Rush v. Oppenheimer & Co., Inc.
| Decision Date | 22 March 1985 |
| Docket Number | No. 84 Civ. 3219 (RWS).,84 Civ. 3219 (RWS). |
| Citation | 606 F. Supp. 300 |
| Court | U.S. District Court — Southern District of New York |
| Parties | R. Stockton RUSH III, Plaintiff, v. OPPENHEIMER & CO., INC. and Scott Seskis, Defendants. |
Lovell & Stewart, New York City, for plaintiff; Victor E. Stewart, New York City, of counsel.
Joan Caridi, New York City, for defendant Oppenheimer & Co., Inc.
Defendants Oppenheimer & Co., Inc. ("Oppenheimer") and Scott Seskis ("Seskis") have moved to sever the pendent common law claims, to compel arbitration of those claims, and to stay this arbitration until final resolution of the federal securities law claims. The motion is denied.
R. Stockton Rush III ("Rush") commenced this action by filing a complaint on May 10, 1984. Count one alleged violations of the Federal securities laws; count two alleged violations of New York common law; and count three alleged violations of the Organized Crime Control Act of 1970, 18 U.S.C. § 1961(1)(D). The specific allegations of the first complaint are set forth in this court's August 23, 1984 opinion and need not be reiterated here. 592 F.Supp. 1108. Rush granted Oppenheimer several extensions of time to answer the complaint or bring a motion, and on June 25, 1984 Oppenheimer filed a motion to dismiss pursuant to Fed.R.Civ.P. 9(b), 10(b), and 12(b)(6). At no point in its challenge to the court's jurisdiction did Oppenheimer argue that a prior arbitration agreement required severance of the state claims. On August 23, 1984 I issued an opinion dismissing the third count and the punitive damages aspect of the second count. Also on August 23, Rush filed an amended complaint.
On August 31, 1984 Rush filed a motion for reargument on that aspect of the August 23 opinion that dismissed the claim for punitive damages. On September 7, Oppenheimer answered the amended complaint, denying the allegations and raising thirteen affirmative defenses. The answer nowhere mentioned the existence of an arbitration agreement between Rush and Oppenheimer. Throughout this period, discovery progressed, and Oppenheimer obtained documents from Rush, noticed the depositions of two non-parties, and produced defendant Seskis.
On November 9, 1984 I issued an opinion reinstating the punitive damages aspect of Rush's state claims and setting a discovery deadline of February 6, 1984. 596 F.Supp. 1529. On December 31, 1984 Oppenheimer filed this motion for severance, and the motion was argued on January 18, 1985.
Oppenheimer seeks through this motion to enforce an arbitration agreement signed by Rush on November 30, 1981. The agreement states:
Any controversy between you and the undersigned arising out of, or relating to this agreement, or the breach thereof, or arising out of transactions with you shall be settled by arbitration, in accordance with the Rules, then obtaining, of either the National Association of Securities Dealers, Inc. or of the New York Stock Exchange Inc., as I may elect. If I do not make such election by registered mail addressed to you at your main office within five days after receipt of notification from you requesting such election, then you may make such election. Any arbitration hereunder shall be before at least three arbitrators, and the award of the arbitrators or a majority of them shall be final, and judgment upon the award rendered may be entered in any court having jurisdiction. I agree that notice of, and, in any such arbitration sic may be sent to me by mail, and waive personal service thereof.
Rush initially argued that the doctrine of intertwining prevents the severance. However, in view of Dean Witter Reynolds Inc. v. Byrd, ___ U.S. ___, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), in which the Supreme Court rejected the doctrine of intertwining, Rush now relies exclusively on the arguments that the agreement to arbitrate was fraudulently induced and is therefore not enforceable, and that any right to enforce arbitration has been waived by Oppenheimer's active participation in the litigation to this point. Because I conclude that Oppenheimer waived its right to arbitration, I need not reach the question whether the agreement to arbitrate was fraudulently induced.
Despite the strong federal policy favoring arbitration of contractual disputes, United Steelworkers v. Warrior and Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1352-53, 4 L.Ed.2d 1409 (1960), the right...
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...to arbitrate after sensing an adverse decision would in effect give that party another chance in a second forum. Rush v. Oppenheimer & Co., 606 F.Supp. 300, 301 (S.D.N.Y.), rev'd on other grounds, 779 F.2d 885 (2d Cir.1985). None of these indicators of prejudice are present in the case at h......
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