Before we know it, a new hockey season will be upon us. In that spirit, I report on a Federal Arbitration Act “preemption hat trick” that was completed August 12th by the Supreme Judicial Court of Massachusetts’ decision in McInnes v. LPL Financial, Inc., SJC-11356.
For those not familiar with hockey, a “hat trick” occurs when a player scores three (or more) goals in one game. In the arbitration world, a third major decision by a previously anti-mandatory arbitration court shows the court has fallen in line with the U.S. Supreme Court’s clear view that the Federal Arbitration Act (“FAA”) preempts state law (statutory or decisional) that impedes the enforcement of pre-dispute arbitration clauses.
In previous posts on this blog, I’ve written of two recent decisions that indicate the courts – the federal Ninth Circuit and the Massachusetts Supreme Judicial Court – seem to have gotten the U.S. Supreme Court’s memo that the FAA preemption of state law war is over. Now a third case has come down in McInnes, in which for the second time this month Massachusetts – however reluctantly – confirmed that it gets the preemption message.
McIinnes involved a customer – broker securities dispute. When the customer initiated a lawsuit over her suitability claim against LPL, the broker moved to stay litigation and compel arbitration at FINRA as provided in the account agreement. This failed, with the lower court relying on a 1982 Supreme Judicial Court ruling in Hannon v. Original Gunite Aquatech Pools, Inc. that “even where a consumer executed a valid contract agreeing to arbitrate all disputes, a plaintiff may not be compelled to arbitrate a claim alleging an unfair or deceptive trade practice in violation of G.L. c. 93A, § 9.” The statute in question reads:
“Any person entitled to bring an action under [G.L. c. 93A, § 9,] shall not be required to initiate, pursue or exhaust any remedy established by any regulation, administrative procedure, local, state or federal la w or statute or the common law in order to bring an action under [§ 9] or to obtain injunctive relief or recover damages or attorney’s fees or costs or other relief a s provided in this section.”
Given a chance to rethink the issue in light of the Supreme Court’s recent FAA preemption decisions, the Massachusetts court, in a well-reasoned opinion, unanimously held the Massachusetts statute was preempted by the FAA:
“We hold today that such claims must be referred to arbitration where the contract involves interstate commerce and the agreement to arbitrate is enforceable under the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (2006) (FAA). Because the plaintiff and defendants in this case entered into a valid contract in which they agreed to settle all controversies related to the plaintiff’s financial account by arbitration, and because the arbitration agreement is governed by the FAA, we conclude that the motion judges erred in declining to stay judicial proceedings and order the matter to proceed to arbitration” [footnote omitted].
A hockey hat trick usually means the game is over. The FAA preemption hat trick is a sure confirmation that the FAA preemption battle is over as well.
