Cavanaugh v. McDonnell & Co.
| Citation | 357 Mass. 452,258 N.E.2d 561 |
| Court | United States State Supreme Judicial Court of Massachusetts |
| Decision Date | 05 May 1970 |
| Parties | , Fed. Sec. L. Rep. P 92,660 Alfred J. CAVANAUGH v. McDONNELL & COMPANY, Inc. |
Stephen A. Moore, Boston, for defendant.
Donald J. Wood, Boston, for plaintiff.
Before WILKINS, C.J., and SPALDING, KIRK, REARDON and QUIRICO, JJ.
The plaintiff, a resident of this Commonwealth, is a security salesman for the defendant, a member of the New York Stock Exchange, which does business in this Commonwealth. He brings this suit for discovery in aid of prospective arbitration proceedings which he plans to commence against the defendant in accordance with the constitution and rules of the exchange. Allegations of the bill set up a cause of action in deceit (see Pietrazak v. McDermott, 341 Mass. 107, 108, 167 N.E.2d 166; Powell v. Rasmussen, 355 Mass. 117, 119, 243 N.E.2d 167) in that the defendant intentionally made false representations of material facts to the plaintiff with intent that the plaintiff rely on them, that should he commence employment with the defendant, he would be assigned certain institutional accounts; that the plaintiff, in reliance on the defendant's representations, gave up his employment and accepted employment with the defendant; and that the defendant failed to assign the accounts to the plaintiff, who suffered financial loss. As matter of law, this controversy must be settled by the arbitration procedure prescribed by the constitution and rules of the exchange. This is the plaintiff's only remedy. The methods of discovery under the General Laws and the rules of this court are 'legally unavailable' to the plaintiff. The bill prays for the production of various records and for leave to take the depositions of three officers.
The defendant demurred to the bill on two grounds: (1) The discovery requested is not incidental to any court proceeding or to any relief which a court has power to grant. (2) The allegations are insufficient to constitute a cause of action against the defendant 'which would require the relief sought by the bill.'
An interlocutory decree was entered overruling the demurrer. The defendant appealed. G.L. c. 231, § 96. The judge being of opinion that the question of law raised by the demurrer so affects the merits of the controversy that the matter ought, before further proceedings, to be determined by the full court, reported the case.
The plaintiff has not argued invalidity of that part of the contract which prohibits resort to all courts, both in this Commonwealth and elsewhere, in favor of arbitration proceedings in New York City. See Nashua River Paper Co. v. Hammermill Paper Co., 223 Mass. 8, 16, 111 N.E. 678; Cadillac Auto. Co. of Boston v. Engeian, 339 Mass. 26, 30, 157 N.E.2d 657; Jenkins v. General Acc. Fire & Life Assur. Corp. Ltd., 349 Mass. 699, 701--702, 212 N.E.2d 464. As to this, we need express no opinion.
The bill is 'for discovery only, where no felief is sought.' See Owens-Illinois Glass Co. v. Bresnahan, 322 Mass. 629, 630--631, 79 N.E.2d 195, 196; MacPherson v. Boston Edison Co., 336 Mass. 94, 100, 142 N.E.2d 758. In such a case, equity is asked to use its ancillary jurisdiction.
'There is no doubt of the jurisdiction of the court to entertain bills for discovery, although the usefulness of such bills has, to a great extent, been taken away by statutes authorizing interrogatories to the adverse party and compelling such party to testify at the trial.' American Sec. & Trust Co. v. Brooks, 225 Mass. 500, 501, 114 N.E. 732. 'Various statutes indicate that equitable jurisdiction over bills for discovery still exists.' MacPherson v. Boston Edison Co., 336 Mass. 94, 99, 142 N.E.2d 758, 763. 'This jurisdiction does not depend upon statute, but is a part of the general jurisdiction of a court of equity.' Owens-Illinois Glass Co. v. Bresnahan, 322 Mass. 629, 631, 79 N.E.2d 195.
It cannot be doubted that Massachusetts equity courts retain the power to grant discovery in aid of actions at law. But when it comes to discovery in aid of arbitration proceedings, a further problem is presented.
We next consider that question.
Since jurisdiction to grant discovery was first recognized at a time when cases were decided in the courts and before the practice of references to arbitration, it is not surprising that the pertinent decisions in this Commonwealth reflect that fact in their language defining the scope and purpose of that jurisdiction. For example, in Wilson v. Webber, 2 Gray, 558, 562, we read, 'The discovery sought must be material to enable the plaintiff in a bill to support or defend a suit.' Also in Post & Co. v. Toledo, Cincinnati & St. Louis R.R., 144 Mass. 341, 347, 11 N.E. 540, the purpose of discovery is stated as being 'to aid the plaintiff in a suit which he intends immediately to bring, as well as in a suit already brought, if the bill discloses a cause of action * * *.' See American Sec. & Trust Co. v. Brooks, 225 Mass. 500, 502, 114 N.E. 732, supra.
No case in this Commonwealth seems to have made specific feference to the propriety or impropriety of discovery in aid of arbitration. We have, however, been impressed by an unequivocal statement in Pomeroy, Eq.Jur. (5th ed.) § 196: 'It is well settled that a discovery will not be granted in aid of a controversy before arbitrators, where the submission to arbitration was the voluntary act of the parties; 1 but the reason of this rule fails, and a discovery will be compelled in aid of a compulsory reference to arbitrators or referees ordered by the court in an action.' 2
On the practical aspect of the case we may assume that the plaintiff on the merits is in need of the records and other information he seeks; that this material, which is wholly in the defendant's control, is of the type properly the subject of discovery. On the other hand, the arbitration will have to be held in New York City under the Constitution of the New York Stock Exchange, art. VIII, §§ 1, 5. In a sense this was the result of agreement by the parties, but an agreement the language of which, we infer, was the defendant employer's.
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