and again to be underwritten and brokered by GS pursuant to similar agreements (the “2006 Underwriter Agreement” and “2006 Broker—Dealer Agreement”). (Compl ¶¶ 18—20). The Broker—Dealer Agreements contain forum selection clauses to the effect that “all actions and proceedings arising out of this Broker—Dealer Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the District of Nevada . . .” (See 2005 Broker—Dealer Agreement § 5.09, at 14, ECF No. 1-6; 2006 Broker—Dealer Agreement § 5.09, at 14, ECF No. 1-7). The Broker—Dealer Agreements also contain merger and integration clauses to the effect that “the [Broker—Dealer Agreement] and the other agreements and instruments executed and delivered in connection with the issuance of the ARS, contain the entire agreement between the parties relating to the subject matter hereof, and there are no other representations.” (See 2005 Broker—Dealer Agreement § 5.04, at 13, ECF No. 1-6; 2006 Broker—Dealer Agreement § 5.04, at

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13, ECF No. 1-7). Neither Broker—Dealer Agreement contains an arbitration clause. Neither Underwriter Agreement contains either a forum selection clause or an arbitration clause.

On February 10, 2012, the City fi led a claim against GS with FINRA, alleging wrongdoing with respect to the 2005 and 2006 agreements. (Compl. ¶¶ 27—29). GS sued the City in this Court, asking the Court to declare that FINRA is an inappropriate forum for the claims in light of the mandatory forum selection clauses in the Broker—Dealer Agreements and the lack of any arbitration clauses in either the Broker—Dealer Agreements or the Underwriter Agreements. GS has asked the Court for a preliminary injunction against the FINRA proceedings.

II. LEGAL STANDARDS

The Court of Appeals in the past set forth two separate sets of criteria for determining whether to grant preliminary injunctive relief:

Under the traditional test, a plaintiff must show: (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases). The alternative test requires that a plaintiff demonstrate either a combination of probable success on the merits and the possibility of irreparable injury or that

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serious questions are raised and the balance of hardships tips sharply in his favor.

Taylor v. Westly, 488 F.3d 1197, 1200 (9th Cir. 2007). “These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases.” Id.

The Supreme Court recently reiterated, however, that a plaintiff seeking an injunction must demonstrate that irreparable harm is “likely,” not just possible. Winter v. NRDC, 555 U.S. 7, 19—22, 129 S. Ct. 365, 172 L. Ed. 2d 249 (2008) (rejecting the Ninth Circuit’s alternative “sliding scale” test). The Court of Appeals has explicitly recognized that its “possibility” test was “defi nitively refuted” in Winter, and that “[t]he proper legal standard for preliminary injunctive relief requires a party to demonstrate ‘that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.’” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (quoting Winter, 555 U.S. at 20) (reversing a district court’s use of the Ninth Circuit’s pre-Winter, “sliding-scale” standard and remanding for application of the proper standard).

The Court of Appeals later parsed the language of Winter and subsequent appellate rulings and determined that the sliding scale test remains viable when there is a lesser showing of likelihood of success on the merits amounting to “serious questions,” but not when there is

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a lesser showing of likelihood of irreparable harm. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134 (9th Cir. 2011). This case presents some diffi culty in light of Winter and prior Ninth Circuit cases. To the extent Cottrell’s interpretation of Winter is inconsistent with Selecky, Selecky controls. Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en banc) (holding that, in the absence of an intervening Supreme Court decision, only the en banc court may overrule a decision by a three-judge panel). In any case, the Supreme Court stated in Winter that “[a] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter, 555 U.S. at 20 (citing Munaf v. Geren, 553 U.S. 674, 128 S. Ct. 2207, 2218—19, 171 L. Ed. 2d 1 (2008); Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542, 107 S. Ct. 1396, 94 L. Ed. 2d 542 (1987); Weinberger v. Romero-Barcelo, 456 U.S. 305, 311—12, 102 S. Ct. 1798, 72 L. Ed. 2d 91 (1982)) (emphases added). The test is presented as a four-part conjunctive test, not as a four-factor balancing test, and the word “likely” modifies the success-on-the-merits prong in exactly the same way it separately modifi es the irreparable-harm prong. In rejecting the sliding-scale test as to the irreparable-harm prong, the Winter Court emphasized the fact that the word “likely” modifi es the irreparable-injury prong. See id. at 22. The word “likely” also modifi es the successon-the-merits prong. See id. at 20.

