Preemption of California Standards in Arbitration –

Winberg vs. Salomon Smith Barney

Preemption of the California Standards by Federal Legislation Upheld

WINBERG v. SALOMON SMITH BARNEY, INC., No. F042866 (Cal. App., 5Dist., 2/13/04).

Preemption of the California Standards by federal legislation has been the subject of a number of decisions in the Second Appellate District and panel after panel of that District’s jurists have ruled in favor of preemption; now, they are joined by this recent Fifth District decision.

Plaintiffs in this matter argued before the trial court that both the NASD and NYSE arbitration forums “refused to appoint arbitrators in California because of newly adopted disclosure requirements for all arbitrators” and, on that basis, the trial court denied Defendants’ motion to compel arbitration.

However, on appeal, a three-judge Panel reversed that ruling, relying in great part upon the Second District’s preemptive analysis in Jevne v. Superior Court, to hold that “the California Standards are preempted by the Exchange Act.”

The argument is also posed that agreeing to a waiver of the Standards or to an out-of-state hearing situs offers a Hobson’s choice, rendering the agreement to arbitrate at a SRO forum effectively impossible of performance. However, the Court points out, that the Plaintiffs have not proven that the cost and inconvenience of travel would be so burdensome as to constitute impossibility. (SAC Ed: The Mayo v. DWR decision, SAA 2003-16, was one of the first federal court decisions (NDCA) to find preemption and the state court decisions followed. Recently, another federal judge in the Northern District of California found California vacatur law preempted by the FAA in a post-Award challenge, Skinner v. DLJ Securities Corp., No. C03-2625 (VRW) (N.D. Cal., 12/29/03). Both the Skinner and Winberg decisions will be fully summarized in next week’s edition of the Securities Litigation Alert, SLA 2004-08.)

Copyright 2003 Securities Arbitration Commentator, Inc. P.O. Box 112, Maplewood, NJ 07040; t: 973-761-5880 f: 973-761-1504. Materials denoted with a SAC Reference No. (e.g. SAC Ref. No. 99-01-001) are on hand at SAC and may be obtained by calling the Securities Arbitration Commentator, or by email to The Securities Arbitration Commentator is the leading publication for securities arbitration news and information, and maintains the most complete database of arbitration awards availalble anywhere. For more information regarding their services, visit their website at

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.