This matter concerns a dispute between a securities clearing firm and commodities futures investors over the investors’ losses sustained while trading options on the clearing firm’s e-trading platform. Both parties agreed the dispute should be resolved through arbitration but disagreed as to whether the National Futures Association (NFA) should serve as their arbitrator. An Illinois district court judge resolved the issue by compelling the parties to arbitrate before the NFA and to cease all other arbitrations pending before other arbitral bodies. The investors appealed the nonfinal arbitration order.

During the pendency of the appeal, the clearing firm requested the district court issue a briefing schedule for a proposed motion that it intended to bring seeking certain contractually mandated attorneys’ fees. The investors objected that the arbitrator, not the court, should decide the issue concerning contractually mandated fees.

The Seventh Circuit dismissed the investors’ appeal of the district court’s arbitration order, and the clearing firm filed a motion to enforce the arbitration order, complaining that the investors had violated the order by demanding and obtaining from NFA final hearings and proceedings, including final evidentiary hearings, outside the Northern District of Illinois — the judicial district that ordered arbitration. In turn, the investors filed a motion to stay the case arguing that the venue decision should be made by the arbitrator in the first instance.

The district court denied the clearing firm’s motion to enforce the arbitration order, noting that the arbitration order did not address the issue of venue. The district court held that under section 4 of the Federal Arbitration Act, it only had the power to compel arbitration before the NFA in the Northern District of Illinois and that the interpretation of the arbitration agreement’s venue selection clause is a procedural question that should be decided by the arbitrator.

The district court similarly declined to decide the issue whether the clearing firm was entitled to contractually mandated fees under the arbitration agreement for bringing the action, holding again that the arbitrator, not a federal court, should determine whether the clearing firm is entitled under the arbitration agreement to reimbursement of attorneys’ fees incurred in compelling the investors to arbitrate in the proper forum.

Accordingly, the district court stayed the case.

INTL FCStone Financial, Inc. v. Jacobson, No. 1:19-cv-01438 (N.D. Ill. Sept. 30, 2021)