107 F.Supp. 75 (S.D.N.Y. 1952), Wilko v. Swan

Citation107 F.Supp. 75
Party NameWILKO v. SWAN et al.
Case DateMay 23, 1952
CourtUnited States District Courts, 2nd Circuit, Southern District of New York

Page 75

107 F.Supp. 75 (S.D.N.Y. 1952)

WILKO

v.

SWAN et al.

United States District Court S.D. New York.

May 23, 1952

Henry E. Mills, Washington, D.C., for plaintiff, by Richard H. Wels, New York City, of counsel.

Chadbourne, Parke, Whiteside, Wolff & Brophy, New York City, for defendants, by Leonard P. Moore, Edwin C. Hoyt, Jr., New York City, of counsel.

Roger S. Foster, Gen. Counsel, Alexander Cohen, Sp. Counsel, George H. Jaffin, Attorney, Washington, D.C. for Securities and Exchange Commission, amicus curiae.

Page 76

GODDARD, District Judge.

Motion by defendants, Hayden, Stone & Co. to stay the trial of this action pursuant to Title 9 U.S.C.A. 3, and all further proceedings herein until an arbitration has been had in accordance with the terms of the margin agreements entered into between plaintiff and defendants. Defendants, Hayden, Stone & Co. have not yet answered the complaint. The Securities and Exchange Commission has filed a brief amicus curiae opposing the stay of proceedings pending arbitration.

The suit is under the Securities Act of May 27, 1933 as amended, 15 U.S.C.A. 77a et seq., and seeks to recover damages in the amount of $3,888.88.

The plaintiff alleges that on or about January 17, 1951, defendants sold to the plaintiff 1600 shares of the common stock of Air Associates, Inc., a New Jersey corporation, and that plaintiff paid $29, 517.54 therefor; that 'Said sale of securities by the defendants to the plaintiff was made by the use of the means and instrumentalities of transportation and communication in interstate commerce, to wit: the facilities of the New York Curb Exchange, a registered national securities exchange, the telephone and telegraph lines of the New York Telephone Company and the Western Union Company, and by the use of the United States mails, and said sale was made by means of communications by the defendants to the plaintiff which were and, which included untrue statements of material facts and omitted to state material facts necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading.' Plaintiff charges that defendants represented to the plaintiff that Air Associates, Inc. had concluded a merger with the Borg Warner Corporation which would increase the value of the stock and that banks and large financial interests were buying the stock as a result. Plaintiff asserts that these representations were in fact untrue and plaintiff did not know them to be untrue at the time of his purchase. He also charges that the defendant Haven B. Page, a director, counsel and owner of record of a large block of the stock of Air Associates, Inc. was at that time selling his stock or some of it on the New York Curb Exchange, including some or all of the stock sold to the plaintiff.

Hayden, Stone & Co. assert that the relationship between plaintiff and defendants Hayden, Stone & Co. was established by, based upon, and controlled by the terms and conditions of Margin Agreements dated May 2, 1950 and January 18, 1951, respectively, duly executed by the plaintiff.

The Margin Agreements, in small-type printed form, contain 16 separate paragraphs, and provide in part:

(Introductory clause)

'In consideration of your opening now or in the future or continuing an account or accounts in my name or for me for the purchase or sale of property, I agree with you and your successors as follows, all my relations and dealings with you being subject to this agreement.'

(Paragraph 2)

'All transactions made by you or your agents for me are to be subject to the constitutions, rules, customs and practices of the exchanges or markets where executed and of their respective clearing houses and shall be subject to the provisions of the Securities Exchange Act of 1934 (15 U.S.C.A. 78a et seq.) * * * .'

(Paragraph 8)

'I expressly agree that you shall not be bound by any representation or agreement heretofore or hereafter made by any of your employees or agents which in any way purports to affect or diminish your rights under this agreement and that no representation or advice by you or your employees or agents regarding the purchase or sale by me of any property bought or sold on my order or carried or held in any manner for my account shall be the basis of any liability on your part to me.'

Page 77

(Paragraph 16)

'Any controversy arising between us under this contract shall be determined by arbitration pursuant to the Arbitration Law of the State of New York, and under the rules of either the Arbitration Committee of the Chamber of Commerce of the State of New York, or of the American Arbitration Association, or of the Arbitration Committee of the New York Stock Exchange or such other Exchange as may have jurisdiction over the matter in dispute, as I may elect. Any arbitration hereunder shall be before at least three arbitrators.'

The contract for the sale of the stock was a separate agreement.

The Federal Arbitration Statute, Section 3, Title 9 U.S.C.A. 3 reads:

'If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.'

