## Facts

- American Express Financial Advisors Inc. affiliated with several financial planners as independent-contractor “financial advisors.”
- Each advisor’s contract contained: (1) non-disclosure and one-year non-solicitation obligations regarding clients served during the affiliation, (2) a clause requiring arbitration before the National Association of Securities Dealers for disputes arising under the agreements, and (3) a provision stating American Express could seek an injunction in court to prevent continuing violations while arbitration was pending.
- Between May and July 1997, the advisors left American Express.
- American Express alleged the departing advisors used confidential information and solicited former American Express clients in violation of the agreements.
- American Express initiated NASD arbitration and also filed in federal district court seeking a preliminary injunction to bar use of confidential information and solicitation pending arbitration.
- The district court denied the preliminary-injunction requests without applying the traditional equitable factors, reasoning that temporary relief should be pursued in arbitration given the arbitrability of the merits and the expected speed of arbitration.

## Issues

1. When the merits of a dispute are concededly subject to arbitration, may a district court decline to consider a properly filed motion for a preliminary injunction on the ground that interim relief should be left to the arbitrator?
2. Does a contractual term contemplating judicial injunctive relief pending arbitration affect the court’s obligation to rule on the motion under ordinary preliminary-injunction standards?

## Decision

- The Second Circuit vacated the orders denying preliminary injunctive relief and remanded.
- The district court was required to consider the preliminary-injunction application on the merits under the usual equitable criteria, rather than refusing to rule because the dispute would be arbitrated.
- The court expressed no view on whether an injunction should issue, leaving that determination to the district court on remand.

## Legal Principles

- An agreement to arbitrate the merits does not eliminate a federal court’s authority, and when properly invoked its responsibility, to consider preliminary injunctive relief aimed at preserving the status quo pending arbitration.
- The possibility or expectation of “speedy” arbitration does not justify a court’s refusal to address interim injunctive relief; delay or irreversible changes can impair the effectiveness of the arbitral remedy.
- Where the parties’ contract expressly contemplates judicial injunctions pending arbitration, it supports (and is consistent with) judicial consideration of interim relief while the merits proceed in arbitration.
- Appellate review may be limited to whether the district court applied the correct procedural approach; the substantive injunction factors must be evaluated by the district court in the first instance.

## Conclusion

The Second Circuit held that a district court may not decline to decide a preliminary-injunction motion merely because the dispute’s merits will be resolved in arbitration, particularly where the contract contemplates judicial injunctive relief pending arbitration; the case was remanded for application of the traditional preliminary-injunction standards.


Am. Express Fin. Advisors Inc. v. Thorley, 147 F.3d 229 (2d Cir. 1998)