Thomas James Associates, Inc. v. Jameson, 193
| Citation | 102 F.3d 60 |
| Decision Date | 12 December 1996 |
| Docket Number | D,No. 193,193 |
| Parties | THOMAS JAMES ASSOCIATES, INC.; Barbara S. Miller; Michelle K. Reichert; Dave Kleber; Michael G. Gomez; and James A. Villa, Plaintiffs-Appellants, v. Harry JAMESON, Defendant-Appellee. ocket 96-7004. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Peter H. Abdella, Harter, Secrest & Emery, Rochester, NY (Robert L. Cholette, Harter, Secrest & Emery, Rochester, NY, of counsel), for Plaintiffs-Appellants.
Michael A. Oswald, Oswald & Yap, Irvine, CA, for Defendant-Appellee.
Before: WALKER, McLAUGHLIN and JACOBS, Circuit Judges.
Thomas James Associates, Inc., and several of its employees (together, "TJA") appeal from a judgment of the United States District Court for the Western District of New York (Michael A. Telesca, Judge ), granting Harry Jameson's motion for summary judgment and dismissing TJA's complaint in its declaratory judgment action. The effect of the dismissal is to allow Jameson's requested arbitration of his employment dispute with TJA to proceed before the National Association
of Securities Dealers (the "NASD"). For the reasons that follow, we affirm the district court's grant of summary judgment and dismissal of the complaint.
The NASD is a self-regulatory association of securities firms, operating under the oversight of the federal Securities and Exchange Commission. The NASD enacts various codes, rules, and forms for its members. TJA is a securities firm and a member of the NASD.
In February, 1993, TJA hired Jameson as a broker in its Irvine, California office. As part of the employment process, Jameson executed a Uniform Application for Securities Industry Registration or Transfer, an industry-wide document universally known as "Form U-4." The application asked for detailed information about Jameson's employment and personal history. It also contained various general employment provisions to which, by his signature, Jameson agreed. One of these was an arbitration clause stating:
I agree to arbitrate any dispute, claim or controversy that 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 may register ... and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction.
Through the Form U-4, Jameson also officially "registered" with the NASD. Accordingly, any "rules, constitutions [and] by-laws" of the NASD that require arbitration became binding on Jameson by his Form U-4's arbitration provision.
In practice, this meant that Jameson was bound by the NASD's Code of Arbitration (the "NASD Code"). At all relevant times the NASD Code § 8 ("s 8")--entitled "Required Submission"--directed that:
Any 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), 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.
The second line of § 8 refers to "part I of this Code." Part I, § 1 of the NASD Code (" § 1")--entitled "Matters Eligible for Submission"--provided for arbitration of:
any dispute, claim or controversy arising out of or in connection with the business of any member of the [NASD], 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 public customers, or others; and (3) between or among members, registered clearing agencies with which the [NASD] has entered into an agreement to utilize the [NASD]'s arbitration facilities and procedures, and participants, pledgees or other persons using the facilities of a registered clearing agency, as these terms are defined under the rules of such a registered clearing agency.
The Form U-4 also contained a provision dealing with TJA's right to report to others Jameson's employment status and related information:
I authorize all of my employers and any other person to furnish to any jurisdiction or organization or any agent acting on its behalf, any information they have including my creditworthiness, character, ability, business activities, educational background, general reputation, history of my employment and, in the case of former employers, complete reasons for my termination. Moreover, I release each employer, former employer and each other person from any and all liability of whatever nature, by reason of furnishing any of the above information, including that information reported on the Uniform Termination Notice for Securities Industry Registration (Form U-5).
On this sea of arbitration provisions is one piece of flotsam--Jameson also executed an Employment Agreement with TJA, which provided in part:
The employee hereby waives all rights to arbitration which may be provided by any federal, state or self-regulatory organization rule or regulation for the resolution of any dispute arising out of this agreement or the termination thereof, including but not limited to NASD Manual--Code of Arbitration Procedure, Section 8.
Jameson started with TJA on March 1, 1993, and two months later he worked on a private placement debenture for a new venture called Christiana Capital Corporation ("Christiana"). Jameson submitted the proposal to TJA's "clearing house," Cowen & Company ("Cowen"), for review by its credit committee. Cowen notified TJA that the proposed offering was questionable--Christiana was apparently under investigation by the Federal Bureau of Investigation. TJA therefore instructed Jameson to drop the proposal and cease all contact with Christiana. According to TJA, Jameson ignored these instructions. TJA fired Jameson on August 3, 1993, for his alleged insubordination.
Industry standards require NASD-member firms to complete a Uniform Termination Notice for Securities Industry Registration, known as "Form U-5," when a registered representative ends his employment with a member firm for any reason. Barbara Miller, a TJA employee, completed Jameson's Form U-5, on which she wrote that Jameson was discharged for "failure to follow and abide by firm procedures and management's supervisory direction." Miller also indicated that Jameson was involved in a pending Securities and Exchange Commission ("SEC") investigation.
Following his termination, Jameson filed for unemployment insurance with the California Employment Development Department (the "CEDD"). The CEDD asked TJA the reason for Jameson's termination. Michelle Reichert, TJA's personnel director, informed the CEDD that Jameson had been fired for failing to follow TJA's explicit instructions.
Asserting that he had never contravened TJA's instructions, that he was never the subject of an SEC investigation, and that TJA's statements to the contrary--in both the Form U-5 and to the CEDD--were lies, Jameson filed a Statement of Claim with the NASD, requesting arbitration of an employment dispute against TJA and several of its employees. He sought an arbitration award including: an order that the "false statements" on the Form U-5 be stricken; money damages for lost income and injury to character; and attorney's fees.
TJA countered by filing a declaratory judgment action, pursuant to 28 U.S.C. § 2201, in the United States District Court for the Western District of New York. TJA sought a judicial determination that: (1) TJA is not required to arbitrate Jameson's claim, because the NASD Code does not provide for arbitration of employment-related disputes; (2) Jameson waived his right to arbitration in the Employment Agreement; (3) Miller and Reichert are not required to arbitrate Jameson's dispute; and (4) Jameson released TJA from any liability with respect to statements made in the Form U-5.
Jameson moved for summary judgment. TJA filed a cross-motion for summary judgment, asking the district court to stay the NASD arbitration. The court granted Jameson's motion, rejecting in turn TJA's first three arguments, and holding that the question whether Jameson released TJA from liability with respect to the Form U-5 should be determined by the arbitrators. The court therefore dismissed TJA's complaint in its entirety. The functional result of this judgment, of course, was to allow Jameson's requested arbitration before the NASD to go forward.
TJA now appeals, renewing its arguments raised below, and contending that the district court erred in all respects.
TJA argues that it cannot be required to arbitrate Jameson's claim because the NASD Code does not provide for arbitration of employment-related disputes. We disagree, and find that a registered representative's employment-related claim against an NASD-member employer is arbitrable under the NASD Code. 1
"Section 1 [of the NASD Code] defines the general universe of issues that may be arbitrated, and Section 8 describes a subset of that universe that must be arbitrated under the [NASD] Code." Armijo v. Prudential Ins. Co. of Am., 72 F.3d 793, 798 (10th Cir.1995). We begin with § 1, which, as mentioned above, provides for arbitration of any controversy:
arising out of or in connection with the business of any member of the [NASD], 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 public customers, or others; and (3) between or among members [and] registered...
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