Jevne v. Superior Court
| Decision Date | 19 November 2003 |
| Docket Number | No. B167044,B167044 |
| Citation | 6 Cal.Rptr.3d 542,113 Cal.App.4th 486 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Jack JEVNE et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; JB Oxford Holdings, Inc., et al., Real Parties in Interest. |
Zilinskas & Woosley, Victor G. Zilinskas and Eric A. Woosley for Petitioner.
No appearance for Respondent.
Miller Milove & Kob, Jeffrey S. Kob, San Diego, and W. Richard Sintek for Real Parties in Interest.
Bill Lockyer, Attorney General, Andrea Lynn Hoch, Chief Assistant Attorney General, David S. Chaney, Senior Assistant Attorney General, and Amy J. Winn, Deputy Attorney General, for Amicus Curiae Attorney General Bill Lockyer.
Milbank, Tweed, Hadley & McCloy, Los Angeles, Douglas W. Henkin and M. Benjamin Valerio for Amicus Curiae New York Stock Exchange, Inc.
Gibson, Dunn & Crutcher, Irvine, and Mark A. Perry for Amicus Curiae NASD Dispute Resolution, Inc.
Giovanni P. Prezioso, General Counsel, Jacob H. Stillman, Solicitor, and Eric Summergrad, Deputy Solicitor; Of Counsel Meyer Eisenberg, Deputy General Counsel, for Amicus Curiae Securities and Exchange Commission.
Horovitz & Levy, David S. Ettinger and Mitchell C. Tilner for Amicus Curiae Judicial Council of California.
Jack Jevne and Avalon Investments, S.A. (collectively "Jevne") filed a petition for writ of mandate directing respondent Superior Court to vacate its order denying Jevne's motion: (1) to set aside the court's prior order compelling binding arbitration of Jevne's claim against Real Parties, a brokerage and financial services firm; and (2) to restore the matter to the active civil trial calendar. Below Jevne argued the agreement to arbitrate was unenforceable because the designated dispute resolution provider, NASD Dispute Resolution, Inc. (hereinafter known as "NASD") had refused to appoint a replacement arbitrator during the arbitration unless Jevne agreed to waive application of the recently enacted California ethics standards for neutral arbitrators (the "California Standards"). Jevne claimed that notwithstanding his agreement to arbitrate in accord with the NASD rules and procedures, which include provisions for arbitrator appointments, disqualifications and disclosure of conflicts of interest, he was entitled to the benefit of the California Standards. The trial court disagreed concluding, in view of his agreement to arbitrate under the NASD rules, the California Standards did not apply and were, in essence, preempted by federal law.
This writ petition raises several issues of first impression for the California State Courts, including, whether the Judicial Council of California acted within its authority in drafting the California Standards and whether they are preempted by the Federal Arbitration Act (FAA) and/or the Securities Exchange Act of 1934. As we discuss more fully below, the Judicial Council decision to make the California Standards applicable to arbitrators appointed by dispute resolution providers was not inconsistent with the intent of the Legislature. In addition, the California Standards are not hostile to arbitration and thus, in the abstract, the FAA does not preempt them. Notwithstanding these conclusions, we find under the circumstances presented here, the California Standards are preempted by the Securities Exchange Act of 1934, in that they conflict with NASD's arbitration procedures authorized by the Securities and Exchange Commission. Consequently, we conclude the trial court did not err in denying Jevne's motion and accordingly, we deny the writ of mandate.
In the summer of 2000, Jevne filed an action against Real Parties, a brokerage and financial services firm and a member of the NASD, asserting causes of action for negligence, breach of fiduciary duties and conversion in connection with funds which Jevne alleged had been improperly withdrawn from an account Real Parties maintained on his behalf.
Real Parties moved to compel arbitration of the matter based on an arbitration provision in an agreement relating to one of Jevne's accounts. The provision required all disputes arising out of the relationship between the parties to be settled through binding arbitration in accordance with the rules and procedures of the NASD, a self-regulatory organization (SRO), registered with the Securities and Exchange Commission (SEC) to, among other functions, administer securities arbitrations.1 Jevne did not oppose the motion to compel, and in February 2001, the court granted it.
Thereafter in May 2001, the parties signed a Uniform Submission Agreement memorializing their agreement to have the arbitration conducted in accordance with NASD rules and overseen by NASD's Director of Arbitration. During the summer of 2001, the parties selected a three arbitrator panel pursuant to the NASD procedures for appointing arbitrators.
