DocketNumber: No. CV 95 0549057
Judges: HENNESSEY, J.
Filed Date: 1/5/1996
Status: Non-Precedential
Modified Date: 4/17/2021
On April 25, 1995, the plaintiff, Matthew Saltzman, filed an eight count complaint against the defendants, The Travelers, Inc. (Travelers) and Smith Barney Shearson, Inc. (Smith Barney). The facts in the complaint are as follows. In June 1989, the plaintiff was hired by the defendant Smith Barney (formerly known as Smith Barney, Harris Upham Co., Inc.) as a securities representative and an agent. At that time the plaintiff signed a Uniform Application for Securities Industry Registration form (U-4) that contained an arbitration clause. The plaintiff designated Smith Barney as his "firm" on the form U-4. An examination of item 10 on the form U-4 reveals an "X" signifying the NASD (National Association of Securities Dealers, Inc.) and the NYSE (New York Stock Exchange, Inc.), among others, as the organizations with which the plaintiff was registered.
On or about February 10, 1995, the plaintiff voluntarily left the employment of Smith Barney, which is a wholly owned subsidiary of the Travelers. Prior to his departure, the plaintiff had participated in the Travelers' Capital Acquisition Plan (the Plan) in which certain employees could have a portion of their gross earnings invested in discounted, transfer-restricted stock of the Travelers. According to the Plan, the shares' transfer restriction would be removed if the employee remained in the employ of Smith Barney for two years from the date of the shares' issuance. If the employee voluntarily terminated his employment before the end of the two year restriction period, the stock would automatically revert to the Plan.
When the plaintiff voluntarily left Smith Barney's employment, the plaintiff owned 2,327 restricted shares from his participation in the Plan in 1993 and 1994. These shares were obtained by Smith Barney having deducted $37,002.82 and $30,799.50 from the plaintiff's earnings in 1993 and 1994 respectively. Upon leaving Smith Barney's employment, the plaintiff was informed that his restricted stock would revert back to the Travelers' Plan.
In his eight count complaint dated April 25, 1995, the plaintiff alleges (1) a civil action for failure to reimburse deductions from wages pursuant to General CT Page 280 Statutes §
This matter comes before the court on the defendants' motion for stay of proceedings which was filed on June 7, 1995 with a supporting memorandum. On August 4, 1995, the plaintiff filed an objection to the motion for stay of proceedings and a memorandum in support thereof. On September 20, 1995, the defendants filed a reply memorandum.
The defendants' motion was brought pursuant to General Statutes §
In support of their motion for stay, the defendants offer two arguments. They first argue that the plaintiff's arbitration obligation is valid and must be enforced under the Federal Arbitration Act,
Additionally, the defendants argue that the plaintiff's claims are within the scope of the agreement to arbitrate. Describing the arbitration provision in question as "broadly worded and encompass[ing] all controversies relating to the plaintiff's employment and termination thereof", the defendants argue that it cannot be said with "positive assurance" and without any doubt that the arbitration provision would not cover the dispute. (Memorandum in Support of Defendants' Motion for Stay, p. 5.) The defendants cite two cases from the Second Circuit to support the proposition that "the Form U-4 arbitration provision has been held to require arbitration of claims by employees against former employees." See McGinnis v. E.F.Hutton Co., Inc.,
In response to the defendants' motion, the plaintiff counters that "the form U-4 registration does not constitute a contract between the parties in the action." (Plaintiff's Memorandum in Support of Objection to Motion for Stay, p. 6.) The plaintiff further argues that "[a]ssuming arguendo that the Form U-4 is a contract, it is unenforceable because it is a contract of adhesion" due to lack of mutual assent and unconscionability. The plaintiff claims that "[t]he Defendants' position that the uniform application provides for arbitration of all disputes, of every nature, effectively forecloses the Plaintiff from availing himself of the opportunity to litigate any matter in court, and is therefore unconscionable." (Plaintiff's Objection to Motion for Stay of Proceedings, pp. 1-2.)
In their reply brief, the defendants reiterate their arguments that (1) they are entitled to enforce the form U-4 arbitration obligation because the arbitration agreement is enforceable by Smith Barney and the Travelers, and the plaintiff's claims against Travelers are covered by the arbitration agreement; (2) the form U-4 arbitration CT Page 282 agreement is not a contract of adhesion; (3) the arbitration agreement is not unconscionable and (4) no evidentiary hearing is necessary.
The arbitration provisions of the form U-4 are governed by the terms of the F.A.A. The form U-4 between the plaintiff and Smith Barney designates the NYSE and the NASD as the exchanges with which the plaintiff was registered. The form obviously involves interstate commerce so that the agreement falls within the F.A.A.'s scope. Section 21 of the F.A.A. embodies a substantive rule applicable in state as well as federal courts, whereby Congress acting under the Commerce Clause2 foreclosed state legislatures from undercutting the enforceability of arbitration agreements. Southland Corporation v. Keating,
The court finds no support for the plaintiff's argument that the form U-4 is unenforceable as a contract of adhesion. According to the F.A.A., arbitration agreements are enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract."
