Goldman, Sachs & Co. v. City of Reno

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GOLDMAN, SACHS & CO., No. 13-15445

Plaintiff-Appellant,

D.C. No.

v. 3:12-cv-00327-

RCJ-WGC

CITY OF RENO,

Defendant-Appellee. OPINION

Appeal from the United States District Court

for the District of Nevada

Robert Clive Jones, Chief District Judge, Presiding

Argued and Submitted

September 9, 2013—San Francisco, California

Filed March 31, 2014

Before: Mary M. Schroeder and Jay S. Bybee, Circuit

Judges, and Anthony J. Battaglia, District Judge.*

Opinion by Judge Bybee;

Partial Concurrence and Partial Dissent by Judge Battaglia

*

The Honorable Anthony J. Battaglia, District Judge for the U.S.

District Court for the Southern District of California, sitting by

designation.

2 GOLDMAN, SACHS & CO. V. CITY OF RENO

SUMMARY**

Arbitration / Forum Selection

The panel reversed the district court’s denial of a

preliminary injunction, and its final judgment in favor of the

City of Reno, in an action brought by Goldman, Sachs & Co.

to enjoin Financial Industry Regulatory Authority arbitration.

The panel held that the forum selection clauses in the

parties’ contracts superseded any right to Financial Industry

Regulatory Authority (“FINRA”) arbitration. The panel held

that the court, rather than FINRA, must determine the

arbitrability of the dispute. The panel further held that

although Reno qualified as Goldman’s customer under

FINRA Rule 12200, Reno disclaimed its right to FINRA

arbitration by agreeing to the forum selection clauses in the

parties’ agreements. The panel remanded to the district court

to consider whether a preliminary injunction is warranted.

District Judge Battaglia concurred with Parts III-A and

III-B of the majority’s opinion, and dissented from the

finding that the contracting parties’ forum selection clauses

superseded Goldman’s pre-existing obligation to arbitrate

under the FINRA Rules. Judge Battaglia would affirm the

district court’s denial of Goldman’s motion to preliminarily

enjoin the FINRA arbitration.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

GOLDMAN, SACHS & CO. V. CITY OF RENO 3

COUNSEL

Matthew A. Schwartz (argued), David H. Braff, and Andrew

H. Reynard, Sullivan & Cromwell LLP, New York, New

York; Stanley W. Parry and Jon T. Pearson, Ballard Spahr

LLP, Las Vegas, Nevada, for Plaintiff-Appellant.

James R. Swanson (argued) and Alysson L. Mills, Fishman

Haygood Phelps Walmsley Willis & Swanson, LLP, New

Orleans, Louisiana; Robert A. Winner, Winner & Carson, PC,

Las Vegas, Nevada, for Defendant-Appellee.

OPINION

BYBEE, Circuit Judge:

In 2005 and 2006, the City of Reno issued approximately

$211 million in complex securities and employed Goldman,

Sachs & Co. (“Goldman”) as its sole underwriter and broker-

dealer. Years after Reno’s financing collapsed, Reno initiated

an arbitration before the Financial Industry Regulatory

Authority (“FINRA”) to resolve its claims against Goldman

arising out of their contractual relationship. Goldman then

filed this action to enjoin the FINRA arbitration, arguing that

(1) Reno was not a “customer” entitled to arbitrate under

FINRA Rule 12200 and (2), at any rate, Reno had disclaimed

any right to arbitrate by agreeing to forum selection clauses

in the contracts between the parties. Reno responded that

FINRA had the right in the first instance to determine

arbitrability. The district court agreed with Reno and

disagreed with Goldman. It therefore denied Goldman’s

motion for injunctive relief and entered final judgment in

favor of Reno.

4 GOLDMAN, SACHS & CO. V. CITY OF RENO

We have little difficulty determining that Reno was

Goldman’s “customer” under the FINRA Rules. However, the

second question—whether the forum selection clauses

superseded Goldman’s obligation to arbitrate under FINRA

Rule 12200—has been the subject of litigation in multiple

circuits, with decidedly mixed results. The Fourth Circuit and

the District of Minnesota have held that an identical forum

selection clause does not supersede a FINRA member’s

obligation to arbitrate under the FINRA Rules, see UBS Fin.

Servs., Inc. v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013);

UBS Sec. LLC v. Allina Health Sys., No. 12-2090, 2013 WL

500373 (D. Minn. Feb. 11, 2013), while two judges within the

Southern District of New York have held that materially

identical forum selection clauses trump FINRA Rule 12200

such that the customer must bring its claims in federal court,

see Goldman, Sachs & Co v. N.C. Mun. Power Agency No.

One, No. 13-CV-1319, 2013 WL 6409348, at *7 (S.D.N.Y.

Dec. 9, 2013); Goldman, Sachs & Co. v. Golden Empire

Schools Fin. Auth., 922 F. Supp. 2d 435 (S.D.N.Y. 2013).

Because we find that the forum selection clauses in the

parties’ contracts superseded any right to FINRA arbitration,

we reverse the district court’s order and final judgment, and

remand for further proceedings consistent with this opinion.

I. BACKGROUND

In 2005, Reno undertook a series of city projects. To

finance these projects, Reno chose to issue municipal bonds.

Reno approached Goldman to discuss financing options, and

Goldman advised Reno to issue the debt in the form of

auction rate securities (“ARS”).

ARS are long-term, variable-rate instruments with interest

rates that reset at periodic auctions. At each auction, ARS

GOLDMAN, SACHS & CO. V. CITY OF RENO 5

investors submit a bid setting forth the number of ARS that

they wish to purchase, hold, or sell, and the lowest interest

rate that they will accept. The lowest interest rate at which the

entire issue can be sold at par establishes the new interest rate

to be paid until the next auction. This new interest rate is

known as the “clearing rate.” If there are insufficient bids to

cover the bonds available for sale at the auction, however, the

auction “fails,” and the interest rate is set at a contractual

“maximum rate” until the next auction.

With Goldman’s assistance, Reno issued $73.45 million

in ARS in October 2005 (the “2005 Bonds”). At that time,

Reno and Goldman entered into two written agreements that

governed their relationship: (1) an underwriter agreement that

outlined Goldman’s duty to purchase and offer the 2005

Bonds (the “2005 Underwriter Agreement”) and (2) a

separate, but contemporaneously executed, broker-dealer

agreement that outlined Goldman’s duty to manage the

auctions for the 2005 Bonds (the “2005 Broker-Dealer

Agreement). The contracts were entered into after arm’s-

length negotiations in which both parties were represented by

counsel.

For purposes of our analysis, the 2005 Broker-Dealer

Agreement contains two significant clauses. First, it contains

a forum selection clause providing that:

The parties agree that all actions and

proceedings arising out of this Broker-Dealer

Agreement or any of the transactions

contemplated hereby shall be brought in the

United States District Court for the District of

Nevada and that, in connection with any such

6 GOLDMAN, SACHS & CO. V. CITY OF RENO

action or proceeding, the parties shall submit

to the jurisdiction of, and venue in, such court.

Second, the 2005 Broker-Dealer Agreement contains a

merger clause providing that:

This Broker-Dealer Agreement, and the other

agreements and instruments executed and

delivered in connection with the issuance of

the ARS, contain the entire agreement

between the parties relating to the subject

matter hereof, and there are no other

representations, endorsements, promises,

agreements or understandings, oral, written or

inferred, between the parties relating to the

subject matter hereof.

Reno and Goldman entered into substantially identical

contracts in 2006 (the “2006 Underwriter Agreement” and the

“2006 Broker-Dealer Agreement”) when Reno financed a

new city project by issuing $137.43 million in ARS (the

“2006 Bonds”).

Reno compensated Goldman for its services under each

of these four agreements. Pursuant to the 2005 and 2006

Underwriter Agreements, Goldman received an underwriter’s

discount by purchasing the 2005 and 2006 Bonds for less than

their face value. In addition, pursuant to the 2005 and 2006

Broker-Dealer Agreements, Goldman received annual broker-

dealer fees in exchange for its management of the ARS

auctions.

In 2008, the ARS market collapsed, and Reno’s ARS

auctions began to fail. As a result, Reno was forced to

GOLDMAN, SACHS & CO. V. CITY OF RENO 7

refinance the 2005 and 2006 Bonds at considerable cost.

