Submitted on Briefs: March 20, 2019
FROM: District Court of the Fourth Judicial District, In and
For the County of Missoula, Cause No. DV-16-554 Honorable
John W. Larson, Presiding Judge
Appellants: Charles E. Hansberry, Jenny M. Jourdonnais,
Hansberry & Jourdonnais, PLLC, Missoula, Montana, Simon
M. Levy, Julie L. Taylor, Keesal, Young & Logan, San
Appellee: Terance P. Perry, Nathan G. Wagner, Datsopoulos,
MacDonald & Lind, P.C., Missoula, Montana
M. Sandefur Justice
Edward Jones & Company, L.P., Jeremy Kientz, and Nick
Ferranto, et al. (collectively Edward Jones), appeal the
portion of a judgment of the Montana Fourth Judicial District
Court, Missoula County, denying their motion to compel
arbitration of post-termination claims asserted against them
by former Edward Jones employee Adam Bucy.
We address the following restated issues on appeal:
1. Whether Bucy waived his challenge to the
enforceability of the 1998 NASD Form U4 and 2003 arbitration
agreements by failing to cross-appeal?
2. Whether the 2003 arbitration agreement was illusory or
lacking in mutuality due to Edward Jones' retention of a
limited right to seek injunctive relief?
3. Whether the 1998 and 2003 arbitration agreements had
an illegal or void object absent an explicit explanation and
waiver of Montana constitutional rights?
4. Whether the 1998 and 2003 arbitration agreements were
unenforceable in equity as unconscionable?
5. Whether Bucy's post-termination claims were
arbitrable within the express scope of the 1998 and 2003
We reverse and remand for further proceedings.
AND PROCEDURAL BACKGROUND
Adam Bucy worked for Edward Jones for approximately 19 years
between 1996 and 2015, primarily as a financial advisor in
the Edward Jones branch office in Missoula, Montana. As
pertinent, Edward Jones is a Missouri-based investment
brokerage engaged in the business of providing securities
investment and related financial management and planning
services. Edward Jones is a federally registered broker and a
registered member of the Financial Industry Regulatory
Authority, Inc. (FINRA).
FINRA is a private organization of "investment bankers,
dealers, and brokers" with "congressionally
delegated self-regulatory authority" to enforce member
compliance with federal securities laws and to promulgate
and enforce supplemental regulations under the regulatory
oversight of the Securities and Exchange Commission (SEC).
Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Nat'l Ass'n of Sec. Dealers, Inc., 616 F.2d
1363, 1365-67 (5th Cir. 1980) (citing 15 U.S.C. § 78o).
See also Nat'l Ass'n of Sec. Dealers, Inc. v.
SEC, 431 F.3d 803, 804 (D.C. Cir. 2005). FINRA is the
SEC-approved corporate and legal successor of the National
Association of Securities Dealers, Inc. (NASD), under the
1934 Securities and Exchange Act, as amended (1934 Act). NASD
formed in 1939 as a "self-regulatory organization"
(SRO) under the 1934 Act, as amended in 1938. See 15
U.S.C. §§ 78a, 78o. FINRA formed in 2007 upon the
SEC-approved merger of the member regulatory and arbitration
functions of the NASD, New York Stock Exchange (NYSE), and
NYSE Regulation, Inc. See NASD and NYSE Member Regulation
Combine to Form the Financial Industry Regulatory Authority -
FINRA, FINRA (July 30, 2007),
https://perma.cc/DY33-6EFP. As pertinent here, applicable
NASD and FINRA Rules were approved by the SEC pursuant to its
regulatory authority under § 19(b)(1) of the 1934 Act,
as amended. See 15 U.S.C. § 78s(b)(1), (c);
Credit Suisse First Boston Corp. v. Grunwald, 400
F.3d 1119, 1130-32 (9th Cir. 2005).
In 1996, after obtaining a bachelor's degree in finance
from the University of Montana, Bucy applied for and obtained
employment with Edward Jones as a financial advisor in St.
Louis, Missouri. At all times pertinent, Edward Jones was and
is a securities broker or brokerage registered with the SEC
under the 1934 Act (15 U.S.C. § 78o(a)(1)). As a means
of similarly subjecting them to federal securities laws and
regulations, the SEC and NASD/FINRA require approved
registration (licensing) of broker principals and
representatives as a condition of employment with
employing member-brokers. See FINRA Rules 0140,
1210; NASD Rules 0115, 1021, and 1031.
