Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 1 of 16 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x GOLDMAN, SACHS & CO., : : Plaintiff, : : 12 CV 4558 (RJS) -v- : : GOLDEN EMPIRE SCHOOLS : ECF CASE FINANCING AUTHORITY and KERN : HIGH SCHOOL DISTRICT, : : Defendants. : x REPLY MEMORANDUM IN FURTHER SUPPORT OF GOLDMAN, SACHS & CO. S MOTION FOR A PRELIMINARY INJUNCTION SULLIVAN & CROMWELL LLP David H. Braff Matthew A. Schwartz Andrew H. Reynard 125 Broad Street New York, New York 10004-2498 Telephone: 212-558-4000 Facsimile: 212-558-3588 Attorneys for Goldman, Sachs & Co.
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 2 of 16 TABLE OF CONTENTS Page PRELIMINARY STATEMENT...1 ARGUMENT...1 I. GOLDMAN SACHS IS LIKELY TO SUCCEED ON THE MERITS....1 A. Golden Empire s Opposition Mischaracterizes the Presumption Concerning Arbitration...1 B. The Agreements Between the Parties Negate Arbitration...2 1. The Parties Contracts Override FINRA s Rule...2 2. Contrary To Golden Empire s Contention, the Plain Meaning of Actions and Proceedings Includes Arbitrations...4 3. The Contract Clauses Designating this Court as the Exclusive Forum For Resolving Disputes Are Clear and Unmistakable....6 C. Golden Empire Cannot Escape That Its Claims Arise Under Both the Underwriter Agreement and the Broker-Dealer Agreement...7 II. GOLDEN EMPIRE ESSENTIALLY CONCEDES THAT THE OTHER FACTORS FAVOR ISSUING A PRELIMINARY INJUNCTION....10 CONCLUSION...10 -i-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 3 of 16 TABLE OF AUTHORITIES CASES Page(s) 4 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009)... 5 Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995)... 5 Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98 (2d Cir. 2012)... 7 Applied Energetics, Inc. v. NewOak Cap. Mkts., LLC, 645 F.3d 522 (2d Cir. 2011)... passim Atofina Chems, Inc. v. Sierra Chem. Co., 2004 WL 739953 (E.D. Pa. April 5, 2004)... 9 Bank Julius Baer & Co. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005)... 3 Berg v. Faulkner, 2007 WL 2809911 (N.D. Tex. Sept. 27, 2007)... 7 Biremis, Corp. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 2012 WL 760564 (E.D.N.Y. March 8, 2012)... 3, 6 Carson v. Giant Food, Inc., 175 F.3d 325, 329 (4th Cir. 1999)... 2 Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30 (2d Cir. 2010)... 5 City of New York v. Uniformed Fire Officers Ass n, Local 854, 699 N.Y.S.2d 355 (1st Dep t 1999)... 5 Granite Rock v. Int l Bhd. of Teamsters, 130 S. Ct. 2847, 2858-59 (2010)... 2 Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y. 2002)... 4 -i-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 4 of 16 Page(s) In re Am. Exp. Fin. Advisors Sec. Litig., 672 F.3d 113 (2d Cir. 2011)... 2, 6, 7 In re Estate of Stravinsky, 4 A.D.3d 75, 81 (1st Dep t 2003)... 9 In re Merrill Lynch Auction Rate Sec. Litig., 758 F. Supp. 2d 264 (S.D.N.Y. 2010)... 7 J. Brooks Sec., Inc. v. Vanderbilt Sec., Inc., 126 Misc. 2d 875 (Sup. Ct. N.Y. Cty. 1985).5 Kent County Deputy Sheriffs Ass n v. Kent County Sheriff and Kent County Bd. of Comm ns, 616 N.W.2d 677 (Mich. 2000)... 5 Kidder, Peabody & Co. v. Zinsmeyer Trusts P'ship, 41 F.3d 861 (2d Cir. 1994)... 2 Kvaerner ASA v. Bank of Tokyo-Mitsubishi, Ltd., 210 F.3d 262 (4th Cir. 2000)..3 NCR Corp. v. CBS Liquor Control, Inc., 874 F. Supp. 168 (S.D. Ohio 1993)... 5 Morrow Equip. Co. v. Baker Concrete Constr., Inc., 2010 WL 4483914 (D. Or. June 8, 2010)....3 Personal Security & Safety Systems, Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002)... 7 Roby v. Corp. of Lloyd s, 996 F.2d 1353, 1363 (2d Cir. 1993)... 10 Smith Barney, Inc. v. Critical Health Sys. of N. Carolina, 212 F.3d 858, 862 (4th Cir. 2000)... 4 Spanski Enters., Inc. v. Telwizja Polska, S.A., 2007 WL 1187870 (S.D.N.Y. April 23, 2007)... 3, 6 UBS Fin. Servs. Inc. v. Carilion Clinic, No. 12-cv-424, slip op. at 11 (E.D. Va. July 30, 2012)... 6 UBS Fin. Servs. Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643 (2d Cir. 2011)... 2, 3, 5 -ii-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 5 of 16 Page(s) Wally v. Cameron Indus., Inc., 579 N.Y.S.2d 48 (1st Dep t 1992)... 