Steck v. Smith Barney, Harris Upham & Co., Inc.

• Decision Date: 04 June 1987
• Docket Number: Civ. A. No. 86-4207.
• Citation: 661 F. Supp. 543
• Court: U.S. District Court — District of New Jersey
• Parties: Robert STECK, Plaintiff, v. SMITH BARNEY, HARRIS UPHAM & CO., INCORPORATED, Defendant.

661 F. Supp. 543

Robert STECK, Plaintiff, v. SMITH BARNEY, HARRIS UPHAM & CO., INCORPORATED, Defendant.

Civ. A. No. 86-4207.

United States District Court, D. New Jersey.

June 4, 1987.

Kevin Kiernan, Smith, Mullin & Kiernan, P.C., West Orange, N.J., for plaintiff.

Brian F. McDonough, Shanley & Fisher, P.C., Morristown, N.J., for defendant.

OPINION

SAROKIN, District Judge.

Defendant moves before this court pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq., seeking to compel arbitration of plaintiff's ADEA and related state claims. For the reasons set forth below, the court denies the defendant's motion to require arbitration of the federal ADEA claim. As to the state law claims, the court is compelled to grant defendant's motion.

BACKGROUND

Plaintiff, Robert Steck, was hired by the defendant, Smith, Barney, Harris Upham & Co., in November 1973 as an account executive. As a condition of employment, plaintiff executed an application and agreement for approval as a registered representative pursuant to the rules of the New York Stock Exchange ("NYSE"). See Application for Securities Industry Registration, Exhibit A attached to Clark Affidavit. The standardized agreement provides as follows:

"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, Inc.".

In addition, Rule 347 of the New York Stock Exchange mandates that any controversy between a registered representative and any member "arising out of employment or termination of employment of such registered representative by and with such member" shall be settled by arbitration at the instance of any such party. Defendant contends that in registering with the NYSE, plaintiff agreed to and became bound by its rules.

On or about September 29, 1984, plaintiff was terminated by the defendant. Alleging that the termination constituted unlawful discrimination on the basis of age, plaintiff instituted the underlying suit. The complaint alleges violations of the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq., the New Jersey Law Against Discrimination, N.J.S.A. § 10:5 et seq., as well as the public policy of the State of New Jersey.

Defendant now moves before the court pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. to require arbitration of plaintiff's ADEA and related state claims. Section 2 of the Arbitration Act, 9 U.S.C. § 2, provides:

A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Defendant asserts that neither the text nor legislative history of the ADEA reflect any Congressional intent to exempt ADEA claims from the Arbitration Act's requirements. In addition, relying on the Supreme Court's holding in Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), defendant contends that Smith Barney's federally protected right to arbitration overrides any contrary right by the plaintiff to bring his pendent state claims in this forum.

DISCUSSION

I. Plaintiff's ADEA Claim

In determining the arbitrability of plaintiff's ADEA claims the court relies on the analytic framework set forth in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). The Mitsubishi Court required a two step inquiry: (1) "whether the parties' agreement to arbitrate reached the statutory issues" and (2) "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims." Id. at 3355.

The Mitsubishi Court refused to read a presumption against arbitration of statutory claims into the Federal Arbitration Act. Id. at 3353. Emphasizing the significant federal interest favoring rigorous enforcement of arbitration agreements, Moses H Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 675 (1983) ("questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration"), the Court held that a party who has agreed to arbitrate must do so "unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Mitsubishi, 105 S.Ct. at 3355. Adopting Mitsubishi's reasoning, the Third Circuit has held that determining arbitrability of federal statutory claims is a "matter of statutory interpretation" and may not be determined "on the basis of some judically recognized public policy". Jacobson v. Merrill Lynch, Pierce, Fenner & Smith, 797 F.2d 1197, 1202 (3d Cir 1986). Thus, a statutory claim is "arbitrable" -that is, capable of being subjected to arbitration by the parties' prior agreement-unless there is a congressional intention, "deducible from text or legislative history'" to the contrary. Mitsubishi, 105 S.Ct. at 3355.

