Blue Gray Corporations I & II v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 90-5069

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Writing for the Court: Before FAY and EDMONDSON, Circuit Judges, and TUTTLE; FAY
• Citation: 921 F.2d 267
• Parties: Fed. Sec. L. Rep. P 95,742 BLUE GRAY CORPORATIONS I & II and First Sunset Corporation, Plaintiffs-Appellees, Cross-Appellants, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant-Appellant, Cross-Appellee.
• Docket Number: No. 90-5069,90-5069
• Decision Date: 15 January 1991

Page 267

921 F.2d 267 Fed. Sec. L. Rep. P 95,742 BLUE GRAY CORPORATIONS I & II and First Sunset Corporation,
Plaintiffs-Appellees, Cross-Appellants,
v.
MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.,
Defendant-Appellant, Cross-Appellee. No. 90-5069. United States Court of Appeals,
Eleventh Circuit. Jan. 15, 1991.

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Bennett Falk, Alex J. Sabo, Miami, Fla., for defendant-appellant, cross-appellee.

William P. McCaughan, Jeffrey B. Crockett, Miami, Fla., for plaintiffs-appellees, cross-appellants.

Appeals from the United States District Court for the Southern District of Florida.

Before FAY and EDMONDSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

FAY, Circuit Judge:

Defendant-appellant Merrill Lynch, Pierce, Fenner & Smith, Inc., appeals a district court order denying its motion to compel arbitration of claims arising under federal securities laws, filed by plaintiffs-appellees Blue Gray Corporations I & II and First Sunset Corporation. Plaintiffs cross-appeal the district court's order, which compelled arbitration of plaintiffs' state law claims against defendant. We hold that the plain language of the arbitration agreement provided plaintiffs the right to litigate federal securities law claims, and that the arbitration agreement could be construed to compel arbitration of state law claims. Accordingly, we AFFIRM.

BACKGROUND

This case depends solely upon the interpretation of an arbitration provision included in certain agreements into which plaintiffs and defendant entered. Between May 13, 1985, and April 24, 1987, plaintiffs signed several investment account agreements with defendant. ¹ Each of these

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agreements contained virtually identical "Arbitration Agreement" provisions. The arbitration agreements provided, in pertinent part:

Except to the extent that controversies involving claims arising under the Federal securities laws may be litigated, it is agreed that any controversy between us arising out of your business or this agreement shall be submitted to arbitration....

In September 1989, plaintiffs brought suit in federal district court against defendant, alleging violations of the Securities Exchange Act of 1934, and raising various state law claims. ² Defendant moved to compel arbitration of all the claims. The district court denied defendant's motion to compel arbitration as to plaintiffs' federal securities claims, but granted defendant's motion to compel arbitration of the state claims. Defendant appeals, and plaintiffs cross-appeal.

DISCUSSION

The question before us is whether the exception clause in the arbitration agreement permits plaintiffs the option of choosing whether to submit to arbitration controversies involving claims arising under federal securities laws. A corollary to this question is whether the state claims fall within the language "controversies involving claims arising under Federal securities laws."

The Federal Arbitration Act ("FAA") provides that written arbitration clauses in securities agreements are valid and enforceable. 9 U.S.C. Sec. 2 (1988). Section 2 of the FAA is "a congressional declaration of a liberal federal policy favoring arbitration agreements." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id. (footnote omitted). Yet, arbitration agreements are, essentially, creatures of contract. Goldberg v. Bear, Stearns & Co., 912 F.2d 1418, 1419 (11th Cir.1990). Accordingly, parties to a contract will not be required to arbitrate when they have not agreed to do so. Id. (citing Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989)). Likewise, parties who do agree to arbitrate are not prevented from excluding certain claims from the scope of their arbitration agreement. Volt, 489 U.S. at 478, 109 S.Ct. at 1255 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 3354-55, 87 L.Ed.2d 444 (1985) (citation omitted)). Our circuit has recognized that

[t]he courts are not to twist the language of the contract to achieve a result which is favored by federal policy but contrary to the intent of the parties. The Federal Arbitration Act (FAA) "simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms."

Goldberg, 912 F.2d at 1419-20 (quoting Volt, 489 U.S. at 478, 109 S.Ct. at 1255). The FAA was designed "to make arbitration agreements as enforceable as other contracts, but not more so." Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 1806 n. 12, 18 L.Ed.2d 1270 (1967).

Defendant argues that the clause in the arbitration agreement, "Except to the extent that controversies involving claims arising under Federal securities laws may be litigated" is ambiguous. If ambiguous,

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