Federal Court Affirms Federal Jurisdiction in FINRA Arbitration Appeal

non-party REJ Properties, Inc. d/b/a Walters, Meyer, Trosclair & Associates' ("Company") unwritten compensation agreement and payment method of commissions violated SEC and FINRA regulations; Claimant was fired in retaliation for reporting the Individual Respondents' conduct to Ameriprise in violation of Louisiana Law; non-party Company tortiously interfered with Claimant's employment agreement; and Claimant's employment agreement's non-compete and non-solicitation provisions are invalid and non-party Company tortiously interfered with Claimant's book of business after wrongful termination in violation of Louisiana's Unfair Trade Practices & Consumer Protection Law ("LUPTA"). In Claimant's Second Amended and Restated Statement of Claim, she added as a cause of action that Ameriprise was a joint employer and is jointly and severally liable for the actions of the Individual Respondents and non-party Company. The causes of action relate to Claimant's allegations that she was involuntarily terminated from her employment with non-party Company, a franchise of Ameriprise. 

[A]fter hearing arguments of counsel, the Panel granted Ameriprise's motion to dismiss on the basis that Claimant failed to prove Ameriprise was a "joint employer." The Individual Respondents' motions to dismiss were deferred pending additional briefing by the parties.

. . .

On November 20, 2018, the Panel and the Individual Respondents held a recorded in person conference to hear the parties' oral argument on the Individual Respondents' motions to dismiss. The Individual Respondents argued that Claimant's theories of recovery were legally and/or factually without merit. Claimant opposed the motions to dismiss. After due deliberation, the Panel granted the Individual Respondents' motions to dismiss and found that Claimant did not: 1) establish liability for the Individual Respondents under the Louisiana Whistleblower Act; 2) prove a tortious interference with contract claim against the Individual Respondents; and 3) prove any claim against the Individual Respondents under the Louisiana Unfair Trade Practice Act or establish any other basis for recovery under the Amended and Restated Statement of Claim. 

Civil Action 19-10353 is a petition to vacate the arbitration award that this Court has already confirmed, on the basis of fraud allegations that this Court has already determined to be legally frivolous. (17-9492-Rec. Doc. 161). Once the case was removed the Principals moved to confirm the arbitration award issued in their favor. Badgerow then moved to remand the case to state court. 

Given that the Court has already considered and rejected Badgerow's fraud challenge to the arbitration award, the sole question before the Court is whether it has subject matter jurisdiction over the removed action so as to grant the Principals' motion to confirm the award and enter a final judgment in their favor. Both parties have provided extensive briefing in conjunction with Badgerow's motion to remand the case to state court. Badgerow's position is straightforward: She asserts that under the well-pleaded complaint rule a federal court lacks jurisdiction over her petition to vacate because it raises only state law issues. After all, the fraud allegations that Badgerow raises in resisting the award are directed solely at her state law whistleblower claim. The Principals' position is likewise straightforward: They contend that federal question jurisdiction applies because the Louisiana whistleblower claim was premised on violations of federal law, and that the Court should apply the "look through" approach . . . ..

[B]adgerow's position is that the petition only involves state law because she only seeks to vacate the award with respect to the state law whistleblower claim. To the contrary, the award was based on state law as well as federal law because Badgerow included as part of the arbitration her joint employer claims that were grounded on federal employment law. This Court is persuaded that Badgerow cannot deprive the Court of subject matter jurisdiction over an action to vacate the award by stripping off a single state law claim as a basis for attacking the award.7 Because the award itself included federal claims, the Court is persuaded that federal question jurisdiction applies notwithstanding the artfully pleaded petition. Therefore, the motion to remand is denied.

The district court's application of the look-through analysis proceeded in the following steps: (1) Federal jurisdiction exists over the petition to vacate if at least one of Badgerow's claims in the FINRA arbitration was predicated on federal law; (2) Badgerow's joint-employer claim against Ameriprise in the FINRA arbitration was predicated on federal employment law; (3) The joint-employer claim against Ameriprise in the FINRA arbitration may confer federal jurisdiction, even though the dismissal of that claim is not a dismissal that Badgerow seeks to vacate with her petition to vacate; and (4) Federal jurisdiction therefore exists over the petition to vacate because of the federal claim against Ameriprise in the FINRA arbitration. 

