Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BROWN v. WHEAT FIRST SECURITIES

June 13, 2000

RONALD L. BROWN, PLAINTIFF,
V.
WHEAT FIRST SECURITIES, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Oberdorfer, District Judge.

MEMORANDUM

Plaintiff Ronald L. Brown, a former employee of defendant Wheat First Securities, Inc., is suing Wheat First, First Union Corp., and several individuals employed by Wheat First for conspiracy in violation of Section 2 of the Civil Rights Act of 1871, 17 Stat. 13 (April 20, 1871), wrongful termination, and tortious interference with economic advantage. Compl. Three motions are pending: (1) defendants Wheat First, First Union, and Marshall Wishnack moved to compel arbitration on the authority of 9 U.S.C. § 4 (1994) ("A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement"), or in the alternative, for dismissal of plaintiff's first amended complaint (Dkt.28); (2) defendants Wheat First and First Union moved to confirm the arbitration award pursuant to 9 U.S.C. § 9 ("If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order confirming the award unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.") (Dkt.29); and (3) invoking 9 U.S.C. § 10(a)(4), plaintiff moved to vacate that award ("In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration — . . . (4) Where the arbitrators exceeded their powers . . .") (Dkt.26). All motions have become ripe. For the reasons stated below, an accompanying order denies plaintiff's motion to vacate the arbitration award, grants defendants' cross-motion to confirm the award, grants defendants' motion to compel arbitration of plaintiff's statutory claims with instructions to the arbitrators with respect to the employer's responsibility for arbitrators' fees and expenses, and dismisses plaintiff's complaint as moot.

I.

Defendant Wheat First employed plaintiff as a registered representative in its Washington, D.C., office from November 13, 1991, until February 21, 1997. Compl. 13-14. At the time of his hiring, plaintiff completed and signed a Uniform Application for Securities Industry Registration or Transfer (Form U-4) in order to register with the National Association of Securities Dealers (NASD). Dkt. 28, Ex. 1. In signing the Form U-4, plaintiff agreed "to arbitrate any dispute, claim or controversy that may arise" between himself and his employer, "that is required to be arbitrated" under NASD rules. Id. at p. 4, ¶ 5.

Plaintiff alleges that, during his employment at Wheat First, he became aware of "numerous illegal activities," including, inter alia, unauthorized, excessive, and unsuitable trading in customer accounts, improper relationships with customers, and failure to report customer complaints to legal and regulatory authorities. Compl. 18-19. In October 1996, plaintiff reported the alleged misconduct to his manager and to Wheat First's compliance officer. Compl. 23-26. In November 1996, plaintiff communicated to the Securities and Exchange Commission details of the alleged violations of law occurring at Wheat First. Compl. 30-32.

On February 21, 1997, Wheat First terminated plaintiff's employment for "lack of production." Compl. 38. On February 17, 1998, plaintiff filed with the NASD's Office of Dispute Resolution a Statement of Claim against Wheat First that included allegations of wrongful termination (retaliation), breach of implied contract, defamation, slander, and tortious interference with business relationships. Dkt. 28, Ex. 2. Plaintiff's 1998 Statement of Claim did not allege that Wheat First had violated any federal statute. See id. At the time he filed the Statement of Claim, plaintiff signed a Uniform Submission Agreement, which submitted "the present matter in controversy, as set forth in the attached statement of claim . . . to arbitration in accordance with the Constitution, ByLaws, Rules, Regulations, and/or Code of Arbitration Procedure" of the NASD. Dkt. 28, Ex. 3. The Uniform Submission Agreement also included the following provision: "The undersigned parties further agree to abide by and perform any award(s) rendered pursuant to this Submission Agreement and further agree that a judgment and any interest due thereon, may be entered upon such award(s) and, for these purposes, the undersigned parties hereby voluntarily consent to submit to the jurisdiction of any court of competent jurisdiction which may properly enter such judgment." Id. On June 29, 1998, after it filed its answer to plaintiff's Statement of Claim, defendant Wheat First also signed the Uniform Submission Agreement. Dkt. 28, Ex. 5.

The original arbitration hearing, scheduled to begin March 22, 1999, was adjourned at the request of the parties. Dkt. 14, Addendum p. 5. Rule 10319 of the NASD Code of Arbitration Procedure sets forth the procedure for adjournments. National Association of Securities Dealers Code of Arbitration (visited May 2, 2000) <http://www.nasdr.com/2820b.htm10319>. Rule 10205(c) states that the arbitrator determines who bears the costs for adjournments. Id. at htm# 10205. Pursuant to these rules, the arbitrators assessed $1,500 in fees, requiring each party to pay $750. Dkt. 14, Addendum p. 5.

