Here, I find that BGC Notes should be compelled to arbitrate because it receives direct benefits flowing from the Employment Agreement, which contains an arbitration clause. In setting forth Gordon's compensation, the Employment Agreement provided that Gordon would receive a $700,000 loan from BGC Notes, in addition to salary and commissions. The Note expressly stated that BGC Financial would cause BGC Notes to make the $700,000 loan "[i]n consideration for services performed . . . and as consideration for Employee's consent to enter this Agreement." Based on this provision, BGC Notes clearly received a direct benefit from the Employment Agreement as it obtained the right to make the loan to Gordon under this agreement.

That BGC Notes benefitted from the Employment Agreement is further supported by the fact that the repayment terms under the Note were directly related to the Employment Agreement. The Note states that Gordon shall "repay the Loan (principal and interest) from the net Partnership distributions . . . on all of Maker's Partnership units (including future units) in the Partnership exclusive of any purchased by Maker with money in connection with a separate subscription agreement." The Note also sets forth various events under which the Note will "become immediately due and payable to the Lender, without notice or demand," such as if Gordon failed to become a partner in BGC Holdings within 90 days of starting his job at BGC Financial, or if he ceased to be a partner in BGC Holdings prior to the expiration of the Employment Agreement. Thus, BGC Notes' right to receive payment on the loan was directly related to the status of Gordon's employment with BGC Financial.

SIDE BAR: Welcome to my world of law. According to the NYS Supreme Court ruling, non-FINRA firm BGC Notes is compelled to arbitrate before FINRA because Plaintiff had received benefits from the Employment Agreement to which Gordon and BGC Financial were parties. The Court further held that Plaintiff's right to receive payment on the loan was directly related to the status of Gordon's employment with BGC Financial. 

Now, please, don't misunderstand my commentary: I agree with the Court's ruling and see the frequent use by many FINRA member firms of what I view as a "cut-out" non-member-firm lender as merely a transparent attempt to evade FINRA arbitration. Notwithstanding, we have a non-FINRA member firm that is not a party to the Employment Agreement imposing arbitration found to be required to arbitrate because of having benefitted via its "right to receive payment on the loan." And y'all wonder why I get paid hundreds of dollars an hour?  You try figuring that stuff out everyday. 

In November of 2012, around six months after starting his employment with BGC Financial and nearly five years before the end of the term set forth in the employment agreement, Gordon resigned to join Credit Suisse, one of BGC Financial's largest customers. Gordon maintained that he had intended to work for BGC Financial for the full term of his employment agreement, but that he left because of certain disagreements between him and BGC Financial. For example, Gordon stated, BGC Financial had been unable to negotiate a timely buyout of his noncompetition agreement with his previous employer, thus costing Gordon approximately $1 million. Gordon also contends that BGC Financial had not, as it had promised, fully reimbursed him for the costs and expenses incurred in negotiating and coming to a settlement with his former employer. Nonetheless, Gordon continued to refer business to BGC Financial during his one-and-a-half-year employment with Credit Suisse, and claimed that those referrals resulted in at least $1 million in commissions to BGC Financial.

SIDE BAR: For a bit more insight into the issue of the commissions, consider this assertion in Gordon's Memorandum of Law:

Notwithstanding BGC Notes' position that it could have accelerated the Promissory Note on July 15,2012 or, at the latest, November 9, 2012 (See Kofsky Aff. ¶ 25-26), BGC Notes deliberately chose not to commence this action until June 2014 because BGC Financial was earning substantial commissions likely in excess of $1 million-- more than BGC Notes claims is owed on the Promissory Note -- from the Credit Suisse business that Gordon gave them. (Gordon Aff. 28.)

The motion court correctly ordered BGC Notes to arbitrate its claims against Gordon in accordance with the terms of Gordon's employment agreement with BGC Financial. Although BGC Notes was not a signatory to the employment agreement, which is the document actually containing the arbitration provision, BGC Notes nonetheless received a "direct benefit" directly traceable to the employment agreement (Life Tech. Corp. v AB Sciex Pte. 15 Ltd., 803 F Supp 2d 270, 275 [SD NY 2011]; Matter of Belzberg v Verus Invs. Holdings Inc., 21 NY3d 626, 631 [2013]).

Specifically, section 3(d) of the employment agreement provides that BGC Financial would "cause" BGC Notes to make a loan to Gordon by way of the very note that BGC Notes sues upon in this action, and BGC Notes received all the benefits that an entity ordinarily receives upon the giving of a loan (see Mark Ross & Co., Inc. v XE Capital Mgt., LLC, 46 AD3d 296, 297 [1st Dept 2007]). Thus, BGC Notes derived benefits from the employment agreement, and BGC Notes' contention that section 3(d) conferred a benefit only to Gordon, and at most an "indirect" benefit to BGC Notes itself, belies the terms of the employment agreement (Life Tech. Corp., 803 F Supp 2d at 276).

Likewise, we reject BGC Notes' argument that it cannot be compelled to arbitrate because it is not subject to FINRA's jurisdiction. FINRA routinely hears arbitrations brought by customers of securities firms that are not FINRA members, and FINRAs procedures permit nonmember parties to submit to FINRA arbitration even when they do not fall under FINRA's rules on mandatory arbitration. Moreover, BGC Notes may not do indirectly what it is forbidden to do directly - namely, divest an employee of his right under the FINRA Rules to arbitrate employment disputes. Here, Gordon entered into the note as part of his compensation package and as directly provided for in the employment agreement, and his decision to end his employment directly relates to his default on the note. Indeed, FINRA Rule 13806 establishes promissory note proceedings for disputes surrounding employee-forgivable loans like the note here. Thus, despite BGC Notes' assertion to the contrary, this action does not bear a mere tangential relation to the employer-employee relationship between BGC Financial and Gordon.

In January 2009, Merrill Lynch paid $2.8 billion in retention bonuses structured as loans to over 5,000 registered representatives. The promissory notes required registered representatives to agree that actions regarding the notes could be brought only in New York state court, a state which greatly limits the ability of defendants to assert counterclaims in such actions. Also, Merrill Lynch structured the program to make it appear that the funds for the program came from MLIFI, a non-registered affiliate, rather than from the firm itself, allowing it to pursue recovery of amounts due in the name of MLIFI in expedited hearings in New York state courts to circumvent Merrill Lynch's requirement to arbitrate disputes with its associated persons. Later that year, after a number of registered representatives left the firm without repaying the amounts due under the loan, Merrill Lynch filed over 90 actions in New York state court to collect amounts due under the promissory notes, thus violating a FINRA rule that requires firms to arbitrate disputes with employees.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "Merrill Lynch specifically designed this bonus program to bypass FINRA's rule requiring firms to arbitrate disputes with employees, and purposefully filed expedited collection actions in New York State courts and denied those registered representatives a forum to assert counterclaims."