Moran v. Paine, Webber, Jackson & Curtis

• Decision Date: 15 January 1968
• Docket Number: No. 16615.,16615.
• Citation: 389 F.2d 242
• Parties: Mary B. MORAN, Appellant, v. PAINE, WEBBER, JACKSON & CURTIS.
• Court: U.S. Court of Appeals — Third Circuit

389 F.2d 242 (1968)

Mary B. MORAN, Appellant, v. PAINE, WEBBER, JACKSON & CURTIS.

No. 16615.

United States Court of Appeals Third Circuit.

Argued November 3, 1967.

Decided January 15, 1968.

James D. McDonald Jr., Quinn, Plate, Gent, Buseck & Leemhuis, Erie, Pa. (Curtze, Gent & McCullough, by John G. Gent, Erie, Pa., on the brief), for appellant.

John F. Potter, MacDonald, Illig, Jones & Britton, Erie, Pa., for appellees.

Before McLAUGHLIN, GANEY and SEITZ, Circuit Judges.

OPINION OF THE COURT

GANEY, Circuit Judge.

This appeal concerns itself with one who invested in the purchases of stock through the brokerage house of Paine, Webber, Jackson & Curtis, appellee, by way of a margin agreement which she, as appellant, entered into with the appellee on the 15th of March, 1960. It seems that the relationship between the appellant and the appellee was an unhappy one from the very beginning, as some few days after the margin agreement had been entered into she alleges misrepresentation in the purchase of 1,000 shares of Carrier Corporation stock and later, in September of 1960, she complained that the appellee had made an unauthorized purchase of 1,000 shares of American Cable and Radio stock and finally complained that the brokerage house wrongfully collected commissions on the sales and purchases of stock which was the result of overactivity in her account, which they allegedly induced.

It is clear from the record that correspondence ensued between Mrs. Moran and the New York Stock Exchange, the Securities and Exchange Commission and the appellee, initiated by the appellant at a very early date after the margin agreement was entered into, but the earliest evidence in the record thereof was on February 6, 1962. Answering an earlier complaint concerning the conduct of the appellee, Leo L. McKernan, Manager of the Division of Conduct and Complaint Department of the New York Stock Exchange, on February 6, 1962, advised appellant that the function of the Exchange under its rules relative to the business conduct of its member firms was for it to refer any complaints to the proper body of the Stock Exchange for consideration and possible disciplinary action, and that it was not within its jurisdiction to adjudicate claims or in any wise to act as an agency for the collection of such claims. Furthermore, McKernon wrote, "We have always felt that such matters are more properly for resolution before a court of law or a board of arbitration. If, therefore, you feel you have a civil claim against Paine, Webber, Jackson & Curtis, we can only suggest that you avail yourself of the legal remedies open to you." On February 9, 1962, the appellant wrote to the Securities and Exchange Commission concerning the alleged mishandling of her account in which she stated as follows: "On February 6, I received a letter from the Exchange advising that they were unable to resolve the conflict of thought and it was their suggestion that the matter could only be resolved before a court of law or a board of arbitration." On March 2, 1962, in a letter from the Securities and Exchange Commission's Acting Supervisory Attorney, he stated as follows: "You desire to secure help and advice in settling the controversy. It is noted that the New York Stock Exchange has suggested that the matter could only be resolved before a court of law or a board of arbitration. * * * It is suggested, therefore, that you give the full facts again to the Department of Member Firms of the New York Stock Exchange. In the event you do not obtain any satisfaction in that manner, you have your recourse in court. In this connection you may wish to consider discussing the matter with your own attorney."

Again, on April 6, 1962, Mrs. Moran was advised by the Acting Supervisory Attorney of the Securities and Exchange Commission as follows: "It is appropriate to point out that any investigations that we may conduct are usually nonpublic and any information developed therein is kept confidential except to the extent that it is made public in proceedings brought before the Commission or in the courts. As I told you over the phone, the federal securities laws do not authorize us to give legal or financial advice to members of the public and, accordingly, we cannot assist you in the resolution of your problems. In view of this, you may wish to seek the service of an attorney for advice and guidance." In spite of these directions to her, she wrote again to Leo L. McKernan, Manager of the Division of Conduct and Complaints of the New York Stock Exchange, asking for clarification of certain portions of the margin agreement and, amongst other things, asked his opinion on whether she could choose between arbitration and the courts and in answer thereto, on November 2, 1962, she was advised that a broker had authority to sell certain securities in his possession when the value of the stock held on margin reached a point where a call is needed, that is where the customer's equity in the stock was less than 25% required under Exchange rules and, finally, in the same letter, he stated, "We would suggest that you get in touch with your own attorney for such clarification as you desire."

In view of this correspondence, nine months later, on August 12, 1963, Mrs. Moran submitted her claim to arbitration. After a full hearing and by order of the Arbitration Board dated October 30, 1963, Mrs. Moran was awarded $1,564.05 plus $240.00 for costs. Dissatisfied with this award the appellant filed a Petition for Modification of Award in the Court of Common Pleas of Erie County, Pennsylvania, and it was defended by the appellee on the basis that the arbitrators' award was binding. The courts of Erie County ruled in favor of the appellee and Mrs. Moran appealed to the Pennsylvania Supreme Court and, in an opinion on June 24, 1966, that Court upheld the lower court's holding that the award of arbitration was final and binding. In the course of the opinion the court specifically held that Mrs. Moran voluntarily elected to submit to arbitration with the knowledge that she could avail herself of remedies in a court of law, that no confidential relationship was breached and that she had not been misled in the transaction.

In the present action in the United States District Court for the Western District of Pennsylvania, appellant sets forth the same complaint which had been made to the Board of Arbitrators and before the Court of Common Pleas of Erie County, Pennsylvania, raising the same factual matters relative to the sale and purchase of certain securities. A Motion to Dismiss was filed by the appellee...