Plaintiff filed an "Opposition to Order Directing [Plaintiff] to Pay for Costs Related to Arbitration," requesting that the arbitration panel either: (1) render a declaratory judgment ending arbitration and allowing plaintiff to pursue his case in a court of competent jurisdiction, or (2) issue an order that plaintiff was not required to pay any fees in the proceedings. Id. at p. 1. On April 12, 1999, the NASD's Office of Dispute Resolution informed plaintiff that the imposition of adjournment fees was consistent with the NASD's Code of Arbitration Procedure, and reiterated the requirement that plaintiff pay $750 in adjournment fees. Id. On June 29, 1999, the day before plaintiff filed his original complaint in this matter, plaintiff moved again for the arbitrators to enter a declaratory judgment and to find that, because plaintiff had been ordered to pay part of the adjournment fees, the NASD "no longer ha[d] jurisdiction and that the plaintiff may pursue his case in a court of competent jurisdiction." Id. at p. 3. On September 7, 1999, the arbitrators, in a letter sent by the Office of Dispute Resolution, denied plaintiff's motion without discussion. Id. at p. 32. On September 13, 1999, the arbitration hearing commenced. Plaintiff did not attend the proceeding, sending his counsel, instead, solely to restate his objections to the NASD's jurisdiction over the matter. Dkt. 14, p. 6. On November 9, 1999, after hearing only defendants' version of the case, the arbitrators dismissed plaintiff's Statement of Claim with prejudice, requiring that each party bear its own costs and expenses. Dkt. 14, Addendum, p. 54-57. The arbitrators assessed Wheat First $9,985, and obligated plaintiff to pay $6,365, consisting of a $500 initial filing fee, a $750 adjournment fee, $5,100 in forum fees, and $15 for administrative costs. Id. at 57.

Meanwhile, on June 30, 1999, plaintiff had filed his original complaint in this Court. On December 13, 1999 (after the November 9, 1999, arbitration award), he filed his first amended complaint, asserting common law claims similar to those in his Statement of Claim and, for the first time, alleged a conspiracy in violation of Section 2 of the Civil Rights Act of 1871.

II.

Plaintiff now moves to vacate the November 9 arbitration award, arguing that the arbitrators "exceeded their powers" by failing to stay the arbitration proceeding until a court of competent jurisdiction ruled on plaintiff's legal challenge to arbitrability that resulted from the arbitrators' assessment of fees on plaintiff. Dkt. 26, p. 1, 5. Defendants move to confirm the arbitration award, which dismissed with prejudice plaintiff's common law claims (wrongful termination, breach of implied contract, defamation, slander, and tortious interference). Dkt. 28, Ex. 2.

Plaintiff relies on Cole v. Burns International Security Services, 105 F.3d 1465 (D.C.Cir. 1997). In that case, after being fired from his job, plaintiff filed a complaint in federal court against his employer, alleging, inter alia, racial discrimination in violation of Title VII. Id. at 1469. Defendant moved to dismiss the complaint and compel arbitration of the dispute, pointing to a "Pre-Dispute Resolution Agreement" between the parties, which authorized the defendant employer to choose to arbitrate any claims arising out of the termination of employment. Id. The district court found that the Agreement covered plaintiff's claims, granted defendant's motion to compel arbitration, and dismissed plaintiff's complaint. Cole v. Burns Int'l Sec. Serv., No. 95-1785 (D.D.C. Jan. 31, 1996).

A divided court of appeals affirmed the district court subject to a proviso. Cole, 105 F.3d at 1488. The court interpreted the arbitration agreement as "requiring [defendant] to pay all of the arbitrator's fees necessary for a full and fair resolution of [plaintiff's] statutory claims."*fn1 Id. at 1485. The court ruled that plaintiff "could not be required to agree to arbitrate his public law claims as a condition of employment if the arbitration agreement required him to pay all or part of the arbitrator's fees and expenses." Id. at 1485 (emphasis added). The court noted: "It would undermine Congress's intent to prevent employees who are seeking the vindicate statutory rights from gaining access to a judicial forum and then require them to pay for the services of an arbitrator when they would never be required to pay for a judge in court." Id. at 1484 (emphasis added). The court concluded, "an arbitrator's compensation and expenses must be paid by the employer alone." Id. at 1481.

The Cole court defined the compensation and expenses for which the employee had no obligation to pay to include the arbitrator's honorarium, the arbitrator's expenses, and any other costs associated with the arbitrator's services. Id. at 1484 n. 15. Those were the employer's responsibility. The court distinguished arbitrator's fees from other fees, such as filing fees, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.