Case Title: Ex Parte McKinney

Citation: 515 So. 2d 693

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1987-08-21T00:00:00Z

Document:
515 So. 2d 693 (1987)
Ex parte Wallace R. McKINNEY IV.
(In Re Robert and Karen LANE v. E.F. HUTTON & COMPANY, INC., and Wallace R. McKinney IV).
86-324.

Supreme Court of Alabama.
August 21, 1987.
*694 James F. Duffy, Jr., of Inge, Twitty, Duffy & Prince, Mobile, for petitioner.
Paul W. Brock and Orrin K. Ames III of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, and Charles A. Gilman and Robert A. Alessi of Cahill, Gordon & Reindell, New York City, for respondents.
MADDOX, Justice.
On January 20, 1987, the petition for mandamus was denied, without opinion. See 514 So. 2d 350 (Ala.1987). The petitioner has filed an application for rehearing.
This petition for writ of mandamus involves a question of whether a dispute was subject to arbitration under the provisions of the Federal Arbitration Act. In order to answer that question, we must determine whether there was a valid enforceable arbitration agreement that applied to the dispute, and whether the party moving for arbitration had waived its right to have the controversy arbitrated because it had substantially invoked the judicial process.
On January 4, 1984, Robert and Karen Lane commenced a lawsuit in the Circuit Court of Mobile County captioned Robert Lane and Karen Lane v. E.F. Hutton & Company, Inc. and Wallace R. McKinney IV, No. CV-84-000018. The Lanes alleged that, in reliance upon misrepresentations made to them by Hutton and McKinney, who acted as the Lanes' account executive, they purchased a single premium deferred annuity (SPDA) policy issued by an insurance company that subsequently experienced financial difficulties, and that because of the fraud practiced upon them by the defendants they were damaged substantially.
On May 2, 1984, McKinney, the petitioner here, answered the Lane complaint and cross-claimed against Hutton, alleging that (1) if he made any misrepresentations to the Lanes, such misrepresentations were based upon information provided to him by Hutton, and (2) the Lane lawsuit had caused him mental anguish and had caused damage to his reputation. Hutton answered the Lane complaint and McKinney's cross-claim on September 24, 1984, and filed a cross-claim against McKinney in which it alleged that, if McKinney made any misrepresentations to the Lanes concerning their SPDA policy, he acted beyond the scope of his employment with Hutton and should be held liable to Hutton for indemnity if Hutton were found liable to the Lanes.
The Lanes' suit is one of several cases filed against Hutton and Hutton employees in the Circuit Court of Mobile County, arising out of Hutton's marketing of the SPDA involved in the Lane suit. It is one of several in which this petitioner, McKinney, is, and was, named as a defendant along with his employer, Hutton. The lawsuit filed by the Lanes against Hutton and McKinney was the first lawsuit to be filed, however.
Because there were approximately 50 of these lawsuits filed against Hutton and employees of Hutton, such as McKinney, the then-presiding judge of the Circuit Court of Mobile County, the Honorable *695 Robert E. Hodnette, Jr., entered an order consolidating all of the cases for the purpose of discovery, and designated Robert T. Cunningham, Jr., counsel for the Lanes, as chief counsel in charge of all "general" discovery for all plaintiffs in all of the cases and, until his retirement, Judge Hodnette handled all discovery motions, pleadings, other motions, etc., in all of the cases.
After the filing of the lawsuit by the Lanes, and the entry of the consolidation order, there were approximately 115 depositions taken by the parties.
Hutton took McKinney's pre-trial deposition on five occasions (September 27, 1984; May 14, 1985; May 15, 1985; April 28, 1986, and May 8, 1986). Hutton also propounded two sets of interrogatories, and Hutton filed several motions in the court in connection with the pending claims.
Just prior to May 19, 1986, the day on which the case was to be tried in the Circuit Court of Mobile County, Hutton entered into a settlement agreement with the Lanes, which resulted in the dismissal of the Lanes' case against Hutton and McKinney.
There remained, however, the cross-claims of McKinney against Hutton, and Hutton against McKinney, and a conference was then held in the chambers of Judge Douglas I. Johnstone, to whom the case had been reassigned, with regard to the rescheduling of the trial of the issues embraced in those cross-claims.
