GREGORY J. SCHWARTZ & CO., INC. v. Fagan, Docket No. 229389

• Court: Court of Appeal of Michigan (US)
• Writing for the Court: METER, J.
• Citation: 660 N.W.2d 103,255 Mich. App. 229
• Parties: GREGORY J. SCHWARTZ & COMPANY, INC., and Gregory J. Schwartz, Plaintiffs-Appellants, v. Barry S. FAGAN, Marcia C. Fagan, DIB & Fagan Profit Sharing Plan & Trust, DIB & Fagan P.C. Profit Sharing Plan, Allan J. DIB, Salma DIB, National Association Dealers, Inc., and NASD Regulation, Inc., Defendants-Appellees. Gregory J. Schwartz and Gregory J. Schwartz & Company, Inc., Plaintiffs-Appellants, v. Richard Krygiell, National Association of Security Dealers, Inc., and NASD Regulation, Inc., Defendants-Appellees. Gregory J. Schwartz & Company, Inc., Plaintiff-Appellant, v. Andrew Polinsky, Jr., Andrew Polinsky Living Trust, and NASD Regulation, Inc., Defendants-Appellees.
• Decision Date: 18 April 2003
• Docket Number: Docket No. 234076.,Docket No. 229389,Docket No. 229401

660 N.W.2d 103
255 Mich. App. 229

GREGORY J. SCHWARTZ & COMPANY, INC., and Gregory J. Schwartz, Plaintiffs-Appellants,
v.
Barry S. FAGAN, Marcia C. Fagan, DIB & Fagan Profit Sharing Plan & Trust, DIB & Fagan P.C. Profit Sharing Plan, Allan J. DIB, Salma DIB, National Association Dealers, Inc., and NASD Regulation, Inc., Defendants-Appellees.
Gregory J. Schwartz and Gregory J. Schwartz & Company, Inc., Plaintiffs-Appellants,
v.
Richard Krygiell, National Association of Security Dealers, Inc., and NASD Regulation, Inc., Defendants-Appellees.
Gregory J. Schwartz & Company, Inc., Plaintiff-Appellant,
v.
Andrew Polinsky, Jr., Andrew Polinsky Living Trust, and NASD Regulation, Inc., Defendants-Appellees

Docket Nos. 229389, 229401, 234076.

Court of Appeals of Michigan.

Submitted May 15, 2002, at Detroit.

Decided January 31, 2003, at 9:05 a.m.

Released for Publication April 18, 2003.

Sullivan, Ward, Bone, Tyler & Asher, P.C. (by David S. Snyder and Sheri B. Cataldo), Southfield, for the plaintiffs.

Anthony V. Trogan, P.L.L.C. (by Anthony V. Trogan), West Bloomfield, for Barry S. Fagan, Richard Krygiell, and others.

David M. Foster, P.C. (by David M. Foster), Farmington Hills, for Andrew Polinsky, Jr., and others.

Before: WHITBECK, C.J., and O'CONNELL and METER, JJ.

METER, J.

In these consolidated appeals, defendants¹ obtained participation certificates

660 N.W.2d 104

in the Mortgage Corporation of America (MCA) through the brokerage services of plaintiff Gregory J. Schwartz & Co., Inc. (Schwartz & Co.), a member of the National Association of Securities Dealers (NASD). After defendants lost money because of the failure of the MCA, they filed arbitration claims with the NASD against Schwartz & Co. and certain of its employees. Schwartz & Co., along with one of its employees, Gregory J. Schwartz, then commenced the instant actions to enjoin the arbitration. The trial court granted summary disposition to defendants and dismissed the complaints. Plaintiffs now appeal as of right, and we affirm

The main issue raised by plaintiffs in these consolidated appeals is whether the trial court erred in failing to determine the eligibility of defendants' arbitration claims under Rule 10304 of the NASD Code of Arbitration Procedure (NASD code), which states, in part, that "[n]o dispute, claim or controversy shall be eligible for submission to arbitration under the Code where six (6) years have elapsed from the occurrence or event giving rise to the act or dispute, claim or controversy." The trial court concluded that the arbitrator, and not the court, should decide whether defendants' claims fell within the six-year limitation period of Rule 10304. Therefore, the court referred the matters to arbitration.

Whether the arbitrator or the court should apply Rule 10304 to NASD arbitration claims is a question of law, and we review questions of law de novo. Wills v. State Farm Ins. Co., 222 Mich.App. 110, 114, 564 N.W.2d 488 (1997). Similarly, we review de novo a trial court's ruling with respect to a summary disposition motion. Id.

The United States Supreme Court, in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), recently addressed the very issue raised by plaintiffs. The Court addressed "whether a court or an NASD arbitrator should apply [Rule 10304] to the underlying controversy." Howsam, supra, 537 U.S. at___, 123 S.Ct. at 590, 154 L.Ed.2d at 495. The Court noted that the federal circuit courts had reached different conclusions on the issue, with some holding that the court should apply Rule 10304 because an application of the rule essentially presents a question of the underlying dispute's "arbitrability"—i.e., it involves whether the parties intended to submit a particular dispute to arbitration. Howsam, supra, 537 U.S.___, 123 S.Ct. at 591, 154 L.Ed.2d at 496-497.

The Court agreed that a "question of arbitrability" is an issue for judicial determination unless the parties...