According to Reno, these costs should be attributed to

Goldman’s conduct. Specifically, Reno alleges that, where

Goldman served as underwriter, it had a general practice of

placing support bids in ARS auctions to ensure that these

auctions did not fail; that Goldman did not disclose this

general practice to Reno before Reno issued the 2005 and

2006 Bonds; that, consistent with Goldman’s general

practice, it placed support bids in Reno’s ARS auctions until

2008; that Goldman’s decision to stop placing support bids in

2008 caused Reno’s ARS auctions to fail; and that, if

Goldman had told Reno about this general practice, Reno

would not have issued ARS to finance its city projects. Based

on these allegations, Reno claims that Goldman’s conduct

breached its fiduciary duty, amounted to fraud and negligent

misrepresentation, violated the Securities Exchange Act of

1934, violated the Nevada Securities Act, and violated

Municipal Securities Rulemaking Board and FINRA Rules.

In order to resolve these claims through arbitration,

Reno filed a Statement of Claim against Goldman before

FINRA on February 10, 2012. FINRA is a self-regulatory

organization that has “the authority to exercise

comprehensive oversight over ‘all securities firms that do

business with the public.’” UBS Fin. Servs., Inc. v. W. Va.

Univ. Hosps., Inc., 660 F.3d 643, 648 (2d Cir. 2011) (quoting

72 Fed. Reg. 42169, 42170 (Aug. 1, 2007)). To exercise this

oversight, FINRA has instituted rules with which its

members, including Goldman, agree to comply. See FINRA

Bylaws, art. IV, § 1(a). And one of these rules provides that

FINRA members and their customers “must arbitrate a

dispute . . . [i]f [a]rbitration . . . [is] [r]equested by the

customer; [t]he dispute is between a customer and a member

8 GOLDMAN, SACHS & CO. V. CITY OF RENO

. . . ; and [t]he dispute arises in connection with the business

activities of the member . . . .” FINRA Rule 12200.

In response to Reno’s Statement of Claim, Goldman filed

this action in the United States District Court for the District

of Nevada, seeking a declaratory judgment that FINRA lacks

jurisdiction over the dispute and an injunction against the

arbitration proceedings. In Goldman’s motion for preliminary

injunction, filed shortly after its complaint, Goldman argued

that Reno was not a “customer” entitled to arbitrate under

FINRA Rule 12200 and that, at any rate, Reno had disclaimed

any right to arbitrate by agreeing to the forum selection

clauses in the 2005 and 2006 Broker-Dealer Agreements.

The district court denied Goldman’s motion for

preliminary injunction. Goldman, Sachs & Co. v. City of

Reno, No. 3:12-CV-00327, 2012 WL 5944966 (D. Nev. Nov.

26, 2012). In so doing, the district court reached three legal

conclusions that are at issue on appeal. First, the district court

found that FINRA had jurisdiction to decide the arbitrability

of Reno’s claims. Second, the district court determined that

Reno was a “customer” under FINRA Rule 12200. And third,

the district court found that the forum selection clauses in the

2005 and 2006 Broker-Dealer Agreements did not supersede

Reno’s right to FINRA arbitration. Accordingly, the district

court ruled that Goldman was not likely to succeed on the

merits.

Following the district court’s ruling, the parties agreed

that there was nothing further to litigate, and the district court

entered final judgment in favor of Reno. Goldman then filed

this appeal.

GOLDMAN, SACHS & CO. V. CITY OF RENO 9

II. STANDARD OF REVIEW

In order to obtain a preliminary injunction, Goldman must

demonstrate that (1) it is likely to succeed on the merits, (2)

it is likely to suffer irreparable harm in the absence of

preliminary relief, (3) the balance of equities tips in its favor,

and (4) an injunction is in the public interest. Winter v.

Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

We review the district court’s denial of a preliminary

injunction for an abuse of discretion, its factual findings for

clear error, and its conclusions of law de novo. See Perfect

10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1157 (9th Cir.

2007).

III. DISCUSSION

There are three issues on appeal. First, we address

whether FINRA must determine the arbitrability of this

matter in the first instance. Because we conclude that we,

rather than FINRA, have jurisdiction to determine

arbitrability, we reach the remaining two issues. Second, we

consider whether Reno was a “customer” of Goldman, giving

it the right to invoke arbitration under the FINRA Rules.

Third, we examine whether Reno and Goldman contracted

around FINRA Rule 12200 through forum selection clauses

and agreed to litigate any claims in the United States District

Court for the District of Nevada.

A. Jurisdiction to determine arbitrability

Both the arbitrability of the merits of a dispute and the

question of who has the primary power to decide arbitrability

depend on the agreement of the parties. See First Options of

10 GOLDMAN, SACHS & CO. V. CITY OF RENO

Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995). “But, unlike

the arbitrability of claims in general, whether the court or the

arbitrator decides arbitrability is an issue for judicial

determination unless the parties clearly and unmistakably

provide otherwise.” Oracle Am., Inc. v. Myriad Group A.G.,

724 F.3d 1069, 1072 (9th Cir. 2013) (internal quotation marks

and citations omitted). Thus, “there is a presumption that

courts will decide which issues are arbitrable.” Id.

The district court concluded that, because Goldman is a

FINRA member, it has agreed to FINRA arbitration on the

issue of arbitrability itself. As support for this conclusion, the

district court relied on FINRA Rule 12203(a), which states

that “[t]he Director may decline to permit the use of the

FINRA arbitration forum if the Director determines that . . .

the subject matter of the dispute is inappropriate, or that

accepting the matter would pose a risk to the health or safety

of arbitrators, staff, or parties or their representatives.”

This legal conclusion was incorrect. FINRA Rule

12203(a) does not provide “clear and unmistakable” evidence

that FINRA members like Goldman have consented to

FINRA determination of the issue of arbitrability. Instead,

FINRA Rule 12203(a) simply describes certain circumstances

under which the FINRA Director may deny access to the

FINRA arbitration forum. Furthermore, neither the

underwriter nor the broker-dealer agreements provide “clear

and unmistakable” evidence that the parties intended that

FINRA would determine the issue of arbitrability. The

presumption that the court will decide which issues are

arbitrable remains unrebutted, and we must make the call.

GOLDMAN, SACHS & CO. V. CITY OF RENO 11

B. Reno as Goldman’s “Customer”

“[A]rbitration is a matter of contract,” Rent-A-Center, W.,

Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010), and there is “a

liberal federal policy favoring arbitration agreements.”1

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,

460 U.S. 1, 24 (1983). “In line with these principles, courts

must place arbitration agreements on an equal footing with

other contracts, and enforce them according to their terms.”

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745

(2011) (internal citations omitted).

Here, the relevant arbitration provision is FINRA Rule

12200, which requires FINRA members like Goldman to

arbitrate disputes arising out of their business activities at the

request of a “customer.” Goldman denies any obligation to

1

The Federal Arbitration Act (“FAA”) provides that:

A written provision in any maritime transaction or a

contract evidencing a transaction involving commerce

to settle by arbitration a controversy thereafter arising

out of such contract or transaction, or the refusal to

perform the whole or any part thereof, or an agreement

in writing to submit to arbitration an existing

controversy arising out of such a contract, transaction,

or refusal, shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for

the revocation of any contract.

9 U.S.C. § 2. FINRA Rule 12200 constitutes an “agreement in writing”

under the FAA, and, assuming Reno is a customer, it is entitled to invoke

FINRA Rule 12200 as an intended third-party beneficiary in its dispute

with Goldman. See Kidder, Peabody & Co. v. Zinsmeyer Trusts P’ship,

41 F.3d 861, 863–64 (2d Cir. 1994); see also Waterford Inv. Servs., Inc.

v. Bosco, 682 F.3d 348, 353 (4th Cir. 2012); MONY Sec. Corp. v.

Bornstein, 390 F.3d 1340, 1342 (11th Cir. 2004).

12 GOLDMAN, SACHS & CO. V. CITY OF RENO

arbitrate under this rule because Reno was not a “customer”

as that term is used in the FINRA Rules.

The FINRA Rules define “customer” only in the negative:

“A customer shall not include a broker or dealer.” FINRA

Rule 12100(i). This definition does not tell us what a

“customer” is, and because Reno is neither a broker nor a

dealer, the FINRA Rules’ definition, standing alone, cannot

tell us whether Reno fits the bill.

Goldman argues that Reno was not a “customer” because

their relationship did not relate directly to investment or

brokerage services. As support for this narrow definition,

Goldman cites the Eighth Circuit’s decision in Fleet Boston

Robertson Stephens, Inc. v. Innovex, Inc., 264 F.3d 770 (8th

Cir. 2001). In Fleet Boston, the court considered whether “a

‘customer’ is everyone who is not a broker or dealer.” Id. at

772. Rejecting this broad definition, the court explained that

“the [FINRA] Rules were [not] meant to apply to every sort

of financial service a [FINRA] member might provide,

regardless of how remote that service might be from the

investing or brokerage activities, which [FINRA] oversees.”