In summary, to satisfy Winter, a movant must show that he is “likely” to succeed on the merits. “Likely” means

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“having a high probability of occurring or being true.” Merriam—Webster Dictionary, http://www.merriam-webster.com/dictionary/ likely. This colloquial, lay defi nition of “likely” seems too stringent. Though it could be read consistently with the Winter language, Merriam—Webster’s defi nition of “likely” would appear to require a showing corresponding to the clear-and-convincing evidence standard, because something with a “high probability” of being true has more than a mere greater-than-not chance of being true. Black’s Law Dictionary, a more contextual reference work, defi nes the “likelihood-of-success-on-the-merits test” more leniently as “[t]he rule that a litigant who seeks [preliminary relief] must show a reasonable probability of success . . . .” Black’s Law Dictionary 1012 (9th ed. 2009). The Court must reconcile the cases by interpreting the Cottrell “serious questions” requirement to be in harmony with the Winter/Selecky “likelihood” standard, not as being in competition with it. “Serious questions going to the merits” must mean that there is at least a reasonable probability of success on the merits. Taken in a vacuum, “serious questions” appears to focus on the gravity of the issues, but appears silent on the probability of the truth of the proffered proposition, which is the focus of the success-on-the-merits prong. The gravity of the issues is separately considered under the balance-of-hardships prong. The Cottrell Court must have meant something like “reasonable probability,” which appears to be the most lenient position on the sliding scale that can satisfy the requirement that success on the merits be “likely.” If success on the merits is merely possible, but not reasonably probable, no set of circumstances with respect to the other prongs will justify preliminary relief.

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III. ANALYSIS

The Second Circuit recently decided a similar case. See UBS Financial Services, Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643 (2d Cir. 2011). There, UBS argued that arbitration was not required either under the relevant contracts or under the FINRA Rules because the defendant was not a “customer” of UBS. See id. at 648. UBS also argued that even if arbitration were required, the contractual forum selection clause between it and the defendant would be superior to the FINRA rules with respect to the location of arbitration. See id. at 654. The UBS court fi rst determined that the defendant was UBS’s “customer” under FINRA Rule 12200. That rule provides:

Parties must arbitrate a dispute under the Code if:

Arbitration under the Code is either:

(1) Required by a written agreement, or

(2) Requested by the customer;

The dispute is between a customer and a member or associated person of a member; and

The dispute arises in connection with the business activities of the member or the associated person, except disputes involving the insurance business activities of a member that is also an insurance company.

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FINRA Code, Rule 12200, available at http: //f inra .compl inet .com /en /d isplay/d isplay _v iewal l .html?rbid=2403&element_id=607&record_id=609; see UBS Fin. Servs, Inc., 660 F.3d at 649 (quoting id.). After examining regulatory and dictionary defi nitions, the UBS court determined that “customer” under FINRA Rule 12200 included “at least a non-broker or non-dealer who purchases, or undertakes to purchase, a good or service from a FINRA member.” UBS Fin. Servs, Inc., 660 F.3d at 649—50. The district court had relied on a Third Circuit case ruling that a FINRA member who underwrites securities issued by another party has that party as a “customer” under FINRA Rule 12200. See id. at 650; see also UBS Fin. Servs., Inc. v. W. Va. univ. Hosps., Inc., 760 F. Supp. 2d 373, 378 (S.D.N.Y. 2011) (citing Patten Sec. Corp. v. Diamond Greyhound & Genetics, Inc., 819 F.2d 400 (3d Cir. 1987)). The court determined that it did not need to resolve whether an issuer of securities (such as the City of Reno) was necessarily a “customer” of its underwriter (such as GS) under FINRA Rule 12200, nor whether, as the dissent urged, it could never be, see UBS Fin. Servs., Inc., 660 F.3d at 650 & n.4, because in the case before it, the broker—dealer agreement provided for a fee from the issuer to the underwriter in exchange for services in facilitating the auctions at which the bonds were resold. See id. at 650. “In view of that undertaking and a defi nition of customer that at least includes an entity that undertakes to purchase a good or service, [the defendant] became UBS’s customer under Rule 12200 by contracting with UBS to obtain auction services for a fee.” Id.

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In the present case, the Broker—Dealer Agreements also provide for the City to pay fees in exchange for GS’s services in facilitating auctions of the securities the City issued. Therefore, UBS is on point, and the City is a customer entitled to arbitration under FINRA Rule 12200. (See 2005 Broker—Dealer Agreement § 2.05, at 6—8, ECF No. 1-6; 2006 Broker—Dealer Agreement § 2.05, at 6—8, ECF No. 1-7).

