Opinion
Civ. No. 98-351 (DRD)
August 26, 1999.
Nancy S. Martin, Esq., Law Offices of Linda B. Kenney, for Plaintiff.
John James Peirano, Jr., Esq., Carpenter, Bennett Morrissey, for Defendant.
O P I N I O N
In this Title VII and New Jersey Law Against Discrimination Action, a former employee is suing her former employer for allegedly discriminating against her based upon gender. The defendant, Prudential Insurance Financial Services, Inc. ("Prudential"), has moved to dismiss the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), or, in the alternative, to compel arbitration and to stay this action pursuant to 9 U.S.C. § 1 et seq. For the reasons set forth below, Prudential's motion to compel arbitration will be granted.
I. BACKGROUND
In April of 1980, the plaintiff, Barbara Irons ("Irons"), began working for Prudential as a registered representative or sales agent in its district office in Neptune, New Jersey. Irons's job duties included selling insurance policies and other products deemed to be securities under state and federal law. As a condition of employment, Irons was required to become licensed to sell securities with the National Association of Securities Dealers, Inc. ("NASD"). In August of 1982, Irons was promoted to the position of sales manager for the Neptune office. As sales manager, Irons was still required to be licensed by NASD.
On or about February 2, 1982, Irons signed a "Uniform Securities Industry Registration," or "Form U-4," which registered her with NASD. On or about February 8, 1984, Irons executed a second Form U-4, identifying "Pruco Securities Corporation," Prudential's wholly-owned subsidiary through which Irons sold securities, as the entity with which she would maintain registration.
Form U-4 contains, among other things, an arbitration agreement by which all signatories agree to be bound. The arbitration provision provides that those executing the form agree to arbitrate any dispute, claim or controversy between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or bylaws of the [NASD].
See Levinskas Aff. ¶¶ 2, 3, Ex. A. This paragraph appears directly below a bold print instruction that states "THE FOLLOWING SHOULD BE READ VERY CAREFULLY BY THE APPLICANT."
Irons's signature appears on page four of the Form U-4, just below the arbitration provision and an acknowledgment that states "I hereby certify that I have read and understand the foregoing statements and that my responses are true and complete to the best of my knowledge." Irons's signature was witnessed by another employee and was notarized by a New Jersey Notary Public.
Among the NASD's rules referred to in the arbitration provision, is the Code of Arbitration Procedure (the "Code"). Section 10101 of the Code, entitled "Matters Eligible for Submission") requires the arbitration of any claims "arising out of the employment or termination of employment of associated persons." Id. Ex. C. Section 10201(a) of the Code, entitled "Required Submission," requires that any claim that arises "out of the employment or termination of employment of . . . associated person(s) with such member, shall be arbitrated under this Code, at the insistence of" one of the parties. Id.
On January 22, 1998, Irons filed a Complaint with this court alleging gender discrimination in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000(e) et seq., the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. ("NJLAD"), violation of the Equal Pay Act, 29 U.S.C. § 206(d), and a violation of New Jersey public policy.
II. DISCUSSION
A. Standards Regarding Arbitrability
The agreement to arbitrate encompassed in Form U-4 is governed by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. (1970). See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). Under the FAA, a party to an arbitration agreement who seeks redress in a judicial proceeding first, can be compelled by the court to proceed before an arbitrator. See 9 U.S.C. § 4; see also Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).
There is a strong presumption in favor of arbitrability and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). This presumption applies equally "where a party bound by an arbitration agreement raises claims founded on statutory rights." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). In order to determine whether a claim is arbitrable, the Court must determine whether there is an agreement to arbitrate, whether the claim falls within the scope of the agreement, and whether there has been a waiver of the right to arbitrate. See Gilmer, 500 U.S. at 24-34 (1991).
Although Irons raises various arguments, there is no legitimate dispute about the existence of an agreement to arbitrate in this action. Irons admits to signing Form U-4s on multiple occasions. Under New Jersey law, in the absence of fraud or other wrongdoing, a person who signs a contract is conclusively presumed to know its contents and to assent to the terms. Rudbart v. North Dist. Water Supply, 127 N.J. 344, 353, 605 A.2d 681, cert. denied, 506 U.S. 871, 113 S.Ct. 203, 121 L.Ed.2d 145 (1992); Onderdonk v. Presbyterian Homes of New Jersey, 171 N.J. Super. 529, 410 A.2d 252 (App.Div. 1979), aff'd in part, rev'd in part on other grounds, 85 N.J. 171, 425 A.2d 1057 (1981); Moreira Const. Co. v. Moretrench Corp., 97 N.J. Super. 391, 235 A.2d 211 (App.Div. 1967),aff'd, 51 N.J. 405, 241 A.2d 236 (1968); Rivera v. North Am. Co. for Life and Health Ins., 269 N.J. Super. 418, 423, 635 A.2d 598, 602 (Law Div. 1993); Wade v. Park View Inc., 25 N.J. Super. 433, 96 A.2d 450 (Law Div.), aff'd, 27 N.J. Super. 469, 99 A.2d 589 (App.Div. 1953). Irons's subjective knowledge at the time she signed the Form U-4s is irrelevant. Absent special circumstances, a plaintiff cannot avoid his or her obligation to arbitrate by stating that he or she did not know what the Form U-4 contained. See Upton v. Tribilcock, 91 U.S. 45, 50, 23 L.Ed. 203 (1875); Genesco, Inc. v. T. Kakiuchi Co., Ltd., 815 F.2d 840, 845 (2d Cir. 1987). After a thorough review of the evidence, I conclude that no such special circumstance exists in this case.