5 WorldCrisa Corp. v. Armstrong, 129 F.3d 71 (2d Cir. 1997).. 3 OTHER AUTHORITIES BLACK S LAW DICTIONARY (5th Ed. 1979)... 5 RULES FINRA Rule 12200... passim -iii-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 6 of 16 Plaintiff Goldman, Sachs & Co. ( Goldman Sachs ) respectfully submits this reply memorandum in further support of its Motion to preliminarily enjoin Golden Empire s FINRA Arbitration. 1 PRELIMINARY STATEMENT In its opposition to Goldman Sachs Motion ( Opposition or Opp. ), Golden Empire concedes that it signed contracts with exclusive forum selection clauses agreeing that it would bring all actions or proceedings against Goldman Sachs before this Court, and not before FINRA. (Opp. at 8) Those contractual representations should end the analysis. Nevertheless, in its quest to avoid bringing its claims in this Court to prevent immediate dismissal on statute of limitations grounds, Golden Empire advances several unpersuasive arguments and draws on plainly distinguishable decisions from other districts to rationalize its basis for arbitration. None of these arguments have merit. ARGUMENT I. GOLDMAN SACHS IS LIKELY TO SUCCEED ON THE MERITS. A. Golden Empire s Opposition Mischaracterizes the Presumption Concerning Arbitration. Golden Empire contends that there is a general presumption in favor of arbitration, and that such a presumption should resolve any doubts about this Motion in Golden Empire s favor. (Opp. at 9-10) That position, however, is simply wrong. Although doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration (Opp. at 9 n.16), Golden Empire never explains how this is a case about the scope of an arbitration clause. The issue here is, instead, whether the parties have a valid agreement to arbitrate in the 1 Unless otherwise specified herein, defined terms have the same meanings that they were given in Goldman Sachs opening brief dated August 8, 2012 ( Motion or Mot. ).
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 7 of 16 first place. Accordingly, no presumption exists here. See Applied Energetics, Inc. v. NewOak Capital Mkts., LLC, 645 F.3d 522, 526 (2d Cir. 2011) (noting that, although doubts concerning the scope of an arbitration clause should be resolved in favor of arbitration, the presumption does not apply to disputes concerning whether an agreement to arbitrate has been made ) (emphasis added); In re Am. Exp. Fin. Advisors Sec. Litig., 672 F.3d 113, 132 (2d Cir. 2011) ( different or additional contractual arrangements for arbitration can supersede the rights conferred on a customer by virtue of a broker s membership in... FINRA ) (quoting Kidder, Peabody & Co. v. Zinsmeyer Trusts P ship, 41 F.3d 861, 864 (2d Cir. 1994) (internal brackets omitted). 2 B. The Agreements Between the Parties Negate Arbitration. 1. The Parties Contracts Override FINRA s Rule. Golden Empire contends that an agreement to arbitrate exists by virtue of FINRA Rule 12200 s general requirement that Goldman Sachs arbitrate customer claims. (Opp. at 10) But even assuming that Golden Empire is a customer within that Rule, 3 the Rule by its terms applies only in the absence of any subsequent agreement revoking or otherwise limiting the scope of [the arbitration agreement]. In re Am. Exp., 672 F.3d at 128-29 (emphasis added). Here, there is precisely such a subsequent agreement : the plain language of the 2 See also Granite Rock v. Int l Bhd. of Teamsters, 130 S. Ct. 2847, 2858-59 (2010) (courts may apply[] the presumption of arbitrability only where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand ); Carson v. Giant Food, Inc., 175 F.3d 325, 329 (4th Cir. 1999) (although doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, the presumption does not apply to the issue of which claims are arbitrable ). 3 Goldman Sachs does not agree that Golden Empire was Goldman Sachs customer in connection with the ARS issuances, although acknowledges that, at least with respect to Goldman Sachs role as broker-dealer, the Second Circuit has held otherwise in similar circumstances in UBS Fin. Servs. Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643 (2d Cir. 2011). (See Mot. at 17-18) Notably, the UBS Court expressly declined to rule whether underwriting could create a customer relationship, see id. at 650, thus calling into question the arbitrability of any claims that purportedly arise solely from that role. (See infra pp. 7-9) -2-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 8 of 16 Broker-Dealer Agreements requires that all actions and proceedings arising out of this Broker- Dealer Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court in the County of New York. 4 (Mot. at 7-8) Moreover, the Broker-Dealer Agreements contain broad merger clauses providing that there are no other representations, endorsements, promises, agreements or understandings... between the parties relating to the subject matter hereof and, therefore, the exclusive forum selection clause supersedes FINRA Rule 12200. (Id.) Accordingly, Golden Empire has no basis to argue that the general FINRA rule should apply to its claims here. Golden Empire attempts to distinguish the Second Circuit s holding in Applied Energetics that contracting parties are free to revoke an earlier agreement to arbitrate by executing a subsequent agreement the terms of which plainly preclude arbitration. 645 F.3d at 524-25. According to Golden Empire, the arbitration agreement in Applied Energetics was contained in a preliminary contract, which specifically contemplated that the parties would enter into a subsequent, more formal agreement (Opp. at 10) setting forth the terms and conditions... customarily contained in agreements of such character. Applied Energetics, 645 F.3d at 523. But Applied Energetics holding was not based on the order or formality of the 4 Golden Empire cites UBS Fin. Servs., Inc., 660 F.3d at 654, Bank Julius Baer & Co. v. Waxfield Ltd., 424 F.3d 278, 284 (2d Cir. 2005), WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 75 (2d Cir. 1997), Kvaerner ASA v. Bank of Tokyo-Mitsubishi, Ltd., 210 F.3d 262 (4th Cir. 2000), and Morrow Equip. Co. v. Baker Concrete Constr., Inc., 2010 WL 4483914, at *4 (D. Or. June 8, 2010) in support of its argument that forum selection clauses do not override FINRA Rule 12200. (Opp. at 16-18) But those cases all involve non-exclusive forum selection clauses or consent to jurisdiction clauses that, unlike the exclusive forum selection clause here, clearly do not preclude arbitration. By contrast, the cases cited by Goldman Sachs involve exclusive forum selection clauses, many of which provide that the parties shall bring claims in a certain court, like the language here. (Mot. at 18-19 (citing Applied Energetics, 645 F.3d at 525-526; Biremis, Corp. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 2012 WL 760564, at *5 (E.D.N.Y. March 8, 2012); Spanski Enters., Inc. v. Telwizja Polska, S.A., 2007 WL 1187870, at *4-6 (S.D.N.Y. April 23, 2007)).) -3-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 9 of 16 contracts, but rather on the existence of language in a superseding agreement that, as here, plainly preclude[d] arbitration. Id. at 524-25. Moreover, the facts here are similar to those in Applied Energetics. Any agreement by Goldman Sachs under FINRA rules to arbitrate with its customers which forms the entire basis of Golden Empire s argument that it may bring its claims before FINRA preceded the execution of the Underwriter and Broker-Dealer Agreements. Both the underwriting and broker-dealer services that Golden Empire alleges that it sought from Goldman Sachs beginning in early 2004 (Opp. at 2-4) clearly contemplated that the parties would enter into contracts setting forth the specific terms and conditions of the underwriter and broker-dealer relationship. And indeed, the parties did exactly that, with one of the contractual terms being the clear and unambiguous exclusive forum selection clause that plainly preclude[s] arbitration. Applied Energetics, 645 F.3d at 524-25; see also Smith Barney, Inc. v. Critical Health Sys. of N. Carolina, 212 F.3d 858, 862 (4th Cir. 2000). 