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Posted: March 18, 2018

Specific Forum Selection Clause in Broker’s Employment Contract Not Superseded by Arbitration Clause in Later-Signed Form U-4

On February 28, 2018, Justice Scarpulla of the New York County Commercial Division issued a decision in Hyuncheol Hwang v. Mirae Asset Sec. (USA) Inc., 2018 NY Slip Op. 30368(U), holding that a forum selection clause in a broker’s employment contract was not superseded by an arbitration clause in a later-signed Form U-4, explaining:

The proponent of arbitration has the burden of demonstrating that the parties agreed to arbitrate the dispute at issue. A court will not order a party to submit to arbitration absent evidence of that party’s unequivocal intent to arbitrate the relevant dispute and unless the dispute falls clearly within that class of claims which the parties agreed to refer to arbitration.

Pursuant to FINRA Rule 12200, parties must arbitrate a dispute if arbitration is required by a written agreement, or requested by the customer; theĀ· dispute is between a customer and a member or associated person of a member; and the dispute arises in connection with the business activities of the member or the associated person, except disputes involving the insurance business activities of a member that is also an insurance company.

When he signed the U4, Hwang executed a boilerplate agreement to arbitrate any dispute, claim or controversy that could arise between him and Mirae that was required to be arbitrated under the rules. However, a month prior, Hwang and Mirae signed a negotiated employment agreement, in which both parties specifically agreed to the forum selection clause, and a clause requiring that any changes to the employment agreement be set forth in a signed written agreement.

Mirae argues that because the U4 was signed after the employment agreement, the agreement to arbitrate in the U4 automatically supplanted and superseded the forum selection clause in the employment agreement. I disagree. Mirae presents no evidence to show that the parties intended the arbitration clause in the U4 to supplant the forum selection clause in the employment agreement. Rather, the evidence presented demonstrates that the parties intended to be bound by the forum selection clause in the employment agreement.

Hwang avers in his affidavit in support that, when he signed the employment agreement, both he and Mirae understood that Hwang’s position at Mirae would require him to sign the FINRA U4. As such, his signing of the U4 — which was done a few weeks after the employment contract was executed — was contemplated when the employment agreement, and specifically the forum selection clause, was negotiated and executed. Mirae submits no evidence to the contrary.

Further, Hwang’s employment contract contains a clause requiring any changes to the agreement be set forth in a signed written agreement. Mirae submits no evidence to show that both parties knowingly agreed, in a written employment contract modification, to eliminate the forum selection clause in Hwang’s employment agreement. If the parties intended to change the forum for disputes concerning Hwang’s employment, they would have had to indicate such in a signed written agreement, but they did not do so.

(Internal quotations and citations omitted).

Commercial litigation involves more than courts. Disputes often are–by agreement–decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.

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