Dillard v. Security Pacific ( 1996 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 95-20503
Summary Calendar
_____________________
CARVEL G. DILLARD,
Plaintiff-Appellant,
versus
SECURITY PACIFIC CORPORATION,
MERRILL LYNCH, PIERCE, FENNER
& SMITH, INC., SECURITIES INDUSTRY
ASSOCIATION, INC., SECURITY PACIFIC
BROKERS, INC., FINANCIAL CLEARING
AND SERVICES CORPORATION, JENKENS &
GILCHRIST, A PARTNERSHIP, JENKENS &
GILCHRIST, A PROFESSIONAL CORPORATION,
Defendants-Appellees.
_______________________________________________________
Appeal from the United States District Court for
the Southern District of Texas
(CA-H-88-2848)
_______________________________________________________
April 18, 1996
Before REAVLEY, SMITH and PARKER, Circuit Judges.
PER CURIAM:*
Plaintiff-appellant Carvel Gordon Dillard challenges orders
compelling arbitration with defendants Merrill Lynch, Pierce,
Fenner & Smith, Inc. (Merrill Lynch), Security Pacific
Corporation, Security Pacific Brokers, Inc., Financial Clearing
*
Pursuant to Local Rule 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in Local Rule
47.5.4.
and Services Corporation (FCSC), and Jenkens and Gilchrist (J&G),
(collectively, Security Pacific). Dillard also challenges an
order granting summary judgment to Security Industry Association,
Inc. (SIA), a trade association for the securities industry.
Finally, Dillard challenges the denial of his motions for partial
summary judgment and for a preliminary injunction. We affirm.
I.
The lengthy factual and procedural history of Dillard’s
three federal lawsuits is detailed in Dillard v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 961 F.2d 1148 (5th Cir. 1992)
(Dillard II), cert. denied, 506 U.S. 1079 (1993), and Dillard v.
Security Pacific Brokers, Inc., 835 F.2d 607 (5th Cir. 1988)
(Dillard I). Dillard brought suit against the defendants in
1985, 1986, and 1988. This appeal concerns the 1988 suit.
Dillard’s causes of action against the various defendants arose
from trades in margins and options that Merrill Lynch and
Security Pacific made for Dillard in 1983 and 1984. Before
Dillard opened margin and option accounts at the two firms he
signed agreements requiring disputes to be resolved through
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arbitration.1 The central issue in the case is whether the
arbitration clauses are enforceable.
A. Merrill Lynch
In his first amended complaint, Dillard asserted causes of
action against Merrill Lynch for malicious prosecution, abuse of
process, defamation and violations of RICO, civil rights, and
antitrust laws. Merrill Lynch filed a motion to compel
arbitration, and an alternative motion for summary judgment. The
district court granted the motion to compel arbitration, denied
as moot the motion for summary judgment, and dismissed the suit
against Merrill Lynch. We affirm these orders of the district
court.
1
Paragraph 11 of the Customer Agreement with Merrill Lynch
states:
It is agreed that any controversy between us arising out of
your business or this agreement shall be submitted to
arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New
York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the National Association of
Securities Dealers, Inc., as the undersigned may elect.
Dillard’s customer agreement and margin agreement with
Security Pacific Brokers contain the following:
To the extent permitted by law, any controversy arising out
of or relating to any of my account(s) with FiCS or this
agreement, shall be submitted to arbitration conducted under
the Constitution and Rules of the Board of Governors of the
New York Stock Exchange Inc. or the Code of Arbitration
Procedure of the National Association of Securities Dealers,
Inc. or the arbitration panel of any other exchange which
has jurisdiction over the transaction in dispute[.]
3
Merrill Lynch and Dillard signed a contract requiring
arbitration of disputes. Dillard does not deny that the language
of the arbitration clause is broad enough to cover the claims he
has made against Merrill Lynch. In order to have his case heard
in court, the party resisting arbitration “must make at least
some showing that under prevailing law, he would be relieved of
his contractual obligation to arbitrate if his allegations proved
to be true.” Dillard II, 961 F.2d at 1154. Dillard argues
that the arbitration provision is unenforceable because it is an
unconscionable provision in an adhesion contract, and because it
is the product of an antitrust conspiracy. These arguments
failed in Dillard II, and they fail again here. Id. at 1153-55.
Adhesion contracts are not automatically unenforceable; the
party seeking to avoid one must generally show that it is
unconscionable. Id. at 1154. Dillard II rejected the argument
that arbitration clauses in the securities context are
unconscionable as a matter of law, 961 F.2d at 1154-55, and
Dillard failed to produce evidence that the agreement to
arbitrate was unfair, oppressive, or made under duress. In fact,
Dillard admitted that he never even negotiated to have the
arbitration clauses removed from either the Merrill Lynch or the
Security Pacific contracts.2
2
In a hearing and in his deposition, Dillard stated that at
Merrill Lynch he inquired generally about whether the contract
could be changed, but admitted that he did not attempt to
negotiate for a change in the arbitration clause, by offering,
for example, to pay a higher charge for trades. Dillard also
admitted that he made no attempt to change the arbitration clause
at Security Pacific.