The arbitration commenced and Real Parties filed a demurrer to Jevne's claims. In July 2002, the arbitration panel sustained the demurrer with leave to amend. Jevne amended his claim. Real Parties filed a second demurrer and the matter was set for hearing in October 2002. Prior to the hearing, one of the arbitrators voluntarily recused himself.
In late September 2002, NASD stopped appointing arbitrators in NASD arbitrations in California in light of the California Standards which imposed new ethical obligations (including requirements for disclosure of potential conflicts of interests and procedures for disqualification of arbitrators) upon all persons appointed to serve as arbitrators in California after July 1, 2002. The NASD informed Jevne it would not appoint a replacement arbitrator and would not proceed with the arbitration unless he agreed to waive the California Standards or he agreed to have his arbitration conducted in another state.
Jevne would not agree to the waiver and instead filed a motion in the trial court for an order to set aside the court's prior order compelling binding arbitration and to restore the matter to the active civil trial calendar. Jevne argued the California Standards governed his arbitration and therefore the agreement to arbitrate was no longer enforceable because of NASD's refusal to proceed with the arbitration without a waiver of the California Standards.
The court denied the motion concluding, in essence, federal law preempted the California Standards. Specifically, the court found Jevne had agreed to arbitrate under the NASD rules, the arbitration was governed by the FAA and the California Standards could not supplant the NASD rules.
Jevne filed a petition for a writ of mandate and this court issued an Order to Show Cause.
The parties addressed the issue of whether the California Standards were preempted by the Securities and Exchange Act of 1934 and/or the FAA. Because no California State Court has directly addressed this issue2 and because of its far reaching implications for the general public, various governmental entities and national institutions, this court invited amici curiae briefing from the NASD and the NYSE3 (hereinafter NASD and NYSE are collectively referred to as the SROs) the SEC, the California Attorney General, and the Judicial Council of California on the issue of federal preemption.
We also requested the parties and the amici curiae to address another issue considered in the federal litigation and implicated here, specifically whether the California Standards may be applied to SROs as a matter of California law in light of the definition of "neutral arbitrator" contained in Code of Civil Procedure section 1280, subdivision (d) which does not expressly include arbitrators selected or appointed by a dispute resolution provider organization. It is to these matters which we now turn our attention.
The Real Parties and the SROs argue the Judicial Council exceeded its legislative mandate in drafting the California Standards to apply to arbitrators appointed by dispute resolution provider organizations (DRPOs).4 The Real Parties and the SROs assert the Legislature directed the Judicial Council to promulgate ethical rules for "neutral arbitrators" and they point out the definition of "neutral arbitrator" in Code of Civil Procedure section 1280 does not include arbitrators appointed by DRPOs. Thus, they contend the California Standards cannot apply to arbitrators appointed by the SROs. As we shall explain, we disagree.
The Judicial Council is empowered to adopt rules for court administration, practice and procedure5 "not inconsistent with statute." (Cal. Const., art. VI, § 6.) To comply with this requirement, a rule drafted by the Judicial Council must not conflict with statutory intent. (People v. Hall (1994) 8 Cal.4th 950, 960-963, 35 Cal.Rptr.2d 432, 883 P.2d 974.) Nonetheless a rule promulgated by the Judicial Council may go beyond the specific provisions of a related statute so long as the rule reasonably furthers the statutory purpose. (Trans-Action Commercial Investors, Ltd. v. Firmater, Inc. (1997) 60 Cal.App.4th 352, 364, 70 Cal.Rptr.2d 449.) Consequently whether the Judicial Council exceeded its authority here turns on whether including DRPOs within the California Standards furthers the statutory purpose, which is determined by examining the Legislative intent.
To ascertain the intent of the Legislature the court first looks to the language of the statute. (Elden v. Superior Court (1997) 53 Cal.App.4th 1497, 1504, 62 Cal.Rptr.2d 322.) If the meaning is without ambiguity, doubt, uncertainty and would not otherwise result in absurd consequences which the Legislature could not have intended, then the language of the statute controls. (Ibid.; Horwich v. Superior Court (1999) 21 Cal.4th 272, 276, 87 Cal.Rptr.2d 222, 980 P.2d 927.) If, however, the meaning is not clear, then the court...
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Credit Suisse First Boston Corp. v. Grunwald
....... No. 03-15695. . United States Court of Appeals, Ninth Circuit. . Argued and Submitted December 2, 2003. . Filed March 1, 2005. . ...We recognize that the California Court of Appeal addressed this issue of California law in Jevne v. Superior Court, 6 Cal.Rptr.3d 542 (Ct.App.2003). The California Supreme Court, however, ......