INTL FCStone Financial v. Jacobson

INTL FCStone Financial, Inc. (FCStone) (plaintiff) was a large firm that offered a variety of financial services. In its futures commission merchant division, FCStone offered services related to transactions in exchange-traded futures, commodities, and options. Separately, FCStone operated a securities-related business. As required for its securities-related business, FCStone was a member of the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization that oversaw the securities and investment banking industry. Between October 2016 and July 2018, FCStone opened accounts in its futures commission merchant division for a number of individuals and their related trusts (collectively, the investors) (defendants). Except for one married couple, William and Cynthia Motley, the investors all signed arbitration agreements with FCStone, agreeing that any claims arising out of their accounts would be settled by arbitration by either the National Futures Association (NFA) or the contract market on which the disputed transactions were executed. The arbitration agreement also stated that the investors would be supplied with a list of qualified organizations for the arbitration from which they could make their pick. In November 2018, the investors all incurred significant losses in their accounts based on fluctuations in the natural-gas market, resulting in their owing balances to FCStone. On December 3, 2018, the investors, excluding the Motleys, filed an arbitration against FCStone before FINRA, alleging that FCStone had violated the Commodity Exchange Act. In response, FCStone invoked the arbitration agreement and insisted that arbitration take place elsewhere, before either the NFA, the Chicago Mercantile Exchange, or the American Arbitration Association (AAA). When the investors’ counsel did not timely respond, FCStone initiated arbitration before the NFA, claiming that the investors owed FCStone due to their losses. Subsequently, on January 29, 2019, the investors’ counsel selected AAA for arbitration. The following month, AAA found that it lacked jurisdiction over the dispute on the basis that FCStone had never agreed to arbitrate the claims before AAA. Thereafter, FCStone filed an action in federal district court to compel the investors to arbitrate their disputes before the NFA. FCStone argued that because FINRA only regulated securities-related issues, FCStone's membership in FINRA was not a sufficient basis for arbitration of non-securities-related claims to take place in in front of FINRA.