2. Contrary To Golden Empire s Contention, the Plain Meaning of Actions and Proceedings Includes Arbitrations. Golden Empire next argues that the exclusive forum selection clauses requirement that all actions or proceedings be brought in this Court does not apply to arbitration[s]. (Opp. at 10) Golden Empire explains that, under the N.Y. C.P.L.R., there are two types of civil judicial disputes: actions and special proceedings. (Id. at 11 (citing N.Y. C.P.L.R. 103)) Because neither of these types of judicial disputes includes arbitrations under the framework of New York s civil procedure, Golden Empire s argument goes, the exclusive forum selection clauses do not encompass the FINRA Arbitration. (Id.) This argument is baseless. [A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (N.Y. 2002). An arbitration is plainly a -4-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 10 of 16 proceeding as that term is ordinarily understood. Indeed, the U.S. Supreme Court, 5 the Second Circuit, 6 and New York State courts 7 have consistently referred to arbitrations as proceedings. (See Mot. at 20-21 & n.15) 8 Even UBS v. W. Va. Univ. Hosps., Inc., one of the cases upon which Golden Empire relies most heavily, finds that the phrase actions and proceedings encompasses arbitrations. 660 F.3d at 654-55 (holding that a clause governing all actions and proceedings concern[ed] the site of arbitration ). In fact, Golden Empire s own Statement of Claim describes the FINRA Arbitration as a proceeding[], as well as an action. (SOC at 20-21) 9 5 See, e.g., 4 Penn Plaza LLC v. Pyett, 556 U.S. 247, 269 (2009) (discussing an arbitral body conducting a proceeding ); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 288 n.1 (1995) (discussing arbitration as a mode of proceeding ) (citation omitted) (emphasis added). 6 See, e.g., Citigroup Global Mkts, Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 32 (2d Cir. 2010) ( VCG began arbitration proceedings against CGMI before the FINRA pursuant to FINRA Rule 12200. ) (emphasis added). 7 Wally v. Cameron Indus., Inc., 579 N.Y.S.2d 48, 48 (1st Dep t 1992) ( [A]rbitrator and arbitration tribunal did not conduct the proceedings in accordance with the published rules of the forum. ); City of New York v. Uniformed Fire Officers Ass n, Local 854, 699 N.Y.S.2d 355, 357 (1st Dep t 1999) ( Normally, a party to a valid arbitration agreement is required to submit to arbitration and to defer any challenge to the proceeding until an award is rendered.... ) (emphasis added) (citation omitted). 8 See also BLACK S LAW DICTIONARY 1083-84 (5th Ed. 1979) ( Proceeding means any action, hearing, investigation, inquest, or inquiry (whether conducted by a court, administrative agency, hearing officer, arbitrator, legislative body, or any other person authorized by law) in which, pursuant to law, testimony can be given. ) (emphasis added). 9 The New York cases Golden Empire cites in support of its argument that arbitrations are not actions or special proceedings (Opp. at 11-12) all involve peculiar New York procedural issues such as the power of a court to enjoin an arbitration under the N.Y. C.P.L.R., e.g., J. Brooks Sec., Inc. v. Vanderbilt Sec., Inc., 126 Misc. 2d 875, 877 (N.Y. Sup. Ct. 1985), or the applicability of statutes of limitation to arbitrations, e.g., NCR Corp. v. CBS Liquor Control, Inc., 874 F. Supp. 168, 172 (S.D. Ohio 1993), and are, accordingly, not relevant to the interpretation of a forum selection clause. In fact, at least one case Golden Empire cites characterizes arbitration as a proceeding. See Kent Cnty. Deputy Sheriffs Ass n v. Kent Cnty. Sheriff and Kent Cnty. Bd. of Comm ns, 616 N.W.2d 677, 683 n.18 (Mich. 2000). The New York cases calling arbitrations proceedings (supra n.7) illustrate the proper interpretation of that term under its plain meaning, rather than irrelevant cases regarding obscure New York procedure. -5-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 11 of 16 3. The Contract Clauses Designating this Court as the Exclusive Forum For Resolving Disputes Are Clear and Unmistakable. Golden Empire also contends that the Broker-Dealer Agreements do not manifest a clear enough intention to override arbitration of its claims. (Opp. at 17-18) Its