On April 14, 2021, the U.S. Court of Appeals for the Ninth Circuit reversed the decision of the U.S. District Court for the Northern District of California finding that a FINRA registered investment banker’s statutory employment discrimination and civil rights claims were not subject to arbitration. In reversing, the Ninth Circuit held that the express language of the multiple arbitration provisions the investment banker signed demonstrated that she knowingly waived the right to judicial determination of claims arising from her employment and submitted these disputes to FINRA arbitration.

In Zoller v. GCA Advisors, LLC, 993 F.3d 1198 (9th Cir. 2021), Zoller was hired by GCA Advisors, LLC (GCA) as an investment banker and signed multiple documents containing arbitration provisions as part of her employment. After GCA fired Zoller, she brought suit in federal court alleging various contract claims as well as statutory gender discrimination and civil rights claims. While Zoller agreed to arbitrate the contract claims, she argued that the statutory claims were outside the scope of the agreement or, in the alternative, that she did not knowingly waive judicial determination of those claims. The District Court agreed, holding that Zoller did not knowingly waive her right to pursue these claims in court.

On Appeal, the Ninth Circuit defined the knowing waiver doctrine as a judicially created rule that allows arbitration of civil rights claims only when a party to an arbitration agreement knowingly and explicitly waives the right to judicial determination of those claims. Although the Ninth Circuit noted “some tension” between its prior decisions regarding the proper statutory interpretation method to determine when the knowing waiver requirement applies, the Court concluded that it need not reach that issue in this case because the documents Zoller signed and the circumstances of her signature demonstrated her knowing waiver.

Specifically, Zoller signed multiple documents with parallel arbitration provisions explicitly binding herself to arbitration for any dispute arising out of her employment. Further, Zoller had an opportunity to review the documents and consult with counsel before signing. Zoller also signed a FINRA Rule 2263 disclosure form which explained that, although employment discrimination claims are not required to be arbitrated under FINRA rules, FINRA could arbitrate such claims if the parties agreed to the arbitration. The Court concluded that Zoller’s subjective misunderstanding of the documents was not dispositive when the terms of the documents she signed are clear that their arbitration provisions encompass employment discrimination and civil rights claims arising from her employment. Accordingly, the Ninth Circuit reversed and remanded with instruction that all claims be compelled to arbitration.

Troutman Pepper frequently represents financial services institutions such as broker-dealers and their associated persons in FINRA arbitration disputes and regulatory matters involving customer/investor, employment, and intra-industry claims.