But this action is brought under the Securities Act of 1933, Title 15 U.S.C.A., and Section 77l of that Act provides that:

'Any person who- * * *

'(2) sells a security * * * by means of a prospectus or oral communication, which includes an untrue statement of a material fact * * * and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to...

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5 practice notes
  • Expanded grounds for judicial review of employment arbitration awards.
    • United States
    • Defense Counsel Journal Vol. 67 Nbr. 4, October 2000
    • 1 Octubre 2000
    ...(15.) 346 U.S. at 436-37 (citations omitted), quoting case below, 201 F.2d 439, 445 (2d Cir. 1953). For district court decision, see 107 F. Supp. 75 (S.D. N.Y. 1953). (16.) Hayford, supra note 14, at 775, citing Justice Stevens dissenting in Mitsubishi Motors Corp. v. Soler Chrysler-Plymout......
  • 201 F.2d 439 (2nd Cir. 1953), 96, Wilko v. Swan
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 15 Enero 1953
    ...a margin agreement entered into between the plaintiff and the firm of Hayden, Stone & Co. In a carefully reasoned opinion reported in 107 F.Supp. 75, Judge Goddard denied the motion. Hayden, Stone & Co. have appealed. Although the order is interlocutory, it is appealable, since it i......
  • 247 So.2d 733 (Fla.App. 3 Dist. 1971), 70--1194, Shearson, Hammill & Co. v. Vouis
    • United States
    • Florida Florida Court of Appeals Third District
    • 20 Abril 1971
    ...is conclusive, and we adopt the reasoning therein. The cases and theory upon which petitioner relies were distinguished in Wilko v. Swan, 107 F.Supp. 75, 79 (S.D.N.Y., 1952), affirmed 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168. As to the second basis for our decision, the case of Cruger v. Al......
  • 346 U.S. 427 (1953), 39, Wilko v. Swan
    • United States
    • Federal Cases United States Supreme Court
    • 7 Diciembre 1953
    ...of 1933. Respondents' motion to stay the action, pursuant to § 3 of the United States Arbitration Act, was denied by the District Court. 107 F.Supp. 75. The Court of Appeals reversed. 201 F.2d 439. This Court granted certiorari. 345 U.S. 969. Reversed, p. Page 428 REED, J., lead opinion MR.......
  • Request a trial to view additional results
4 cases
  • 201 F.2d 439 (2nd Cir. 1953), 96, Wilko v. Swan
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 15 Enero 1953
    ...a margin agreement entered into between the plaintiff and the firm of Hayden, Stone & Co. In a carefully reasoned opinion reported in 107 F.Supp. 75, Judge Goddard denied the motion. Hayden, Stone & Co. have appealed. Although the order is interlocutory, it is appealable, since it i......
  • 247 So.2d 733 (Fla.App. 3 Dist. 1971), 70--1194, Shearson, Hammill & Co. v. Vouis
    • United States
    • Florida Florida Court of Appeals Third District
    • 20 Abril 1971
    ...is conclusive, and we adopt the reasoning therein. The cases and theory upon which petitioner relies were distinguished in Wilko v. Swan, 107 F.Supp. 75, 79 (S.D.N.Y., 1952), affirmed 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168. As to the second basis for our decision, the case of Cruger v. Al......
  • 346 U.S. 427 (1953), 39, Wilko v. Swan
    • United States
    • Federal Cases United States Supreme Court
    • 7 Diciembre 1953
    ...of 1933. Respondents' motion to stay the action, pursuant to § 3 of the United States Arbitration Act, was denied by the District Court. 107 F.Supp. 75. The Court of Appeals reversed. 201 F.2d 439. This Court granted certiorari. 345 U.S. 969. Reversed, p. Page 428 REED, J., lead opinion MR.......
  • 993 F.2d 578 (7th Cir. 1993), 91-2346, Pacific Dunlop Holdings Inc. v. Allen & Co. Inc.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Seventh Circuit
    • 7 Mayo 1993
    ...The district court denied the motion, concluding that arbitration was contrary to the remedies afforded by the 1933 Act. Wilko v. Swan, 107 F.Supp. 75, 79 (1952). The Second Circuit reversed, holding that the congressional policies under the United States Arbitration Act permitted arbitrati......
1 books & journal articles
  • Expanded grounds for judicial review of employment arbitration awards.
    • United States
    • Defense Counsel Journal Vol. 67 Nbr. 4, October 2000
    • 1 Octubre 2000
    ...(15.) 346 U.S. at 436-37 (citations omitted), quoting case below, 201 F.2d 439, 445 (2d Cir. 1953). For district court decision, see 107 F. Supp. 75 (S.D. N.Y. 1953). (16.) Hayford, supra note 14, at 775, citing Justice Stevens dissenting in Mitsubishi Motors Corp. v. Soler Chrysler-Plymout......