N.D. of Texas Lifts TRO Enjoining FINRA Arbitrations

On February 18, 2011, The Northern District of Texas issued a Temporary Restraining Order (TRO) enjoining multiple arbitration proceedings before the Financial Industry Regulatory Authority (FINRA) in Billitteri v. Securities America Inc., et al., No. 3:09-CV-01568-F and related cases, (N.D. Tex., February 18, 2011). In the case, a group of representative plaintiffs in a class action lawsuit jointly filed a Motion for Preliminary Approval of a partial class action settlement with settling defendants from the financial services industry. The representative plaintiffs also filed a Motion for a Temporary Restraining Order to enjoin three scheduled FINRA arbitration proceedings because the plaintiffs in the arbitration proceedings were also members of the proposed class. The representative plaintiffs cited the All Writs Act, 28 U.S.C. § 1651(a), and claimed that allowing the scheduled FINRA arbitrations to proceed would require the settling defendants to expend monies needed for the proposed settlement on defending the arbitrations.

The case made the news because the Northern District of Texas issued a TRO to preserve the status quo while the court considered whether to approve the proposed settlement. The court also noted that it would consider the appropriateness of using the All Writs Act to enjoin arbitration proceedings when it decided the parties’ Motion for Preliminary Approval. (Read more here.)

Last week, Judge Royal Furgeson denied the parties’ proposed settlement and lifted the TRO:

Because the terms of the proposed settlement would involve the enjoining of a number of FINRA arbitrations brought by individual investors against Securities America, the Court set a hearing and briefing schedule for March 18, 2011, the earliest possible date for such a hearing to occur. The Court considered the oral arguments and briefs of all of the parties. In accordance with the Court’s Order from the bench at the conclusion of the hearing, it is the opinion of the Court that the Representative Plaintiff’s Motion should be DENIED. As part of this decision, it is ORDERED the Temporary Restraining Order issued on February 18, 2011 (Billitteri Docket No. 210, Toomey Docket No. 75, McCoy Docket No. 132) and extended on March 7, 2011 (Billitteri Docket No. 290, Toomey Docket No. 89, McCoy Docket No. 179), which temporarily stayed several FINRA arbitrations against Defendant Securities America while the instant Motion was pending, is hereby LIFTED.

(N.D. Tex., March 21, 2011, 2011 WL 1033647)

The short order and opinion did not go into further detail. Judge Furgeson stated, however, the “Court shall issue a further order in the near future further explaining the Court’s reasoning in making its decision.”

Disputing will definitely be keeping an eye out for the Northern District’s forthcoming opinion. You may also read more about the case here.

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