Opinion
No. CV-04-146-ST.
May 25, 2004
FINDINGS AND RECOMMENDATION
INTRODUCTION
On December 30, 2003, plaintiff, Jordan P. Gates ("Gates") originally filed this action in Multnomah County Circuit Court as Jordan P. Gates v. Veravest Investments, Inc., Veravest Investment Advisors, Inc., Allmerica Financial Services Corporation, dba Allmerica Financial Services, Allmerica Financial Life Insurance and Annuity Company and Allmerica Investment Management Company, Inc., and Michael R. Burgoyne, Case No. 0312-13904. Defendants removed this case to federal court pursuant to 28 U.S.C. § 1332 because plaintiff and defendants are citizens of different states and the matter in controversy exceeds $75,000 exclusive of interest and costs.
Gates' alleges four claims against defendants: Breach of Contract (First Claim), Defamation (Second Claim), Interference with Business Relations (Third Claim), and Intentional Infliction of Severe Emotional Distress (Fourth Claim).
Now before this court is defendants' Amended Motion to Compel NASD Arbitration (docket #11). For the reasons that follow, defendants' motion should be granted and this case should be dismissed.
FACTUAL BACKGROUND
I. Parties
Defendant Allmerica Financial Corporation ("Allmerica") is a holding company which offers financial products and services through its subsidiaries. Defendants' Reply Ex 1, p. 2. One of Allmerica's wholly owned subsidiaries is defendant Allmerica Financial Life Insurance and Annuity Company ("Allmerica Life"). Defendants' Reply Ex 2. Defendants Vera Vest Investments ("VVI") and VeraVest Investment Advisors ("VVA") are subsidiaries of Allmerica Life. Id. VVA was named Allmerica Investment Management Company ("AIMCO") until January 3, 2003. Defendants' Ex 1, p. 1. Similarly, VVI was previously known as SMA Equities, Inc. ("SMA") until March 5, 1992, and as Allmerica Investments, Inc. ("Allmerica Investments") until January 3, 2003. Defendants' Reply Ex 3, p. 1.
Both parties have submitted documents with various attachments. Citations to affidavits are identified by the last name of the affiant and citations are to the paragraph(s) of the affidavit. All other citations are to the exhibit number of the parties' submissions. Additionally, accompanying their Memorandum in support of their motion and their Reply, defendants submitted two different sets of exhibits beginning with the number one. Defendants later sent a letter to this court, dated April 23, 2004, which was made an exhibit (docket #23). Therefore, citations to defendants' exhibits are to the original five exhibits accompanying their Memorandum in support of their motion unless noted as being one of "Defendants' Reply Exhibits" or the "Defendants' Letter Exhibit."
The Complaint names both VVA and AIMCO as defendants. Since these are the same entities, defendants contend that the Complaint is in error.
Gates entered into a "Career Agent Agreement," which set forth the terms of his employment, on October 1, 1993, and a "Middle Management Agreement" on June 1, 1994, with State Mutual Life Assurance Company of America and SMA Life Assurance Company. Defendants' Ex 3, pp. 14, 21-22. Defendants indicated at oral argument that State Mutual Life Assurance Company of America and SMA Life Assurance Company subsequently became Allmerica Life. On February 14, 1994, Gates entered into a "Financial Planner Agreement" with AIMCO (now known as VVA) which set forth the terms of his compensation as an independent contractor. Defendants' Ex 3, p. 28.
Defendant Michael R. Burgoyne ("Burgoyne") was a registered representative of VVI, an investment advisor of VVA, and an insurance agent of Allmerica Life. Complaint, ¶ 4; Defendants' Ex 3, ¶ 1.3. Beginning in March 2002, Burgoyne was the Managing Director of defendants' Oregon office. Complaint, ¶ 11. II. Gates' Termination
On December 12, 2002, Burgoyne notified Gates that Allmerica would not renew his contracts in January 2003 because of a dispute over the deposit of a check. Id at ¶ 18.
On January 29, 2003, VVA sent Gates a letter forwarding a "Form U-5 Uniform Termination Notice for Securities Industry Registration" ("U-5"). Defendants' Ex 3, p. 60. This U-5 states that Gates was voluntarily terminated on December 11, 2002. Id at 61-62. It also states that Gates is not subject to an investigation by a governmental body or self-regulatory organization and not subject to an internal review for fraud. Id at 62.
