Farrand v. Lutheran Broth.
| Decision Date | 07 June 1993 |
| Docket Number | No. 92-2983,92-2983 |
| Citation | 993 F.2d 1253 |
| Parties | 61 Fair Empl.Prac.Cas. (BNA) 1029, 62 Fair Empl.Prac.Cas. (BNA) 1, 61 Empl. Prac. Dec. P 42,225, 61 USLW 2688 Charles L. FARRAND, Plaintiff-Appellant, v. LUTHERAN BROTHERHOOD, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Raymond J. Hafsten, Jr. (argued), Indianapolis, IN, for plaintiff-appellant.
Robert K. Bellamy (argued), Tim A. Baker, Barnes & Thornburg, Indianapolis, IN, for defendants-appellees.
Before EASTERBROOK and KANNE, Circuit Judges, and ENGEL, Senior Circuit Judge. *
Gilmer v. Interstate/Johnson Lane Corp., --- U.S. ----, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), holds that a stockbroker who agrees to arbitrate disputes covered by the rules of the New York Stock Exchange must arbitrate The district court dismissed the suit on the authority of Gilmer. The judgment states: "This cause is dismissed without prejudice, provided, however, nothing in Order [sic] shall prevent Plaintiff from arbitrating his claims against Defendants." An order dismissing a complaint "without prejudice" usually is not appealable, because the plaintiff may file an amended complaint. The judgment and accompanying opinion show, however, that no amendment is possible, which makes the order final and appealable. "Without prejudice" means only "without detriment to Farrand's ability to present the claims to an arbitrator." Although the defendants asked the court to "compel arbitration," the judgment rightly does not do so. Farrand may elect between arbitration and accepting his termination; all the judge decreed was that Farrand could not pursue his ADEA claim in court. So 9 U.S.C. § 16(b) does not pose an obstacle to Farrand's appeal--which would in any event be proper because the district court conclusively disposed of all issues in the case. S + L + H S.p.A. v. Miller-St. Nazianz, Inc., 988 F.2d 1518 (7th Cir.1993); Perera v. Siegel Trading Co., 951 F.2d 780 (7th Cir.1992).
with his employer a claim arising under the Age Discrimination in Employment Act. Charles Farrand agreed with the Lutheran Brotherhood financial companies to arbitrate "any dispute, claim or controversy that may arise between me and my firm ... that is required to be arbitrated under the rules ... of the organizations with which I register". Gilmer and Farrand signed identical agreements, securities industry Form U-4. But while Gilmer registered with the NYSE, Farrand registered with the National Association of Securities Dealers. We must decide whether the rules of the NASD require arbitration of employment disputes
Several district courts have held that persons registered with the NASD must arbitrate disputes arising out of their employment. E.g., Foley v. Presbyterian Ministers' Fund, 1992 W.L. 63269 (E.D.Pa.); Gardner v. Benefits Communication Corp., 1991 W.L. 294564 (D.D.C.). None of these opinions quotes the language of the NASD's rules; each assumes that Gilmer turned on the clause in the securities industry form rather than the provisions of the exchange's rules. Yet the form refers only to arbitration "required ... under the rules ... of the organizations with which I register". Rule 347 of the NYSE provides for arbitration of "[a]ny controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative". The NASD lacks any similar rule. Instead it adopted a Code of Arbitration Procedure, § 1 of which provides:
This Code of Arbitration Procedure is prescribed ... for the arbitration of any dispute, claim or controversy arising out of or in connection with the business of any member of the Association, with the exception of disputes involving the insurance business of any member which is also an insurance company:
(1) between or among members;
(2) between or among members and public customers, or others; and
(3) between or among members, registered clearing agencies with which the Association has entered into an agreement to utilize the Association's arbitration facilities and procedures, and participants, pledgees or other persons using the facilities of a registered clearing agency, as these terms are defined under the rules of such a registered clearing agency.
Section 8 of the Code requires arbitration of all disputes within the scope of § 1.
Lutheran Brotherhood picks out the language "any dispute, claim or controversy arising out of or in connection with the business of any member of the Association" and insists that the NASD's rule is universal. That would be an appropriate reading if the rule stopped at the colon. But it continues with language that the Brotherhood does not mention. The text following the colon establishes which matters are arbitrable. Thus, for example, § 1(2) when read in conjunction with the body of the rule calls for arbitration of "any dispute, claim or controversy arising out of or in connection with the business of any member of the Association ... between or among members and public customers, or others". At oral argument the Brotherhood seized on "or others", contending that this extends § 1 to all persons. Yet such a reading It would not exceed the bounds of reason for the NASD or the SEC to conclude that "or others" has the purport Lutheran Brotherhood finds there. But neither the SEC nor the NASD has published an interpretation of this language. The NASD adopted its Code of Arbitration Procedure in 1968, when the rules of such organizations did not require the SEC's approval. Until the 1975 amendments to §§ 15A and 19(b)(1) of the Securities Exchange Act, 15 U.S.C. §§ 78o-3, 78s(b)(1), changes in the NASD's rules became effective unless the SEC objected. The NASD did not have to submit explanations of its rules, and the SEC did not explain why it let them go into force. So there is no paper trail that might assist in interpretation.
of "or others" would make all of the words after the colon surplus. What is the point of writing down a list of parties, only to sweep everything off the table with a comprehensive "or others"? Language of this kind in a list usually means "others" similar to preceding terms--here, perhaps, clients who for technical reasons cannot properly be called "public customers." Perhaps the term establishes a form of pendent party jurisdiction: "others" may be added to the arbitration of a dispute between a member and a public customer
The Arbitration Act tells courts to treat arbitration agreements the same as other contracts. 9 U.S.C. § 2. No contract, no arbitration. AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Gilmer did not establish a grand presumption in favor of arbitration; it interpreted and enforced the texts on which the parties had agreed. The NYSE's Rule 347 and the NASD's Code of Arbitration Procedure are dissimilar. Bereft of interpretive assistance, we conclude that § 1 of the NASD's Code does not authorize, and § 8 therefore does not require, the arbitration of an employment dispute between a member of the NASD and one of the member's registered representatives. The judgment is reversed, and the case is remanded for adjudication on the merits.
June 7, 1993.
Our opinion holds that the rules of the National Association of Securities Dealers do not provide for arbitration of employment disputes. Although we acknowledged that the language of the NASD's rules could be stretched to cover such disputes, we concluded that this was not the most natural reading and added: Majority Op. at 1254.
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