The cross-claim of McKinney against Hutton in the Lane lawsuit was then scheduled for trial on September 22, 1986. Hutton dismissed its cross-claim against McKinney on September 8, 1986, and on the next day, September 9, 1986, which was over two years after the date McKinney had filed his cross-claim against it, Hutton moved for an order compelling arbitration and a stay of the proceedings pending arbitration, contending that the case between it and McKinney became arbitrable for the first time when the settlement was reached by and between Hutton and the Lanes. The motion was supported by documents containing what Hutton contended, and contends in its response to this petition, is a valid arbitration agreement by and between McKinney and it.
On September 12, 1986, after receiving extensive briefing on Hutton's motion to compel arbitration and after entertaining oral argument on the motion on September 5 and 11, 1986, Judge Johnstone held that McKinney's claims against Hutton must be stayed pending arbitration. He entered the following order:
On September 25, 1986, McKinney moved for reconsideration of Judge Johnstone's September 12, 1986, order compelling arbitration. After receiving additional briefing and hearing further oral argument on October 24, 1986, Judge Johnstone denied McKinney's motion for reconsideration in a written order dated November 10, 1986. In that order, Judge Johnstone, being advised by McKinney's counsel that he would seek a writ of mandamus from this Court, did stay his order to compel arbitration until this Court acted on the mandamus petition.
On December 8, 1986, McKinney petitioned this Court for a writ of mandamus to Judge Johnstone. Upon receipt of McKinney's petition and Hutton's letter response dated December 17, 1986, this Court denied McKinney's petition on January 20, 1987.
Dissatisfied with this Court's decision, McKinney petitioned the Court on February 3, 1987, for a rehearing on his petition for a writ of mandamus. A majority of this Court set aside its January 20, 1987, *696 order denying McKinney's petition for a writ of mandamus, and directed Hutton to respond to McKinney's petition.
The matter was presented orally before the Court, and is now ripe for resolution.
First, we address our scope of review. This is a mandamus petition, and this Court has said many times that "[m]andamus is an extraordinary remedy, which should be granted only when there is a clear showing that the trial court abused its discretion." Ex parte Lang, 500 So. 2d 3, 5 (Ala.1986). See, also, Ex parte Hartford Ins. Co., 394 So. 2d 933, 936 (Ala.1981), wherein this Court stated that "[m]andamus itself is an extraordinary remedy which should only be granted when there is a clear showing that the trial court abused its discretion and exercised it in an arbitrary or capricious manner."
We have examined the record and related material forwarded to this Court by McKinney and Hutton and we are of the opinion that Judge Johnstone very carefully considered and analyzed the issues presented on Hutton's motion to compel arbitration, and that he held three separate hearings at which oral arguments were presented by McKinney and Hutton concerning each of the matters raised in the petition for mandamus. The record shows that Judge Johnstone reviewed the briefs and affidavits submitted by the parties and questioned counsel on all relevant issues, and that only then did he issue a written order holding that McKinney is obligated under the controlling arbitration agreements to submit his claims to arbitration.
Judge Johnstone allowed McKinney a final opportunity to present arguments in opposition to Hutton's motion to compel arbitration on October 24, 1986, in connection with McKinney's motion for reconsideration. Upon further consideration of the issues, and despite having been made aware of McKinney's intention to seek a writ of mandamus if the circuit court ruled against him, Judge Johnstone again concluded, in a written order dated November 10, 1986, that arbitration was mandated.
Based on this record, we cannot conclude that Judge Johnstone abused his discretion or exercised it in an arbitrary or capricious manner. Quite to the contrary, the record reflects that Judge Johnstone gave due consideration to the arguments of both sides; therefore, the writ is not due to be granted on the proposition that the trial judge did not adequately consider the matter.
Hutton contends that in view of the fact that Judge Johnstone did give due consideration to the matter before him, this Court should deny McKinney's petition without reaching the merits of the arbitration issue. This we decline to do.
The question of whether McKinney agreed to arbitrate this particular dispute between him and Hutton is a substantial one, and if we hold that the parties did agree to arbitrate, there is a more substantial question whether Hutton waived its right to compel arbitration.