Id. The court then held that “[FINRA] Rules support a

general definition of ‘customer’ as one who receives

investment and brokerage services or otherwise deals more

directly with securities than what occurred here.” Id.

(emphasis added). Although the court said it was a “close

call,” the Eighth Circuit held that where the purported

customer “only received financial advice,” it did not qualify

as a “customer” entitled to arbitration. Id. at 773.

Other circuits have refined the definition of “customer” in

the years following Fleet Boston. See Carilion Clinic,

706 F.3d at 325; W. Va. Univ. Hosps., Inc., 660 F.3d at 651.

GOLDMAN, SACHS & CO. V. CITY OF RENO 13

In Carilion Clinic, UBS and Citigroup sought to enjoin

arbitration under the FINRA Rules, contending that Carilion

Clinic was not a “customer.” 706 F.3d at 321. The Fourth

Circuit rejected this contention. In so doing, the court looked

to other provisions of the FINRA Rules to provide context for

the definition of “customer.” Id. at 324–35. Specifically, the

court noted that FINRA Rule 12200 provides that arbitrable

disputes must arise in connection with the “business

activities” of the FINRA Member, suggesting that a person

must be a customer of a FINRA member’s business activities

to obtain arbitration; that FINRA Rule 12100(r) suggests that

the business activities of a FINRA member involve

“investment banking or securities business”; and that

FINRA’s mission, among other things, is “[t]o promote

through cooperative effort the investment banking and

securities business, to standardize its principles and practices,

to promote therein high standards of commercial honor, and

to encourage and promote among members observance of

federal and state securities laws.” Restated Certificate of

Incorporation of Financial Industry Regulatory Authority,

Inc. § 3 (July 2, 2010).

Subject to the scope indicated by the FINRA Rules,

however, the court reasoned that “the term ‘customer’ in Rule

12200 still retains its generally accepted meaning—‘one that

purchases a commodity or service.’” Carilion Clinic,

706 F.3d at 325 (quoting Merriam Webster’s Collegiate

Dictionary 308 (11th ed. 2007)). The court concluded that a

“customer” is “one, not a broker or dealer, who purchases

commodities or services from a FINRA member in the course

of the member’s business activities insofar as those activities

are covered by FINRA’s regulation, namely the activities of

investment banking and the securities business.” Id; see also

W. Va. Univ. Hosps., Inc., 660 F.3d at 650. Thus, because

14 GOLDMAN, SACHS & CO. V. CITY OF RENO

UBS and Citigroup had provided a variety of services to

Carilion Clinic in connection with the issuance of ARS

bonds, Carilion Clinic was their “customer.” Carilion Clinic,

706 F.3d at 327–28.

Similarly, in UBS Financial Services, Inc. v. West

Virginia University Hospitals, West Virginia University

Hospitals (“WVUH”) issued $329 million in bonds, a portion

of which were issued as ARS. 660 F.3d at 645. UBS served

as “both the lead underwriter and the main broker-dealer

responsible for facilitating the Dutch auctions in which

WVUH’s bonds were resold and their interest rates set.” Id.

Like Reno and Goldman, WVUH and UBS entered into

underwriter and broker-dealer agreements. UBS facilitated

the auctions, for which it was paid a fee, and was permitted

to purchase the ARS at a discount rate. Id. The Second

Circuit concluded that “[t]he term ‘customer’ includes at least

a non-broker or non-dealer who purchases, or undertakes to

purchase, a good or service from a FINRA member.” Id. at

650. On that basis, “WVUH was UBS’s customer because

WVUH purchased a service, specifically auction services,

from UBS.” Id.

We find the Second and Fourth Circuits’ analysis

persuasive. Accordingly, we conclude that a “customer” is a

non-broker and non-dealer who purchases commodities or

services from a FINRA member in the course of the

member’s FINRA-regulated business activities, i.e., the

member’s investment banking and securities business

activities.

With this definition in mind, we find that Reno easily

qualifies as Goldman’s “customer.” To finance a series of city

projects, Reno issued approximately $211 million in ARS

GOLDMAN, SACHS & CO. V. CITY OF RENO 15

bonds. Pursuant to the 2005 and 2006 Underwriter and

Broker-Dealer Agreements, Goldman served as the

underwriter for the 2005 and 2006 Bonds and as the broker-

dealer for the ARS auctions; sold Reno interest rate swaps to

protect the financing structure; acted as Reno’s agent in

dealing with the rating agencies; conducted discussions with

bond insurers on Reno’s behalf; and provided monitoring and

advisory services for the 2005 and 2006 Bonds and the

interest rate swaps. Goldman provided these services in the

course of its securities business activities, and Reno

compensated Goldman in the form of underwriter’s discounts

and annual broker-dealer fees. Accordingly, under both the

2005 and 2006 Underwriter and Broker-Dealer Agreements,

Reno was Goldman’s “customer.” And because Goldman’s

customer has requested arbitration, FINRA Rule 12200

requires Goldman to arbitrate unless Reno has disclaimed its

right to arbitrate through contract.

C. Forum Selection Clauses

Goldman argues that, even if Reno is its customer,

Goldman may enjoin the ongoing FINRA arbitration because

Reno disclaimed its right to arbitrate by agreeing to the forum

selection clauses in the 2005 and 2006 Broker-Dealer

Agreements. These forum selection clauses recite that “all

actions and proceedings . . . shall be brought in the . . .

District of Nevada.” As a threshold matter, we agree with

Goldman that a contract between the parties can supersede

the default obligation to arbitrate under the FINRA Rules.

See, e.g., Carilion Clinic, 706 F.3d at 328; Applied

Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d

522, 525 (2d Cir. 2011). The question, then, is whether the

forum selection clauses at issue here sufficiently demonstrate

the parties’ intent to do so. We conclude that they do.

16 GOLDMAN, SACHS & CO. V. CITY OF RENO

Goldman had a default obligation to arbitrate with its

customers under the FINRA Rules, but Goldman was free to

make alternative arrangements with each individual customer

when the parties formed or modified their contractual

relationship. Here, at the time the contracts were negotiated,

Goldman and Reno agreed to forum selection clauses which

clearly indicate that the parties never agreed to arbitrate

claims arising out of their contractual relationship. Instead,

from the beginning of this relationship, Goldman and Reno

agreed to bring such claims in the District of Nevada. We

therefore hold that these forum selection clauses superseded

Goldman’s default obligation to arbitrate under the FINRA

Rules.

1. Legal Standards

The Supreme Court has emphasized that the “first

principle” of its arbitration decisions is that “[a]rbitration is

strictly a matter of consent and thus is a way to resolve those

disputes—but only those disputes—that the parties have

agreed to submit to arbitration.” Granite Rock Co. v. Int’l

Bhd. of Teamsters, 130 S. Ct. 2847, 2857 (2010) (internal

quotation marks and citations omitted). When determining

whether parties have agreed to submit to arbitration, “we

apply ‘general state-law principles of contract interpretation,

while giving due regard to the federal policy in favor of

arbitration by resolving ambiguities as to the scope of

arbitration in favor of arbitration.’” Mundi v. Union Sec. Life

Ins. Co., 555 F.3d 1042, 1044 (9th Cir. 2009) (quoting

Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th

Cir. 1996)). This policy, however, “is merely an

acknowledgment of the FAA’s commitment to ‘overrule the

judiciary’s longstanding refusal to enforce agreements to

arbitrate and to place such agreements upon the same footing

GOLDMAN, SACHS & CO. V. CITY OF RENO 17

as other contracts.’” Granite Rock, 130 S. Ct. at 2859

(emphasis added) (quoting Volt Info. Scis., Inc. v. Bd. of

Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478

(1989)). Accordingly, the Supreme Court “[has] never held

that this policy overrides the principle that a court may

submit to arbitration ‘only those disputes . . . that the parties

have agreed to submit.’ Nor [has the Court] held that courts

may use policy considerations as a substitute for party

agreement.” Id. (citations omitted) (quoting First Options of

Chi., 514 U.S. at 943).

Guided by this first principle, we do not apply the so-

called “presumption in favor of arbitrability” in every case.

