From JPMorgan Secs. Inc. v. La. Citizens Prop. Ins. Corp., 712 F. Supp. 2d 70 (S.D.N.Y. 2010):

JP Morgan and Bear Stearns ask this Court to grant a preliminary injunction enjoining its pending FINRA arbitration with Citizens. This Court's power to enjoin that arbitration derives from the Federal Arbitration Act ("FAA"). Section 2 of the FAA establishes that compulsory arbitration agreements are "valid, irrevocable, and enforceable" when "in writing." Section 4 of the FAA provides courts with the power to compel an arbitration pursuant to a valid agreement to arbitrate, and to enjoin such an arbitration in the absence of an applicable agreement. Because JP Morgan and Bear Stearns have not demonstrated that they are likely to succeed in showing the absence of an agreement requiring arbitration of the dispute at issue, I deny their motion for a preliminary injunction. A denial of a motion to enjoin an arbitration ordinarily has the effect of compelling that arbitration. However, as will be discussed below, in this instance, I do not have the power to compel the arbitration because it is scheduled to proceed outside of this district. ***

While there is no arbitration agreement between either Citizens and JP Morgan or Citizens and Bear Stearns, FINRA rules may establish the requisite arbitration agreements. By becoming members of FINRA, JP Morgan and Bear Stearns have agreed to submit to FINRA rules, including FINRA Rule 12200, which requires members to arbitrate disputes in connection with their business activities if and when arbitration is demanded by a customer. This Rule creates "a compulsory arbitration agreement" between FINRA and its members, of which customers are intended "third party beneficiaries." Accordingly, for Citizens to trigger this compulsory arbitration agreement, it must establish (1) that it is a customer of JP Morgan and Bear Stearns and (2) that the dispute arises in connection with the business activities of JP Morgan and Bear Stearns.

***Only one court has considered whether an issuer is a customer of an underwriter. In Patten Securities Corp., Inc. v. Diamond Greyhound & Genetics, Inc., [819 F.2d 400, 405-06 (3d Cir. 1987), abrogated on other grounds, Delgrosso v. Spang & Co., 903 F.2d 234, 236 n.2 (3d Cir. 1990),] the Third Circuit determined that an issuer was a customer for purposes of a compulsory arbitration rule promulgated by NASD, the predecessor of FINRA. The court based its determination on an NASD committee statement that the compulsory arbitration provision then in force was meant to cover disputes arising "over a proposed underwriting." Because the contemporary rule has been altered, this interpretive statement is no longer binding. Nevertheless, the statement remains the most compelling evidence of whether FINRA's compulsory arbitration rule is intended to cover disputes between underwriters and issuers. ***

B. Power to Compel

In general, a court order denying a petition to enjoin an arbitration has an identical effect to an order compelling that arbitration. Petitions to compel and petitions to enjoin are two sides of the same coin. If the court determines there is an applicable agreement to arbitrate, the parties are compelled to arbitrate the covered dispute. If the court determines that there is no applicable agreement to arbitrate, the arbitration cannot proceed. In this instance, however, this Court lacks the authority to compel the arbitration because it is scheduled to occur outside of the Southern District of New York.

Section 4 of the Federal Arbitration Act ("FAA") authorizes district courts to compel arbitration where appropriate. It provides in relevant part:

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. . . . The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed.

The difficulty in determining whether this Court has the power to compel an arbitration in New Orleans arises from the final two sentences of the above-quoted portion of section 4. The first sentence instructs the district court, if it determines arbitration is appropriate, to direct the parties to proceed with the arbitration "in accordance with the terms of the agreement." The second sentence states that the arbitration shall proceed "within the district in which the petition for an order directing such arbitration is filed." While these provisions can in many instances be read together without conflict, if the arbitration agreement contains a forum selection clause requiring the arbitration to occur in a district other than where the petition to compel was filed, it is impossible to comply with both directives. A compelled arbitration will either not take place where the agreement directs or will not take place in the district where the petition to compel was filed.

The situation in this case is slightly more complex as there is no agreement to arbitrate between either Citizens and JP Morgan or Citizens and Bear Stearns. However, *** Rule 12200 creates a compulsory arbitration agreement between FINRA members and FINRA, and makes customers third party beneficiaries of that agreement. As an addendum to that notional agreement, Rule 12213(a) essentially creates a forum selection clause dictating that FINRA, in accordance with its rules, will determine the location of the arbitration. FINRA rules therefore can create a situation analogous to that caused by arbitration agreements containing forum selection clauses. If this Court were to compel arbitration when FINRA has already selected a forum outside of the Southern District of New York, doing so would either violate the statutory directive that the arbitration proceed in accordance with the agreement or the statutory directive that arbitration occur within the same district as the court where the petition to compel was filed.