arguments in support of this contention fall flat. First, Golden Empire wrongly maintains that, in order for the Broker-Dealer Agreements to revoke an earlier agreement to arbitrate, the revocation must explicit[ly] mention arbitration. (Id. at 17) But it is well-settled that, [a]lthough [a] [f]orum [s]election [c]lause does not explicitly use the word arbitration, it need not do so if its plain and unambiguous terms nevertheless specifically preclude[] the disputed arbitration, as the Broker-Dealer Agreements here clearly do. Spanski Enters., Inc. v. Telwizja Polska, S.A., 2007 WL 1187870, at *5 (S.D.N.Y. April 23, 2007). Golden Empire contends that a recent decision from the Eastern District of Virginia, UBS Fin. Servs. Inc. v. Carilion Clinic, should be persuasive (Opp. at 23-24) because the court there held, without citation, that if [the plaintiffs] had intended to contract out of [FINRA arbitration],... they could and should have included an explicit term in their written agreement. No. 12-cv-424, slip op. at 11 (E.D. Va. July 30, 2012), appeal docketed, No. 12-2066 (4th Cir. Aug. 30, 2012). Goldman Sachs respectfully submits that this decision (which has been appealed) is not only wrong, it obviously cannot trump the cases in this Circuit (e.g., Applied Energetics, 645 F.3d at 524-26; In re Am. Exp., 672 F.3d at 132-33; Biremis, 2012 WL 760564, at *3-5; Spanski, 2007 WL 1187870, at *5), all of which hold that an agreement containing an exclusive forum selection clause supersedes a prior agreement to arbitrate and that an explicit invocation of the word arbitration is unnecessary. Second, Golden Empire asserts that Goldman[] [Sachs ] reading of the forum selection clause creates an unnecessary conflict with the purported agreement to arbitrate -6-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 12 of 16 under FINRA Rule 12200 because the clause does not defer[] to the FINRA rule. (Opp. at 19-20) But there is no conflict. Rather, the parties simply agreed to supersede FINRA 12200 and bring all their claims in this Court. At bottom, Golden Empire appears to be asking the Court to hold that parties may never contract out of FINRA arbitration. But that is not the law. See Applied Energetics, 645 F.3d at 524-26; In re Am. Exp., 672 F.3d at 132-33. 10 C. Golden Empire Cannot Escape That Its Claims Arise Under Both the Underwriter Agreement and the Broker-Dealer Agreement. In an attempt to immunize at least some of its claims from being litigated in this Court (where they risk dismissal at the outset) (Mot. at 2, 23-24), 11 Golden Empire argues that its 10 Golden Empire also incorrectly argues that a forum selection clause in a single contract that is part of a broader contractual arrangement will not foreclose arbitration of claims relating to the broader [contract]. (Opp. at 16) But the lone case on which Golden Empire relies to support this proposition is inapposite. Personal Security & Safety Systems, Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002) concerned two agreements, one of which contained a forum selection clause and one of which contained a broad arbitration provision. Id. at 390, 394. Unlike here, the agreements were properly construed together because they were executed together as part of the same overall transaction. Id. at 390. Any purported agreement to arbitrate based on FINRA rules here could not be construed with the Broker-Dealer Agreement because they were not executed contemporaneously, and were not intended to be read together. See Berg v. Faulkner, 2007 WL 2809911, at *4 (N.D. Tex. Sept. 27, 2007) (explaining that Motorola, which considered clearly related agreements that were contemporaneously executed, is inapplicable where two agreements had no relation and no temporal proximity ). 