Nasd Dispute Resolution, Inc. v. Judicial Council of the State of California

The parties agree that this appeal is moot. The underlying dispute has been resolved in other litigation. The parties disagree, however, on what should happen now. Appellants NASD Dispute Resolution, Inc. (“NASD”), and New York Stock Exchange, Inc. (“NYSE”), the plaintiffs, say we should vacate the district court’s judgment dismissing their lawsuit. The defendant, the Judicial Council of the State of California (“the Council”), asks us to dismiss this appeal without vacating the district court’s judgment. We agree with appellants and vacate the district court judgment.

I. Background

In 2001, the California legislature passed a law ordering the Judicial Council of California, the rule-making arm of the California court system, to create ethical standards for commercial arbitrators. Cal.Code Civ. Proc. § 1281.85. The Council responded by enacting comprehensive standards including requirements for conflict-of-interest checks, disclosures to arbitrating parties, and penalties for unrevealed conflicts.

NASD and NYSE objected to the California standards. Those organizations have operated their own securities arbitration services for decades under federal auspices. They have their own…