Coenen v. RW Pressprich & Co., No. 153

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtMEDINA, MANSFIELD and MULLIGAN, Circuit
Citation453 F.2d 1209
PartiesDale S. COENEN, Plaintiff-Appellant, v. R. W. PRESSPRICH & CO., Inc., Defendant-Appellee, and Stirling Homex Corporation, Defendant.
Docket NumberDocket 71-1714.,No. 153
Decision Date12 January 1972

453 F.2d 1209 (1972)

Dale S. COENEN, Plaintiff-Appellant,
v.
R. W. PRESSPRICH & CO., Inc., Defendant-Appellee, and Stirling Homex Corporation, Defendant.

No. 153, Docket 71-1714.

United States Court of Appeals, Second Circuit.

Submitted October 20, 1971.

Decided January 12, 1972.


453 F.2d 1210

Royall, Koegel & Wells, New York City (David F. Dobbins and Thomas W. Towell, Jr., New York City, on the brief), for plaintiff-appellant.

Winthrop, Stimson, Putnam & Roberts, New York City (Stephen A. Weiner and Arnold S. Anderson, New York City, on the brief), for defendant-appellee.

Before MEDINA, MANSFIELD and MULLIGAN, Circuit Judges.

MEDINA, Circuit Judge:

The question raised by this appeal is the applicability of the arbitration clause contained in the New York Stock Exchange Constitution to a claim which: (1) arose before the plaintiff joined the Stock Exchange; (2) alleges violation of the Securities Exchange Act of 1934; and (3) alleges violation of the Sherman and Clayton Acts. For the reasons that follow we hold that such a claim is subject to arbitration.

In 1968, while a director of Stirling Homex Corporation, Dale S. Coenen purchased 90,000 shares of Stirling Homex stock for investment purposes. The stock certificates bore the standard restriction against transfer unless the shares were registered, or unless Stirling was furnished with an opinion of counsel satisfactory to Stirling, to the effect that such registration was not required. In the Spring of 1970 Coenen, needing capital, desired to sell a substantial portion of the 90,000 shares. He contacted R. W. Pressprich & Co. and asked them to handle the sale of the shares. The sale took place on September 25, 1970.

In November, 1970, Coenen & Co., a brokerage house of which Coenen is an officer, applied for membership in the New York Stock Exchange. The application was approved and Coenen & Co. became a member of the Exchange on December 31, 1970. As an officer, Coenen automatically became an allied member.

On January 6, 1971 Coenen's counsel sent Pressprich a copy of a complaint that Coenen was going to file against Pressprich and Stirling, and asked if there was any chance of settlement. The complaint alleged that Pressprich and Stirling conspired to force Coenen into selling the Stirling stock at an unconscionably low price by refusing to allow the transfer of the shares free of the restrictive legend until the low price was

453 F.2d 1211
agreed upon. Coenen's complaint asserted three causes of action: one arising under the common law and the Uniform Commercial Code; another arising under the Securities Exchange Act of 1934; and the third arising under the Sherman and Clayton Acts

On February 16, 1971, Pressprich demanded, in writing, that the controversy be submitted to arbitration in accordance with the Constitution of the New York Stock Exchange. Coenen replied by commencing the present action, in the United States District Court for the Southern District of New York, on February 18, 1971. Pressprich moved to stay the action, pending arbitration, on March 19, 1971. The motion was granted by Judge Metzner, ruling that by agreeing to abide by the Rules and Constitution of the Stock Exchange, Coenen agreed to submit "any controversy" with a member firm to arbitration, and that this controversy is a proper one for arbitration. Reported in 329 F.Supp. 1296 (S.D.N.Y.1971). For the reasons that follow, we agree with this conclusion.

I

Coenen Agreed to Arbitrate

A

We turn our attention first to the question of whether Coenen agreed to arbitrate. This issue is governed by federal law by virtue of the Arbitration Act, Title 9 of the United States Code.

Section 2 of the Act, 9 U.S.C. Section 2 (1970), makes enforceable all arbitration agreements concerning transactions relating to commerce. Section 3 of the Act, 9 U.S.C. Section 3 (1970), authorizes a Federal District Court to stay proceedings pending arbitration when there is an arbitration agreement that is validated by Section 2. The sale of securities here constitutes a transaction relating to commerce for the purposes of the Arbitration Act. Once a dispute is covered by the Act, federal law applies to all questions of interpretation, construction, validity, revocability, and enforceability. Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir.1959), cert. granted, 362 U.S. 909, 80 S.Ct. 682, 4 L.Ed.2d 618, dismissed under Rule 60, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37 (1960).

Article VIII, Section 1 of the New York Stock Exchange Constitution provides:

Any controversy between parties who are members, allied members, member firms or member corporations shall, at the instance of any such party, and any controversy between a nonmember and a member or allied member or member firm or member corporation arising out of the business of such member, allied member, member firm or member corporation, * * * shall, at the instance of such nonmember, be submitted for arbitration, in accordance with the provisions of the Constitution and the rules of the Board of Governors.

An examination of the applicable federal law on the subject convinces us that Coenen is bound by these terms.

The constitution and rules of a stock exchange constitute a contract between all members of the exchange with each other and with the exchange itself * * *.
Since the rules of the Exchange "constitute a contract between the members, the arbitration provisions which they embody have contractual validity." * * * The Exchange provisions requiring arbitration constitute an agreement to arbitrate which is binding upon both parties.