On January 31, 2003, VVI sent Gates a letter forwarding another U-5. Id at 54. This U-5 states that Gates was "discharged" on December 31, 2002 because "customer funds deposited into registered reps personal bank account. Rep claims deposit was unintentional." Id at 55-56. It also states that Gates is the subject of an investigation by a governmental body or selfregulatory organization and under internal review for fraud. Id at 56.
On February 19, 2003, VVI sent Gates another letter forwarding a third U-5. Plaintiff's Ex 5, p. 1. This U-5 stated that Gates was not subject to an investigation by a governmental body or self-regulatory organization. Id at 2-3. However, the U-5 states that an investigation was being conducted by the National Association of Securities Dealers ("NASD") as of December 19, 2002. Id at 5.
Gates claims the information in the U-5s was false, misleading, and defamatory.
III. Arbitration Agreements
Defendants point to two documents which they believe require Gates to arbitrate his disputes with the NASD. First, On October 5, 1993, Gates executed a "Form U-4 Uniform Application for Securities Industry Registration or Transfer" ("U-4") with Allmerica Investments. Defendants' Ex 2, p. 1. The form includes the following arbitration provision:
I agree to arbitrate 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 indicated in Item 10 [which names the NASD] as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgement in any court of component jurisdiction.Id at 1, 6.
Second, on December 8, 2003, Gates filed a Statement of Claim with the NASD entitled Jordan Gates v. VeraVest Investments, Inc., Allmerica Financial, Allmerica Investment Management Company, and Michael R. Burgoyne, NASD Arbitration No. 03-8688 ("Gates' NASD Action"). Defendants' Ex 3, pp. 1-13. The Statement of Claim alleges the same four causes of action as alleged in the Complaint. Id at 9-12. Also on December 8, 2003, Gates filed a form with the NASD entitled "NASD Dispute Resolution Arbitration Uniform Submission Agreement" ("NASD Arbitration Uniform Submission Agreement") naming all the defendants named in the Complaint. Defendants' Letter Exhibit, p. 4. Paragraph 1 of Gates' NASD Arbitration Uniform Submission Agreement states:
The undersigned party hereby submits the present matter in controversy, as set forth in the attached statement of claim, answers, and all related counterclaims and/or third-party claims which may be asserted, to arbitration in accordance with the Constitution, By-Laws, Rules, Regulations, and/or Code of Arbitration Procedure of the sponsoring organization.Id.
On December 11, 2003, the NASD informed Gates that neither Allmerica nor AIMCO were members of the NASD and instructed him on the following steps which must be taken to proceed against them:
Please provide a pre-dispute agreement to arbitrate or a court order mandating arbitration with these parties. In the absence of such information, said respondents will be served on a voluntary basis. Note that a signed predispute agreement or court order is required to compel these parties to NASD arbitration. Please advise in writing if you wish to serve these respondents on a voluntary basis and also provide service addresses.
Plaintiff's Ex 2, p. 1 (emphasis in original).
By letter dated December 23, 2003, Gates' attorneys advised the NASD that an investigation was being conducted as to which entities Gates would pursue. Plaintiff's Ex 3.
Gates' memorandum indicates that on or about December 23, 2003, his attorney called NASD, informed it of their investigation, and asked that the matter be temporarily stayed. Plaintiff's Mem, pp. 8-9. However, no evidence was submitted of this oral request for a stay. Therefore, this court will not consider the impact of that request.
Gates filed this lawsuit on December 30, 2003. Complaint, p. 15. On January 30, 2004, the parties named in the caption of Gates' NASD Action (VVA, Allmerica, AIMCO, and Burgoyne) submitted their own NASD Arbitration Uniform Submission Agreement. Defendants' Ex 5. That agreement contained the same arbitration provision as in Gates' NASD Arbitration Uniform Submission Agreement. Id at 1.
On February 6, 2004, Gates' attorney notified the NASD that he would not proceed in arbitration against parties not subject to NASD jurisdiction and did not agree to arbitrate claims against entities that are not subject to NASD arbitration. Plaintiff's Ex 4. Because Gates was unaware of which entities are subject to NASD jurisdiction, he asked for additional time to meet with defense counsel and to investigate the issue. Id.
On April 23, 2004, after questioning at oral argument, Allmerica Life, the remaining defendant named in Gates' Complaint, filed an NASD Arbitration Uniform Submission Agreement. Defendants' Letter Ex, pp. 6-7.