On appeal, Badgerow argues that the third step of the analysis was erroneous because only claims in the FINRA arbitration that were made against the Principals, the defendants in the petition to vacate, may be considered for the purposes of determining federal jurisdiction over the petition. She thus argues that because she does not seek to vacate the FINRA arbitrators' dismissal of her claim against Ameriprise and has not named Ameriprise as a defendant in this action, the claim against Ameriprise in the FINRA arbitration cannot be considered in the look-through analysis. We next move to the merits of this objection.

In this opinion, we have held that the district court had jurisdiction over Badgerow's petition to vacate, which was filed in, and removed from, the Louisiana state court. To resolve that question, we have first acknowledged that we are bound by our court's Quezada decision to apply the look-through analysis as defined by the Supreme Court in Vaden. Applying the look-through analysis, we have held, first, that the district court correctly found that Badgerow's Title VII declaratory judgment claim against Ameriprise in the FINRA arbitration was a federal-law claim. We have held, second, that all of Badgerow's claims against the Principals and Ameriprise in the FINRA arbitration arose from the same common nucleus of operative fact, and that under the principle of supplemental jurisdiction, federal jurisdiction obtains over Badgerow's state-law tortious interference and whistleblower claims. The district court therefore properly held that Badgerow's federal claim against Ameriprise in the FINRA arbitration invested federal jurisdiction over Badgerow's Louisiana petition to vacate the FINRA arbitration award as to the Principals. Because there was federal jurisdiction over the removed petition to vacate, denial of remand back to the Louisiana state court was proper.

Ameriprise is a registered broker dealer that offers financial products and services to customers through several models, including through a franchisee-based platform of independent advisors who own and operate their own businesses, as franchises. (Rec. Doc. 27-2, Odash decl. ¶ 3). The principals of WMT-Gregory Walters, Thomas Meyer, and Roy Trosclair-were independent franchise advisors for Ameriprise during the period of Badgerow's employment. (Id. ¶ 4). Ameriprise did not have a franchise agreement with REJ Properties, Inc. (Id. ¶ 5).

After completing a 90-day probationary period with WMT, Badgerow was promoted to Associate Financial Advisor ("AFA") on January 1, 2014. (Rec. Doc. 1, Complaint § 12). Her work as an AFA was supervised by Gregory Walters, one of three directors at WMT. (Id. ¶ 12). 

Badgerow contends that she had an oral agreement with WMT that she would receive a base salary of $30,000 per year plus commissions. Badgerow was not provided a written compensation agreement. (Id. ¶ 14). Badgerow complains that WMT retroactively changed her compensation structure in October 2014 after she made a large commissioned sale. (Id. ¶ 15). Badgerow alleges that the new compensation structure was enforced only against her and not against similarly situated male employees. (Id. ¶ 17). She also alleges that she was earning quarterly bonuses that were half the amount of her male counterparts. (Id. ¶ 24). 

Badgerow also alleges that she was subjected to constant office harassment after she declined to work as Walters' assistant. The harassment was instigated by Tommy Meyer, another director at WMT, and his team, including other females. (Id. ¶¶ 20-21). Even though Badgerow was promoted to the role of Financial Advisor ("FA"), Meyer determined that all FAs would keep the title of "associate" until they attained five years of service with WMT. (Id. ¶ 23). In December 2015, after complaining constantly to Walters, Badgerow was moved to a separate office to avoid any further distress to Meyer, segregating her from the rest of the WMT team and putting her in an office all by herself. (Id. ¶ 25). 

On July 26, 2016, Walters terminated Badgerow after she refused to resign. (Id. ¶ 29). According to the Complaint, Walters fired Badgerow in retaliation for speaking with Marc Cohen, a compliance officer with Ameriprise. (Id. ¶ 29).

Badgerow filed a Charge of Discrimination against WMT on September 8, 2016, claiming gender discrimination and retaliation. (Rec. Doc. 27-3 at 5). On October 6, 2016, she amended the charge to include class allegations. (Id. at 8). On June 27, 2017, the EEOC issued a dismissal and notice of rights (Id. at 13).

• FINRA
• Arbitration
• Badgerow
• Ameriprise
• EDLA
• Jurisdiction
• Whistleblower
• Retaliation
• 5Cir
• BrokeAndBroker
• Bill Singer