Imagine this: you are in-house counsel for a Fortune 500 company and you have just authorized a $100 million class action settlement. You tell the board of directors that the settlement will bring the certainty and finality that class settlements always tend to bring. The court approves the settlement without hesitation.
One year later, certain members of the class file an arbitration claim, seemingly arising out of the very same course of conduct. “Huh,” you might ask? You assume the claim will be dismissed but it is not. Your company is now subject to a potential flood of new claims that you thought were settled for a very large sum of money.
On appeal, the 2nd Circuit acknowledged that the class settlement released Ameriprise from its agreement to arbitrate all claims covered by that settlement. Therefore, the case turned on a single question: whether any of the Belands’ FINRA claims fell outside the class settlement and therefore were subject to arbitration?
The court first affirmed the district court’s authority to enjoin the private arbitration, insofar as it dealt with claims covered by the settlement. The court then agreed that the settlement clearly released some of the Belands claims, specifically those involving investments in preferred mutual funds. But some of the suitability claims did not “entirely overlap” with the claims released by the class settlement because the settlement expressly excluded from its release those suitability claims that did not arise out of the common course of conduct alleged (or that could have been alleged) by the class.