Lawsuit Challenging FINRA Arbitration Dismissed for Lack of Jurisdiction


The Plaintiffs sued FINRA after their arbitration case was dismissed. They had been brokers and had been fired by their employer. They then filed claims with FINRA contesting the terminations. Shortly before the hearing, they withdrew their claims.  They then sued in federal court alleging that FINRA failed to provide them with an arbitration forum and failed to properly train arbitrators.

The Complaint was dismissed by the district court on grounds of arbitral immunity. On appeal, the case was dismissed because there is no federal jurisdiction. To establish diversity jurisdiction, plaintiffs needed to show that they were citizens from different states than the defendant and that there was in excess of $75,000 in dispute. The Seventh Circuit ruled that they did not satisfy the diversity requirement and the case was dismissed for lack of jurisdiction. The amount in controversy in the litigation was limited to $1800, the filing fee paid to FINRA to start the arbitration. The court ruled that the legal fees incurred by plaintiffs (which exceeded the diversity amount) could not be recovered in the lawsuit and therefore could not be used to meet the amount in controversy.  Judge Ripple dissented. He would have allowed FINRA” to keep the lawsuit in federal court.

via Webb v. FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., Court of Appeals, 7th Circuit 2018 – Google Scholar

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