Where the arbitrability of a dispute is contested, we must

decide whether the parties are contesting the existence or the

scope of an arbitration agreement. If the parties contest the

existence of an arbitration agreement, the presumption in

favor of arbitrability does not apply. If the parties contest the

scope of an arbitration agreement, we must determine

whether the scope of the agreement covers the relevant

dispute. The presumption in favor of arbitrability applies only

where the scope of the agreement is ambiguous as to the

dispute at hand, and we adhere to the presumption and order

arbitration only where the presumption is not rebutted.

Granite Rock, 130 S. Ct. at 2858–60; AT&T Techs., Inc. v.

Commc’ns Workers of Am., 475 U.S. 643, 650 (1986)

(“[W]here the contract contains an arbitration clause, there is

a presumption of arbitrability in the sense that an order to

arbitrate the particular grievance should not be denied unless

it may be said with positive assurance that the arbitration

clause is not susceptible of an interpretation that covers the

asserted dispute.” (internal quotation marks, brackets, and

citation omitted)); Mundi, 555 F.3d at 1044–45 (“The

presumption in favor of arbitration . . . does not apply if

18 GOLDMAN, SACHS & CO. V. CITY OF RENO

contractual language is plain that arbitration of a particular

controversy is not within the scope of the arbitration

provision.” (internal quotation marks and citation omitted));

Bank Julius Baer & Co. v. Waxfield Ltd., 424 F.3d 278, 281

(2d Cir. 2005).

Consistent with this analytical framework, we must

decide whether Goldman contests the existence or scope of a

valid arbitration agreement. Goldman and Reno did not

include an express arbitration clause in the Underwriter or

Broker-Dealer Agreements. Instead, as a FINRA member,

Goldman had a default obligation to arbitrate at the request of

a “customer.” And as a “customer,” Reno stood to benefit

from this default obligation, provided that the parties did not

contract around it. According to Goldman, however, that is

precisely what occurred when the parties agreed to the forum

selection clauses: Reno disclaimed any right to arbitrate that

it might otherwise have had. If Goldman is correct that the

forum selection clauses superseded its default obligation

under the FINRA Rules, Goldman and Reno agreed not to

arbitrate any claims that might arise out of their contractual

relationship at the very time this relationship was formed.

Goldman thus contests the existence, rather than the scope, of

an arbitration agreement, and, therefore, the presumption in

favor of arbitrability does not apply in this case.

The Second Circuit reached the same conclusion on

similar facts in Applied Energetics, 645 F.3d at 526. There,

the parties included an arbitration clause in an “Engagement

Agreement.” That clause, however, was allegedly superseded

by a forum selection clause in a subsequent “Placement

Agreement.” Id. at 523. The court noted that “while doubts

concerning the scope of an arbitration clause should be

resolved in favor of arbitration, the presumption does not

GOLDMAN, SACHS & CO. V. CITY OF RENO 19

apply to disputes concerning whether an agreement to

arbitrate has been made.” Id. at 526. Consequently, because

the question of whether the Placement Agreement had

superseded the Engagement Agreement was a dispute over

the existence, rather than the scope, of the agreement to

arbitrate, “the presumption in favor of arbitrability [did] not

apply.” Id.

Because we likewise conclude that the presumption in

favor of arbitrability does not apply here, we use general

state-law principles of contract interpretation to decide

whether a contractual obligation to arbitrate exists, see

Mundi, 555 F.3d at 1044: If the parties’ agreement is clear on

its face, we must enforce it as written. See Greenfield v.

Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002) (“[A]

written agreement that is complete, clear and unambiguous on

its face must be enforced according to the plain meaning of

its terms.”); accord Canfora v. Coast Hotels & Casinos, Inc.,

121 P.3d 599, 603 (Nev. 2005) (“[W]hen a contract is clear

on its face, it will be construed from the written language and

enforced as written.” (internal quotation marks and citation

omitted)). Accordingly, to avoid arbitration, the forum

selection clauses to which Goldman and Reno agreed need

only be “sufficiently specific to impute to the contracting

parties the reasonable expectation that they are superseding,

displacing, or waiving the arbitration obligation created by

FINRA Rule 12200.” Carilion Clinic, 706 F.3d at 328.

2. Application

With this standard in mind, we turn to the text of the

forum selection clauses and conclude that Reno has clearly

and unambiguously disclaimed any right it might otherwise

have had to FINRA arbitration. As previously mentioned, the

20 GOLDMAN, SACHS & CO. V. CITY OF RENO

forum selection clauses provide that “all actions and

proceedings . . . shall be brought in the . . . District of

Nevada.” Reno argues that the phrase “all actions and

proceedings” refers only to judicial proceedings and is not

incompatible with Reno enforcing its rights under FINRA

Rule 12200.

We are not writing on a blank slate. Although the precise

question is new in our court, it has been the subject of

litigation in federal courts around the country. The Fourth

Circuit and the District of Minnesota have held that the

phrase “all actions and proceedings” is in fact limited to

judicial proceedings, see Carilion Clinic, 706 F.3d at 329–30;

Allina Health Sys., 2013 WL 500373, at *6 , while the

Southern District of New York has held that the very same

phrase, “by its plain terms, encompasses arbitration,” Golden

Empire, 922 F. Supp. 2d at 443; see also N.C. Mun. Power

Agency, 2013 WL 6409348, at *6.2 We have benefitted from

the thoughtful opinions of these courts and recognize that the

question is a close one. For the reasons that follow, we agree

with the Southern District of New York that the parties have

agreed to resolve their contractual disputes in federal court in

Nevada.

First, noting that the forum selection clauses make no

reference to arbitration, Reno argues that if Goldman had

intended to contract out of its duty to arbitrate, it could have

and should have included an express waiver of arbitration in

the parties’ agreements. While this certainly would be an

easier case if the parties had included an express waiver, we

know of no requirement that they do so. Rather, because the

2

We note that Golden Empire is on appeal to the Second Circuit and

will be heard on April 4, 2014.

GOLDMAN, SACHS & CO. V. CITY OF RENO 21

presumption in favor of arbitrability does not apply here, the

forum selection clauses need only be sufficiently specific to

impute to the contracting parties the reasonable expectation

that they would litigate any disputes in federal court, thereby

superseding Goldman’s default obligation to arbitrate under

FINRA Rule 12200. See Applied Energetics, 645 F.3d at

525–26. Thus, although an express waiver might be

preferable, we decline to impose formal incantations when

applying general state-law principles of contract

interpretation. But see Carilion Clinic, 706 F.3d at 329

(“[O]ne would reasonably expect that a clause designed to

supersede, displace, or waive arbitration would mention

arbitration.”).

Second, Reno points out that the forum selection clauses

require only that “actions and proceedings” be brought in

federal court in Nevada. Reno contends that the New York

Civil Practice Laws and Rules3 (“N.Y. C.P.L.R.”) do not

consider arbitrations to be “actions” or “proceedings” and

that, as a result, the forum selection clauses do not encompass

arbitration. See N.Y. C.P.L.R. § 103 (defining civil judicial

disputes as “actions” or “special proceedings”); id. § 304

(“An action is commenced by filing a summons and

complaint or summons with notice . . . . A special proceeding

is commenced by filing a petition . . . .”). In Goldman, Sachs

& Co. v. Golden Empire Schools Financing Authority, the

Southern District of New York found that this argument

“strains reason,” noting that “the Forum Selection Clause

negotiated between [the ARS issuer] and Goldman makes no

mention of the C.P.L.R. and suggests no such limitation.”

3

The 2005 and 2006 Broker-Dealer Agreements stipulate that they

“shall be governed by and construed in accordance with the laws of the

State of New York . . . .”

22 GOLDMAN, SACHS & CO. V. CITY OF RENO

922 F. Supp. 2d at 442. The same is true here; there is no

evidence the parties intended the phrase “actions and

proceedings” to have a technical meaning limited by the N.Y.

C.P.L.R. In common parlance, an arbitration is certainly an

action or a proceeding. The United States Supreme Court, our

court, and New York state courts routinely refer to

arbitrations as “actions” or “proceedings.” See, e.g., 14 Penn

Plaza LLC v. Pyett, 556 U.S. 247, 269 (2009) (referencing an

“arbitral body conducting a proceeding” (emphasis added)

(quoting Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614, 634 (1985)); Sacks v. Dietrich,

663 F.3d 1065, 1066–67 (9th Cir. 2011) (discussing “a

securities arbitration proceeding to be administered by

[FINRA]” (emphasis added)); City of New York v. Uniformed

Fire Officers Ass’n, Local 854, 263 A.D.2d 3, 7 (N.Y. App.

Div. 1999) (“Normally, a party to a valid arbitration

agreement is required to submit to arbitration and to defer any

challenge to the proceeding until an award is rendered.”

