Dickstein v. DuPont, No. 7808.

• Court: U.S. Court of Appeals — First Circuit
• Writing for the Court: ALDRICH, , McENTEE and COFFIN, Circuit
• Citation: 443 F.2d 783
• Docket Number: No. 7808.
• Decision Date: 02 June 1971
• Parties: Merritt DICKSTEIN, Plaintiff, Appellant, v. Edmond duPONT et al., as they are partners of Francis I. duPont & Co., Defendants, Appellees.

443 F.2d 783 (1971)

Merritt DICKSTEIN, Plaintiff, Appellant,
v.
Edmond duPONT et al., as they are partners of Francis I. duPont & Co., Defendants, Appellees.

No. 7808.

United States Court of Appeals, First Circuit.

June 2, 1971.

443 F.2d 784

C. Keefe Hurley, Boston, Mass., with whom Earle C. Cooley, David S. Mortensen, Gary W. Carlson, and Hale & Dorr, Boston, Mass., were on brief, for plaintiff, appellant.

James C. Heigham, Boston, Mass., with whom William Diller and Choate, Hall & Stewart, Boston, Mass., were on brief, for defendants, appellees.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

COFFIN, Circuit Judge.

Merritt Dickstein, employed as a "registered representative" by Francis I. duPont & Co., a member of the New York Stock Exchange, helped obtain the Valle's Steak House chain as a financial and underwriting client for duPont. He received a "finder's fee" of $2,000, which he claimed was "grossly inadequate". After an unsuccessful demand on duPont for a "fair and reasonable finder's fee", Dickstein brought this diversity action in federal court, seeking damages in the amount of $200,000 for breach of contract. DuPont did not file a responsive pleading, but instead moved under the Federal Arbitration Act, 9 U. S.C. § 3, to stay the action pending arbitration. After a hearing before the district court, duPont's motion was granted, 320 F.Supp. 150, and Dickstein appealed.¹

DuPont's motion was based on paragraph 34(j) of Dickstein's "Application for Approval of Employment" to the New York Stock Exchange (NYSE), pursuant to rule 345(a) (1) of the Exchange requiring registration with the NYSE of all persons seeking employment as a "registered representative". NYSE Form RE-1 Paragraph 34(j) states:

"I agree that any controversy between me and any member or member organization or affiliate or subsidiary thereof arising out of my employment or the termination of my employment 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."

Dickstein questions the applicability of the Federal Arbitration Act to his situation and the enforceability of the arbitration clause itself.

The Application was submitted jointly to the NYSE by duPont as

443 F.2d 785

"applicant" and Dickstein as "candidate". As a condition precedent to his employment by duPont, the application was an integral and mutually binding part of appellant's employment arrangement with duPont. Given this conclusion, appellant's argument that the promise to arbitrate disputes was not part of a "contract evidencing a transaction involving commerce", 9 U.S.C. § 2, fails, for it is clear that the creation of an employment relationship which involves commerce is a sufficient "transaction" to fall within section 2 of the Act. Cf. Bernhardt v. Polygraphic Co. of America, Inc., 350 U.S. 198, 200-201, 76 S.Ct. 273, 100 L.Ed. 199 (1956); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401 n. 7, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). Our resolution of this question also disposes of appellant's argument that the appellees did not have standing to invoke the arbitration provision. Under 9 U.S.C. § 3, the district court shall stay its proceedings "on application of one of the parties". The term "party" denotes either a party to the civil suit, which would include duPont, or a party to the arbitration provision, which under our above analysis of the "contract" would also include duPont. NYSE Constitution, Art. VIII, § 6

Equally unavailing is appellant's argument that he was a worker "engaged in foreign or interstate commerce" within the exceptions to the Arbitration Act set out in section 1. 9 U. S.C. § 1. Courts have generally limited this exception to employees, unlike appellant, involved in, or closely related to, the actual movement of goods in interstate commerce. Tenney Engineering, Inc. v. United Electrical Radio & Machine Workers, 207 F.2d 450, 452-453 (3d Cir. 1953); Signal-Stat Corp. v. Local 475, etc., 235 F.2d 298 (2d Cir. 1956), cert. denied, 354 U.S. 911, 77 S. Ct. 1293, 1 L.Ed.2d 1428 (1957), reh'g denied, 355 U.S. 852, 78 S.Ct. 7, 2 L.Ed. 2d 61 (1957). Finally appellant raises a charge of default on the part of duPont in failing to file a formal complaint in arbitration until six months after this suit was commenced. This court's decision in Hilti, Inc. v. Oldach, 392 F.2d 368 (1st Cir. 1968), where an 18-month lapse between the filing of the action and the motion for a stay was held insufficient to constitute waiver or default, supports a contrary conclusion. Furthermore, appellant, who was informally notified of duPont's arbitration claim shortly after this suit was begun, has alleged no prejudice from the half-year delay.

The second issue — the legality, and therefore the enforceability, of the arbitration agreement entered into by appellant — was injected into the case only after the complaint was filed and appellee called appellant's attention to the arbitration condition he had accepted in applying for employment. Subsequently, appellant's attorney, on being sent a copy of the Application for Approval of Employment form, and on being informed that Rule 345 of the Exchange would be violated by failure to arbitrate, responded that appellant would arbitrate but asserted the position that the requirement and enforcement of the Application violated sections 1 and 2 of the Sherman Antitrust Act.

The district court, noting the grant of self-regulatory authority to stock exchanges under the Securities Act of 1934, 15 U.S.C. § 78a et seq., see Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), held (1) that it was not "readily apparent" that conditioning approval of employment on submission to arbitration would result in unreasonable...