Although both state and federal law strongly law strongly favor arbitration "a person can be compelled to arbitrate a dispute only if, to the extent that, and the manner in which he has agreed to do so," Marsala v. Valve Corporation of America,
First, as a threshold matter, this court may not adjudicate the "arbitrability" issue if the terms of the form U-4 agreement executed by the plaintiff designates this responsibility to the arbitrator itself. Normally, the decision as to whether or not a particular dispute is arbitrable falls on the court. However, "[i]f the parties to a contract expressly agree to refer questions of arbitrability to the arbitrators, then the Court must enforce their agreement by refusing to answer the questions. If, however, their contract does not so provide, then the Court must decide such questions, for ``[a] party cannot be forced to arbitrate the arbitrability issue.'" Litton Financial Printing Division v. NLRB,
A useful tool to resolve coverage questions that has been developed by the courts is examining a contract to arbitrate to see whether it contains a so-called "broad arbitration clause" verses a "narrow arbitration clause." The Second Circuit has said: "Where the arbitration clause is broad we have directed courts to compel arbitration whenever a party has asserted a claim, however frivolous, that on its face is governed by the contract." PeerlessImporters, Inc. v. Local One,
At the center of the arbitrability issue is a clause contained in the form U-4 executed by the plaintiff: "I agree to arbitrate any dispute, claim or controversy that CT Page 285 may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register, as indicated in item 10 as may be amended from time to time." In item 10, as aforementioned, the plaintiff indicated the NYSE and the NASD.
NYSE's Rule 347 requires the arbitration of: "[a]ny controversy between a registered representative and any member or member organization arising out of the employmentor termination of employment of such registered representative by and with such member or member organization . . . at the instance of any such party." (Emphasis added.)4 This provision must be examined in conjunction with NYSE's arbitration rule. Rule 600(a) (¶ 2600) provides that "[a]ny dispute, claim or controversy between a customer or non-member and a member, allied member, member organization and/or associated personarising in connection with the business of such member, allied member, member organization and/or associated person in connection with his activities as an associated person shall be arbitrated . . . as provided by any duly executed and enforceable written agreement . . . ." (Emphasis added.)
The NASD's Code of Arbitration Procedure (Part I, ¶ 3701, Sec. 1) ("Matters Eligible for Submission") "is prescribed . . . for the arbitration of any dispute, claim.or controversy arising out of or in connection with the business of any member of the [NASD] . . ., or arising out ofthe employment or termination of employment of associated person(s) with any member, with the exception of disputes involving the insurance business of any member which is also an insurance company: (1) between or among members; (2) between or among members and associated persons; (3) between or among members or associated persons and public customers, or others; and (4) between or among members . . . ." (Emphasis added.) The Code of Arbitration Procedure (Part II, ¶ 3708, Sec. 8, (a)) ("Required Submissions") states that: "[a]ny dispute, claim, or controversy eligible for submission under Part I of this Code between or among members and/or associated persons, and/or certain others,arising in connection with the business of such member(s) or in connection with the activities of such associated person(s), or arising out of the employment or terminationof employment of such associated person(s) with such CT Page 286 member, shall be arbitrated under this Code, at the instance of: (1) a member against another member; (2) a member against a person associated with a member or a person associated with a member against a member; and, (3) a person associated with a member against a person associated with a member." (Emphasis added.)
Excluding from arbitration only one type of dispute, disputes involving the insurance business of any member which is also an insurance company, NASD's Code of Arbitration applies to "any dispute, claim, or controversy arising out of or in connection with the business of any member of the [NASD] . . ., or arising out of the employment or termination of employment." Lacking any qualifying or exclusionary language imposing conditions precedent, the NYSE's arbitration clause applies to "any controversy . . . arising out of the employment or termination of employment" and "[a]ny dispute, claim or controversy between a customer or non-member and a member." Under the broad terms of the U-4 document entered into by the parties, that decisions as to the arbitrability of employment disputes under the NASD Code are solely the responsibility of the arbitrator. This court is satisfied that the plaintiff's complaint asserts claims which "aris[e] out of or in connection with the business of any member of the [NASD] . . ., or aris[e] out of the employment or termination of employment . . . ." This court finds that the defendants are ready and willing to arbitrate. See Memorandum in Support of Defendants' Motion for Stay, p. 9. This court, therefore, concludes that the complaint is subject to the written agreement to arbitrate.
Accordingly, the defendants' motion for stay of proceedings pending arbitration is granted.
M. Hennessey, J.
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