11 While Golden Empire acknowledges that the merits of [its] claims are not at issue here (Opp. at 2 n.1), it uses much of its Opposition arguing (incorrectly) that Goldman Sachs provided advice and made recommend[ations] concerning Golden Empire s bond structure (Opp. at 3-6), despite Golden Empire s (i) admission that it had its own independent legal and financial advisors for the transaction (see July 21, 2012 Answer at 2-3), and (ii) citation of a presentation attached as an exhibit to its Opposition in which Goldman Sachs expressly disclaims such a role. (Chalupa Decl., Ex. A at inside cover page.) Golden Empire also incorrectly states that Goldman Sachs wildly misrepresents a case dismissing virtually identical claims. (Opp. at 2, n.1) But the court in In re Merrill Lynch Auction Rate Sec. Litig., 758 F. Supp. 2d 264 (S.D.N.Y. 2010) held that, by 2006, ARS issuers were on notice of the very conduct Golden Empire alleges was concealed from it. Id. at 278-79; see also Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 110 (2d Cir. 2012). Accordingly, Golden Empire has no possible claim for damages concerning its 2006 and 2007 ARS issuances, and its claims concerning its 2004 ARS issuance are time-barred. -7-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 13 of 16 fraud, negligent misrepresentation, and breach of fiduciary duty claims arise only out of the Underwriter Agreement, and are therefore not covered by the forum selection clause in the Broker-Dealer Agreement. (Opp. at 21-22) These arguments are equally groundless. As shown in the Motion, Golden Empire s claims in the FINRA Arbitration inextricably arise from both the Underwriter and the Broker-Dealer Agreements, and are inseparable. (Mot. at 10-11, 14) Golden Empire argues that three of its claims focus on alleged deceptions during the ARS underwriting (Opp. at 21-22), but it cannot escape that these alleged deceptions clearly center on Goldman Sachs role and practices as both underwriter and brokerdealer, and are predicated on the allegation that Golden Empire did not know[] that... if it issued ARS it would be wholly-dependent on Goldman[ Sachs ] continued support bidding practice to prevent its ARS from failing. (See Mot. at 10-11, 14; SOC at 9 (emphasis added)) Nor can Golden Empire avoid that it seeks damages related to Goldman Sachs broker-dealer function (including broker-dealer fees), and that its alleged injuries stem from Goldman Sachs placement of cover bids as broker-dealer to prop[] up the ARS market. (Id.; SOC at 1, 14-15) Even if some of Golden Empire s claims did arise out of only the Underwriting Agreement, they would still be covered by the Broker-Dealer Agreement s exclusive forum selection clause. Like the governing agreement in Applied Energetics, 645 F.3d at 523-24, the Broker-Dealer Agreement includes a broad merger clause referencing the other agreements and instruments executed and delivered in connection with the issuance of the []ARS and stating that they all contain the entire agreement between the parties relating to the subject matter hereof. (Opp. at 14) (emphasis added) Despite the fact that the Underwriter Agreement indisputably was executed and delivered in connection with the issuance of the []ARS, Golden Empire argues that the word -8-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 14 of 16 hereof must be given special emphasis, and that the inclusion of this term indicates that the parties intended to restrict the merger clause to the Broker-Dealer Agreement alone. (Opp. at 14) But Golden Empire cannot negate the plain meaning and clear intent of the broad merger clause by cherry-picking one word. In re Estate of Stravinsky, 4 A.D.3d 75, 81 (1st Dep t 2003) ( Contracts are not to be interpreted by giving a strict and rigid meaning to general words or expressions without regard to the surrounding circumstances. ). 12 Moreover, any interpretation of the Broker Dealer Agreement that excludes the Underwriter Agreement from the set of agreements... executed and delivered in connection with the issuance of the []ARS (Opp. at 14) must be wrong the Underwriter Agreement is one of the agreements associated with the ARS issuance, and is clearly encompassed by this unambiguous language. Finally, Golden Empire s reading of the merger clause ignores that the two agreements were negotiated contemporaneously 13 and pertain to the same transaction and subject-matter, and must therefore be read together as one contract under New York law. (Mot. at 4, 15-16) 14 12 Golden Empire also argues that the two Agreements cannot be read together because they have irreconcilable governing law clauses. (Opp. at 15) But it is not irreconcilable to have different governing laws for different aspects of an overall transaction and, in any event, conflicting choice of law provisions have no bearing on the effectiveness of [a nonconflicting] forum selection clause. Atofina Chems, Inc. v. Sierra Chem. Co., 2004 WL 739953, at *5 n.9 (E.D. Pa. April 5, 2004). 