(emphasis added) (internal quotation marks and citation

omitted)). Similarly, the FINRA Rules repeatedly refer to

arbitrations held under their authority as “proceedings.” See,

e.g., FINRA Rule 12400 (discussing “the selected hearing

location for each proceeding” (emphasis added)). What is

more, Reno itself refers to the FINRA arbitration as a

“proceeding[]” and an “action” in its Statement of Claim. In

light of these ubiquitous references to arbitration as an action

or proceeding, it is of little significance that the N.Y.

C.P.L.R. contemplate “actions” or “proceedings” in the civil

judicial context.4

4

Reno and the dissent contend that the forum selection clauses at issue

here are narrower than the provision covering “any dispute” in Applied

Energetics, where the Second Circuit found that a similar forum selection

clause had displaced an earlier agreement to arbitrate. 645 F.3d at 525.

GOLDMAN, SACHS & CO. V. CITY OF RENO 23

Third, Reno asserts that if the term “actions and

proceedings” included arbitration, the forum selection clauses

would make no sense. The Fourth Circuit endorsed this

argument in Carilion Clinic. There, the court reasoned that if

“actions and proceedings” included arbitration, the forum

selection clauses would have to be read with the following

substitution: “all proceedings, including arbitration . . . shall

be brought in [federal court].” Carilion Clinic, 706 F.3d at

329 (omission in original) (emphasis added). The court

rejected this reading:

In whatever way that sentence could be read,

it could not be read to preclude arbitration; to

the contrary, it presumes its availability but

localizes it, albeit to a forum where it could

not be pursued . . . . Regardless of how one

might explain the commitment of an

arbitration proceeding to a court, the sentence

surely cannot be read to preclude or waive

arbitration.

According to Reno and the dissent, because the forum selection clauses

here do not purport to address “any dispute,” they should be limited to

judicial proceedings arising under the agreements between the parties. Dis.

Op. at 35–37. This argument assumes that the term “dispute” is

necessarily broader than the term “actions and proceedings.” We cannot

see why this would be so. The fact that the term “dispute” includes

arbitration does not mean that the term “actions and proceedings” does

not. To the contrary, we now follow the Supreme Court, our own

precedents, New York state courts, the FINRA Rules, and Reno itself in

concluding that the term “actions and proceedings,” by its plain meaning,

encompasses arbitration.

24 GOLDMAN, SACHS & CO. V. CITY OF RENO

Id.; see also Dis. Op. at 41–42. We respectfully disagree.5 An

arbitration is an alternative to a civil action in federal court,

not an alternative remedy.6 By their nature, arbitrations are

brought in lieu of a federal lawsuit. An arbitration may be

enforced in federal court, 9 U.S.C. § 9, but federal courts do

not conduct the arbitrations themselves. We thus agree with

the Fourth Circuit that it makes no sense to read these forum

selection clauses as obligating the parties to bring their

arbitrations to federal court, but we reach the opposite

conclusion from this premise: the parties have agreed to

litigate their disputes in federal court, and that is incompatible

with any prior obligation to arbitrate such disputes in another

forum. In other words, the question is not whether an

arbitration can be brought in federal court. The question is

whether, by definition, the term “arbitration” falls under the

broad umbrella of “all actions and proceedings.” Because we

find that it does, Goldman and Reno have agreed to bring

5

As the Golden Empire court explained, the same logical conclusion

would follow from the analogous substitution of “actions in the Nevada

state courts” since actions in the Nevada state courts cannot be brought in

the District of Nevada; “[n]evertheless, it can hardly be argued that such

a dispute would fall outside the heading of ‘actions and proceedings.’”

922 F. Supp. 2d at 442.

6

We use the term “arbitration” to refer both to a particular kind of

proceeding and to an alternative forum. Thus, we may speak of

“commencing an arbitration” rather than “commencing a lawsuit.” We

also may say that we are “going to arbitration” instead of “going to court.”

The point of the forum selection clauses is that “all actions and

proceedings” must be pursued in a particular forum, federal district court

in Nevada. Because arbitration is an “action” or “proceeding,” and “all

actions and proceedings” must be brought in federal district court,

Goldman and Reno have agreed to resolve all of their disputes in judicial

proceedings rather than arbitrations. Even if we think of an arbitration as

a forum, it is an alternative forum to the forum agreed upon by the parties.

GOLDMAN, SACHS & CO. V. CITY OF RENO 25

their claims in a judicial action in the District of Nevada,

even if those same claims might otherwise have been raised

in an arbitral forum in the absence of the forum selection

clauses agreed to by the parties.

Fourth, Reno argues that if the term “actions and

proceedings” included arbitration, the portion of the forum

selection clauses that waives “all right to trial by jury” would

become nonsensical. The Fourth Circuit also endorsed this

argument in Carilion Clinic, reasoning that, because there is

no right to trial by jury, “[t]he more reasonable construction

would take the references to ‘court’ and ‘jury trials’ as

limiting what is meant by ‘actions and proceedings.’”

706 F.3d at 329–30; see also Dis. Op. at 40–41. Again, we

respectfully disagree. The waiver of the right to jury in the

forum selection clauses “merely states the obvious, that

certain ‘actions and proceedings’ would allow for jury trials,

and then clarifies that the jury right is forfeited in those

instances.” Golden Empire, 922 F. Supp. 2d at 442. The

forum selection clauses thus commit the parties to federal

court, where they consent to a bench trial.

Fifth, both Reno and the dissent argue that if there is a

reading of the forum selection clauses that permits

Goldman’s default obligation to arbitrate under the FINRA

Rules to remain in effect, we must choose that reading. Dis.

Op. at 34. And indeed, such a reading is available here.

Arbitration awards are not self-enforceable. Accordingly, we

could require Goldman to arbitrate at Reno’s request and then

require Reno to enforce the arbitration award, if any, in the

District of Nevada, thereby harmonizing Goldman’s default

obligation to arbitrate with the forum selection clauses. The

flaw in this argument is that it erroneously assumes that the

presumption in favor of arbitrability applies. Where the

26 GOLDMAN, SACHS & CO. V. CITY OF RENO

presumption applies, we compel arbitration “unless it may be

said with positive assurance that the arbitration clause is not

susceptible of an interpretation that covers the asserted

dispute.” AT&T Techs., Inc., 475 U.S. at 650 (internal

quotation marks and citation omitted). Where, as here, the

presumption does not apply, however, we use general state-

law principles of contract interpretation to effectuate the

intent of the parties. As a result, the mere availability of an

alternative reading of the forum selection clauses is beside the

point.

In light of the foregoing, we will give full effect to the all-

inclusive breadth of the forum selection clauses (“all actions

and proceedings”), their mandatory nature (“shall”), and their

reference to a judicial forum (“the United States District

Court for the District of Nevada”). We therefore conclude

that the forum selection clauses superseded Goldman’s

default obligation to arbitrate under the FINRA Rules and

that, by agreeing to these clauses, Reno disclaimed any right

it might otherwise have had to the FINRA arbitration forum.

Lastly, Reno contends that, even if the forum selection

clauses in the 2005 and 2006 Broker-Dealer Agreements

require that Reno bring claims arising out of those

agreements in the District of Nevada, Reno’s claims arising

solely out of the 2005 and 2006 Underwriter Agreements—

which do not contain a forum selection clause—may still

proceed in FINRA arbitration. Reno is mistaken on this point,

too.

The 2005 and 2006 Broker-Dealer Agreements contain

broad merger clauses referencing “the other agreements and

instruments executed and delivered in connection with the

issuance of the ARS” and stipulating that the Broker-Dealer

GOLDMAN, SACHS & CO. V. CITY OF RENO 27

Agreements “contain the entire agreement between the parties

relating to the subject matter hereof.” The “other agreements

and instruments executed and delivered in connection with

the issuance of the ARS” certainly include the 2005 and 2006

Underwriter Agreements. As a result, the forum selection

clauses also encompass claims arising out of those

agreements.

Moreover, as the Statement of Claim reveals, all of

Reno’s claims are inextricably linked to the 2005 and 2006

Broker-Dealer Agreements. The core of Reno’s claims is that,

when negotiating with Reno to become both underwriter and

broker-dealer for the 2005 and 2006 Bonds, Goldman did not

disclose its general practice of placing support bids to prevent

ARS auctions from failing. Reno asserts that “[h]ad [it]

known that [its ARS] would be wholly-dependent on

Goldman’s continued support bidding practice . . . , Reno

would never have taken the risk . . . . Instead, Reno could

have chosen an alternative structure for the financing.” As

damages, Reno seeks, inter alia, “disgorgement of all fees and

costs associated with issuing the ARS [and] conducting the

auctions,” i.e., both underwriter and broker-dealer fees.