DISCUSSION
Defendants argue that the arbitration provisions in the U-4 Gates signed with Allmerica Investments on October 5, 1993, and the December 8, 2003 NASD Arbitration Uniform Submission Agreement require this court to dismiss this case in favor of arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et. seq. Gates counters that he has not agreed to arbitrate with all of the defendants. Furthermore, he requests further discovery in order to determine the nature of his agreements with defendants. For the reasons discussed below, Gates' arguments should be rejected.
I. Enforceability of the Arbitration Clause A. Applicable Law
The FAA provides that written agreements to arbitrate disputes arising out of transactions involving interstate commerce "shall be valid, binding, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. If an issue is referable to arbitration under a written agreement, then the court is required to direct that issue to arbitration and stay the trial of the remaining issues until arbitration is complete. 9 U.S.C. § 3. Where "the making of the agreement for arbitration . . . is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4. If made, an agreement to arbitrate shall be "rigorously enforce[d]." Dean Witter Reynolds, Inc., v. Byrd, 470 U.S. 213, 221 (1985).
The district court must order arbitration under § 4 of the FAA if it is satisfied that:
the making of the agreement for arbitration . . . is not in issue. . . . Therefore, the district court "can only determine whether a written arbitration agreement exists, and if it does, enforce it `in accordance with its terms.'"Howard Elec. Mech. v. Briscoe Co., 754 F.2d 847, 849 (9th Cir 1985) (citations omitted).
However, as provided under § 2 of the FAA, contracts containing arbitration agreements are subject to "such grounds as exist at law or in equity for the revocation of any contract." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 112 (2001). When these grounds exist, such as unconscionability, courts may refuse to enforce arbitration agreements. Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir 2003). In determining the validity of an arbitration agreement, federal courts "should apply ordinary state-law principles that govern the formation of contracts." Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir), cert denied, 535 U.S. 1112 (2002), citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
The Supreme Court has repeatedly affirmed that all doubts as to the scope of arbitrability must be resolved in favor of arbitration. Volt Info. Sci. v. Bd. of Tr. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76 (1989); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
B. NASD Arbitration Rules
Both of the arbitration provisions accepted by Gates state that he only bound himself to arbitration according to the rules of the NASD. See Defendants' Letter Ex, p. 4; Defendants' Ex 2, pp. 1, 6. Sections 10101 and 10201 of the NASD Code of Arbitration Procedure outline what disputes are subject to arbitration. NASD Code § 10101 (Defendants' Ex 4, Tab B) states that NASD arbitration is available for:
any dispute, claim, or controversy arising out of or in connection with the business of any member of the [NASD], or arising out of the employment or termination of employment of associated persons(s) with any member, . . . (b) between or among members and associated persons; [and] (c) between or among members or associated persons and public customers, or others. . . .
NASD Code § 10201(a) (Defendants' Ex 4, Tab B) then states that arbitration is required for certain claims between certain parties:
[A] dispute, claim, or controversy eligible for submission under [Rule 10101] between or among members and/or associated persons, and/or certain others, arising in connections with the business of such member(s) or in connection with the activities of such associated person(s), or arising out of the employment or termination of such associated persons(s) with such member, shall be arbitrated under this Code, at the instance of: . . . (2) a member against a person associated with a member . . . [or] (3) a person associated with a member against a person associated with a member.
(emphasis added).
The NASD By-Laws define "member" as "any broker or dealer admitted to membership" in the NASD. By-Laws of the National Association of Securities Dealers, Inc., Art. I., ¶ (q). A "person associated with a member" or an "associated person of a member" means:
The by-laws of the NASD are available at: http://cchwallstreet.com/nasd/nasdviewer.asp?SelectedNode=3FileName=/ nasd/organization/CorporateOrganization.xml#chp_1_3.
(1) a natural person who is registered or has applied for registration under the Rules of the Association; (2) a sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not any such person is registered or exempt from registration with the NASD under these By-Laws or the Rules of the Association. . . .Id, ¶ (dd). C. Arbitration Under Gates' 1993 U-4 Signed with AIMCO
As a basis for arbitration, defendants first point to the arbitration provision in the U-4 Gates signed with Allmerica Investments on October 5, 1993. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23 35 (1991) (holding that an Age Discrimination in Employment Act dispute between a registered representative and his former employer was arbitrable under the FAA as a result of his U-4). Defendants argue that Gates' four claims are arbitrable subjects under NASD Code § 10101. Furthermore, defendants argue that NASD Code § 10201(a) requires Gates to arbitrate his claims against all the parties, except Allmerica, because VVI is an NASD member; Burgoyne is an "associated person" of an NASD member; and VVA, AIMCO, and Allmerica Life are "certain others" covered under the NASD Code.
