Reinsurance Focus

Petitioners brought two Financial Industry Regulatory Authority (“FINRA”) arbitration actions against the Respondents, their former employer and a former supervisor, asserting a multitude of claims. The Respondents filed counterclaims. The FINRA panel consolidated all claims and counterclaims into one action. The panel later granted the Respondents’ motion for summary judgment, dismissed Petitioners’ claims in their entirety, and scheduled subsequent hearings for Respondents’ counterclaims. Petitioners then filed a petition in state court to vacate the panel’s decision, but the court stayed the petition pending final resolution of the action. When the FINRA panel issued the final arbitration award requiring one Petitioner to pay eighty percent of Respondents’ attorney fees and costs incurred, the Petitioners filed an amended petition to vacate the award in state court. Respondents in turn filed a motion to confirm the arbitration award. Days later, Petitioners filed a petition to vacate in the federal court. Petitioners then filed an ex parte motion to stay the Respondents from proceeding in state court pending the federal petition to vacate for manifest disregard of the law.

In support of their motion to stay, Petitioners argued an exception to the Anti-Injunction Act applied that allowed the district court to stay the state court proceedings because a stay was necessary in aid of the jurisdiction of the district court to review the federal petition to vacate. Citing the Supreme Court case of Atlantic Coast Line R.R., the district court explained that the exception does not apply unless such relief is necessary so as to prevent the serious impairment of the federal court’s flexibility and authority to decide the case. The existence of a parallel action in state court does not satisfy the level of impairment necessary to permit injunctive relief under the exception. The district court concluded that the requested injunctive relief was not necessary in aid of its jurisdiction and was prohibited by the Anti-Injunction Act. Holland v. Wachovia Securities, LLC, Case No. 08-1772 (USDC S.D. Cal. December 3, 2008).

This post written by Dan Crisp.