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Royal Alliance Associates, Inc. v. Mooney et al. (2017)

September 14, 2017

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Horvitz & Levy LLP secured reversal of an order requiring Royal Alliance Associates, an investment broker/dealer, to submit to a FINRA arbitration brought by real estate investors with whom it had never done business.

The district court ruled that Royal Alliance was required by FINRA rules to arbitrate with the investors because it had acquired their customer accounts in an asset purchase transaction with another broker/dealer. On appeal, Horvitz & Levy argued that the purchase agreement was ambiguous in light of provisions overlooked by the district court, and that extrinsic evidence favored Royal Alliance’s interpretation.

In an unpublished decision, the Ninth Circuit reversed. The Court agreed with Horvitz & Levy’s argument that the claimants bore the burden of showing the existence of a valid arbitration agreement and concluded that the purchase agreement was ambiguous and that “Claimants produced no evidence beyond the words of the contract that their accounts were ever transferred from [the other broker/dealer] to Royal.” The Court accordingly reversed the judgment and directed the district court to enter a new judgment enjoining the FINRA arbitration against Royal.

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