4
Dillard’s argument that an antitrust conspiracy renders the
arbitration clause unenforceable is likewise without merit. Even
if such an antitrust conspiracy existed, “this finding would not
compel the invalidation of the agreement to arbitrate . . . .”
Dillard II, 961 F.2d at 1155.
Dillard argues vociferously that the arbitration clause
violates his Seventh Amendment right to jury trial. This
argument is meritless. Private actors such as Merrill Lynch and
Security Pacific cannot violate Dillard’s constitutional rights,
and in Dillard II this court held that “the Seventh Amendment
does not preclude ‘waiver’ of the right to jury trial through the
signing of a valid arbitration agreement.” 961 F.2d at 1155
n.12. Dillard argues that enforcement of contractual arbitration
clauses violates the Seventh Amendment where the contract is one
of adhesion and there is a great disparity of bargaining power.
Even if Dillard correctly states the law, his argument fails for
the reasons given above: Dillard has produced no evidence that
the clause is unconscionable, oppressive, or was made under
duress.
Because Dillard failed to show that he would be relieved of
his contractual obligation to arbitrate, and because all of his
claims are arbitrable, his claims were properly ordered to
arbitration.
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B. Security Pacific
Dillard asserted claims for malicious prosecution, abuse of
process, defamation, and violations of RICO, Hobbs Act, civil
rights laws, and antitrust laws, against Security Pacific, Inc.,
Security Pacific Brokers, Inc., and Financial Clearing & Services
Corp. (FCSC). Dillard has agreed to arbitrate his claims against
these entities. Dillard asserted all but the antitrust claims
against J&G, with whom he opposes arbitration.
Dillard’s claims against J&G are based on acts J&G took as
an agent of Security Pacific Brokers in matters related to
Dillard’s margin and option accounts. Claims against an agent of
a signatory to an arbitration agreement are arbitrable if such
claims fall within the scope of the arbitration agreement.
Taylor v. Investors Assoc., Inc., 29 F.3d 211, 213 (5th Cir.
1994) (defendant’s motion to compel arbitration must be granted
where the defendant is an agent or third-party beneficiary of an
arbitration agreement between the plaintiff and a co-defendant).
Because claims against J&G fall within the scope of the
arbitration agreement, the district court properly issued orders
compelling arbitration of those claims, dismissing the case
against the Security Pacific defendants and J&G, and denying
these defendants’ motion for summary judgment.
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C. Securities Industry Association, Inc. (SIA)
Prior to Dillard II, the district court had dismissed the
antitrust claims against SIA for failure to state a claim. In
Dillard II, this court reversed after noting that Dillard was not
required to produce facts to support his allegations at that
stage in the proceedings. Dillard II, 961 F.2d at 1159. Dillard
filed an amended complaint in 1993, asserting causes of action
for antitrust and RICO violations against SIA. SIA moved for
summary judgment on the antitrust and RICO claims on January 20,
1994, and the district court granted the motion on March 27,
1995. Dillard now appeals. We review de novo the district
court’s order granting summary judgment.
Under Fed. R. Civ. P. 56(c), the moving party bears the
initial burden of demonstrating an absence of a genuine issue for
trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 106
S. Ct. 1348, 1355-56 (1986). Once the moving party has met its
burden, the non-movant must come forward with specific,
admissible evidence demonstrating a genuine issue of material
fact for trial. Matsushita, 106 S. Ct. at 1356.
In order to prevail on his antitrust claim, Dillard must
prove (1) the existence of a conspiracy (2) affecting interstate
commerce (3) that imposes an unreasonable restraint of trade.
Dillard II, 961 F.2d at 1158. If defendants had no rational
economic motive to conspire, and if their conduct is consistent
with equally plausible, legal explanations, the conduct does not
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give rise to an inference of conspiracy. Matsushita, 106 S. Ct.
at 1356. To survive a motion for summary judgment, Dillard must
present evidence that tends to exclude the possibility that the
alleged conspirators acted independently. Id. SIA submitted
evidence that brokerage firms use arbitration because it is a
quicker and less expensive way to resolve litigation. This meets
SIA’s burden under Rule 56(c).
Dillard failed to present any evidence of an alleged
conspiracy, admitting in his deposition that he lacks specific
facts to support his assertion that SIA and its members conspired
to establish adhesion arbitration clauses in brokerage contracts.
Dillard also admitted that SIA had no control over its members
and did not compel members to include arbitration clauses in
their contracts governing margin and option accounts.