The first question we consider is whether McKinney agreed to submit the dispute between him and Hutton to arbitration. McKinney contends that he did not. We disagree. We find substantial evidence to support the finding of the trial judge that there was a valid, binding arbitration agreement between McKinney and Hutton. McKinney signed at least three agreements upon which the trial court could have found him obligated to arbitrate this dispute between him and Hutton.
On October 10, 1980, McKinney executed a New York Stock Exchange agreement ("Form 4-80"), pursuant to paragraph (d) of which he agreed to the following dispute-resolution procedure:
On October 10, 1980, McKinney also executed an American Stock Exchange agreement in which he expressly agreed to be bound by the arbitration provisions contained in the respective Rules and Constitutions of the American Stock Exchange and the New York Stock Exchange:
Finally, on April 27, 1981, McKinney executed a "uniform Application for Securities Industry Registration" ("Form U-4"), pursuant to paragraph 5 of which he agreed "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 with which I register." (Emphasis added.) (Hutton Appendix, Exhibit I.)
In all three of the above-quoted agreements, which Judge Johnstone had before him on Hutton's motion to compel arbitration, McKinney agreed to comply with and be bound by the constitution and rules of the New York Stock Exchange and to submit to its jurisdiction. Article XI, Section 1, of the New York Stock Exchange constitution provides:
Similarly, Rule 347 of the New York Stock Exchange specifically provides for arbitration of disputes arising out of employment or the termination of employment:
It is not disputed that all of the claims advanced by McKinney against Hutton arise out of the course of his employment with Hutton; therefore, we hold that the trial court did not abuse its discretion in holding that the claims must be arbitrated in accordance with his arbitration agreements and the rules of the New York Stock Exchange.
McKinney relies upon a California case, Chan v. Drexel Burnham Lambert, Inc., 178 Cal. App. 3d 632, 223 Cal. Rptr. 838 (1986), to support his argument that there was no agreement to arbitrate. In Chan, the account executive had executed an agreement pursuant to which he agreed generally to be bound by the "Statute(s), Constitution(s), Rule(s) and By-Laws" of the organization to which he was applying for membership. 178 Cal. App. 3d  at 636, 223 Cal. Rptr.  at 840. The court held that, under California law, the arbitration rule (Rule 347) of the New York Stock Exchange was not incorporated by reference into the general agreement signed by the account executive, noting that the agreement before that court did not even mention the word "arbitration." The court held:
"* * *
Unlike the agreement executed by the account executive in Chan, however, each of the three agreements executed by McKinney states on its face that the parties thereto agree to arbitrate any disputes arising among them.
We think Chan is inapposite for a further reason. A majority of this Court, when first faced with the question of whether a state court should enforce the provisions of the Federal Arbitration Act, held that the Federal Arbitration Act did not pre-empt state law regarding arbitration, and that an agreement to arbitrate a future dispute violated the public policy of this state. Ex parte Alabama Oxygen Co., 433 So. 2d 1158 (Ala.1983) (Maddox, J., dissented, joined by Torbert, C.J.). On appeal, the Supreme Court of the United States vacated the judgment and remanded the case to this Court for further consideration. York International v. Alabama Oxygen Co., 465 U.S. 1016, 104 S. Ct. 1260, 79 L. Ed. 2d 668 (1984). On remand, this Court held that the views expressed in the dissenting opinion on original deliverance were consistent with the holding in Southland Corp. v. Keating, 465 U.S. 1, 104 S. Ct. 852, 79 L. Ed. 2d 1 (1984), and denied the writ of mandamus. Ex parte Alabama Oxygen Co., 452 So. 2d 860 (Ala.1984).
This Court now follows the rule that when there is an agreement to arbitrate a dispute under the provisions of the Federal Arbitration Act, this Court will enforce that agreement, in accordance with the federal policy as expressed in the Federation Arbitration Act and court decisions construing that Act. See Ex parte Costa & Head (Atrium), Ltd., 486 So. 2d 1272 (Ala. 1986).
