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Rejecting the argument that in not explicitly referring two class action claims back to the trial court, an arbitrator had implicitly decided the causes could not be litigated, the California Court of Appeal held that the two causes of action could be heard in state court.
In Clark v. First Union Securities, Inc., No. B189589, 2007 WL 1346188 (Cal. Ct. App. May 9, 2007), Clark, an investment consultant, sued First Union Securities, Inc. (FSI) and Wachovia, his former employer, both as an individual and as the representative of a putative class.
Clark, through signing upon his employment a "Form U-4," became bound by a National Association of Securities Dealers, Inc. (NASD) arbitration agreement. Though broadly worded, the arbitration agreement placed an express limitation on the arbitrability of "class actions." The trial court sent all of Clark's claims into arbitration. The individual causes of action were resolved, but the arbitrator ruled the two "class action" causes non-arbitrable.
Following the arbitrator's ruling, the trial court reconsidered its earlier ruling and decided it would hear Clark's class action claims. Wachovia objected, claiming that the arbitrator's dismissal of the claims was "final and binding" and that the trial court was foreclosed from reviewing the arbitrator's decision.
In rejecting this argument, the Court noted that Wachovia ignored the actual question before the arbitrator: whether the claims were arbitrable. In ruling that they were not, the arbitrator did not dispose of the claims or foreclose the trial court's consideration of them.
In addition, the Court rejected Wachovia's argument that the arbitrator's "decision" not to refer the claims back to the trial court should be construed as an implicit ruling on the merits. The cases that Wachovia relied upon were not similar, in that the NASD agreement expressly authorized both the court and the arbitrator to decide questions of arbitrability.
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