Gates responds that the U-4 is binding only with respect to Allmerica Investments, and not with any of the named defendants in this case. Although Gates admits that VVI is a member of the NASD, he never had a contract with VVI. He concedes that Burgoyne is an "associated person," but argues that his claims against Burgoyne are only arbitrable to the extent Burgoyne was acting solely on behalf of an entity that is also subject to NASD Code §§ 10101 and 10201(a), which Gates does not believe Burgoyne was. Gates also denies that the other parties are either "associated persons" or "certain others." Finally, Gates argues that the U-4 entered into with Allmerica Investments did not actually bind him to arbitration because ¶ 14 of his February 14, 1994 contract with AIMCO explicitly reserved a right to seek judicial remedies in court. 1. VVI
There is no dispute that Gates signed the U-4 with Allmerica Investments dated October 5, 1993. This court rejects Gates' argument that he has no contract with VVI because it was not a named party to the U-4. VVI is simply the new name for Allmerica Investments. Defendants' Reply Ex 3, p. 1. There is no evidence whatsoever that this name change affected Gates' agreement with Allmerica Investments, and hence VVI, in any way.
Additionally, Gates' U-4 agreement with Allmerica Investments/VVI, when read in combination with NASD Code §§ 10101 and 10201, requires him to arbitrate his claims against VVI. Gates concedes that VVI is a member of the NASD. Furthermore, Gates is an "associated person" of VVI because of his status as a registered representative of Allmerica Investments/VVI. See John Hancock Life Ins. Co. v. Wilson, 254 F.3d 48, 51 (2nd Cir 2001) (agent and sales representative is "associated person" under NASD rules). Therefore, as a dispute between a member (VVI) and an associated person of a member (Gates) "arising out of or in connection with" VVI's business or termination of Gates' employment, the content of Gates' dispute with VVI is arbitrable under NASD Code § 10101. See First Inv. Corp. v. Am. Cap. Fin. Serv., Inc., 823 F.2d 307, 309 (9th Cir 1987) (finding that tort claims are arbitrable under the NASD rules). Indeed, arbitration is mandatory for such disputes under NASD Code § 10201.
Gates hints that his status as an independent contractor or agent for defendants somehow affects whether he is an associated person of VVI. However, contrary to Gates' arguments, NASD rules and policies "consider associated persons of a member to be employees of the member, regardless of their locations or compensation arrangements," including independent contractors or agents. NASD Notice to Members 86-65 (Defendants' Reply Ex 4, p. 1). Similarly, some courts have held that independent contractors can be associated persons who are subject to mandatory arbitration pursuant to NASD Code § 10101. See First Liberty Inv. Group v. Nicholsberg, 145 F.3d 647, 652 (3rd Cir 1998); Beard v. American Express Fin. Advisors, Inc., 2001 WL 1231003, *4 (WD MO 2001); see also Hollinger v. Titan Cap. Corp, 914 F.2d 1564 (9th Cir 1990) (holding that a broker-dealer is "controlling person" under the Securities Exchange Act with respect to its registered representative, even if the broker-dealer and its representative contractually agreed that the representative would be an independent contractor). Therefore, Gates' employment as an agent for Allmerica/VVI does not affect his status as an associated person of VVI within NASD Code §§ 10101 and 10201.
2. Burgoyne
Gates concedes that Burgoyne is an associated person. Gates also agrees that to the extent his claims arise out of his employment relationship with Burgoyne, such claims are arbitrable, but only to the extent Burgoyne was acting solely on behalf of any entity that is also subject to NASD Code § 10101 and 10201(a).
