Tjart v. Smith Barney, Inc.

• Decision Date: 13 August 2001
• Docket Number: No. 46857-0-I.,46857-0-I.
• Citation: 107 Wash.App. 885,28 P.3d 823
• Parties: Arlene E. TJART, Appellant, v. SMITH BARNEY, INC. a foreign corporation; Thomas O'Neal and Jane Doe O'Neal, husband and wife and marital community composed thereof; Randy Shipley and Ila Shipley, husband and wife and the marital community composed thereof; Deberah A. Fox and William Fox, wife and husband and the marital community thereof, Respondents.
• Court: Washington Court of Appeals

28 P.3d 823

107 Wash.App. 885

Arlene E. TJART, Appellant, v. SMITH BARNEY, INC. a foreign corporation; Thomas O'Neal and Jane Doe O'Neal, husband and wife and marital community composed thereof; Randy Shipley and Ila Shipley, husband and wife and the marital community composed thereof; Deberah A. Fox and William Fox, wife and husband and the marital community thereof, Respondents.

No. 46857-0-I.

Court of Appeals of Washington, Division 1.

August 13, 2001.

John Mele, Ryan Swanson & Cleveland, Seattle, for Appellant.

Eric Lansverk, Hillis Clark Martin & Petterson, Seattle, for Respondents.

WEBSTER, J.

Every firm in the securities industry requires its agents to register with a self-regulatory organization (SRO), such as the New York Stock Exchange or the National Association of Securities Dealers, and be bound by the rules promulgated for the SRO members. This is accomplished by having applicants sign a "Uniform Application for Securities Industry Registration or Transfer," commonly called a "U-4." This form contains an agreement to arbitrate "any dispute, claim, or controversy that may arise between [the applicant and her] firm .... that is required to be arbitrated under the rules .... of the organizations with which I register."

Arlene Tjart was a stockbroker at E.F. Hutton, which was acquired by Shearson Lehman Brothers, which was later acquired by Smith Barney. When she was hired by E.F. Hutton, she signed the Form U-4, as well as a trainee agreement which contained an arbitration clause. When Hutton was acquired by Shearson, she completed an employment application which contained another agreement to arbitrate any controversies between her and her employer.

After Tjart was terminated, she sued Smith Barney, alleging that she had been fired for discriminatory reasons in violation of the Washington Law Against Discrimination and in violation of public policy, and that Smith Barney's conduct had constituted sexual harassment and/or creation of a hostile work environment. Smith Barney maintained that she was bound by her agreements to arbitrate and the trial court entered an order staying the proceedings and compelling arbitration. After she failed to arbitrate, the trial court dismissed her complaint. On appeal, Tjart argues that her statutory discrimination claims should not be subject to arbitration. We affirm, because the Shearson Application is an enforceable agreement to arbitrate.

FACTS

In September 1995, Arlene Tjart sued Smith Barney, alleging that she was wrongfully discharged in September 1992. Her complaint alleged that she was terminated for "illegal discriminatory reasons including but not limited to her sex and age and in violation of law, including RCW Chapter 49.60" and in violation of public policy. She also alleged that Smith Barney's conduct constituted sexual harassment and/or creation of a hostile work environment in violation of RCW Chapter 49.60.

Smith Barney moved for an order compelling Tjart to arbitrate all of her claims. In its motion, Smith Barney argued that the Federal Arbitration Act ("FAA"), 9 USC. § 1 et seq., required enforcement of arbitration provisions in three documents executed by Tjart: (1) an Account Executive Trainee Agreement ("Trainee Agreement") on February 5, 1987; (2) an Application for Employment with Shearson Lehman Brothers ("Shearson Application") on February 11, 1988, and (3) a Uniform Application for Securities Industry Registration or Transfer ("Form U-4") (collectively, "the Forms") on February 5, 1987.

Tjart opposed Smith Barney's motion, arguing that the FAA did not apply to the claims made in her complaint and that she had not waived her right to a judicial forum. In support of her position, Tjart submitted a declaration in which she testified that she was never provided with a copy of the rules of the American Stock Exchange (AMEX), National Association of Securities Dealers (NASD) or of the New York Stock Exchange (NYSE). She testified that she was never told that any of the arbitration clauses were to apply to state or federal discrimination claims. She further testified that it was never explained to her that, under the documents she executed, she would be obligated to arbitrate any state or federal law discrimination claims, that she had never agreed to arbitrate state or federal law discrimination claims, and that she had never knowingly waived her rights to a judicial forum.

