Investor’s $225 million arbitration against JPMorgan faces court challenge over FDIC claims

A federal judge in California is questioning whether the court can intervene in a dispute involving more than $225 million in alleged investment losses tied to market-linked products recommended by wealth advisors once affiliated with First Republic Bank.

The case—Ferdowsi v. JPMorgan Chase Bank, N.A., No. 24-cv-04644-MMC—was filed by investor Arash Ferdowsi and the Arash Ferdowsi Revocable Trust, who argue that they have the right to arbitrate claims against JPMorgan entities for alleged misconduct between 2020 and 2023. On March 26, U.S. District Judge Maxine M. Chesney ordered both sides to explain why the lawsuit should not be dismissed, citing concerns that the matter is not ripe for judicial resolution while arbitration is still pending.

The dispute comes in the wake of the May 2023 failure of First Republic Bank and raises key issues for financial professionals, including successor liability, the enforceability of arbitration agreements following a receivership, and the consequences of missing FDIC administrative claim deadlines.

In January 2020, Ferdowsi signed an Investment Management Agreement with First Republic Investment Management, Inc. (FRIM), and a Trust Account Application with First Republic Securities Company, LLC (FRSC), both subsidiaries of First Republic Bank. Both agreements included binding arbitration clauses.

After First Republic Bank was placed into FDIC receivership, JPMorgan Chase Bank, N.A. acquired the bank’s assets—including its ownership interests in FRIM and FRSC. However, according to the FDIC as Receiver (FDIC-R), JPMorgan did not assume any of the subsidiaries’ liabilities, which were retained by the FDIC-R.

On July 30, 2024, Ferdowsi initiated a FINRA arbitration against Arif Ahmed (a registered investment advisor), JPMorgan Private Wealth Advisors LLC (successor to FRIM), and JPMorgan Securities LLC (successor to FRSC). He alleges that from April 2020 through October 2023, the respondents placed their financial interests ahead of his by steering him into market-linked investments (MLIs) that generated excessive fees. He claims this conduct was concealed and resulted in investment losses exceeding $225 million.

In February 2024, Ferdowsi demanded compensation from JPMorgan. JPMorgan’s counsel responded that the FDIC-R had retained liability for the matter, had granted JPMorgan indemnity, and was the real party in interest. Ferdowsi subsequently filed suit in federal court seeking a declaration affirming his right to arbitrate the claims and that the FDIC’s receivership process did not bar them.

In response, the FDIC-R filed counterclaims, asserting that it was properly appointed as receiver on May 1, 2023, and had published notice requiring all potential claimants to submit administrative claims by September 5, 2023. Ferdowsi did not file a claim by that deadline.

After receiving a demand letter from JPMorgan in February 2024, the FDIC-R issued a Notice to Discovered Claimant, informing Ferdowsi he could still submit a late-filed claim by May 15, 2024. He did not file one. Instead, the arbitration proceeded.

The FDIC-R contends that because Ferdowsi failed to comply with the claims process, he is barred from asserting his claims in FINRA arbitration or in any proceeding outside the federal court. It seeks a declaratory judgment and a permanent injunction to prevent him from continuing the arbitration.

In October 2024, the FDIC-R filed a Notice of Substitution in the arbitration, asserting that it—not JPMorgan or its affiliates—was the correct party to defend against the claims. FINRA did not accept the substitution. The arbitration is scheduled to begin December 8, 2025, and is expected to conclude by January 16, 2026.

In the March 26 order, Judge Chesney found that the claims raised by both Ferdowsi and the FDIC-R are not ripe for judicial review. Citing Bova v. City of Medford, the court emphasized that Article III of the Constitution requires a concrete and particularized injury—not a hypothetical or contingent dispute. Because the FINRA arbitrator has not yet ruled on any substantive issues, the court found that no such injury exists.

The court further noted that federal courts lack authority to intervene in ongoing arbitration proceedings except in extreme and rare circumstances. Citing Ninth Circuit precedent (Aerojet-General Corp. and In re Sussex), the judge concluded that the case may not fall within the narrow exceptions that permit court involvement.

Both parties have until April 16, 2025, to show cause why the action should not be dismissed.

The case spotlights critical considerations for wealth managers and financial institutions when liabilities from failed institutions are contested post-sale. It also serves as a reminder of the importance of timely compliance with FDIC claims procedures and the potential limitations of arbitration rights following bank failures and asset transfers.

If dismissed, the dispute may proceed entirely within FINRA’s arbitration forum, raising further questions about the enforceability of receivership-based defenses outside of court.

Case Name: Arash Ferdowsi, et al. v. JPMorgan Chase Bank, N.A., et al.
Case No.: 24-cv-04644-MMC
Court: U.S. District Court, Northern District of California
Judge: Hon. Maxine M. Chesney