Accordingly, all of Reno’s claims arise, at least in part, out of

the 2005 and 2006 Broker-Dealer Agreements and are

therefore subject to the forum selection clauses that limit

jurisdiction to the District of Nevada.

IV. CONCLUSION

We conclude that we, rather than FINRA, must determine

the arbitrability of this dispute. Although we agree with the

district court that Reno qualifies as Goldman’s customer

under FINRA Rule 12200, we hold that Reno disclaimed its

right to FINRA arbitration by agreeing to the forum selection

28 GOLDMAN, SACHS & CO. V. CITY OF RENO

clauses in the 2005 and 2006 Broker-Dealer Agreements.

Consequently, we reverse the district court’s order and final

judgment. And despite Goldman’s “overwhelming likelihood

of success on the merits,” we remand this case to the district

court to consider the remaining Winter factors consistent with

this opinion. Evans v. Shoshone-Bannock Land Use Policy

Comm’n, 736 F.3d 1298, 1307 (9th Cir. 2013) (noting that “a

preliminary injunction is an extraordinary remedy never

awarded as of right” and that “the grant of a preliminary

injunction is a matter committed to the discretion of the trial

judge” (internal quotation marks, citations, and alterations

omitted)).

REVERSED and REMANDED.

BATTAGLIA, District Judge, concurring in part and

dissenting in part:

I concur with Parts III-A and III-B of the Majority’s

opinion.

I concur that the district court erroneously concluded that

Goldman, Sachs & Co. (“Goldman”), as a member of the

Financial Industry Regulatory Authority (“FINRA”), agreed

to FINRA arbitration on the issue of arbitrability itself.

Rather, courts should decide where an agreement does not

provide “clear and unmistakable” evidence that the parties

intended FINRA would determine the issue of arbitrability.

Thus, the district court erred in delegating this matter to

FINRA.

GOLDMAN, SACHS & CO. V. CITY OF RENO 29

I also concur with the Majority’s conclusion that a

“customer” is a non-broker and non-dealer who purchases

commodities or services from a FINRA member in the course

of the member’s FINRA-regulated business activities. The

City of Reno (“Reno”), therefore, falls within this definition

of “customer” under both the 2005 and 2006 Underwriter and

Broker-Dealer Agreements.

Finally, I concur with the Majority’s finding that parties

can supersede, displace, or waive FINRA’s arbitration

requirement through a subsequent agreement and that an

express waiver of arbitration is unnecessary. The Majority’s

adoption of the Fourth Circuit’s “sufficiently specific” test

was appropriate for determining if, in fact, the parties

superseded, displaced, or waived the arbitration obligation

created by FINRA Rule 12200 through the 2005 and 2006

Broker-Dealer Agreements. However, it is here that I diverge

from my colleagues and respectfully dissent from the finding

that the contracting parties’ forum selection clauses

superseded Goldman’s pre-existing obligation to arbitrate

under the FINRA Rules. For the following reasons, I would

affirm the district court’s finding that: “[t]he exclusive forum

selection clauses in the Broker-Dealer Agreements do not

touch upon arbitration or arbitrability directly, but rather only

control the forum of a court action apart from, or in review of,

arbitration.” Goldman, Sachs & Co. v. City of Reno, No. 3:12-

CV-00327, 2012 WL 5944966, at *4 (D. Nev. Nov. 26,

2012). As a result, I would affirm the district court’s denial of

Goldman’s motion to preliminarily enjoin the FINRA

arbitration.

In UBS Financial Services, Inc. v. Carilion Clinic, the

Fourth Circuit held that contracting parties may avoid FINRA

arbitration by executing a subsequent agreement that is

30 GOLDMAN, SACHS & CO. V. CITY OF RENO

“sufficiently specific to impute to the contracting parties the

reasonable expectation that they are superseding, displacing,

or waiving the arbitration obligation created by FINRA Rule

12200.” 706 F.3d 319, 328 (4th Cir. 2013) (emphasis added).

As an issue of first impression for the Ninth Circuit, I agree

that adoption of this approach is appropriate. This is

preferable to a narrower express waiver requirement.1

However, as stated above, under the facts of the instant case,

I do not find the forum selection clauses at issue to have

sufficiently demonstrated the parties’ intent to supersede,

displace, or waive arbitration.

I disagree with two aspects of the Majority’s analysis.

First, I disagree with the Majority’s heavy reliance on the

opinion of the Honorable Richard J. Sullivan in Goldman,

Sachs & Co. v. Golden Empire Schools Financial Authority,

922 F. Supp. 2d 435 (S.D.N.Y. 2013). Instead, the Fourth

Circuit’s Carilion Clinic is more persuasive. Second, I do

not agree with the Majority’s conclusion that the phrase

“all actions and proceedings,” in the forum selection clauses

of the 2005 and 2006 Broker-Dealer Agreements, is

“sufficiently specific” to impute to the contracting parties the

reasonable expectation that they are superseding, displacing,

or waiving the arbitration obligation under FINRA Rule

12200.

1

Similarly, the Second Circuit will find FINRA arbitration waived

where contracting parties execute a “subsequent agreement the terms of

which plainly preclude arbitration,” but will enforce arbitration if the

contractual provision can possibly be read as complementary to FINRA’s

arbitration requirement. Applied Energetics, Inc. v. NewOak Capital Mkts,

LLC, 645 F.3d 522, 525 (2d Cir. 2011) (citing Bank Julius Baer & Co. v.

Waxfield Ltd., 424 F.3d 278, 281 (2d Cir. 2005)).

GOLDMAN, SACHS & CO. V. CITY OF RENO 31

Founded in 2007, FINRA is a self-regulatory organization

established under Section 15A of the Securities Exchange Act

of 19342 and has the authority to exercise comprehensive

oversight over “all securities firms that do business with the

public.” Sacks v. SEC, 648 F.3d 945, 948 (9th Cir. 2011)

(quoting 72 Fed. Reg. 42170 (Aug. 1, 2007)). FINRA

membership constitutes an agreement to “adhere to FINRA’s

rules and regulations, including its Code and relevant

arbitration provisions contained therein.” UBS Fin. Servs.,

Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648–49 (2d

Cir. 2011). By becoming a member of FINRA, Goldman

agreed to submit to FINRA rules, including Rule 12200,

which requires members to arbitrate disputes in connection

with their business activities if and when arbitration is

requested by a customer or required by a written agreement.

See FINRA Rule 12200; Citigroup Global Mkts., Inc. v. VCG

Special Opportunities Master Fund Ltd., 598 F.3d 30, 32 n.1

(2d Cir. 2010).

Therefore, although a written arbitration agreement

between Goldman and Reno does not exist, “FINRA rules

may establish the requisite arbitration agreement.” See J.P

Morgan Sec. Inc. v. La. Citizens Prop. Ins. Corp., 712 F.

Supp. 2d 70, 76–77 (S.D.N.Y. 2010). Moreover, FINRA Rule

12200 constitutes an agreement in writing under the Federal

Arbitration Act (“FAA”) and Reno is entitled to invoke

FINRA Rule 12200 as an intended third-party beneficiary.

2

15 U.S.C. § 78o–3; Karsner v. Lothian, 532 F.3d 876, 879 n. 1 (D.C.

Cir. 2008); SEC Release No. 34–56145 (July 26, 2007).

32 GOLDMAN, SACHS & CO. V. CITY OF RENO

See Kidder, Peabody & Co. v. Zinsmeyer Trusts P’ship,

41 F.3d 861, 863–64 (2d Cir. 1994).3

While this existing obligation to arbitrate under FINRA

Rule 12200 exists, Goldman and Reno are nevertheless free

to supersede, displace, or waive arbitration with a subsequent

agreement that is “sufficiently specific.” However, even

without applying the presumption in favor of arbitration, and

instead using general state principles of contract

interpretation, the contract language in the forum selection

clauses is not “sufficiently specific” to impute to the

contracting parties the reasonable expectation they are

superseding, displacing, or waiving the arbitration obligation

created by FINRA Rule 12200. Carilion Clinic, 706 F.3d at

328.

In applying the standard set by Carilion Clinic, the

Majority relies heavily on an opinion from the Southern

District of New York, agreeing with the New York district

court that the phrase “all actions and proceedings”

encompasses arbitration. See Golden Empire, 922 F. Supp. 2d

at 443. In my view, this reliance is misplaced for two reasons.

