(CN) - A man who lost $316,000 after Fisher Investments entrusted his retirement portfolio to an unlicensed financial adviser must complete the arbitration process before he can pursue his claims in federal court, the 8th Circuit ruled.
Thomas Wootten hired Fisher Investments, a money management firm based in Woodside, Calif., as his investment adviser in September 2007, and the firm assigned Michael Weston to be Wootten's investment counselor, according to the ruling.
Wootten followed Weston's suggested investment strategy and invested all his money in stocks. He was unaware at the time that Weston was not licensed or registered to be a financial adviser.
In 2008, Wootten repeatedly contacted Weston, alarmed by the declining value of his portfolio.
He also sent a letter to Fisher Investments demanding a formal review of Weston's recommended investment strategy, and asked the firm to refund his losses.
Fisher Investments denied his request and, in November 2008, Wootten liquidated his account after suffering $316,000 in losses.
When Wootten sought to arbitrate his claims against Fisher Investments, the arbitrator dismissed his Missouri statutory claims based on the choice-of-law clause in the Letter of Agreement (LOA) he signed when he opened the account, which stated that Delaware law should govern any dispute.
Wootten challenged this choice-of-law provision in the Eastern District of Missouri, leading the arbitrator to stay the pending arbitration. After the district court dismissed his claims, Wootten appealed to the 8th Circuit.
Writing for the panel, Circuit Judge Lavenski Smith affirmed the lower court's ruling, finding that "Wootten must fully arbitrate his claims before he may ask a federal court to review the arbitrator's decision regarding a dispute covered by the arbitration agreement."
"Wootten correctly notes that federal courts have frowned upon arbitration agreements that preclude important statutory remedies; however, when the complete arbitration rule applies, available federal court remedies must wait their turn. This is especially so here where the parties have committed to the arbitrator the determination of whether the LOA's arbitration provisions are valid," the judge said.
"Thus, while Wootten may have valid federal claims, he must complete the arbitration before a court can hear those claims," Smith concluded.