The federal courts have held that the arbitration provisions of the New York Stock Exchange are incorporated into Form U-4 and thus made binding on the parties. In Coenen v. R.W. Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949, 92 S. Ct. 2045, 32 L. Ed. 2d 337 (1972), a member of the Exchange sued a member firm on a dispute involving the unrestricted transfer of stock. The trial court stayed the action pending arbitration, holding that, in agreeing to abide by the rules and constitution of the Exchange, Coenen had agreed to submit to arbitration "any controversy," including the one at issue, with a member firm. In affirming the lower court's decision, the Second Circuit held:
"`The constitution and rules of a stock exchange constitute a contract between all members of the exchange with each other and with the exchange itself...
"`Since the rules of the Exchange `constitute a contract between the members, the arbitration provisions which they embody have contractual validity....' The Exchange provisions requiring arbitration constitute an agreement to arbitrate which is binding upon both [parties].'
"* * *
"* * *
*699 "The drafters of the New York Stock Exchange arbitration clause intended it to be very broad.... The purpose behind the drafting of such a broad arbitration clause was, as much as possible, to keep disputes between members out of the courts. This policy is entirely consistent with the congressional grant of power to Stock Exchanges to govern themselves, contained in the Securities Exchange Act of 1934.... To hold that the present dispute is not arbitrable would frustrate this policy by making two Stock Exchange members settle their dispute in court....
453 F.2d  at 1211-12 (citations omitted). See Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 941-942, 74 L. Ed. 2d 765 (1983) (citing Coenen, supra, the Court held that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability") (footnote omitted); Tullis v. Kohlmeyer & Co., 551 F.2d 632, 636 (5th Cir.1977) ("[t]he crucial issue, as ... Coenen ... make[s] clear, is whether the party seeking to avoid arbitration is a member of the Exchange and thus has agreed to arbitration of disputes").
In Aspero v. Shearson American Express, Inc., 768 F.2d 106 (6th Cir.), cert. denied, 474 U.S. 1026, 106 S. Ct. 582, 88 L. Ed. 2d 564 (1985), a former account executive brought suit against her former employer, claiming defamation and intentional infliction of emotional distress as a result of alleged conduct by her office manager following the termination of her employment. The Sixth Circuit held that, although the plaintiff alleged tortious acts by her former employer that occurred after her termination, she was required to arbitrate her dispute in accordance with the arbitration provisons contained in her employment contract and Rule 347 of the New York Stock Exchange:
"* * *
Accord, Morgan v. Smith Barney, Harris Upham & Co., 729 F.2d 1163 (8th Cir.1984); Zolezzi v. Dean Witter Reynolds, Inc., 789 F.2d 1447 (9th Cir.1986).
It is clear that the Federal Arbitration Act establishes a strong federal policy favoring arbitration, requiring that the courts "rigorously enforce" arbitration agreements. The latest expression of this policy is set forth in Shearson/American Express, Inc. v. McMahon, ___ U.S. ___, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987). There, respondents were customers of petitioner Shearson/American Express, Inc., a brokerage firm registered with the Securities and Exchange Commission, under customer agreements providing for arbitration of any controversy relating to their accounts. That case presented two questions. The first was whether a claim brought under § 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 48 Stat. 891, 15 U.S.C. § 78j(b), must be sent to arbitration in accordance with the terms of an arbitration agreement. The second was whether a claim brought under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et *700 seq., must be arbitrated in accordance with the terms of such an agreement. The Court held:
The next question we address is whether, under the facts of this case, Hutton made a timely demand for arbitration. The trial court specifically found that there was no waiver by Hutton. We agree.
*701 Because arbitration is so strongly favored, "`the burden on one seeking to prove waiver is a heavy one.'" Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 So. 2d 1, at 2 (Ala.1986) (quoting American Dairy Queen Corp. v. Tantillo, 537 F. Supp. 718, 720 (M.D.La.1982)). As set forth recently by this Court, to demonstrate waiver, McKinney must establish that (1) Hutton "substantially invoked the litigation process"; and (2) McKinney "suffered prejudice as a result." (Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 494 So. 2d  at 3.) See also Ex parte Costa & Head (Atrium), Ltd., supra, 486 So. 2d  at 1276-77.
