The opinion of the court was delivered by: Hon. Glenn T. Suddaby, United States District Judge
MEMORANDUM-DECISION and ORDER
Currently before the Court in this breach-of-employment contract action, filed by Ayco Company, L.P ("Plaintiff") against William R. Becker ("Defendant"), is Defendant's motion to stay this action and compel arbitration, or in the alternative, to dismiss this action for lack of subject-matter jurisdiction. (Dkt. No. 12.) For the reasons set forth below, Defendant's motion is denied.
Generally, liberally construed, Plaintiff's Complaint alleges that Defendant breached his employment contract with, and other common-law duties owed to, Plaintiff. (See generally Dkt. No. 1 [Plf.'s Compl.].) More specifically, Plaintiff alleges that, after Defendant left Plaintiff's employ to work for Plaintiff's competitor, UBS Financial Services Inc. ("UBS"), Defendant breached the terms of his employment agreement with Plaintiff by (1) misappropriating documents containing confidential business information, (2) soliciting Plaintiff's clients to transfer their accounts to UBS, and (3) rendering financial counseling services to those clients. (Id.) In addition, Plaintiff alleges that Defendant shared Plaintiff's confidential and business information with UBS, and used that information for his own benefit. (Id.)
Based on these factual allegations, Plaintiff's Complaint asserts the following four claims: (1) a claim of breach of employment contract; (2) a claim of breach of fiduciary duty and duty of loyalty; (3) a claim of misappropriation of trade secrets; and (4) a claim of unfair competition. (Id.) Familiarity with the remaining factual allegations supporting these four claims in Plaintiff's Complaint is assumed in this Decision and Order, which is intended primarily for review by the parties.
B. Record Evidence Outside the Pleadings
In considering a motion to dismiss for lack of subject-matter jurisdiction, a court may consider "evidence outside the pleadings." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). Here, the record evidence outside the pleadings reveals as follows, in pertinent part. (See generally Dkt. No. 12, Attach. 2-3; Dkt. No. 16, Attach. 1-5; Dkt. Nos. 21-22 [with Attachments].)
Plaintiff is a financial services company that specializes in providing personal financial counseling, investment management services and tax return preparation services to corporate executives and individuals. (Id.) In 1999, Defendant joined Plaintiff as a financial analyst. (Id.) At the time he started his employment with Plaintiff, Defendant signed a Trade Secrets and Confidentiality Agreement ("Agreement"). (Id.) Pursuant to the Agreement, Defendant promised to refrain from doing the following: (1) using confidential client and business information without Plaintiff's permission; (2) removing from Plaintiff's premises any of its records, including records of the names and addresses of the firm's clients; and (3) soliciting or performing services for Plaintiff's clients during the two year period following his departure from Plaintiff. (Id.) In addition, Defendant agreed that jurisdiction over any disputes arising between the parties under the Agreement would lie in the Northern District of New York. (Id.)
At some point between 1999 and 2010, Defendant applied to become a registered representative of the Financial Industry Regulatory Authority, Inc. ("FINRA"). As part of that application, he signed a FINRA Form U-4 Uniform Application for Securities Industry Registration or Transfer ("Form U-4"), which contained the following arbitration clause: "I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the [Self-Regulatory Organizations] indicated in Section 4 [of this Application] . . . ." (Id. [emphasis in original].)
On April 16, 2010, Defendant resigned from Plaintiff's employ and went to work for UBS; and a dispute ensued between Plaintiff and Defendant that gave rise to this action. (Id.)
C. Parties' Arguments on Defendant's Current Motion
Generally, in support of his motion (to stay this action and compel arbitration, or, in the alternative, dismiss this action for lack of subject-matter jurisdiction), Defendant argues that, regardless of the parties' Agreement, the parties must submit their dispute to FINRA pursuant to the rules of FINRA. (Dkt. No. 12, Attach. 1 [Def.'s Memo. of Law].)
More specifically, FINRA Rule 13200(a) provides that, "[e]xcept as otherwise provided in the Code [of Arbitration Procedure for Industry Disputes], a dispute must be arbitrated . . . if the dispute arises out of the business activities of a member or an associated person and is between or among: Members; Members and Associated Persons; or Associated Persons." FINRA R. 13200(a). "Member" is defined as "any broker or dealer admitted to membership in FINRA ." FINRA R. 13100(o). "Associated Person" is defined as "[a] natural person who is registered or has applied for registration under the Rules of FINRA." FINRA R. 13100(a) & (r).
Applying these FINRA rules, Defendant argues that this dispute must be arbitrated before FINRA for the following three reasons: (1) although the Agreement did not contain an arbitration clause, as a condition of his employment Defendant was required to become licensed as a "registered representative" of the National Association of Securities Dealers, Inc. ("NASD") (n/k/a FINRA), through Plaintiff's affiliate, Mercer; (2) to register with FINRA, Defendant signed a Form U-4 Agreement, which states that "I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm . . . that is required to be arbitrated under the rules . . ."; and (3) Mercer is a "member" of FINRA, and, through Defendant's registration with FINRA, Defendant became an "associated person" for purposes of FINRA. (Dkt. No. 12, Attach. 1 [Def.'s Memo. of Law].)
Defendant further argues that Plaintiff, as a non-signatory of the Form U-4 Agreement, may be bound by its terms, for the following three reasons: (1) although Mercer agreed, in the arbitration clause of the Form U-4 Agreement, to arbitrate disputes arising out of the business activities of a member or an associated person, Plaintiff is the real party in interest with regard to that arbitration clause, and is therefore estopped from avoiding arbitration; (2) because Mercer is Plaintiff's agent, Plaintiff is bound (under agency law) by the arbitration clause of the Form U-4 Agreement, which Mercer entered into for Plaintiff's benefit; and (3) because Plaintiff so dominates and controls Mercer as to be the alter ego of Mercer, Plaintiff is bound by the arbitration clause of the Form U-4 Agreement. (Id.)
Generally, in response, Plaintiff argues as follows: (1) FINRA rules do not confer on this Court jurisdiction to (avoid the forum-selection clause of the parties' Agreement and) compel arbitration of this action under FINRA procedures; (2) common law principles of estoppel, agency, and corporate veil-piercing/alter-ego theory do not support an Order compelling Plaintiff to submit to FINRA arbitration; and (3) FINRA Rule 13200(b) prohibits arbitration of disputes arising out of the insurance business activities of a member that is also an insurance company, and a significant portion of ...