However, Gates cites no authority in support of his efforts to limit the arbitrability of his dispute with Burgoyne. If Burgoyne is an associated person, as Gates concedes, then the dispute is arbitrable under NASD Code § 10201(a) because it is a dispute "between or among members [VVI] and/or associated persons [Gates and Burgoyne] . . . arising in connections with the business of such member(s) [VVI] or in connection with the activities of such associated person(s) [Burgoyne firing Gates], or arising out of the employment or termination of such associated persons(s) with such member[.]" 3. VVA, AIMCO, and Allmerica Life
Defendants argue that Gates must arbitrate his claims against VVA, AIMCO, and Allmerica Life because Gates is an associated person of an NASD member (VVI); at least one of the claimants and/or respondents is an NASD member or associated person (VVI and Burgoyne); and VVA and AIMCO (which are the same entities) and Allmerica Life are "certain others" under the NASD Code § 10201.
Defendants do not argue that Allmerica, the holding company for all the other defendants, is a "certain other" under NASD Code § 10201. They concede that Allmerica does not play an active role in the securities industry or the business of the other defendants. Therefore, they admit that Allmerica's right to compel Gates to arbitrate his claims against it stems exclusively from the NASD Arbitration Uniform Submission Agreement in which Gates agreed to arbitrate his dispute with Allmerica (and the other defendants), discussed below.
Gates responds that defendants have made only broad claims that VVA and Allmerica Life are closely affiliated with VVI, without providing more evidence of these connections or how they were involved in the events which led this dispute. Furthermore, Gates notes that he has no contract with Allmerica, VVI, and VVA. As a result, Gates argues his claims cannot be said to have arisen out of his employment or termination of employment with entities for which he never worked. He also contends that defendants cannot be said to be so intertwined as to have jointly made decisions to terminate and defame him.
a. Arbitration Precedents for "Certain Others"
A person may be appropriately joined as a "certain other" where "that party plays an active role in the securities industry, is a signatory to a securities-industry arbitration agreement (or is an instrument of another party to the arbitration) and has voluntarily participated in the particular events giving rise to the controversy underlying the arbitration." Thomas James Assoc., Inc. v. Jameson, 102 F.3d 60, 67-68 (2nd Cir 1996), citing McMahan Sec. Co. L.P. v. Forum Cap. Mkts, L.P., 35 F.3d 82, 87-88 (2nd Cir 1994). In factual situations similar to the present case — where the plaintiff alleges joint misconduct by affiliated companies, some of which are NASD members or associated persons and some of which are not — the non-NASD member is "sufficiently immersed in the controversy for it to be considered a `certain other' party under [the NASD Code]." McMahan Sec. Co., 35 F.3d at 87-88; see also Westervelt v. Bayou Mgmt., L.L.C., 2003 WL 22533672, at *2-3 (ED La Nov. 4, 2003); Pruco Sec. Corp. v. Montgomery, 2003 WL 22383034, at *2-5 (D ND Oct. 15, 2003)
b. Application
VVA/AIMCO and Allmerica Life play active roles in the securities industry as close affiliates of VVI, an NASD member. The submissions filed by Allmerica with the Securities and Exchange Commission ("SEC") demonstrate the close interaction of these parties in general. See Defendants' Reply Exs 1, pp. 2 (indicating that one of Allmerica's three business segments is its Allmerica Financial Services segment), 15 (stating that "Allmerica Financial Services segment includes the individual financial products and group retirement products and services of Allmerica Financial Life Insurance and Annuity Company [Allmerica Life] . . . as well as our broker/dealer and registered investment advisor affiliates. These affiliates include Vera Vest Investments, Inc. and Vera Vest Advisors, Inc."). Indeed, Allmerica Life, VVA/AIMCO, and VVI are required by law to be closely affiliated. An insurance company offering variable life and annuity contracts, as does Allmerica, can only avoid registering as a broker-dealer with the SEC if it has a wholly-owned subsidiary registered as a broker-dealer and operating in compliance with all the applicable SEC rules and regulations. Distributions of Variable Annuities by Insurance Companies Broker-Dealer Registration and Regulation Under the Securities Exchange Act of 1934 No 8389, 1968 WL 86051, *1-2 (Sept. 13, 1968). Here, Allmerica Life is able to issue variable insurance products without registering as a broker-dealer because it has established such an agency relationship with its affiliated broker-dealers, VVI and VVA. See Defendants' Reply Ex 1, p. 15.
