Crawford v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
| Decision Date | 28 February 1973 |
| Citation | 341 N.Y.S.2d 673,41 A.D.2d 112 |
| Court | New York Supreme Court — Appellate Division |
| Parties | James CRAWFORD, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. and David R. Pierson, Respondents. |
Bond, Schoeneck & King, Syracuse, for appellant (Robert E. Moses, Syracuse, of counsel).
Hancock, Estabrook, Ryan, Shove & Hust, Syracuse, for respondents (Robert A. Small, Syracuse, of counsel).
Before GOLDMAN, P.J., and DEL VECCHIO, WITMER, CARDAMONE and SIMONS, JJ.
The appellant, James Crawford, was employed for two years as a securities salesman by respondent Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) in an office managed by respondent Pierson. He claims respondent owes him $8,850 for commissions he earned working for them and commenced an action seeking recovery. Respondent moved to dismiss the complaint and to compel arbitration under CPLR 7502(a) before the New York Stock Exchange claiming that such was provided by an alleged contract between the parties dated July 16, 1967. While this motion was pending, appellant served on respondent a notice of intention to arbitrate under CPLR 7503(c) naming the American Arbitration Association as arbitrator.
The Matter came on to be heard before Special Term which vacated arbitration before the American Arbitration Association (AAA) and directed appellant, Crawford, to arbitrate his claim before the New York Stock Exchange (NYSE), and dismissed appellant's complaint without prejudice pending the availability of arbitration. In our view, this was error.
On July 16, 1967 the appellant signed an application to the NYSE to be registered with the Exchange. Such application signed solely by appellant could not be construed to be a contract between appellant and respondent, Merrill Lynch. It did provide, however, that any controversy between Crawford and any member of the Exchange shall be settled by arbitration at the instance of any such party 'In accordance with the arbitration procedure prescribed in the Constitution and Rules then obtaining of the New York Stock Exchange.' An examination of section 1 of Article VIII of the Constitution of the New York Stock Exchange and the Rules of the Exchange reveals that controversies between members shall 'at the instance of any such party' and controversies between a non-member and a member shall 'at the instance of such non-member' be submitted for arbitration in accordance with the Constitution and Rules of the Board of Governors. It appears clear from a reading of this provision that arbitration before the NYSE between a member and non-member, the case here, may be compelled only at the instance of the non-member. The Constitution and Rules contain no provision permitting respondent member of the NYSE to compel appellant, a non-member, to arbitrate his claim before the NYSE. Appellant had the option of arbitrating before the NYSE or not, as he chose.
In this case appellant chose to arbitrate before the AAA. The mailing receipt shows that appellant's demand for arbitration before the AAA was received by respondent on November 25, 1970. Thereafter, respondent has ten days from the date of receipt of the demand to move to stay the demanded arbitration (Knickerbocker Insurance Co. v. Gilbert, 28 N.Y.2d 57, 320 N.Y.S.2d 12, 268 N.E.2d 758; Matter of Logan, Inc. (Stillwater Worsted), 31 A.D.2d 208, 295 N.Y.S.2d 853, affd. 24 N.Y.2d 898, 301 N.Y.S.2d 636, 249 N.E.2d 477). Respondent's order to show cause dated and served upon appellant on December 9, 1970 (14 days after receipt of the demand), was not timely and precludes respondent from 'objecting that a valid agreement was not made or has not been complied with'. (CPLR 7503(c)).
To say that by their failure to move to stay the demanded arbitration within 10 days respondent conceded only 'that there was an arbitrable dispute under a valid contract' flies in the face of the statute. The statute precludes an objection that the arbitration agreement 'has not been complied with'--the very objection respondent raises by its claim that arbitration before the AAA as sought by appellant's demand is not in accordance with the obligation to arbitrate.
Were we to reach the question of whether the arbitration demanded by appellant is in compliance with the agreement, we would conclude that it is. The dissent asserts that appellant waived his rights in the July 16, 1967 application and agreed to arbitrate before the NYSE. We cannot agree that paragraph J of the application so provides. The Constitution of the NYSE contains no provision which allows a member of the NYSE to compel a non-member to arbitrate a claim before the Exchange.
In short, appellant never agreed to arbitrate before the NYSE but merely to comply with the Constitution and Rules of the NYSE. These gave him, as a non-member of the Exchange, the option of seeking or not seeking arbitration before that body. Thus, the right appellant chose to exercise was one granted him by the Rules of the organization of which respondent was a member and of which appellant was not. Furthermore, regardless of respondent's claimed right to demand arbitration before the NYSE by the terms of the July 16, 1967 application signed by appellant, respondent is precluded from objecting to appellant's failure to comply with that alleged agreement because of its failure to move timely against appellant's demand for arbitration before the AAA (CPLR 7503(c)).
The orders should be reversed and the motions denied.
Orders reversed with costs and motions denied.
Whether the writing signed by appellant be considered as a 'registration application' or a contract of employment with respondent, it was a written agreement to arbitrate within the purview of CPLR 7501. As such it bound him to arbitrate before the NYSE all disputes arising out of his employment with respondent (see Matter of Alexander, Inc. (Glasser), 31 N.Y.2d 270, 338 N.Y.S.2d 609, 290 N.E.2d 813). The appellant concedes the existence of the contract in his notice of intention to arbitrate and also in the moving papers. Furthermore, in his attorney's affidavit, dated November 27, 1970, appellant concedes that the agreement requires arbitration before the NYSE, but he offers matters in avoidance. He argues that he is not bound by the contract because (a) the contract has expired (but see Matter of Int'l. Ass'n. of Machinists (Buffalo Eclipse Corp.), 12 A.D.2d 875, 210 N.Y.S.2d 214); (b) respondent Pierson cannot enforce the agreement because he did not sign it (he is not required to do so, Matter of Helen Whiting, Inc. (Trojan Textile Corp.), 307 N.Y. 360, 121 N.E.2d 367) and (c) 'plaintiff's agreement to arbitrate before the New York Stock Exchange' did not contemplate the lengthy delay now imposed on the parties and is therefore no longer binding. These admissions are clear evidence that it was the parties' agreement and intention to arbitrate their disputes and to do so before the Stock Exchange. They are judicial admissions binding on appellant and sufficient to support the trial court's order compelling arbitration before the Stock Exchange.
Nevertheless, the majority proceed to interpret that contract otherwise. We cannot do so. The established public policy of this State favors arbitration. Upon this motion under CPLR 7503 the court's responsibility is limited to a determination of whether the three 'threshold' propositions have been met, i.e., (1) is there a written agreement by the parties to arbitrate, (2) is there a dispute within the terms of that agreement, (3) is such dispute time barred (Matter of Exercycle Corp. (Maratta), 9 N.Y.2d 329, 214 N.Y.S.2d 353, 174 N.E.2d 463). The interpretation of the contract, indeed, whether or not it is even in existence or has been rescinded, is for the arbitrator to decide (Matter of...
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Crawford v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
...7503 (subd. (c)) 'thereafter * * * precluded from objecting that a valid agreement was not made or has not been complied with'. (41 A.D.2d 112, 341 N.Y.S.2d 673.) We agree that the notice satisfied the technical requirements of the statute 'specifying (as it did) the agreement pursuant to w......