Judge Louis Stanton
Abbar invested his family’s wealth with affiliates of Citigroup Inc. He claimed Citigroup’s responsibility after his family suffered losses because the investments performed poorly. Under FINRA Rule 12200 Abbar claimed a right to arbitrate his dispute against Citigroup Global Markets Inc. (CGMI). CGMI sought injunctive relief enjoining arbitration, claiming that Abbar was not its customer but rather a customer of London-based Citigroup Global Markets Ltd. (CGML). In granting CGMI’s injunction against arbitration before FINRA, district court found that Abbar and his codefendants had no agreement to arbitrate before FINRA. Abbar did not purchase a product from, or open an account with, CGMI. Citing the Second Circuit’s rulings in UBS Financial Services v. West Virginia University and Wachovia Bank v. VCG Special Opportunities Fund, as well as the Fourth’s in UBS Financial Services v. Carilion Clinic and Raymond James Financial Services v. Cary, the court noted that courts have repeatedly taken a purchase transaction as the defining proof that an investor is the customer of the party with which he has an account. It was CGML which owned the economic interest in hedge funds managed by Abbar. CGMI held only voting interests therein.