This court may consider SEC reports on this motion to dismiss because they are matters of public record. Mack v. South Bay Beer Distrib., Inc., 798 F.2d 1279, 1282 (9th Cir 1986) ("Therefore, on a motion to dismiss a court may properly look beyond the complaint to matters of public record and doing so does not convert a Rule 12(b)(6) motion to one for summary judgment" (citing Phillips v. Bureau of Prisons, 591 F.2d 966, 969 (DC Cir 1979) ("when passing on a motion attacking the legal efficacy of the plaintiff's statement of his claim, the court may properly look beyond the complaint only to items in the record of the case or to matters of general public record")), overruled on other grounds by Astoria Fed. Sav. and Loan Ass'n v. Solimino, 501 U.S. 104, 111 (1991); see also White v. Lee, 227 F.3d 1214, 1242 (9th Cir 2000).
VVA/AIMCO and Allmerica Life are not signatories to the October 5, 1993 arbitration agreement between Gates and Allmerica Investments/VVI, but they were instruments of a signatory, VVI, and voluntarily participated in the events giving rise to this controversy as shown by the close relationship between these three defendants. According to Gates, Burgoyne, who is concededly subject to arbitration, was the district manager for all three defendants. See Complaint ¶ 11. Thus, these three defendants may have been sufficiently intertwined as to have jointly made decisions to terminate Gates. Moreover, according to ¶ 4 of his February 14, 1994 contract with AIMCO, Gates was required to be a registered representative of Allmerica Investments (now VVI) with the NASD in order to work for AIMCO (now VVA). Defendants' Ex 3, p. 29. Finally, at least with regard to VVA/AIMCO, Gates' Complaint alleges numerous acts, such as his complaints regarding the content of the U-5 sent by VVA/AIMCO, that belie his arguments that VVA/AIMCO is not closely related to the events in this dispute. Complaint, ¶ 30.
Therefore, Gates has failed to demonstrate that VVA/AIMCO and Allmerica Life are not closely enough related to this dispute in order to be "certain others" with whom arbitration is mandatory under NASD Code § 10201(a).
Several courts have held that under NASD Code § 10201(a), certain others may not initiate arbitration by themselves. Rather they may only be joined in an arbitration initiated by an NASD member of associated person. See e.g., Burns v. New York Life Ins. Co., 202 F.3d 616, 621 (2nd Cir 2000). However, here the arbitration could be initiated by VVI, an NASD member, pursuant to the U-4.
Additionally, this court rejects Gates argument that the U-4 entered into with Allmerica Investments did not actually bind him to arbitration because ¶ 14 of his February 14, 1994 contract with AIMCO explicitly reserved a right to seek judicial remedies in court. When read in its entirety, ¶ 14 reserved AIMCO the right to join Gates, as a Financial Planner working for AIMCO, in any lawsuit brought by a third party against AIMCO as a result of the negligent, willful, or wrongful acts of Gates. Defendants' Ex 3, p. 31. This contract says nothing about the intentions of the parties as to an available forum in the case of disputes between the parties.
4. Conclusion
Accordingly, under NASD Code § 10101 and § 10201(a), Gates should be required to arbitrate his dispute with VVI, VVA/AIMCO, Allmerica Life, and Burgoyne as a result of the U-4 he signed with Allmerica Investments (VVI's predecessor) on October 5, 1993.
D. Arbitration Under Gates' NASD Arbitration Uniform Submission Agreement
Defendants also argue that Gates bound himself to arbitration with all the parties by submitting an NASD Arbitration Uniform Submission Agreement on December 8, 2003, in which he agreed to arbitrate his claims against all the defendants.
During briefing and oral argument, there was some confusion about the terms of Gates' NASD Arbitration Uniform Submission Agreement because an actual copy of this signed form had not been submitted into the record. A signed copy of the form was later submitted by the defendants with their April 23, 2004 letter (docket #23). This submission mooted several of Gates' defenses. In particular, Gates had previously argued that the December 8, 2003 NASD Arbitration Uniform Submission Agreement did not apply to VVA or Allmerica Life because they were not named on the form. However, the actual NASD Arbitration Uniform Submission Agreement clearly names both VVA and Allmerica Life. Id.
Gates' remaining defense is that his February 6, 2004 letter withdrew his consent to arbitration with the other entities immediately after he learned that all of the named respondents were not members of the NASD, with the exception of VVI, which he concedes is a member of the NASD.
