29 F.3d 255 (6th Cir. 1994), 93-1305, Ford v. Hamilton Investments, Inc.

Docket Nº:93-1305.
Citation:29 F.3d 255
Party Name:Timothy L. FORD, Plaintiff-Appellant, v. HAMILTON INVESTMENTS, INC., Defendant-Appellee.
Case Date:July 15, 1994
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 255

29 F.3d 255 (6th Cir. 1994)

Timothy L. FORD, Plaintiff-Appellant,



No. 93-1305.

United States Court of Appeals, Sixth Circuit

July 15, 1994

Argued April 22, 1994.

John R. Parnell, Walter L. Baumgardner, Jr. (argued and briefed), Musilli & Baumgardner, St. Clair Shores, MI, for Timothy L. Ford.

Grady Avant, Jr. (argued), Sandra J. LeFevre, Daniel M. Brinks, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI, John R. Clark (briefed), Detroit, MI, for Hamilton Investments, Inc.

Before: MERRITT, Chief Judge; and KENNEDY and NELSON, Circuit Judges.

DAVID A. NELSON, Circuit Judge.

This is an appeal from a district court order, entered pursuant to Sec. 9 of the Federal Arbitration Act, confirming a National Association of Securities Dealers arbitration award. Federal courts may hear cases under the Arbitration Act only where some independent basis for federal jurisdiction exists, and the dispositive question presented here--a question that we have raised sua sponte--is whether the district court had jurisdiction over the subject matter of the instant case.

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Both parties contend that federal-question jurisdiction is conferred by 28 U.S.C. Sec. 1331, which provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Because the controversy was submitted to arbitration pursuant to an agreement signed by the plaintiff in applying to become a registered representative for a firm that belonged to the National Association of Securities Dealers, and because the association's rules could not take effect until the Securities and Exchange Commission had determined that the rules met certain statutory criteria, the parties suggest that the nexus with the Securities Exchange Act of 1934, the statute that created the Commission, is strong enough to warrant the conclusion that the case is one "arising under" the statute.

We do not find the suggestion well taken. Accordingly, and because no other basis for the exercise of federal jurisdiction appears on the face of the complaint or otherwise, we shall remand the case to the district court with instructions to vacate the order appealed from and dismiss the case for want of jurisdiction.


Defendant Hamilton Investments, Inc., a securities dealer formerly known as Illinois Company Investments, Inc., apparently hired plaintiff Timothy L. Ford in October of 1989 as manager of the firm's office in Dearborn, Michigan. 1 Mr. Ford promptly signed a form applying for registration, as an employee of the defendant, with the New York and American Stock Exchanges and the National Association of Securities Dealers. 2 In signing the application form, Mr. Ford stated "I agree to arbitrate any dispute ... that may arise between me and my firm ... that is required to be arbitrated under the rules ... of the organizations with which I register...."

Mr. Ford also signed a $40,000 promissory note in favor of the defendant. In the proceedings subsequently held before the arbitrators, Hamilton Investments said that Mr. Ford understood that the loan represented by the note was intended to be repaid if not forgiven over the course of a three-year period.

Mr. Ford left the employ of Hamilton Investments after only one year with the firm. The firm subsequently presented a claim for arbitration. The statement of claim asserted that $26,666.68, plus interest at 8 percent, was due and owing from Mr. Ford on the promissory note. Ford was also said to owe the firm commissions of up to $14,539.59 on sales made in violation of a contractual prohibition against outside trading. Mr. Ford presented a counterclaim in which he evidently alleged various breaches of the employment contract by the firm.

Hamilton Investments--but not Mr. Ford, as far as we can tell--signed a "submission agreement" for NASD arbitration. The agreement recited that the parties "agree to abide by and perform any award(s) rendered pursuant to this Submission Agreement and further agree that a judgment and any interest due thereon, may be entered upon such award(s) and, for these purposes, the undersigned parties hereby voluntarily consent to submit to the jurisdiction of any court of competent jurisdiction which may properly enter such judgment." 3

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A hearing was held before a three-member panel of industry arbitrators in July of 1992. On August 17, 1992, the panel issued a decision awarding Hamilton Investments the sum of $26,666.63, plus interest in the amount of $3,857.53. Mr. Ford's counterclaim was denied in its entirety, as were all other claims. Mr. Ford was also directed to reimburse Hamilton Investments for a $600 deposit made by the firm with the NASD in connection with the arbitration.

On November 17, 1992, Mr. Ford filed a complaint against Hamilton Investments in the United States District Court for the Eastern District of Michigan. (This is the district in which the arbitral award was made.) The complaint alleged--and the defendant's subsequent answer admitted--that jurisdiction was conferred on the court by the Federal Arbitration Act. The complaint went on to recite that an arbitration panel had awarded the defendant a total of...

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