Mayaja, Inc. v. Bodkin

• Decision Date: 24 October 1986
• Docket Number: No. 85-2762,85-2762
• Parties: , Fed. Sec. L. Rep. P 93,007, RICO Bus.Disp.Guide 6437 MAYAJA, INC., S.A. Orart, Elias Sheinberg, and Marcia Sheinberg, Plaintiffs- Appellees, v. Joseph F. BODKIN, Nicholas S. Bustamante, and Shearson Lehman Brothers, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 157

803 F.2d 157

55 USLW 2316, Fed. Sec. L. Rep. P 93,007,

RICO Bus.Disp.Guide 6437

MAYAJA, INC., S.A. Orart, Elias Sheinberg, and Marcia

Sheinberg, Plaintiffs- Appellees, v. Joseph F. BODKIN, Nicholas S. Bustamante, and Shearson

Lehman Brothers, Inc., Defendants-Appellants.

No. 85-2762.

United States Court of Appeals, Fifth Circuit.

Oct. 24, 1986.

William D. Sims, Jr., Jenkens & Gilchrist, Will S. Montgomery, Dallas, Tex., for defendants-appellants.

Charles B. Gorham, Charles R. Shaddox, San Antonio, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Western District of Texas.

Before GEE, RANDALL and DAVIS, Circuit Judges.

RANDALL, Circuit Judge:

I.

In July of 1985, plaintiffs Mayaja, Inc. (Mayaja), Orart S.A. Texas, Inc. (Orart), and Elias and Marcia Sheinberg brought suit against defendants based upon a series of transactions involving their financial management and commodity accounts with defendant Shearson Lehman Brothers, Inc. (Shearson). Both Mayaja and Orart are closely-held private corporations whose officers and directors are members of the Sheinbergs' family. Mayaja and Orart allege that defendant Bustamante, the manager of their discretionary commodity accounts with Shearson, conducted a number of unauthorized transactions on the accounts with the complicity of his supervisor, defendant Bodkin, resulting in staggering losses. The Sheinbergs allege that Bustamante forged their signatures and withdrew money from their financial management account in order to meet margin calls on the commodity accounts of Mayaja and Orart. The plaintiffs assert against defendants claims of securities fraud under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78j(b), and Rule 10b-5 of the Securities and Exchange Commission. Plaintiffs also assert civil RICO claims based upon predicate acts of mail and wire fraud, in violation of 18 U.S.C. Secs. 1341 and 1343, as well as upon the acts of securities fraud independently asserted. ¹

Defendants responded to the complaint with a motion to compel arbitration. Plaintiffs had agreed to arbitrate "any controversy arising out of or relating to [their] accounts, to transactions with [Shearson] ... or to [their] agreement[s] or the breach thereof" when they signed their respective agreements. ² The defendants argued that the Supreme Court's decisions in Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), and in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., --- U.S. ----, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), implicitly overruled established precedent in this circuit holding that securities fraud claims under the 1934 Act are not arbitrable. E.g., Sibley v. Tandy Corp., 543 F.2d 540 (5th Cir.1976), cert. denied, 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82 (1977). Defendants also asserted that these same Supreme Court decisions argue for the arbitrability of the RICO claims.

The district court found that the Court's opinions specifically declined to address the question of the arbitrability of 1934 Act claims. Holding that Justice White's suggestion that 1934 Act claims may be arbitrable, contained in his concurring opinion in Byrd, was insufficient to overcome established precedent in this circuit, the court below denied the motion to compel arbitration.

On appeal of the order denying the motion to compel arbitration, ³ we affirm in part and reverse in part.

II.

This appeal presents the question of whether, under the Federal Arbitration Act, 9 U.S.C. Secs. 1-14, plaintiffs' securities fraud and RICO claims must be submitted to arbitration. Like any decision whether to order arbitration under the Act, the inquiry in this case divides into two broad parts: first, did the parties agree to arbitrate the disputes in question, and, second, did Congress intend that the claims sub judice be arbitrable? See Mitsubishi, 105 S.Ct. at 3354, 3355. Accordingly, we first examine whether plaintiffs' arbitration agreements encompass the statutory claims asserted; in Part III we consider the arbitrability of these claims.

As a preliminary matter, we note that the contracts before us involve "commerce" within sections 1 and 2 of the Act sufficient to bring sections 3 and 4 of the Act into play. Agreements to transact in commodities futures without question involve interstate "commerce" as that term is defined in section 1, ⁴ and an agreement to transact in securities is no less interstate in nature. Having determined the applicability of the Arbitration Act to the instant proceeding, we now pause to consider whether "the issue involved in [this] suit or proceeding is referable to arbitration under such an agreement." 9 U.S.C. Sec. 3.