First, Golden Empire failed to adhere to Second Circuit

precedent directing its courts to enforce an arbitration where

a forum selection clause and an agreement to arbitrate may be

read as complementary. See Bank Julius Baer & Co. v.

Waxfield Ltd., 424 F.3d 278, 284 (2d Cir. 2005) (“Under our

cases, if there is a reading of the various agreements that

permits the Arbitration Clause to remain in effect, we must

chose it . . . .”). Second, Golden Empire failed to

3

Though not addressing FINRA rules themselves, Kidder considered the

rules and regulations of the National Association of Securities Dealers,

Inc. (“NASD”), the predecessor of FINRA.

GOLDMAN, SACHS & CO. V. CITY OF RENO 33

acknowledge the distinction between the phrase “any dispute”

as featured in Applied Energetics and the phrase “all actions

and proceedings” in the agreements presented to the district

court. Golden Empire, 922 F. Supp. 2d at 443 (citing Applied

Energetics Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522,

525 (2011)). This led the New York district court to

mischaracterize the agreements as being “all-inclusive, . . .

mandatory, and neither admits the possibility of the other.”

Id.

In Bank Julius, the Second Circuit determined that the

existence of a broad arbitration agreement creates a

“presumption of arbitrability which is only overcome if it

may be said with positive assurance that the arbitration clause

is not susceptible of an interpretation that covers the asserted

dispute.” 424 F. 3d at 284. The parties in Bank Julius,

initially agreed to arbitrate “any . . . dispute” arising out of

their contractual relationship then subsequently entered into

an agreement omitting any mention of arbitration. Id. at 282.

The subsequent agreement, however, contained a forum

selection clause stating that “any Action” brought by the

defendant must be in any New York State or Federal Court

sitting in New York City. Id. Furthermore, the subsequent

agreement contained a merger clause providing that “[t]his

Agreement supersedes all prior agreements and understanding

between [the parties]” but also provided that “the rights and

remedies provided [herein] are cumulative and not exclusive

of any rights or remedies provided under any other agreement

or by law or in equity.” Id.

Under these circumstances, the Second Circuit concluded

that the forum selection clause in the subsequent agreement

could be read as complementary with an initial agreement to

arbitrate. Id. at 284. The court noted that a subsequent

34 GOLDMAN, SACHS & CO. V. CITY OF RENO

agreement, such as one containing a forum selection clause

and a merger clause, could not nullify an arbitration

agreement unless that subsequent contract “specifically

precludes arbitration.” Id. at 284 (citing Personal Sec. &

Safety Sys. v. Motorola, 297 F.3d 388, 396 n.11 (5th Cir.

2002)). In analyzing the forum selection clause, the Bank

Julius court concluded that “we cannot say that the Forum

Selection Clause, which does not even mention arbitration,

either ‘specifically precludes’ arbitration or contains a

‘positive assurance’ that this dispute is not governed by the

Arbitration Agreement.” Id. The court found that there is

“nothing inconsistent between the arbitration obligation and

the instant forum selection clause. Both can be given effect

. . . .” Id.

Thus, “where a Forum Selection Clause can be

understood . . . as complementary to an agreement to

arbitrate,” a court should enforce the arbitration agreement.

Id. Additionally, because the forum selection clause made no

reference to arbitration, the Second Circuit in Bank Julius

found it to be “at least ambiguous” which requires resolution

“in favor of coverage.” Id. at 285 (internal quotations

omitted) (citing WorldCrisa Corp. v. Armstrong, 129 F.3d 71,

74 (2d. Cir. 1997)). Golden Empire did not adhere to this

Second Circuit directive and ignored the natural integration

of the role and control of the forum court action, apart from,

or in review of, arbitration agreements. Under the facts of

Golden Empire, as well as in the instant case, the forum

selection clause requiring the parties to submit to the

jurisdiction of the district court for the District of Nevada “all

actions and proceedings” may be read as complementary to

FINRA Rule 12200 in that the parties may seek court

enforcement of arbitral awards or challenge the validity or

application of the arbitration agreement in court.

GOLDMAN, SACHS & CO. V. CITY OF RENO 35

Of further concern is Golden Empire’s failure to

recognize the distinction between the phrases “all actions and

proceedings” and “any dispute.” In Bank Julius, the parties

first agreed to arbitrate “any . . . dispute” arising out of their

contractual relationship but subsequently executed an

agreement in which the defendant agreed to submit “any

Action” to a New York state or federal court, creating two

complementary and enforceable agreements.4 This subtle, but

significant, difference in language was recognized by the

Second Circuit in Applied Energetics, Inc. v. NewOak Capital

Markets, and was used to distinguish the two agreements

presented to the Applied court. 645 F.3d at 525–26.

In Applied Energetics, the parties entered into two

agreements during the course of their transaction. The first,

the Engagement Agreement, contained an arbitration clause

stating, “[e]ach of NewOak and Applied agrees that any

dispute arising out of or relating to this letter, the Indemnity

Agreement and/or the transactions contemplated hereby or

thereby . . . shall be resolved through binding arbitration

. . . .” Id. at 523 (emphasis added). The second, the Placement

Agreement, contained a clause providing that “[a]ny dispute

arising out of this Agreement shall be adjudicated in the

Supreme Court, New York County or in the federal district

court for the Southern District of New York.” Id. (emphasis

added). Because the two agreements used the same phrase

“any dispute,” with one requiring arbitration and the other

providing for adjudication in a judicial forum, the Applied

Court found the case fell within the scenario contemplated by

Bank Julius, “where contracting parties are free to revoke an

4

Similarly, the parties in Golden Empire were obligated to arbitrate “a

dispute” under FINRA Rule 12200 should Golden Empire, as a customer,

so request.

36 GOLDMAN, SACHS & CO. V. CITY OF RENO

earlier agreement to arbitrate by executing a subsequent

agreement the terms of which plainly preclude arbitration.”

Id. at 525. The two provisions at issue in Applied Energetics

used parallel language; as a result, the Second Circuit

concluded both provisions were “all-inclusive, both

mandatory, and neither admits the possibility of the other.”

Id.

Thus the Second Circuit in Applied Energetics found the

subsequent Placement Agreement specifically precluded

arbitration. Id. In arriving at this conclusion, the Second

Circuit considered two factors equally worthy of analysis

here. First, the Applied Court noted that the Engagement

Agreement and the Placement Agreement used “parallel

language” that stood in “direct conflict” with each other. Id.

As stated above, the two Agreements were all-inclusive,

mandatory, and neither admitted the possibility of the other,

thereby making it abundantly apparent that the subsequent

agreement completely displaced the first. Id. Second, the

Placement Agreement used the term “adjudicate” as a clear

and unmistakable reference to judicial action. Id.

Accordingly, the subsequent Placement Agreement, which

completely supplanted the Engagement Agreement,

exclusively contemplated judicial proceedings to resolve the

parties’ dispute. These two factors were a part of the basis for

the Second Circuit’s conclusion. However, these two factors

did not exist in Golden Empire, nor do they exist in the

instant matter, and the court in Golden Empire failed to

recognize these important distinctions.

Accordingly, I disagree with Golden Empire’s conclusion

that FINRA Rule 12200 and the Broker-Dealer Agreements’

forum selection clauses were “all inclusive, . . . mandatory,

and neither admits the possibility of the other.” Golden

GOLDMAN, SACHS & CO. V. CITY OF RENO 37

Empire, 922 F. Supp. 2d at 443 (ellipsis in original). Indeed,

the contract language at issue in Golden Empire, and

substantially the same language at issue here, is more akin to

that found in Bank Julius. 424 F.3d at 282. FINRA Rule

12200 provides that a “dispute” must be arbitrated if the

customer so requests or is required by writing, whereas the

Broker-Dealer Agreements’ forum selection clauses provide

that “all actions and proceedings” must be brought in a

judicial forum. Enforcement of both is possible as the two

provisions may be read as complementary. Next, the Golden

Empire court, and the Majority here, concluded that FINRA

Rule 12200 and the forum selection clause are both

mandatory and neither admits the possibility of the other; I

respectfully disagree. Despite the use of the obligatory verb

“must” in FINRA Rule 12200, the duty to arbitrate is only

triggered when one of two conditions are met, if indeed they

are ever met. Yet the court in Golden Empire failed to

recognize that the duty to arbitrate may never be triggered if

a written agreement does not provide for it or if the customer

does not request it. If neither conditions occurs, the parties

may proceed in a judicial forum without any obligation to

arbitrate. Thus, Golden Empire’s characterization of FINRA

Rule 12200 and the forum selection clause as all-inclusive,

mandatory, and mutually exclusive was incorrect.

