According to the Supreme Court's finding, the courts must consider each claim in a lawsuit separately when determining arbitrability. Furthermore, the courts cannot simply deny an arbitration because some of the claims are non-arbitrable. In other words, if some, but not all, of the claims in an arbitration are arbitrable, then the arbitration can continue.
The case made its way to the Supreme Court after a lawsuit was filed against KPMG LLP in state court, asserting negligent misrepresentation, consumer fraud, and aiding and abetting breach of fiduciary duty. At issue was whether several of the claims were or were not subject to the arbitration clause in KPMG's contract. Although some claims were arbitrable, two of the four claims were not, and the trial court reportedly denied arbitration.
The Supreme Court, however, found that if there are multiple claims in a dispute and some are arbitrable, those that are arbitrable must be sent to arbitration. The case was then sent back to lower court to determine whether the remaining two claims in the KPMG lawsuit are subject to the arbitration clause.
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According to court documents, those who filed the initial lawsuit were limited partners in a group of funds known as the Rye Funds. Those funds were reportedly invested with Bernard Madoff and allegedly lost millions of dollars. Lawsuits were also filed against the Rye Funds and the Funds' managers. The lawsuit against KPMG alleged the company failed to use proper auditing standards for the partnerships' financial statements.
For investors, this means that if they file a stockbroker arbitration or claim against a financial firm, their case must be sent to arbitration if some of the claims involved are found to be subject to arbitration. Even if some of the claims are not subject to arbitration, the courts cannot dismiss the case outright.