We find that the arbitration clauses before us encompass the claims asserted in this dispute. Both the 1934 Act claims and the RICO claims "aris[e] out of or relat[e] to" the plaintiffs' accounts or transactions with Shearson: the securities fraud allegations and the other acts predicate to the RICO claim all derive from Shearson's handling of the plaintiffs' accounts or from transactions on those accounts made by Shearson's agents. Bearing in mind the federal policy that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration," Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765 (1983), we find it clear that the parties agreed to arbitrate these claims. Cf. Mitsubishi, 105 S.Ct. at 3353 n. 13 (construing more restrictive arbitration clause as encompassing arbitration of antitrust claims). We now turn to consider whether plaintiffs' 1934 Act and RICO claims are nonarbitrable even though they have agreed to arbitrate them.

III.

In order for a statutory claim to overcome the overriding federal policy in favor of arbitration, Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941-42, it is necessary that the party opposing the motion to compel produce evidence that Congress intended the statutory claim to be non-arbitrable. See Mitsubishi, 105 S.Ct. at 3355. A mere absence of evidence that Congress intended the claims to be arbitrable is insufficient to overcome the presumption in favor of arbitrability; the party opposing the motion must show that Congress intended to make an exception to the Arbitration Act of the statutory claim in question. As the Supreme Court instructed in its Mitsubishi opinion:

Just as it is the congressional policy manifested in the federal Arbitration Act that requires courts liberally to construe the scope of arbitration agreements covered by that Act, it is the congressional intention expressed in some other statute on which the courts must rely to identify any category of claims as to which agreements to arbitrate will be held unenforceable.... We must assume that if Congress intended the substantive protection afforded by a given statute to include protection against waiver of the right to a judicial forum, that intention will be deducible from text or legislative history.

Id.

Thus, the task of a court in determining the arbitrability of a claim under the Federal Arbitration Act is, first, to examine the relevant statutory text and legislative history for express evidence that Congress intended the statutory claim concerned to be non-arbitrable. In many cases Congress may not have explicitly addressed the arbitrability question. In this event, the court must carefully examine the congressional policies prompting the enactment of the cause of action to determine whether, in light of these policies, an implicit congressional intention that the claims under the statute not be subjected to arbitration may be inferred due to the inability of these policies to be furthered if the claims are subject to arbitration. See Mitsubishi, 105 S.Ct. at 3357-59 (examining, in the absence of an explicit statement of congressional intent as to arbitrability, congressional policies behind Sec. 4 of the Clayton Act); cf. McDonald v. City of West Branch, 466 U.S. 284, 104 S.Ct. 1799, 1803-04, 80 L.Ed.2d 302 (1984) (basing finding of congressional intent that Sec. 1983 claims be non-arbitrable upon conflict between arbitration and Sec. 1983's objectives); Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728, 740-45, 101 S.Ct. 1437, 1444-47, 67 L.Ed.2d 641 (1981) (finding congressional intent that FLSA claims be non-arbitrable because of conflict between arbitration and FLSA's purposes); Alexander v. Garner-Denver Co., 415 U.S. 36, 56, 94 S.Ct. 1011, 1023, 39 L.Ed.2d 147 (1974) ("The purpose and procedures of Title VII indicate that Congress intended federal courts to exercise final responsibility for enforcement of Title VII; deferral to arbitral decisions would be inconsistent with that goal.").

With these rules of statutory interpretation in mind, we turn to the questions of whether Congress intended that 1934 Act and private RICO claims be litigated in factual settings similar to that of the case before us.

A.

This court has on many occasions addressed the question of the arbitrability of 1934 Act claims, and consistently held that Congress intended these claims to be non-arbitrable. See, e.g., Bustamante v. Rotan Mosle, Inc., 802 F.2d 815, 816, (5th Cir.1986); Smoky Greenhaw Cotton Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 785 F.2d 1274, 1275 n. 1 (5th Cir.1986); Sawyer v. Raymond, James & Assocs., Inc., 642 F.2d 791, 792 (5th Cir. Unit B 1981); Sibley v. Tandy Corp., 543 F.2d 540, 543 (5th Cir.1976), cert. denied, 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82 (1977). Basing their decisions upon an extension of the Supreme Court's analysis of the anti-waiver provision of the Securities Act of 1933 in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953), these opinions found the similar anti-waiver provision of the 1934 Act to expressly preclude arbitration of the private cause of action that Congress implied in ...