Federal circuit and district courts have repeatedly held that an NASD Arbitration Uniform Submission Agreement is an enforceable agreement to arbitrate. See, e.g., Dean Witter Reynolds Inc. v. Fleury, 138 F.3d 1339, 1342 (11th Cir 1998) (directing district court to order parties to NASD arbitration); Mayo v. Dean Witter Reynolds, Inc., 258 F. Supp.2d 1097, 1116 (ND Cal 2003) (denying motion to vacate order compelling arbitration); First Montauk Sec. v. Menter, 26 F. Supp.2d 688, 689 (SDNY 1998) (dismissing court complaint because plaintiff had signed Uniform Submission Agreement). Similarly, Gates' written NASD Arbitration Uniform Submission Agreement is a written agreement to arbitrate his claims against defendants.
Furthermore, Gates' argument that he withdrew his consent to NASD arbitration through his February 6, 2004 letter is of no merit for several reasons. First, the February 6, 2004 letter nowhere actually states that Gates withdrew his consent. Instead it states that he intended to proceed with NASD arbitration against all entities which are "subject to NASD jurisdiction." Plaintiff's Ex 4.
Second, on January 30, 2004, defendants, except Allmerica Life, removed any doubt about whether they were subjecting themselves to NASD jurisdiction by filing their own NASD Arbitration Uniform Submission Agreement. Defendants' Ex 5. Thus, a binding arbitration agreement was consummated between all the parties prior to Gates' alleged effort to withdraw his consent.
Although Allmerica Life did not submit its own NASD Arbitration Uniform Submission Agreement until April 23, 2004, it also was part of the binding agreement to arbitrate consummated before Gates' effort to withdraw. For the same reasons it is subject to arbitration as a "certain other" to the agreement to arbitrate contained in the U-4 signed on October 5, 1993, Allmerica Life is also a "certain other" bound to arbitrate Gates' December 8, 2003 claim filed with the NASD. As the parent of VVI and VVA/AIMCO, and a provider of variable insurance as one of Allmerica's business segments, Allmerica Life was closely involved in the employment dispute giving rise to this case.
Finally, the FAA and relevant case law indicate that a plaintiff cannot unilaterally withdraw his valid consent to binding arbitration. Section 2 of the FAA provides that arbitration agreements are "irrevocable . . . save upon such grounds as exist at law or in equity for the revocation of any contract." Gates has raised no such common law grounds for discarding his agreement, such as unconscionability. As one court in the Ninth Circuit recently held in a case involving arbitration by New York Stock Exchange rules, "[a]n executed [Uniform Submission Agreement] is a valid, binding agreement." Mayo, 258 F. Supp.2d 1097, 1105, citing First Montauk, 26 F. Supp.2d at 689 (rejecting argument that signed NASD Arbitration Uniform Submission Agreement could be disregarded because party had not intended to submit to NASD jurisdiction).
II. Whether to Permit Further Discovery
Gates argues that arbitration should be deferred at this point in order to permit more discovery to determine his relationship with defendants and whether he is required to arbitrate with them. According to the Ninth Circuit:
The FAA provides for discovery and a full trial in connection with a motion to compel arbitration only if "the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue."Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir 1999), quoting 9 U.S.C. § 4 (emphasis added).
Gates admits that he signed both the U-4 and the NASD Arbitration Uniform Submission Agreement. Defendants have not refused to arbitrate the case. Therefore, the FAA does not permit further discovery.
III. Whether to Dismiss, or Stay the Case
Under § 3 of the FAA, a court has authority, upon application by one of the parties, to grant a stay pending arbitration, but also may dismiss all claims barred by an arbitration clause. Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir 1988); see also Martin Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143 (9th Cir 1978) (holding that judge has discretion to grant summary judgment when all the plaintiff's claims were barred by an arbitration clause).
Other courts have chosen to stay a case pending arbitration rather than dismiss it, even when confronted with an arbitration clause that covers all the plaintiff's claims. See e.g., Bosinger v. Phillips Plastics Corp., 57 F. Supp.2d 986, 993 n 7 (SD Cal 1999). However, this court recommends dismissal because the arbitration provisions in question require arbitration of all of Gates' claims. Nothing will remain for the court to resolve after arbitration.
RECOMMENDATION
For the reasons set forth above, this court recommends that defendants' Amended Motion to Compel Arbitration (docket #11) be GRANTED and the case be DISMISSED.
SCHEDULING ORDER
Objections to these Findings and Recommendation(s), if any, are due June 14, 2004. If no objections are filed, then the Findings and Recommendation(s) will be referred to a district court judge and go under advisement on that date.
If objections are filed, then the response is due within 10 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement.