When an insurance company has a dispute with an ex-advisor, who handles the arbitration?

That’s the question under consideration by the U.S. District Court in Massachusetts. Earlier this week, MassMutual Insurance Companies filed a petition to compel a formerly affiliated certified financial planner and insurance agent, Paul Justin, to arbitrate a dispute with the American Arbitration Association (AAA). Justin insists on having the Financial Industry Regulatory Authority (Finra) settle the matter.

The dispute involves claims by MassMutual that Justin violated the terms of his employment contract by starting his own company and recruiting MassMutual clients.

MassMutual claims that the terms of its “general agent” contract with Justin require that the arbitration be brought before the AAA. In legal documents, attorneys for MassMutual said that the company is not a member of Finra. “In fact,” the documents say, “Finra’s rules expressly exclude insurance-related disputes from mandatory Finra arbitral jurisdiction.”

But Erwin Shustak, a managing partner at Shustak Reynolds & Partners in San Diego, which represents Justin, said in an email that the arbitration clause between Justin and MassMutual says any dispute must be arbitrated before Finra. "Finra already has accepted the case and is processing it,” he said.

Justin and Finra did not immediately respond to a request for comment.

The basis for the original dispute involves Justin’s alleged activities while working as an independently operating general agent for MassMutual in Southern California and after he left the company in February.

Justin allegedly “spent many months engaged in unlawful, improper, and clandestine efforts to build a business and compete directly” with MassMutual despite having “contractual and common law duties of loyalty and confidentiality” to MassMutual, the company alleges in court filings.

The company claims this was a breach of contract and damaging to its business.

Justin operated a company called Agency 255, which had 72 agents besides him, the company says. The filing states that, on February 22, he gave notice to MassMutual that he was retiring. “But it soon became evident that he was not retiring,” the company alleges in its court filing.

He soon after announced that he had joined the Cetera Financial Group, a network of retail firms that competes directly with MassMutual, the company said. Before this, MassMutual claims, he founded a separate RIA firm called Sovran Advisors and an insurance brokerage called Sovran Insurance Services.

MassMutual also alleges that Justin poached employees from MassMutual to join his new firms and made disparaging comments about MassMutual to help lure them away. MassMutual is also accusing him of stealing proprietary information and threatening prospective employees with “repercussions” if they didn’t join him or if they informed MassMutual about his plans.

Attorneys for MassMutual declined to comment. Laura Crisco, head of media relations for MassMutual, said by email, “We intend to vigorously pursue our claims and hold Mr. Justin accountable for his unlawful acts and blatant disregard of his obligations.”

MassMutual is asking the U.S. District Court to hold a hearing within 10 days of its filing.