Moreover, the forum selection clauses contained within

the 2005 and 2006 Broker-Dealer Agreements are not

sufficiently specific to impute the reasonable expectation that

they were intended to supersede, displace, or waive the

arbitration obligation created by FINRA Rule 12200. The

Fourth Circuit reached the same conclusion in Carilion Clinic

when analyzing the language of a forum selection clause

nearly identical to the forum selection clauses at issue here.

706 F.3d at 329. The forum selection clause in Carilion

38 GOLDMAN, SACHS & CO. V. CITY OF RENO

Clinic provided that “all actions and proceedings shall be

brought in the United States District Court in the County of

New York,” then expressly waived the parties’ right to trial

by jury. Id. The Fourth Circuit provided a thorough and well-

reasoned analysis of the adequacy of the forum selection

clause and concluded the clause failed to meet the

“sufficiently specific” standard as it made no suggestion of

the parties’ intent to supersede, displace, or waive the right to

FINRA arbitration. Id. at 330. The Majority here dismisses

the Fourth Circuit’s reasoning and instead fully adopts the

analysis set forth in Golden Empire.

As a result, the Majority agrees with Golden Empire and

finds that there is no evidence the parties intended the phrase

“actions and proceedings” to have a technical meaning

limited to only those actions and proceedings that may be

brought in a judicial forum. It is unsurprising that many

courts and even FINRA have referred to arbitration as a

“proceeding.” It is undeniable that arbitration is referred to as

an “action” or a “proceeding” in common parlance. Indeed,

there are only so many ways we can refer to a course of

events or action. While the Majority references to a number

of sources that refer to arbitration as an “action” or a

“proceeding,” it is also possible to find sources limiting

“actions and proceedings” to those brought in a judicial

forum.

For instance, an “action” in the legal sense is defined as

“[a] civil or criminal judicial proceeding.”5 Black’s Law

5

This broad definition is supported by the following reason:

An action has been defined to be an ordinary

proceeding in a court of justice, by which one party

GOLDMAN, SACHS & CO. V. CITY OF RENO 39

Dictionary 31 (8th ed. 2004); see also Black’s Law

Dictionary 28 (6th ed. 1990) (“A lawsuit brought in a court,

a formal complaint within the jurisdiction of a court of law

. . . that includes all the formal proceedings in a court of

justice . . . .”). The phrase “all actions and proceedings” also

appears in Rule 1 of the Federal Rules of Civil Procedure,

which governs civil actions and proceedings in the United

States district courts. Fed. R. Civ. P. 1. Rule 1 explicitly

refers to actions and proceedings as those brought in a

judicial forum, from which arbitrations are precluded. Section

3 of the Federal Arbitration Act (“FAA”) allows parties with

a valid arbitration agreement to apply for a stay in “any suit

or proceeding” that has been brought into any of the courts of

the United States. 9 U.S.C § 3 (emphasis added). Here, the

FAA undoubtedly refers to “proceedings” as meaning those

proceedings brought in a judicial forum; consequently,

“proceedings” under the language of the FAA does not

encompass arbitration.

In light of the above ambiguities, it is obvious why the

parties have sought judicial resolution on the issue of whether

the forum selection clause superseded, displaced, or waived

the arbitration requirement under FINRA. While not

prosecutes another party for the enforcement or

protection of a right, the redress or prevention of a

wrong, or the punishment of a public offense . . . . More

accurately, it is defined to be any judicial proceeding,

which, if conducted to a determination, will result in a

judgment or decree. The action is said to terminate at

judgment.

Black’s Law Dictionary 31 (8th ed. 2004) (quoting 1 Morris M. Estee,

Estee’s Pleadings, Practice, and Forms § 3, at 1 (Carter P. Pomeroy ed.,

3d ed. 1885)).

40 GOLDMAN, SACHS & CO. V. CITY OF RENO

dispositive, it is important to be mindful of the sophistication

of the parties involved, both undoubtedly represented by

skilled counsel in negotiating, forming, and executing the

Agreements at issue in an arm-length transaction. While it

may be that it is “common parlance” to refer to arbitrations as

an action or a proceeding, it is equally reasonable to conclude

that the parties intended the phrase to denote its technical and

legal meaning that excludes arbitration. With two reasonable

interpretations possible, we must look to the contract itself to

determine the parties’ intent.

“In interpreting a contract, ‘the document must be read as

a whole to determine the parties’ purpose and intent, giving

a practical interpretation to the language employed so that the

parties’ reasonable expectations are realized.’” Queens Best,

LLC v. Brazal S. Holdings, LLC, 35 A.D.3d 695, 696–97

(N.Y. App. Div. 2006) (quoting Snug Harbor Square Venture

v. Never Home Laundry, Inc., 252 A.D.2d 520, 521 (N.Y.

App. Div. 1998)); see also Beal Sav. Bank v. Sommer,

8 N.Y.3d 318, 324–25 (N.Y. 2007) (“Further, a contract

should be read as a whole and every part will be interpreted

with reference to the whole and if possible it will be so

interpreted as to give effect to its general purpose.” (internal

quotation marks and citation omitted)).6 After the initial

language regarding the District of Nevada as the forum for all

actions and proceedings, the forum selection clause goes on

to state “[e]ach of the parties hereto also irrevocably waives

all right to trial by jury in any action, proceeding or

counterclaim arising out of this Broker-Dealer Agreement or

the transactions contemplated hereby.” Therefore, simply

6

Section 5.09 of the 2005 and 2006 Broker-Dealer Agreements provides

that this “Agreement shall be governed by and construed in accordance

with the laws of the State of New York . . . .”

GOLDMAN, SACHS & CO. V. CITY OF RENO 41

referencing this next sentence suggests that the phrase “all

actions and proceedings” refers to only those brought in a

judicial forum, the only forum in which a jury may sit. See

Carilion Clinic, 706 F.3d at 329–30 (“The more reasonable

construction would take the references to ‘court’ and ‘jury

trials’ as limiting what is meant by ‘actions and proceedings.’

Thus read in the context of courts and jury trials, the terms

‘actions and proceedings’ would be understood as a term of

art . . . .”).

Furthermore, if contract clauses appear to be repugnant to

each other, the court should interpret the contract “in a way

which reconciles all its provisions, if possible.” Green

Harbour Homeowners’ Assn., Inc. v. G.H. Dev. & Constr.,

Inc., 14 A.D.3d 963, 965 (N.Y. App. Div. 2005). Here,

although we are dealing with the specific phrase “actions and

proceedings” within a forum selection clause, the same

principles of contract interpretation are relevant. If “actions

and proceedings” includes arbitration, then the provision

suggests arbitration remains available but must be brought in

court. Such a reading renders the entire sentence

contradictory as arbitrations may not be pursued in courts as

a general rule. The Fourth Circuit arrived at this same

conclusion, noting the “problems inherent in this logical

construct.” Carilion Clinic, 706 F.3d at 329. To reconcile the

entire sentence, “all actions and proceedings” must be read to

mean only judicial actions and proceedings. Moreover, we

should not read a contract in a way that would render any

portion meaningless. CNR Healthcare Network, Inc. v. 86

Lefferts Corp., 59 A.D.3d 486, 489 (N.Y. App. Div. 2009).

Again, the suggestion that “actions and proceedings” includes

arbitration results in a nonsensical reading of the remaining

portion of the forum selection clause as the language suggests

arbitration should be brought in a judicial forum with the

42 GOLDMAN, SACHS & CO. V. CITY OF RENO

parties waiving all rights to a trial by jury in the “action” or

“proceeding.” See Carilion Clinic, 706 F.3d at 329. As an

arbitration may not be brought in a judicial forum and

arbitration does not include a right to a jury trial, an

interpretation of “actions and proceedings” as including

arbitration results in an illogical reading of the entire

provision.

With these considerations in mind, I would agree with the

Fourth Circuit in Carilion Clinic that “it would never cross a

reader’s mind that the [forum selection] clause provides that

the right to FINRA arbitration was being superseded or

waived.” Id. at 330. Given the broad right a customer has to

seek arbitration under FINRA Rule 12200, the forum

selection clauses in the Broker-Dealer Agreements falls far

short of providing “sufficiently specific” language to impute

to the contracting parties the reasonable expectation that

FINRA’s arbitration requirement has been superseded,

displaced, or waived. Accordingly, I would affirm the district

court’s denial of Goldman’s motion for preliminary

injunction.