13 Golden Empire tries to leverage the fact that the Underwriter Agreement was executed prior to the Broker-Dealer Agreement to bolster its argument that its claims cannot have arisen from the latter. (Opp. at 22) But these agreements did not pertain to separate transactions; they were negotiated simultaneously, and when the Underwriter Agreement was executed, the parties contemplated that the Broker-Dealer Agreement would also be executed shortly thereafter. 14 If the Court were to find that some of Golden Empire s claims arise solely out of the Underwriter Agreements and allows those claims to proceed in arbitration, the Court should still enjoin Golden Empire from bringing any claims arising out of the Broker-Dealer Agreement in the FINRA Arbitration. Golden Empire should not be allowed to avoid the exclusive forum selection clauses by disclaiming that it is bringing claims under the Broker-Dealer Agreements, but then proceeding with such claims before FINRA. -9-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 15 of 16 II. GOLDEN EMPIRE ESSENTIALLY CONCEDES THAT THE OTHER FACTORS FAVOR ISSUING A PRELIMINARY INJUNCTION. As Goldman Sachs demonstrated in its Motion (Mot. at 21-24), the other factors courts consider on a preliminary injunction motion all favor Goldman Sachs. Golden Empire barely contests this, and does not even dispute irreparable harm. (Opp. at 24) Its only substantive argument is that enjoining the arbitration would deprive it of a speedy and inexpensive forum for quickly resolving its claims. (Opp. at 24) This plea for speedy resolution rings false given that (i) Golden Empire contracted to have all claims arising out of its relationship with Goldman Sachs heard in this Court, (ii) Golden Empire waited four years after the failure of the ARS market to bring its claims, and (iii) Golden Empire is clearly attempting strategically to bring its claims in arbitration to avoid the application by this Court of the statutes of limitation on Golden Empire s claims. (Mot. at 22-24) 15 The most speedy resolution will, in fact, be achieved in the parties contractually agreed-upon forum this Court 16 where Golden Empire s claims properly can be dismissed forthwith as time-barred. CONCLUSION For the foregoing reasons, Goldman Sachs respectfully requests that this Court issue an order preliminarily enjoining Golden Empire from pursuing its claims in the FINRA Arbitration. 15 Indeed, Golden Empire s counsel admitted as much in the UBS Fin. Servs. Inc. v. Carilion Clinic case, stating: [a]rbitrators have the discretion to not apply a limitation period. So, obviously, being in arbitration is more favorable to our client than being in litigation. That is why we want to be in the arbitration, frankly. No. 12-2066, Docket No. 19 (4th Cir. Sept. 20, 2012) at 41 n.25 (citation omitted). 16 Golden Empire does not and cannot dispute that the public interest is served when contractually agreed-upon forum selection clauses are enforced according to their plain terms because the financial effect of forum selection... clauses [is] reflected in the value of contract as a whole. Roby v. Corp. of Lloyd s, 996 F.2d 1353, 1363 (2d Cir. 1993) (citation omitted). -10-
Case 1:12-cv-04558-RJS Document 32 Filed 09/25/12 Page 16 of 16 Dated: September 25, 2012 New York, New York By: /s/ David H. Braff SULLIVAN & CROMWELL LLP David H. Braff Matthew A. Schwartz Andrew H. Reynard 125 Broad Street New York, NY 10004 Telephone: (212) 558-4000 Facsimile: (212) 558-3500 Email: braffd@sullcrom.com schwartzmatt@sullcrom.com reynarda@sullcrom.com Attorneys for Goldman, Sachs & Co. -11-