453 F.2d 1209 (2nd Cir. 1972), 153, Coenen v. R. W. Pressprich & Co.

Docket Nº:153, 71-1714.
Citation:453 F.2d 1209
Party Name:Dale S. COENEN, Plaintiff-Appellant, v. R. W. PRESSPRICH & CO., Inc., Defendant-Appellee, and Stirling Homex Corporation, Defendant.
Case Date:January 12, 1972
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 1209

453 F.2d 1209 (2nd Cir. 1972)

Dale S. COENEN, Plaintiff-Appellant,


R. W. PRESSPRICH & CO., Inc., Defendant-Appellee, and Stirling Homex Corporation, Defendant.

No. 153, 71-1714.

United States Court of Appeals, Second Circuit.

January 12, 1972

Submitted Oct. 20, 1971.

Page 1210

Royall, Koegel & Wells, New York City (David F. Dobbins and Thomas W. Towell, Jr., New York City, on the brief), for plaintiff-appellant.

Winthrop, Stimson, Putnam & Roberts, New York City (Stephen A. Weiner and Arnold S. Anderson, New York City, on the brief), for defendant-appellee.

Before MEDINA, MANSFIELD and MULLIGAN, Circuit Judges.

MEDINA, Circuit Judge:

The question raised by this appeal is the applicability of the arbitration clause contained in the New York Stock Exchange Constitution to a claim which: (1) arose before the plaintiff joined the Stock Exchange; (2) alleges violation of the Securities Exchange Act of 1934; and (3) alleges violation of the Sherman and Clayton Acts. For the reasons that follow we hold that such a claim is subject to arbitration.

In 1968, while a director of Stirling Homex Corporation, Dale S. Coenen purchased 90,000 shares of Stirling Homex stock for investment purposes. The stock certificates bore the standard restriction against transfer unless the shares were registered, or unless Stirling was furnished with an opinion of counsel satisfactory to Stirling, to the effect that such registration was not required. In the Spring of 1970 Coenen, needing capital, desired to sell a substantial portion of the 90,000 shares. He contacted R. W. Pressprich & Co. and asked them to handle the sale of the shares. The sale took place on September 25, 1970.

In November, 1970, Coenen & Co., a brokerage house of which Coenen is an officer, applied for membership in the New York Stock Exchange. The application was approved and Coenen & Co. became a member of the Exchange on December 31, 1970. As an officer, Coenen automatically became an allied member.

On January 6, 1971 Coenen's counsel sent Pressprich a copy of a complaint that Coenen was going to file against Pressprich and Stirling, and asked if there was any chance of settlement. The complaint alleged that Pressprich and Stirling conspired to force Coenen into selling the Stirling stock at an unconscionably low price by refusing to allow the transfer of the shares free of the restrictive legend until the low price was

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agreed upon. Coenen's complaint asserted three causes of action: one arising under the common law and the Uniform Commercial Code; another arising under the Securities Exchange Act of 1934; and the third arising under the Sherman and Clayton Acts.

On February 16, 1971, Pressprich demanded, in writing, that the controversy be submitted to arbitration in accordance with the Constitution of the New York Stock Exchange. Coenen replied by commencing the present action, in the United States District Court for the Southern District of New York, on February 18, 1971. Pressprich moved to stay the action, pending arbitration, on March 19, 1971. The motion was granted by Judge Metzner, ruling that by agreeing to abide by the Rules and Constitution of the Stock Exchange, Coenen agreed to submit "any controversy" with a member firm to arbitration, and that this controversy is a proper one for arbitration. Reported in 329 F.Supp. 1296 (S.D.N.Y.1971). For the reasons that follow, we agree with this conclusion.


Coenen Agreed to Arbitrate


We turn our attention first to the question of whether Coenen agreed to arbitrate. This issue is governed by federal law by virtue of the Arbitration Act, Title 9 of the United States Code.

Section 2 of the Act, 9 U.S.C. Section 2 (1970), makes enforceable all arbitration agreements concerning transactions relating to commerce. Section 3 of the Act, 9 U.S.C. Section 3 (1970), authorizes a Federal District Court to stay proceedings pending arbitration when there is an arbitration agreement that is validated by Section 2. The sale of securities here constitutes a transaction relating to commerce for the purposes of the Arbitration Act. Once a dispute is covered by the Act, federal law applies to all questions of interpretation, construction, validity, revocability, and enforceability. Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir.1959), cert. granted, 362 U.S. 909, 80 S.Ct. 682, 4 L.Ed.2d 618, dismissed under Rule 60, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37 (1960).

Article VIII, Section 1 of the New York Stock Exchange Constitution provides:

Any controversy between parties who are members, allied members, member firms or member corporations shall, at the instance of any such party, and any controversy between a nonmember and a member or allied member or member firm or member corporation arising out of the business of such member, allied member, member firm or member corporation, * * * shall, at the instance of such nonmember, be submitted for arbitration, in accordance with the provisions of the Constitution and the rules of the Board of Governors.

An examination of the applicable federal law on the subject convinces us that Coenen is bound by these terms.

The constitution and rules of a...

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