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A party's non-class claims may be arbitrated, even if they are filed along with non-arbitrable class action claims, so long as the non-class claims are not encompassed by the class claims, according to a federal court in Tennessee.
In Cannon v. GunnAllen Financial, Inc., No. 3:06-0804, 2007 WL 189601 (M.D. Tenn. Jan. 22, 2007), Cannon filed suit against GunnAllen Financial, his former brokerage firm. GunnAllen moved to compel arbitration, citing a series of arbitration agreements between the parties.
However, a provision in the agreements prohibited class actions in arbitration. Since one of Cannon's claims was in the form of a putative class action, Cannon argued that all of his claims were non-arbitrable.
The Court disagreed, noting Sixth Circuit precedent supporting arbitration of the non-class claims under these circumstances, provided that such claims were not "encompassed" by the class claim. Liberte Capital Group v. Capwill, 148 F. App'x 413, 417 (6th Cir. 2005). In other words, the non-class claims would only be withheld from arbitration if they arose from the same factual underpinnings as the class claim—even if the former claims had an independent legal basis. Simon v. Pfizer Inc., 398 F.3d 765, 776 (6th Cir. 2005).
Here, Cannon's class claim dealt only with activities occurring following the termination of Cannon's stockbroker from GunnAllen. Since the class claim did not "encompass" Cannon's non-class claims, which were much broader in scope, the remaining claims could be submitted to arbitration. The Court, however, requested additional information to determine which of these non-class claims were arbitrable under the circumstances.
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