The question then becomes whether the claims asserted by Irons in this action are encompassed by the agreement to arbitrate. Courts have consistently held that claims arising out of an employment relationship, including statutory claims such as claims under Title VII, are within the scope of the Form U-4 and the NASD arbitration provision. See, e.g.,Gilmer, 500 U.S. at 26 (holding that an age discrimination claim under the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. § 621 et seq., can be subjected to compulsory arbitration where employee signed a Form U-4). As in Gilmer, Irons signed Form U-4. Moreover, Irons's asserted claims are of the type asserted by plaintiffs in the aforementioned case in which the Supreme Court compelled arbitration.
Third, and finally, Irons's allegation that Prudential has waived its right to arbitrate these claims because it failed to provide her with a copy of NASD's rules, by-laws, and constitutions is unpersuasive. Prudential had no obligation to inform Irons as to the scope of the agreement that she signed on two different occasions. The terms of the agreement were not hidden, and Irons had a full and fair opportunity to ask questions and gain more knowledge of the NASD's rules before signing Form U-4. As previously stated, absent any fraud on Prudential's part, the presumption is that Irons knew the content of the agreement at the time she signed it. Accordingly, absent some convincing reason not to compel arbitration, arbitration is warranted in this case.
B. Irons's Arguments
1. Voluntary Waiver
First, Irons argues that Title VII requires a knowing and voluntary waiver of the statutory right to a judicial forum for an arbitration agreement to be binding and her signing of the Form U-4 cannot be deemed a knowing waiver. The Supreme Court, in Gilmer, decided that an employee who executes a Form U-4 is bound to arbitrate statutory discrimination claims. 500 U.S. at 24. Additionally, Prudential's failure to provide Irons with copies of the governing rules does not make her waiver involuntary. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 924 F. Supp. 627, 642 (D.N.J. 1996), rev'd on other grounds, 133 F.3d 225 (3d Cir.), cert. denied, 119 S.Ct. 55 (1998); Bender v. Smith Barney, Harris Upham Co., Inc., 789 F. Supp. 155, 159 (D.N.J. 1992); see also Hart v. Canadian Imperial Bank of Commerce, 43 F. Supp.2d 395, 400-01 (S.D.N.Y. 1999); Smith v. The Equitable, 27 F. Supp.2d 565, 568 (E.D.Pa. 1998); Herko v. Metropolitan Life Ins. Co., 978 F. Supp. 141, 146 (W.D.N.Y. 1997). Accordingly, based onGilmer, compelling arbitration is not prohibited in actions concerning substantive statutory rights.2. Contract of Adhesion
Irons also argues that arbitration should not be compelled because Form U-4 is a contract of adhesion and violated established principles of New Jersey contract law. Specifically, Irons argues that the U-4 should not be enforced because she was not permitted to negotiate its terms and Prudential never discussed with her the rights she was giving up.
Although there may well have been an imbalance in bargaining power between Prudential and Irons, such imbalance does not, standing alone, render the agreement to arbitrate a contract of adhesion. In fact, the very form at issue in this case the Form U-4 has been challenged repeatedly as a contract of adhesion. In an unbroken line of cases dating back nearly 30 years, the claim that the contract is one of adhesion has been emphatically rejected. See, e.g., Gilmer, 500 U.S. 20, 33 (finding whether securities registration form is contract of adhesion is case-specific inquiry); Kovaleskie v. SBC Capital Mkt., Inc., 167 F.3d 361, 366-68 (7th Cir. 1999) (noting, where plaintiff claimed Form U-4 was adhesion contract, "[w]e reject this argument, as have numerous courts, including the Supreme Court. Most recently, the First Circuit held inRosenberg that the mandatory arbitration agreement contained in the Form U-4 does not create an unconscionable contract of adhesion." (citation omitted)); Seus v. John Nuveen Co., 146 F.3d 175, 184 (3rd Cir. 1998),cert. denied, 119 S.Ct. 1028, 143 L.Ed.2d 38 (1999) ("[t]he terms of the Form U-4 that [plaintiff] signed were not oppressive, unconscionable, or unreasonably favorable to either the NASD or [plaintiff's employer].");Feinberg v. Bear, Stearns Co., No. 90 Civ. 5250 (JFK), 1991 WL 79309 (S.D.N.Y. May 3, 1991) (rejecting claim that Form U-4 is contract of adhesion); Rust v. Drexel Firestone, Inc., 352 F. Supp. 715, 717 (S.D.N.Y. 1972) (finding arbitration provision in securities exchange registration form not contract of adhesion under federal or New York law).