In 1998, Bucy applied for NASD registration as a
representative of Edward Jones. He submitted a signed NASD
Form U4 (Uniform Application for Securities Industry
Registration) for registration in association with Edward
Jones. See NASD Rule 1013(a)(1)-(2). At the time, NASD
Rules applied to all NASD broker-members and associated
persons and imposed on associated persons the "same
duties and obligations" under the Rules as members. NASD
Rule 0115. In pertinent part, NASD regulations
prescribed a comprehensive Code of Arbitration Procedure
"for the arbitration of any dispute, claim, or
controversy arising out of or in connection with the business
of any [NASD] member or arising out of the employment or
termination of employment of associated person(s) with any
member . . . between or among members and associated
persons." NASD Rule 10101(b). In pertinent part, the Rules
then generally required arbitration of any:
dispute [or] claim . . . between or among members and/or
associated persons . . . arising in connection with the
business of such member(s) or in connection with the
activities of such associated person(s), or arising out of
the employment or termination of employment of such
associated person(s). . . .
Rule 10201(a). In accordance with NASD Rules 0115,
10101(b), and 10201(a)(2), Bucy's Form U4 included the
following standard arbitration agreement:
I agree to arbitrate any dispute, claim or controversy that
may arise between me and my firm . . . that is required to be
arbitrated under the rules, constitutions, or by-laws of
[NYSE and NASD] as may be amended from time to time and that
any arbitration award rendered against me may be entered as a
[judgment] in any court of competent jurisdiction.
See also NASD Rule 1013(a)(1)-(2).
In 2003, Bucy relocated to work in the newly opened Edward
Jones branch office in Missoula. Incident to the transfer,
Bucy voluntarily executed a new employment agreement with
Edward Jones to work as a registered "investment
representative." Bucy expressly agreed:
that any dispute, claim or controversy arising under this
Agreement or as a result of [his] employment with Edward
Jones between [he] and Edward Jones or any present or former
employee, agent, officer, director . . . of Edward Jones
shall be resolved by arbitration and without resort to
litigation in court. Any arbitration proceedings shall be
conducted in accordance with the rules then in effect of the
Boards of Directors of the [NYSE] or the [NASD]. This
agreement to arbitrate disputes shall survive the termination
of your employment with Edward Jones.
You agree to . . . strictly adhere to the rules and
regulations of the SEC, NASD, NYSE and state securities
regulators, and all other applicable rules and regulations.
above the signature line, the agreement further prominently
stated in bold script:
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
In the spring of 2015, after twelve years as a successful
financial advisor in Missoula,  Bucy became "disaffected
by" the "culture" at Edward Jones and
"began looking for new employment." Between April
and June 2015, he was negotiating with LPL Financial (LPL), a
"Boston-based financial planning" firm, to work as
a registered LPL representative and financial advisor in the
Missoula area. Bucy alleges that, at some point, Edward Jones
"intercepted [his] emails or phone calls and
learned" of his intent to leave for new employment with
a "competing financial planning business." He
further asserts, and Edward Jones denies, that Edward Jones
then had developed a "corporate pattern and practice of
blackballing 'breakaway' brokers" to prevent
them from working for competitors. On or about May 28, 2015,
one of Bucy's Edward Jones clients filed a complaint with
FINRA alleging that Bucy conducted an unauthorized
transaction on the client's account. Bucy alleges that
Edward Jones encouraged the client to file the complaint upon
learning of his intent to leave the firm.
The client complaint immediately triggered an internal review
by Edward Jones and a separate licensing investigation by
FINRA. Incident to its internal review, Edward Jones
contacted and communicated with several of Bucy's
existing Edward Jones clients, some of whom later testified
that Edward Jones personnel told them that Bucy had given
them bad advice and mishandled their accounts. While the
Edward Jones review and FINRA investigation were pending,
Bucy's negotiations with LPL Financial came to a
successful conclusion in late June, resulting in his
execution of a written contract, on July 19, 2015, for
prospective employment with LPL. Bucy subsequently informed
Edward Jones of his intent to resign, effective July 31,
On July 30, 2015, the day before the effective date of
Bucy's resignation, a second Edward Jones client filed a
FINRA complaint against him. As with the first client
complaint, Bucy alleges that Edward Jones encouraged the
client to file the complaint. On July 31, 2015, Bucy resigned
from Edward Jones to take new employment with LPL Financial.
Edward Jones subsequently circulated an internal memo
notifying staff of Bucy's "voluntary"
termination and that he had accepted a job at another
financial services firm.
Upon the termination of employment of a registered
representative, FINRA regulations require former employers to
file an electronic FINRA Form U5 terminating the
representative's FINRA registration with that
member-broker. See FINRA Bylaws, Article V, Section
3(a). The web-based electronic Form U5 prompts the reporting
member to report the manner of termination, whether
"Deceased," "Discharged," "Permitted
to Resign," "Voluntary," or "Other."
If the member-broker reports the manner of termination as
"Permitted to Resign," "Discharged," or
"Other," the form requires the member to
"provide" further "explanation" of the
reason for ...