Brown v. Gilligan, Will & Co., 287 F. Supp. 766, 769-770 (S.D.N.Y.1968). See also Axelrod & Co. v. Kordich, Victor & Neufeld, 451 F.2d 838 (2d Cir. 1971).

Coenen, moreover, signed a pledge, in his application for membership, that he would "abide by the Constitution of the Exchange as the same has been or shall be from time to time amended, and by all rules adopted pursuant to the Constitution

453 F.2d 1212
* * *." Accordingly, we have no doubt that Coenen agreed to arbitrate

In thus agreeing to arbitrate "any controversy between * * * members * * *," did Coenen agree to arbitrate the present dispute with Pressprich?

"The issue of arbitrability, i.e., whether a particular dispute is covered by an arbitration clause, being a question of `interpretation and construction,'" is governed by federal law. Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382, 385 (2d Cir.1961). In deciding the question of arbitrability, the "federal policy is to construe liberally arbitration clauses, to find that they cover disputes reasonably contemplated by this language, and to resolve doubts in favor of arbitration * * *." Metro Industrial Painting Corp. v. Terminal Construction Co., supra, 287 F.2d 382, 385 (2d Cir.1961). With this liberal federal policy in mind, we turn to an examination of the clause at issue in this case.

The drafters of the New York Stock Exchange arbitration clause intended it to be very broad. This is evident when it is compared to the Stock Exchange provision governing the arbitration of disputes between a member and a non-member, which must arise out of the business of the member. The purpose behind the drafting of such a broad arbitration clause was, as much as possible, to keep disputes between members out of the courts. This policy is entirely consistent with the congressional grant of power to Stock Exchanges to govern themselves, contained in the Securities Exchange Act of 1934. See Axelrod & Co. v. Kordich, Victor & Neufeld, supra, 451 F.2d at 840 (2d Cir. 1971); Brown v. Gilligan, Will & Co., supra, 287 F.Supp. 766...

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166 practice notes
  • Pioneer Properties, Inc. v. Martin, No. 81-1137.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • March 3, 1983
    ...557 F. Supp. 1366 the court is mindful of the federal policy favoring arbitration of disputes. Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1212 (2nd Cir.), cert. denied 406 U.S. 949, 92 S.Ct. 2045, 32 L.Ed.2d 337 (1972). In determining whether the language of the parties' agreement to a......
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...Inc., 514 F.2d 614, 616-617 (CA1 1975); Germany v. River Terminal R. Co., 477 F.2d 546, 547 (CA6 1973); Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1211-1212 (CA2 1972); Hart v. Orion Insurance Co., 453 F.2d 1358, 1360-1361 (CA10 1971). 32. See n. 34, infra. The Arbitration Act is somet......
  • Chloe Z Fishing Co. v. Odyssey re (London) Ltd., No. 99-2521-IEG RBB.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 26, 2000
    ...arbitrate a particular Page 1253 dispute" and finding that law in the analytical framework of the FAA); Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1211 (2d Cir.1972) ("Once a dispute is covered by the [federal Arbitration] Act, federal law applies to all questions of [the arbitration a......
  • Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, No. 77-2566
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • July 17, 1978
    ...Hospital, 366 F.Supp. 513, 514 (M.D.Pa. 1973), Aff'd, 503 F.2d 1398 (3d Cir. 1974). As the court in Coenen v. R. W. Pressprich & Co., 453 F.2d 1209, 1211 (2d Cir. 1972), stated, "(o)nce a dispute is covered by the (federal Arbitration) Act, federal law applies to all questions of (the arbit......
  • Request a trial to view additional results
166 cases
  • Pioneer Properties, Inc. v. Martin, No. 81-1137.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • March 3, 1983
    ...557 F. Supp. 1366 the court is mindful of the federal policy favoring arbitration of disputes. Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1212 (2nd Cir.), cert. denied 406 U.S. 949, 92 S.Ct. 2045, 32 L.Ed.2d 337 (1972). In determining whether the language of the parties' agreement to a......
  • Moses Cone Memorial Hospital v. Mercury Construction Corporation, No. 81-1203
    • United States
    • United States Supreme Court
    • February 23, 1983
    ...Inc., 514 F.2d 614, 616-617 (CA1 1975); Germany v. River Terminal R. Co., 477 F.2d 546, 547 (CA6 1973); Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1211-1212 (CA2 1972); Hart v. Orion Insurance Co., 453 F.2d 1358, 1360-1361 (CA10 1971). 32. See n. 34, infra. The Arbitration Act is somet......
  • Chloe Z Fishing Co. v. Odyssey re (London) Ltd., No. 99-2521-IEG RBB.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 26, 2000
    ...arbitrate a particular Page 1253 dispute" and finding that law in the analytical framework of the FAA); Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1211 (2d Cir.1972) ("Once a dispute is covered by the [federal Arbitration] Act, federal law applies to all questions of [the arbitration a......
  • Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, No. 77-2566
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • July 17, 1978
    ...Hospital, 366 F.Supp. 513, 514 (M.D.Pa. 1973), Aff'd, 503 F.2d 1398 (3d Cir. 1974). As the court in Coenen v. R. W. Pressprich & Co., 453 F.2d 1209, 1211 (2d Cir. 1972), stated, "(o)nce a dispute is covered by the (federal Arbitration) Act, federal law applies to all questions of (the arbit......
  • Request a trial to view additional results

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