Moreover, a number of the courts in the above cited cases observed that the Form U-4's arbitration provision is imposed not by the employer on the employee but by the stock exchange on both of them, and that both employer and employee are bound by its terms. That factor, equally applicable in this case, cuts strongly against finding that the provision is an unconscionable contract of adhesion. See, e.g., Seus, 146 F.3d at 184; Rust, 352 F. Supp. at 717.
Moreover, as the cases make plain, an imbalance in bargaining power does not, by itself, establish an adhesion contract. More is required. A plaintiff must demonstrate that his or her employer wrongfully used its superior position. As the First Circuit recently held, the Form U-4 is not an unconscionable contract of adhesion "[a]bsent some showing of fraud or oppressive conduct." Rosenberg v. Merrill Lynch, Pierce, Fenner Smith, Inc., 163 F.3d 53, 69 (1st Cir. 1998); accord Kovaleskie, 167 F.3d 367-68; Seus, 146 F.3d at 184.
Here, Irons fails to allege, much less to substantiate, any undue influence or coercion by Prudential. Instead, Irons alleges only that she was not aware of the arbitration provision in the Form U-4, nor of the provisions in the NASD Code requiring arbitration of claims relating to employment or termination of employment.
To this end, Irons asserts that Prudential did not educate her as to the rights that she was giving up. Irons claims that no efforts were made by Prudential to explain the arbitration provision or its scope or otherwise emphasize its significance. Additionally, Irons claims that there was no reference made in the arbitration provision to either discrimination claims, in general, or the specific anti-discrimination statutes such as NJLAD or Title VII. There is no evidence, however, that Irons requested any explanations of the form or the arbitration provision. Moreover, Irons herself signed the portion of the form containing the arbitration clause. That part of the form appears in a box entitled "THE APPLICANT MUST READ THE FOLLOWING VERY CAREFULLY" and contains, in the first paragraph of this section, "I swear or affirm that I have read and understand the items and instructions on this form." Irons had ample opportunity to become familiar with the Form U-4 and with the arbitration provisions of the NASD Code. Irons's assertion that she did not know the terms implicated by the agreement she signed is not credible. Accordingly, compelling arbitration is appropriate in this case.
C. Dismissal
After deciding that arbitration is the proper forum for this dispute, the Court has the discretion to determine whether to stay the action pending the outcome of arbitration or to dismiss the case. The remedy provided in 9 U.S.C. § 3 is for the court to stay any lawsuit until arbitration has been completed. However, courts have dismissed the case when staying the proceedings would serve no purpose. In Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir. 1992), the court decided to dismiss rather than stay the action because all the issues in the case were arbitrable under the agreement. Id. at 1164. The court stated that "[a]ny post-arbitration remedies sought by the parties will not entail renewed consideration and adjudication of the merits . . . but would be circumscribed to a judicial review of the arbitrator's award in the limited manner prescribed by law." Id.; see also Dancu v. Coopers Lybrand, 778 F. Supp. 832, 835 (E.D.Pa. 1991), aff'd, 972 F.2d 1330 (3d Cir. 1992) (holding that the case be dismissed without prejudice because staying the action served no purpose); Hoffman v. Fidelity and Deposit Co. of Md., 734 F. Supp. 192, 195 (D.N.J. 1990) (dismissing case because all issues relating to litigation were subject to arbitration).
Here, the arbitration agreement signed by Irons governs any and all disputes that may arise between her and Prudential. There is no question that all of the disputes in this case arise out of Irons's employment with Prudential. In concert with Hoffman, Dancu, and Alford, staying this action would serve no discernable function and therefore the case will be dismissed without prejudice.
III. CONCLUSION
For the reasons set forth above, Prudential's motion to compel arbitration will be granted and the case will be dismissed without prejudice.
O R D E R
Defendant, Prudential Insurance Financial Services, Inc. ("Defendant"), having moved to dismiss plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6), or, in the alternative, compel arbitration and to stay this action pursuant to 9 U.S.C. § 1 et seq.; and the Court having heard oral argument on August 23, 1999; and for the reasons set forth in an opinion of even date;
IT IS this day of August, 1999, hereby
ORDERED that Defendant's motion to compel arbitration be and hereby is GRANTED; and it is further
ORDERED that the complaint in this matter be DISMISSED without prejudice.