A. Scope of the Arbitration Provision

Following the dictates of Mitsubishi, the court must first determine whether plaintiff's ADEA claim falls within the arbitration provisions of the standardized NYSE agreement applicable to registered representatives.

The agreement executed by plaintiff explicitly requires arbitration of any controversy "arising out of" the "termination of employment". See Exhibit A attached to Clark Affidavit. The broad language draws no distinction between the arbitrability of claims challenging termination on statutory or contractual grounds. Moreover, the Third Circuit, examining a substantially identical NYSE application form, broadly construed the agreement "to mean what the language says, i.e., that `all disputes' arising out of the termination of a registered representative are subject to arbitration". See e.g., Barrowclough v. Kidder, Peabody & Co. Inc., 752 F.2d 923, 938 (3d Cir.1985).

Plaintiff contends that his ADEA claim is outside the scope of the agreement because the parties never "bargained" with respect to the arbitration clause; and further, because the agreement is nothing more than a boilerplate NYSE application which all applicants must sign in order to qualify as registered representatives. However, the Third Circuit expressly rejected this same argument in Barrowclough, supra. Holding that such application forms constitute binding arbitration agreements between registered representatives and their sponsoring employers, the court found that "the arbitration clause is not invalid ... merely because it is required of all registered brokers by New York Stock Exchange Rule 347". Id. at 937.

For the reasons set forth above, the court concludes that the ADEA claim falls within the arbitration provision at issue.

B. Congressional Intent

Plaintiff's federal claim is based upon Section 4 of the ADEA, 29 U.S.C. § 623, which provides:

It shall be unlawful for an employer ... to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age.

In enacting the ADEA, congress sought to "promote employment of older persons based on their ability rather than age" and "to prohibit arbitrary age discrimination in employment". See 29 U.S.C. § 621(b). The ADEA's remedial and procedural provisions exist in order to completely secure the rights and expectations brought into being by this landmark legislation. H.Rep. No. 805, 90 Cong., 1st Sess., reprinted in 1967 U.S.Code Cong & Admin.News 2213, 2218.

In ascertaining Congressional intent concerning the arbitrability of ADEA claims, this court recognizes the "important similarities" between the ADEA and Title VII of the Civil Rights Act, 42 U.S.C. § 2000e et seq. The Supreme Court has noted such similarities "both in their aims — the elimination of discrimination from the workplace — and in their substantive prohibitions. In fact, the prohibitions of the ADEA were derived in haec verba from Title VII". Lorillard v. Pons, 434 U.S. 575, 584, 98 S.Ct. 866, 872, 55 L.Ed.2d 40 (1978). In addition, the Lorillard Court noted that in looking "to the procedural provisions of the ADEA, we find a significant indication of Congress' intent in its directive that the ADEA be enforced in accordance with the `powers, remedies, and procedures'" of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq. Id. at 580, 98 S.Ct. at 870.

Though the Supreme Court has not addressed the arbitrability of the ADEA under the Federal Arbitration Act, the Court's precedent pertaining to these analogous statutory schemes supports the conclusion that suits alleging violation of substantive rights conferred by ADEA can be brought in federal court notwithstanding an agreement to arbitrate. In Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974), a unanimous Court determined that an employee's Title VII rights to be free of discrimination, "are not susceptible of prospective waiver". Id. at 51-52, 94 S.Ct. at 1021-22. Though Alexander involved an attempt to preclude subsequent judicial consideration of a Title VII race discrimination claim previously grieved, rather than an effort to compel arbitration, this court finds Alexander's analysis informative. The Supreme Court reasoned that "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." Id. at 56, 94 S.Ct. at 1023.

Similarly, in Barrentine v. Arkansas-Best Freight...