The Alabama rule is the same one that has been applied in other courts. In Masthead Mac Drilling Corp. v. Fleck, 549 F. Supp. 854 (S.D.N.Y.1982), the court held that waiver of arbitration under federal arbitration law cannot be found in the absence of a showing of substantial prejudice. There, the court held that the commencement of litigation by the moving party did not, of itself, constitute a waiver of arbitration rights.
In Brown v. E.F. Hutton & Co., 610 F. Supp. 76 (S.D.Fla.1985), plaintiff filed a five-count complaint against the defendant in connection with his account, alleging one federal securities claim (Count I) and multiple Florida statutory and common law claims (Counts II through IV).[1] In accordance with the customer agreement and the Federal Arbitration Act, Hutton moved for an order compelling arbitration on the state law claims. Because Hutton assumed that under Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168 (1953), the federal claim for violation of Section 10(b) of the Securities Exchange Act of 1934 was not subject to the arbitration provision of the contract and could be resolved only in a federal forum, it did not move to compel arbitration on that count.[2]
In Brown, the question of waiver was raised, and in Brown there had been some pre-trial discovery. The court commented on the waiver question, as follows:
610 F. Supp.  at 79.
In view of the fact that in this case over two years had elapsed before Hutton invoked the arbitration clause, and in view of the fact that extensive preparation was being made to try the claims sought to be arbitrated, it would appear that, as a matter of law, there was a waiver, but when the particular facts of this case are analyzed, it appears that McKinney's claims did not become arbitrable until Hutton entered into a settlement agreement of the Lanes' claim, and that Hutton did not substantially invoke the litigation process with respect to the claims after that time.
As initially framed by the plaintiffs in January 1984, the Lane action contained both nonarbitrable claims (those involving the plaintiffs, with whom neither Hutton nor McKinney had an arbitration agreement) and arbitrable claims (those involving Hutton and McKinney). Because the arbitrable claims were "inextricably intertwined" with the nonarbitrable claims, arbitration was not available to Hutton. Sibley v. Tandy Corp., 543 F.2d 540, 543 (5th Cir.1976), cert. denied, 434 U.S. 824, 98 S. Ct. 71, 54 L. Ed. 2d 82 (1977); Sawyer v. Raymond, James & Associates, Inc., 542 F.2d 791, 792-93 (5th Cir.1981); Belke v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 693 F.2d 1023, 1026 (11th Cir.1982); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1172 (11th Cir.1982).
In March 1985, the United States Supreme Court rendered an opinion in which it rejected the so-called intertwining doctrine that had theretofore been followed by the Fifth and Eleventh Circuits. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985). The Court held that the Federal Arbitration Act (9 U.S.C. §§ 1-14) requires arbitration of arbitrable claims even where such claims are intertwined with nonarbitrable ones.
This Court specifically followed the principle of the Dean Witter case in Ex parte Costa & Head, supra.
Even though a significant time period elapsed after McKinney first filed its cross-claim against Hutton, and even though there was significant pre-trial discovery made, we cannot find that the trial court erred in finding that Hutton did not waive its rights, because of (1) the strong federal policy that favors arbitration, and (2) the failure of McKinney to show prejudice because of the delay.
The trial judge could have found that it was not until May 23, 1986, when the Lanes' nonarbitrable claims against Hutton and McKinney were dismissed with prejudice, that Hutton's right to arbitration crystalized. Indeed, the trial judge concluded that recognition of the potentially harsh consequences of collateral estoppel, or issue preclusion, would have compelled the court to deny a demand for arbitration made by Hutton prior to the May 23, 1986, dismissal of the Lanes' claims:
"* * *
See Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1360 (11th Cir. 1986) ("[w]hen an arbitration proceeding affords basic elements of adjudicatory procedure, such as an opportunity for presentation of evidence, the determination of issues in an arbitration proceeding should generally be treated as conclusive in subsequent proceedings, just as determinations of a court would be treated"); Belke v. Merrill Lynch, Pierce, Fenner & Smith, supra, 693 F.2d  at 1027 (because an arbitrator, in attempting to evaluate the arbitrable claims, would have been "`impelled to review the same facts'" presented to the court on the nonarbitrable claims, "a motion to compel arbitration at the outset of this litigation, prior to dismissal of the ... [nonarbitrable] claims, would have been futile").
