J.P. MORGAN CHASE BANK, N.A. and J.P. MORGAN SECURITIES, LLC, Plaintiffs-Appellants,
JEFFREY B. MCDONALD and SHELLI A. MCDONALD, Defendants-Appellees
Argued December 9, 2013
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11 CV 6902 -- James B. Zagel, Judge.
For J.P. MORGAN CHASE BANK, N.A., J.P. MORGAN SECURITIES, LLC, Plaintiffs - Appellants: David M. Lederkramer, Attorney, PROSKAUER ROSE LLP, New York, NY.
For JEFFREY B. MCDONALD, SHELLI A. MCDONALD, Defendants - Appellees: Samuel B. Edwards, Attorney, SHEPHERD, SMITH, EDWARDS & KANTAS, LLP, Houston, TX.
Before WILLIAMS, SYKES, and HAMILTON, Circuit Judges.
Hamilton, Circuit Judge.
Businesses often seek to bind customers to arbitration agreements because they view arbitration as more efficient and predictable than going to court. In an unusual role reversal, this case features a large company trying its best to avoid arbitration with two of its former customers. That company, J.P. Morgan Chase Bank, has sued its former investment account holders, Jeffrey and Shelli McDonald, in federal district court to stop them from arbitrating a dispute against an affiliate of the Bank and two Bank employees, but not against the Bank.
The district court dismissed the Bank's case, finding (a) that the Bank lacked standing to block the arbitration to which it was not a party and (b) that the two Bank employees named in the arbitration were indispensable parties to the federal lawsuit. (One of the employees could not be joined without defeating the court's diversity jurisdiction.) We reverse and remand. The Bank has standing to sue because the arbitration would violate a forum-selection clause in the relevant contract with the McDonalds. The McDonalds cannot avoid that forum-selection clause by the tactic of naming only an affiliate of the Bank and the two Bank employees as respondents in the arbitration. We also find that the two employees are not required parties to this federal lawsuit. Our decision should not be understood as touching the merits of the McDonalds' substantive claims. This appeal is limited to forum selection.
I. Factual and Procedural Background
This case stems from investment losses the McDonalds suffered during the recent financial crisis. The couple opened two accounts with J.P. Morgan entities in July 2007: an investment account with J.P. Morgan Chase Bank itself (we call it " the Bank" here) and a brokerage account with J.P. Morgan Securities (" JPMS" ), the Bank's affiliated securities dealer. Different contracts governed the two accounts, and those contracts specified different means of resolving disputes about each account. Those differences control the outcome of this appeal.
The Bank managed the money in the McDonalds' investment account with the Bank itself, while the McDonalds directed the funds ...