Sandefer v. District Court, City and County of Denver
Decision Date | 19 October 1981 |
Docket Number | No. 81SA153,81SA153 |
Citation | 635 P.2d 547 |
Parties | Blue Sky L. Rep. P 71,672 Alice I. SANDEFER, Petitioner, v. DISTRICT COURT, CITY AND COUNTY OF DENVER, and the Honorable Henry E. Santo, District Court Judge, Respondents. |
Court | Colorado Supreme Court |
Head, Moye, Carver & Ray, John F. Head, Edwin A. Naylor, Denver, for petitioner.
Ireland, Stapleton & Pryor, P. C., William G. Imig, John H. Evans, Denver, for respondents.
The petitioner, Alice I. Sandefer, seeks relief in the nature of mandamus pursuant to C.A.R. 21. She contends that the trial court erred in ordering the petitioner to submit certain claims to arbitration. We issued a rule to show cause why the requested relief should not be granted, and we now discharge the rule in part and make the rule absolute in part.
This action arises out of certain securities transactions starting in 1974 between the petitioner and Reynolds Securities, Inc. (Reynolds), a securities broker. Pursuant to their dealings, the petitioner executed a standard "Customer's Agreement" which provided in pertinent part:
In 1979 the petitioner filed a complaint against Reynolds stating three claims for relief. The first was for breach of fiduciary duty; the second, for common law fraud; and the third was for violation of the Colorado Securities Act, section 11-51-125, C.R.S. 1973. Reynolds moved to dismiss, asserting that the agreement to arbitrate ousted the district court of jurisdiction. The district court agreed and dismissed the action for lack of subject matter jurisdiction. Petitioner appealed, arguing that the Colorado Securities Act, section 11-51-125(7), 1 C.R.S. 1973, made arbitration agreements between brokers and investors unenforceable.
In Sandefer v. Reynolds Securities, Inc., Colo.App., 618 P.2d 690, cert. denied, No. 80SC232 (Oct. 6, 1980), the court of appeals found that section 11-51-125(7), C.R.S. 1973, was virtually identical with 15 U.S.C. § 77n of the Federal Securities Act of 1933 and that: The court of appeals adopted the rationale of Wilko and held that the arbitration agreement was an attempt to waive compliance with section 11-51-125(1), C.R.S. 1973, and under section 11-51-125(7), C.R.S. 1973, such an attempted waiver is void.
On remand, Reynolds filed a motion to compel arbitration of the petitioner's first and second claims (the common law claims) and to stay proceedings of the Colorado Securities Act claim pending arbitration. The respondent court determined that the agreement to arbitrate was valid with respect to the common law claims and "pursuant to § 13-22-204(4), C.R.S. 1973, if such claims are severable from Plaintiff's (petitioner's) Securities Act claim, proceedings herein should be stayed and the common law claims should be arbitrated." 2 The respondent court concluded that the common law claims involved factual and legal issues such as the existence of a duty, breach, reliance, intent and scienter that would not arise in relation to the securities claim; and, therefore, the common law claims were severable, both factually and legally, from the securities claim.
The petitioner claims that the trial court acted contrary to the court of appeals mandate, in excess of its jurisdiction, and in abuse of its discretion.
This case presents us with two questions: first, whether the decision of the court of appeals foreclosed the trial court from ruling on the arbitrability of the common law claims; and second, whether the ruling of the trial court ordering arbitration of the common law claims and staying action on the securities claim was correct.
The petitioner argues for an expansive reading of the court of appeals decision. She claims that the opinion of the court of appeals is clear and the trial court had no alternative but to try all of the petitioner's claims since the court of appeals had determined that the arbitration agreement was void as to all claims. We do not agree.
In our view the Sandefer decision dealt solely with the Colorado Securities Act and the securities act claim of the petitioner. Noting the similarity between section 11-51-125(7) and 15 U.S.C. § 77n of the Securities Act of 1933, the court of appeals adopted the rationale of Wilko v. Swan, supra, which held that arbitration agreements were unenforceable as to disputes arising under the 1933 Act. The court of appeals only considered the application and effect of the Colorado Securities Act, and there was no discussion in the opinion of the arbitrability of any claim other than that arising out of the Colorado Securities Act. In short, we do not read Sandefer as foreclosing consideration by the respondent court of whether the common law claims should be arbitrated. The rule is discharged as to this first issue.
Having arrived at this conclusion, we might simply remand and allow the proceedings below to continue. However, in the interests of judicial economy, time, and expense, we will consider whether the ruling of the trial court was correct in view of the public policy favoring arbitration, the allegations in the complaint, the time and expense of separate arbitration and judicial proceedings, and the possibility of inconsistent decisions in separate proceedings.
Arbitration is an efficient and convenient method of dispute resolution, and it has long been favored by this court. Columbine Valley Const. Co. v. Board of Directors, Colo., 626 P.2d 686 (1981). See also Colo. Const. art. XVIII, sec. 3 ( ); Uniform Arbitration Act, 13-22-201 to -223, C.R.S. 1973 (1980 Supp.) (applies to agreements made on or after July 14, 1975). Were it not for the overriding policy of the Colorado Securities Act, this dispute would properly be sent to arbitration. Since the court of appeals established that agreements to arbitrate future disputes arising under the securities act are not enforceable, we must now decide whether nonstatutory claims may be submitted to arbitration under an agreement to arbitrate future disputes when the nonstatutory claims are part of a complaint alleging a violation of the securities act.
This is a case of first impression in Colorado; however, there are many federal cases which address the issue. Since the statutory language which we are interpreting and the policy considerations to be balanced are virtually identical to those in the federal scheme, these cases are highly persuasive. Lowery v. Ford Hill Investment Co., 192 Colo. 125, 556 P.2d 1201 (1976).
The Wilko doctrine has not been extended to cover common law claims. See, e. g., Sawyer v. Raymond, James & Assocs., Inc., 642 F.2d 791 (5th Cir. 1981); Kavit v. A.L. Stamm & Co., 491 F.2d 1176 (2d Cir. 1974); Stockwell v. Reynolds & Co., 252 F.Supp. 215 (S.D.N.Y.1965). See also Jackson v. Beech, 636 F.2d 831, 833 n.4 (D.C.Cir.1980). Therefore, federal courts applying Wilko have been confronted with cases in which a claim for relief based upon the federal securities act has been coupled with pendent state common law claims. In these cases, the courts have applied the doctrine of intertwining as a mechanism for determining whether pendent state claims should be arbitrated or whether the federal court should retain jurisdiction over these claims and try them along with the statutory nonarbitrable claim. 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).
The intertwining doctrine involves an analysis of the legal and factual issues relative to each of the allegations in the complaint. The court will consider whether the arbitrator would be required to "review the same facts needed to establish the ... securities law claim." Id. at 543. If the factual determinations and legal conclusions are inextricably intertwined, then the court must not sever the action. To hold otherwise would risk inconsistent determinations and could result in the arbitrator's infringing upon the court's duty to decide the securities claim.
Applying the intertwining doctrine, the court will decide if it is "impractical if not impossible to separate out non-arbitrable ... securities law claims from arbitrable ... claims ...." Id. See also Lee v. Ply* Gem Industries, Inc., 593 F.2d 1266 (D.C.Cir.), cert. denied, 441 U.S. 967, 99 S.Ct. 2417, 60 L.Ed.2d 1073 (1979) ( ); Sawyer v. Raymond, James & Assocs., Inc., supra; Miley v. Oppenheimer & Co., 637 F.2d 318 (5th Cir. 1981); Kavit v. A.L. Stamm & Co., supra, (considering the issue in terms of pendent...
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