The trial judge was also authorized to find that from May 23, 1986, until September 5, 1986, the date on which Hutton moved to compel arbitration, neither Hutton nor McKinney substantially invoked the litigation process, and that the expiration of this time did not constitute a wavier of Hutton's right to arbitration.
Furthermore, the trial judge was authorized to find from the evidence before him that McKinney had not been prejudiced by Hutton's demand for arbitration, and to conclude that McKinney failed to satisfy the second prong of the two-pronged waiver test set forth in Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 494 So. 2d 1. In other words, the trial court was authorized to find that Hutton's limited discovery in regard to McKinney was taken primarily for the purpose of defending against the Lanes' nonarbitrable claims, and was taken in Mobile, at little or no expense to McKinney. The record shows that McKinney never noticed or took a single deposition in defense of the Lanes' claims or in furtherance of his cross-claim against Hutton. Cf. E.C. Ernst, Inc. v. Manhattan Construction Co., 559 F.2d 268, 269 (5th Cir.1977) (per curiam) (holding that defendant had waived its right to arbitration where it engaged the plaintiff in more than three years' worth of pre-trial proceedings, which culminated in a 40-day bench trial), cited by McKinney in his application for rehearing, Exhibit 1, at 23-24 and 27-28. (See also the trial court and initial appellate court opinions in E.C. Ernst, Inc., reported at 387 F. Supp. 1001 (S.D.Ala.1974), and 551 F.2d 1026 (5th Cir. 1977), respectively.)
With respect to Hutton's discovery as to the plaintiffs and various third-party defendants and non-parties, McKinney was in no way involved. While he declined to attend virtually all the depositions, he did, of course, benefit from them in preparing his defense to the Lanes' claims. Ultimately, as a result, in part, of these discovery efforts, Hutton settled the $20 million Lane lawsuit and secured dismissals of the plaintiffs' claims against both itself and McKinneyat no cost to McKinney.
It has been decided by the New York Stock Exchange that the arbitration proceeding demanded by Hutton will be held in New Orleans, a neighboring city of Mobile. (Hutton Appendix, Exhibit L.) McKinney will thus be able to easily drive to and from the arbitration. We believe the evidence supports the trial court's determination that McKinney will not be prejudiced by having to present his claim to a New York Stock Exchange arbitration panel assembled in New Orleans.
Finally, as Judge Johnstone correctly noted, McKinney has undertaken no case *704 preparation that he would not have undertaken for the arbitration proceeding. The judge concluded that McKinney had failed to demonstrate any "practical prejudice" that he had suffered as a result of Hutton's arbitration demand:
Indeed, McKinney virtually conceded that his modest litigation expenses in this case would have been incurred independently of his cross-claim against Hutton:
Pursuant to this Court's two-pronged waiver test, failure to satisfy either part of the test mandates a finding that the right to arbitration has not been waived. Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 494 So. 2d  at 3 ("`[e]ven if the Court assumes that there was invocation of the litigation process by the defendants, a finding of waiver cannot be made absent a showing of prejudice to the party opposing arbitration'"). We hold, therefore, that McKinney has failed to satisfy both parts of the test. Accordingly, his claim of waiver must be rejected.
After reviewing the record in this case, we are convinced that the trial court correctly applied the federal law of arbitration to the facts of this case, and we conclude that petitioner McKinney has not shown that the trial judge abused his discretion in determining that the dispute between Hutton and McKinney was subject to arbitration and that Hutton had not waived its right to compel arbitration. Based on the foregoing, therefore, McKinney's petition for writ of mandamus is due to be, and it hereby is, denied.
APPLICATION FOR REHEARING GRANTED; PETITION FOR WRIT OF MANDAMUS DENIED.
BEATTY and ADAMS, JJ., concur.
TORBERT, C.J., and ALMON, J., concur in the result.
JONES, SHORES and STEAGALL, JJ., dissent.
HOUSTON, J., not sitting.
[1]  Count I alleged Hutton's violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240-10b-5. Counts II, III, IV and V allege fraudulent misrepresentation, violations of Section 517.211 and 517.301, Florida Statutes, and breach of fiduciary duty, respectively.
[2]  In view of the holding in Shearson/American Express, Inc. v. McMahon, Hutton's assumption in that case may have been inaccurate.