GS does not argue that FINRA Rule 12200 does not independently require arbitration. GS argues rather that the City is not a “customer” under FINRA Rule 12200 for two reasons: (1) because the ARS are municipal securities, the rules of the Municipal Securities Rulemaking Board (“MSRB”) control, not the FINRA Rules; and (2) the City is not a “customer” under FINRA Rule 12200, even if that rule applies.

It is clear that there is no arbitration agreement in the relevant contracts here. Nor is there any express waiver of arbitration. The exclusive forum selection clauses in the Broker—Dealer Agreements do not touch upon arbitration or arbitrability directly, but rather only control the forum of a court action apart from, or in review of, arbitration. The Court therefore rejects the argument that the forum selection clauses prevent arbitration if arbitration is otherwise required. FINRA Rule 12200, as interpreted by the Second Circuit’s persuasive opinion, requires arbitration here, where GS has contracted with the City to receive fees in exchange for services related to the auctioning of the City’s municipal securities. GS relies primarily on Fleet Boston Robertson Stephens, Inc.

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v. Innovex, Inc., 264 F.3d 770 (8th Cir. 2001). In that case, the court rejected the district court’s interpretation of “customer” as including any entity other than a broker or dealer. See id. at 772 (“We do not believe that the NASD Rules were meant to apply to every sort of fi nancial service an NASD [now FINRA] member might provide, regardless of how remote that service might be from the investing or brokerage activities, which the NASD oversees.”). The Court ruled that fi nancial advice alone was insuffi cient to make a party a “customer” of a National Association of Securities Dealers (“NASD”) member. See id. at 771 (“[Plaintiff], a multi-service brokerage fi rm and member of the [NASD], commenced the underlying breach of contract action against AdFlex in an attempt to collect over $800,000 in fees and expenses it claimed it was owed for providing fi nancial advice and assistance to AdFlex . . . . The contract between the parties did not call for [Plaintiff] to act as a broker for AdFlex securities.”). Here, as in UBS, the FINRA member has provided more than fi nancial advice, but rather has provided services directly related to the securities, i.e., facilitation of auctions of the securities themselves. The Court fi nds this to be suffi ciently related to the broker—dealer function for the City fall under the defi nition of “customer.” The facilitation of an auction of securities directly concerns the transfer of securities and is more than a mere underwriting function. The closer question is whether the alleged wrongdoing in this case is directly related to the facts that make the City a customer. Although GS contracted with the City to provide both underwriting and auction facilitation, the alleged wrongdoing in the FINRA arbitration action concerns the underwriting, not the auction facilitation, and

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the auction facilitation is the only jurisdictional purchase the City has upon the FINRA arbitration requirement. See UBS Fin. Servs, Inc., 660 F.3d at 656—61 (Preska, J., dissenting). But GS, as a FINRA member, has agreed to FINRA arbitration on the issue of arbitrability itself. See FINRA Rule 12203(a) (“The Director may decline to permit the use of the FINRA arbitration forum if the Director determines that, given the purposes of FINRA and the intent of the Code, the subject matter of the dispute is inappropriate . . . .”). FINRA may agree with GS that the claims at issue are not arbitrable because they do not arise out of the auction facilitation, under which the City is a “customer,” but rather out of the underwriting, under which it might not be, but this “gateway issue” has been delegated to FINRA. See Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011).

The remaining potentially dispositive issue, which the UBS court did not address, is whether the FINRA Rules are inapplicable because only the MSRB Rules apply. GS argues that MSRB Rule D-9 explicitly excludes an issuer of municipal securities from the defi nition of customer. The Court rejects this argument. In 1997, the Securities Exchange Commission announced that MSRB members would be governed by FINRA (formerly NASD) arbitration rules as if they were FINRA members. See S.E.C. Release No. 39378 (December 1, 1997) (“In addition, the proposed rule change requires that bank dealers abide by the NASD’s Code just as if they were members of the NASD for purposes of arbitration.”). And even in the absence of that rule change, because GS is a FINRA member, see FINRA List of Members - G, http://www.fi nra.org/

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AboutFINRA/ MemberFirms/ListOfMembers/P012918, the fact that it is also a MSRB member (under whose rules it apparently need not arbitrate) does not negate its separate requirement to arbitrate under FINRA. Because Plaintiff is not likely to succeed on the merits, the Court denies the motion for preliminary injunction and will not enjoin the FINRA action.

CONCLUSION

IT IS HEREBY ORDERED that the Motion for Preliminary Injunction (ECF No. 7) is DENIED.

IT IS SO ORDERED.

Dated this 26th day of November, 2012.

/s/ ROBERT C. JONESUnited States District Judge