RBC Capital Markets v. Thomas Weisel Partners LLC, 2010 Del. Ch. LEXIS 36 (Del. Ch. Feb. 25, 2010), read opinion here.
Danielle Blount, an associate in our Delaware office, prepared this summary.
In this Court of Chancery opinion, the parties are members of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and are broker-dealers. RBC Capital Markets Corp. (“RBC”) and the other plaintiffs were defendants in related FINRA arbitration proceeding brought by Thomas Weisel Partners LLC (“Weisel”) relating to harm it experienced in the wake of the collapse of the auction rate securities market. Plaintiffs sought to enjoin the defendant from pursuing certain claims brought on behalf of its customers and not on its own behalf.
The question before the court centered upon whether Wiesel’s statements of claim in the arbitration action include claims brought on behalf of its customers in contravention of FINRA provisions mandating arbitration. In this ruling, the Court determined that as members of FINRA the parties are subject to FINRA’s code of arbitration procedures. Since Wiesel’s claims arose entirely out of their business activities, its claims for arbitration are properly brought under FINRA’s rules. Although certain disputes between broker-dealers and their customers are subject to mandatory arbitration, the rule does not extend to disputes between broker-dealers and the customers of different broker-dealers. Although the remedy sought by Wiesel would benefit its customers, this alone was insufficient to find that the claim exceeded the scope of the parties’ broad arbitration provisions.