The trial court granted Smith Barney's motion and entered an order staying the judicial proceedings and compelling arbitration of Tjart's claims. Tjart then dismissed her lawyer because she was dissatisfied with his work, and sought new counsel.

No further action was taken, and on May 12, 1999, the King County Superior Court sent Tjart a notice that her case would be dismissed for want of prosecution unless she made written application to the court showing good cause why the case should not be dismissed within 45 days.

Tjart, still without a lawyer, assumed her case had been dismissed, and filed a pro se "Motion to Rescind Dismissal and Continue Stay" on June 4, 1999. In her motion, Tjart asked the court to rescind the dismissal and for additional time to find an attorney because "the law has changed and no longer requires binding arbitration in a case such as mine." CP 89-90. Because her original motion was filed without a note for motion, Tjart filed a revised motion on June 24, 1999, which was denied on July 19, 1999.

On July 30, 1999, Tjart filed a pro se motion for reconsideration, which was denied on August 13, 1999. On May 10, 2000, Tjart filed a "reapplication" of her motion for reconsideration. A final order denying her reapplication and dismissing the case was entered July 19, 2000. This appeal timely followed.

ARBITRATION PROVISIONS

Shearson Application

The Shearson Application provided,

I hereby agree that any controversy arising out of or in connection with my compensation, employment or termination of employment shall be submitted to arbitration before the National Association of Securities Dealers, Inc., the New York Stock Exchange, Inc. or the American Stock Exchange Inc. and be resolved in accordance with the rules, then in effect, of such entities. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that I fail to abide by these terms, this section shall in no way limit the Company's other legal rights, including the right to enforce said provisions in a court of competent jurisdiction.

CP 31.

APPLICABLE RULES

The above agreement is an agreement to arbitrate by the rules of certain self-regulatory organizations.

1. The NASD Rules

The NASD Rules no longer require the arbitration of statutory discrimination claims. However, the amendment only applies to claims filed after January 1, 1999, the effective date of the rule.¹ Prior to the amendment to exclude employment discrimination claims from the mandatory arbitration scheme, the rule had provided for arbitration of all employment claims, including statutory discrimination claims.

2. The AMEX Rules

The American Stock Exchange Inc. merged with the NASD in November 1998 and is now The American Stock Exchange LLC, with the NASD as the parent company. All arbitration is now performed by NASD Dispute Resolution, Inc., under the NASD rules.²

3. The NYSE Rules

The NYSE rules do not require arbitration of statutory employment claims.³

DISCUSSION

As a preliminary matter, Smith Barney argues that the final Order in this case is not appealable because it involved a "dismissal without prejudice in connection with an order to proceed with arbitration."

In this case, the Order dismisses the case, but does not indicate that the dismissal was without prejudice. But, even assuming that the dismissal was without prejudice, it is still an appealable order.

RAP 2.2(a)(3) provides that an appeal as of right may be taken from "[a]ny written decision affecting a substantial right in a civil action which in effect determines the action and prevents a final judgment or discontinues the action." Tjart was terminated on September 25, 1992, and the statute of limitations for her claim is 3 years.⁴ Thus, whether her claim was dismissed with or without prejudice, Tjart is barred by the statute of limitations from refiling her case, and her action has effectively been discontinued. Therefore, her appeal is properly before this court.

The parties agree that the sole remaining issue in this case is whether Tjart must arbitrate her claims. This court reviews questions of arbitrability de novo.⁵

The parties agree that if the Shearson Application is enforceable, this case should be affirmed. Because we find that the Shearson Application is enforceable, we do not address the enforceability of the other two agreements.

The Federal Arbitration Act, 9 U.S.C. § 2 et seq. ("FAA"), applies to arbitration agreements in employment contracts.⁶ This court must determine whether the FAA requires enforcement of the arbitration agreements in the Forms.

Applicability of the Federal Arbitration Act

Tjart argues that the FAA does not apply to statutory discrimination claims. We disagree.

Because "[p]arallel state anti-discrimination laws are explicitly made part of Title VII's enforcement scheme," state discrimination claims are arbitrable to the same extent as Title VII claims.⁷

Washington courts have not ruled on the specific question of Congressional intent regarding prospective agreements to arbitrate Title VII claims. The federal circuit courts, except for the Ninth Circuit, have uniformly held that such agreements are enforceable under the FAA.

The Ninth Circuit held in Duffield v. Robertson Stephens and Co.⁸ that the FAA does not require arbitration of discrimination claims under Title VII. The court examined the 1991 Civil Rights Act and held that mandatory predispute arbitration agreements were contrary to Congress's intent.

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