Dillard argues, however, that sufficient discovery has not
been conducted, and that the district court’s denial of
additional time for discovery was an abuse of discretion. This
contention is meritless. The district court points out that this
case has been pending for seven years and related litigation for
ten years. SIA responded to Dillard’s discovery requests and he
served no additional requests on SIA for more than a year before
the judge ruled on SIA’s motion for summary judgment. Dillard
filed no Rule 56(f) affidavit, and although his response to SIA’s
motion for summary judgment detailed discovery that Dillard
believed should have been produced by SIA and Merrill Lynch, he
never explained why the information was essential to justify his
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opposition to SIA’s motion, as Rule 56(f) requires. See Fed. R.
Civ. P. 56(f). Dillard was particularly concerned about copies
of newsletters, bulletins, and letters allegedly sent from SIA to
the membership “exhorting them to adopt the model [arbitration]
clause.” Dillard failed to establish, in his motion opposing
summary judgment or elsewhere, how an exhortation to adopt an
arbitration clause gives rise to an inference of antitrust
conspiracy. Simply put, Dillard has failed to present any
evidence that tends to exclude the possibility that the alleged
conspirators acted independently. See Matsushita, 106 S. Ct. at
1356 (requiring antitrust plaintiffs to come forward with such
evidence or lose on summary judgment). For all of these reasons,
the district court did not abuse its discretion in ruling on the
motion for summary judgment before allowing Dillard additional
time for discovery.
Because Dillard did not introduce evidence raising a fact
issue about the existence of a conspiracy, the district court
properly granted summary judgment on Dillard’s antitrust claims.
Dillard’s RICO claims fail for the same reason. To establish a
RICO claim, a plaintiff must allege and prove the commission of
at least two predicate acts. 18 U.S.C. §§ 1962, 1961(5). The
predicate acts Dillard alleged all depended on violations of the
antitrust laws. Dillard’s failure to establish an antitrust
violation requires summary judgment on the RICO claims as well.
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D. Denial of Dillard’s Preliminary Injunction
On July 27, 1994, Dillard moved for a preliminary injunction
proscribing monopolization and barring the enforcement of
arbitration clauses if brokerage firms required traders to sign
them as a precondition to trading in securities. The district
court denied the injunction without entering findings of fact or
conclusions of law, as required by Fed. R. Civ. P. 52(a).
Dillard appeals the denial of his motion and the failure to enter
findings of fact and conclusions of law. We have jurisdiction
over the ruling on the preliminary injunction.3 We review the
district court’s denial of a preliminary injunction for abuse of
discretion. Lakedreams v. Taylor, 932 F.2d 1103, 1107 (5th Cir.
1991).
The prerequisites for a preliminary injunction are:
(1) substantial likelihood of success on the merits; (2)
irreparable injury; (3) the threatened injury outweighs the
damage the injunction may cause the opposing party; and (4)
no adverse effect on the public interest.
Id.
3
After the district court denied Dillard’s motion for a
preliminary injunction, Dillard timely filed motions for new
trial and amendment of the judgment under rules 52(b) and 59.
The district court denied these motions on March 27, 1995, the
same date on which it issued the final orders forming the basis
of this appeal. Dillard again timely moved for new trial or
reconsideration under rules 52(b) and 59, which motions the
district court again denied. Dillard then timely appealed to
this court. Furthermore, while the preliminary injunction is
moot with regard to SIA, it is not moot with regard to Merrill
Lynch and Security Pacific.
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Dillard cannot prove irreparable injury because he has an
adequate remedy at law--namely, arbitration and this action for
damages--and because he waited nearly six years to request
injunctive relief, strongly implying that delay was not causing
irreparable harm. See, e.g., Oakland Tribune, Inc. v. Chronicle
Pub. Co., 762 F.2d 1374, 1377 (9th Cir. 1985) (long delay implied
lack of irreparable harm in newspaper’s action for Sherman Act
antitrust violation). As our discussion above demonstrates,
Dillard also cannot prove substantial likelihood of success on
the merits.
When it denied the injunction, the district court failed to
enter findings of fact and conclusions of law, as required by
Fed. R. Civ. P. 52(a). Dillard timely filed motions under Rule
52(b) and 59, asking the court to reconsider or clarify its
ruling on the preliminary injunction, and also filed a motion for
partial summary judgment. The district court denied these
motions after entering findings of fact and conclusions of law in
its final orders of March 27, 1995, the orders from which Dillard
now appeals. These findings of fact and conclusions of law
suffice under Rule 52(a).
II.
For the foregoing reasons, we AFFIRM the orders of the
district court (1) compelling arbitration with Merrill Lynch,
Security Pacific, and Jenkens & Gilchrist; (2) granting summary
11
judgment to SIA; and (3) denying Dillard’s motions for a
preliminary injunction and partial summary judgment.
AFFIRMED.
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