Williams v. Cigna Financial Advisors, Inc.
| Decision Date | 19 June 1995 |
| Docket Number | No. 94-11030,94-11030 |
| Citation | 56 F.3d 656 |
| Parties | 68 Fair Empl.Prac.Cas. (BNA) 65, 66 Empl. Prac. Dec. P 43,601, 19 Employee Benefits Cas. 1751 Arthur H. WILLIAMS, Plaintiff-Appellee, v. CIGNA FINANCIAL ADVISORS, INC., et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Rogge Dunn, James E. Davis, Cozen & O'Connor, Dallas, TX, for appellants.
Douglas S. McDowell, Ann Elizabeth Reesman, McGuiness & Williams, Washington, DC, for amicus curiae Equal Employment Advisory Cnsl.
Arthur H. Williams, Irving, TX, pro se.
Gabriel Robles, Nancy DeLeon, Robles & Associates, Dallas, TX, for appellees.
Cathy Ventrell-Monsees, Washington, DC, for amicus curiae--American Assoc. of Retired Persons.
Appeal from the United States District Court for the Northern District of Texas.
Before HIGGINBOTHAM and PARKER, Circuit Judges, and McBRYDE, District Judge. 1
Arthur H. Williams filed suit against the defendants, collectively referred to as Cigna, alleging age discrimination. Cigna moved for a stay pending arbitration pursuant to Williams' registration agreement with the National Association of Securities Dealers. The district court denied Cigna's motion. We find that Williams' dispute is subject to arbitration and remand for entry of an order staying proceedings pending arbitration.
In 1987, Williams began working at Cigna, which is a member firm of the National Association of Securities Dealers. On July 15, 1987, Williams signed a Registered Representative Agreement with Cigna, which required that he maintain a current NASD registration and adhere to NASD rules. On July 17, 1987, Williams registered with NASD by signing a Uniform Application For Securities Industry Registration Or Transfer, also known as a U-4 Registration. The U-4 Registration contract between Williams and NASD provided that Williams would "abide by, comply with, and adhere to all the provisions, conditions and covenants of the ... by-laws and rules and regulations of [NASD] as they are and may be adopted, changed or amended from time to time." The U-4 Registration also provided for mandatory arbitration of "any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register." In 1987, the NASD Code of Arbitration Procedure provided
for the arbitration of any dispute, claim, or controversy arising out of or in connection with the business of any member of [NASD], with the exception of disputes involving the insurance business of any member which is also an insurance company:
(1) between or among members;
(2) between or among members and public customers, or others.
On October 1, 1993, the Securities and Exchange Commission amended its NASD rules to provide "for the arbitration of any dispute, claim or controversy arising out of or in connection with the business of any member of [NASD] or arising out of the employment or termination of employment of associated person(s) with any member." While this regulation was not in effect when Williams signed his first U-4 Registration, it was in effect on October 20, 1993 when Williams executed a second U-4 Registration to sell securities in Colorado.
On December 15, 1993, Cigna terminated Williams. On January 5, 1994, Williams filed an age discrimination claim against Cigna with the Equal Employment Opportunity Commission. On April 13, 1994, after receiving a Notice of Right to Sue from the EEOC, Williams filed suit in state court, claiming recovery under the Age Discrimination in Employment Act. Cigna removed the action to federal court and filed a motion to dismiss, which the district court denied on August 29, 1994. On or about September 16, 1994, Cigna discovered that Williams had signed a written agreement requiring arbitration of his claim and moved for a stay of proceedings pending arbitration. The court denied Cigna's motion, finding it "completely lacking in legal merit." Cigna filed this interlocutory appeal pursuant to 9 U.S.C. Sec. 16(a)(1)(A).
The first step in our analysis is to determine whether the arbitration clause encompasses employment disputes. Plainly, it does. In 1987, Williams agreed to adhere to NASD rules "as they are and may be adopted, changed or amended from time to time." By October 1993, when Williams signed a second U-4 Registration, the NASD rules concerning arbitration explicitly mandated that employment disputes be arbitrated.
A similar situation was presented in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). Gilmer worked for Interstate as its Manager of Financial Services. As a condition of his employment, he was required to register as a securities representative with the New York Stock Exchange. The U-4 Registration that Gilmer signed mandated arbitration as required by NYSE rules. NYSE rules provided "for arbitration of '[a]ny controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative.' " Id. at 23, 111 S.Ct. at 1651. When Interstate terminated Gilmer, Gilmer filed an age discrimination complaint. Interstate filed a motion to stay the proceeding pending arbitration, which the district court denied. The Fourth Circuit reversed, and the Supreme Court affirmed. The Court held that nothing within the strictures of ADEA or its legislative history "evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Id. at 26, 111 S.Ct. at 1652 (citation and internal quotation marks omitted).
Williams attempts to distinguish Gilmer on the grounds that when Gilmer signed his U-4 Registration, NYSE rules explicitly provided for arbitration of employment disputes. By contrast, Williams notes that when he signed his first U-4 Registration, NASD rules did not explicitly provide for arbitration of employment disputes. Even if it were true that the 1987 NASD arbitration rules did not encompass employment disputes, an issue we do not today decide, 2 Williams' argument would still be without merit. Cigna terminated Williams after the NASD rules were amended to provide for arbitration of employment disputes and after Williams executed a second U-4 Registration. Therefore, Williams' agreement with NASD encompasses arbitration of his employment dispute.
Since Williams agreed to arbitrate his employment claims, we next must address the applicability of the Federal Arbitration Act to that agreement. The FAA provides that a written agreement to arbitrate a dispute arising out of that agreement is enforceable so long as the agreement is one "evidencing a transaction involving commerce." 9 U.S.C. Sec. 2. Williams' U-4 Registration is a contract involving the sale of securities and thus involves commerce. See Gilmer, 500 U.S. at 21-25, 111 S.Ct. at 1650-51 (); see also Allied-Bruce Terminix Cos., Inc. v. Dobson, --- U.S. ----, ----, 115 S.Ct. 834, 841, 130 L.Ed.2d 753 (1995) (). Section 3 of the FAA mandates that when an issue is referable to arbitration pursuant to a written agreement, the district court must "stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration."
Section 1 of the FAA exempts from its operation "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Williams argues that his dispute is exempt under Sec. 1 because the arbitration clause is contained in a contract for employment and he was a worker engaged in interstate commerce. This argument is without merit, because the agreement to arbitrate is not contained in a contract for employment but in Williams' U-4 Registration. Williams counters that even though his agreement to arbitrate is contained in the U-4 Registration, it was also incorporated by reference into his employment agreement with Cigna. However, it is the U-4 Registration that is the source of the arbitration agreement, not Williams' contract with Cigna. Stated another way, if we were to hold that Williams' Registered Representative Agreement incorporated by reference the U-4 Registration arbitration clause, Sec. 1 would still exempt only the contract of employment. The U-4 Registration is a separate contract, and its arbitration clause is enforceable under the FAA. See Gilmer, 500 U.S. at 25 n. 2, 111 S.Ct. at 1651-52 n. 2.
This narrow interpretation of Sec. 1 is in line with other courts that have considered the issue. For instance, the Supreme Court in Gilmer noted:
[I]t would be inappropriate to address the scope of the Sec. 1 exclusion because the arbitration clause being enforced here is not contained in a contract of employment.... The record before us does not show, and the parties do not contend, that Gilmer's employment agreement with Interstate contained a written arbitration clause. Rather, the arbitration clause at issue is in Gilmer's securities registration application, which is a contract with the securities exchanges, not with Interstate. The lower courts addressing the issue uniformly have concluded that the exclusionary clause in Sec. 1 of the FAA is inapplicable to arbitration clauses contained in such registration applications.
Id.; accord Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229, 230 n. * (5th Cir.1991).
Williams also argues that his agreement to arbitrate is not enforceable because he did not knowingly and voluntarily waive his right to a judicial forum as required by the Older Workers Benefit Protection Act. Pub.L. No. 101-433, 104...
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