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Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-2531

___________

ING Financial Partners, f/k/a *

Washington Square Securities, *

Inc., a Minnesota corporation, *

*

Appellee, * Appeal from the United States

* District Court for the

v. * District of Minnesota.

*

Alyson Johansen, * [PUBLISHED]

*

Appellants. *

___________

Submitted: April 7, 2006

Filed: May 1, 2006

___________

Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.

___________

PER CURIAM.

Alyson Johansen appeals the district court’s order granting summary judgment

to ING Financial Partners, Inc., f/k/a Washington Square Securities, Inc. (ING), and

permanently enjoining Johansen from pursuing her claims in arbitration. For the

reasons discussed below we reverse the grant of summary judgment and vacate the

permanent injunction.

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In August 2000, ING hired Johansen as a Brokerage Specialist. A Registered

Representative Agreement (RRA), which set forth the terms of Johansen’s relationship

with ING, contained the following arbitration clause:

Any dispute, claim or controversy arising out of or relating to this

Agreement, or the breach thereof, shall be settled by arbitration

conducted in Minneapolis, Minnesota in accordance with the rules of the

National Association of Security Dealers, Inc.

The National Association of Securities Dealers, Inc. (NASD) Code of Arbitration

Procedure provides in relevant part:

A claim alleging employment discrimination, including a sexual

harassment claim, in violation of a statute is not required to be arbitrated.

Such a claim may be arbitrated only if the parties have agreed to arbitrate

it, either before or after the dispute arose.

See NASD Code Rule 10201(b). 

Following her termination from ING in January 2003, Johansen commenced

arbitration proceedings before NASD claiming sex discrimination, sexual harassment,

and retaliatory discharge for whistleblowing. Over a year later, ING filed this action

seeking to enjoin the arbitration on the ground that it had not agreed to arbitrate

Johansen’s claims. ING moved for summary judgment, and the district court granted

the motion finding that the dispute was not subject to arbitration because the RRA

“effectively incorporated” the NASD rules; the NASD rules require consent for

arbitration of statutory employment-discrimination claims; ING did not consent to

arbitration; and “[a]lthough the [RRA] says that ‘all disputes’ arising out of the [RRA]

will be arbitrable, this statement does not negate the fact that the [RRA] is governed

by the rules of the NASD.” The court permanently enjoined Johansen from pursuing

her arbitration claims.

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We review de novo, and we disagree with the district court that the RRA

unequivocally exempted Johansen’s claims from the parties’ agreement to arbitrate.

See Madewell v. Downs, 68 F.3d 1030, 1036 (8th Cir. 1995) (standard of review);

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (question of

arbitrability is issue for judicial determination unless parties clearly and unmistakably

provide otherwise).

Although courts should generally apply ordinary state law principles in

deciding whether the parties have entered an agreement to arbitrate, see Volt Info.

Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 477 (1989), the construction of an agreement

to arbitrate is governed by the Federal Arbitration Act unless an agreement expressly

provides that state law should govern, see Dominium Austin Partners, LLC v.

Emerson, 248 F.3d 720, 729 n.9 (8th Cir. 2001). “[Q]uestions of arbitrability must

be addressed with a healthy regard for the federal policy favoring arbitration.” Moses

H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). 

We believe that the RRA’s arbitration provision can be construed as an

agreement to arbitrate all claims arising out of or relating to the RRA, and that such

an interpretation is not inconsistent with the RRA’s reference to the NASD Rules.

Read in context, Rule 10201(b) is merely an exception to the NASD rules’

requirement that all registered members arbitrate all disputes if so requested by

another member or associated person, without the need for any independent agreement

between the two parties. See Littman v. Morgan Stanley Dean Witter, 766 A.2d 794,

798 (N.J. Super. Ct. App. Div. 2001) (citing answer to “Q: What exactly does the

[1999] amendment do?” from NASD published document “Frequently Asked

Questions Relating To Arbitration of Employment Discrimination Claims”). The

Rules still contemplate that the parties might nevertheless agree to arbitrate claims that

fall within the exception.

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The broadly worded “any dispute” language used in the RRA’s arbitration

clause appears to be such an agreement, and given the federal policy favoring

arbitration, the mere reference to the NASD Rules should not be interpreted to

foreclose arbitration. See CD Partners v. Grizzle, 424 F.3d 795, 800 (8th Cir. 2005)

(doubts about whether arbitration clause should be construed to cover a particular

dispute are generally resolved in favor of arbitration); Lyster v. Ryan’s Family Steak

Houses, Inc., 239 F.3d 943, 945 (8th Cir. 2001) (under federal presumption of

arbitrability, order to arbitrate should not be denied unless it may be said with positive

assurance that arbitration clause is not susceptible of interpretation that covers asserted

dispute). In referring to the NASD Rules, the parties did not specifically limit the

agreement to arbitrate to those matters that NASD rules required to be arbitrated. Had

the parties intended to agree to submit to arbitration only those disputes required to

be arbitrated under NASD rules, they could have drafted language that unambiguously

so provided, as parties have done in comparable settings. Cf. Young v. Prudential Ins.

Co. of Am., Inc., 688 A.2d 1069, 1074, 1078-82 (N.J. Super. Ct. App. Div. 1997)

(holding that Form U-4 agreement “to arbitrate any dispute, claim or controversy that

may arise between me and my firm . . . that is required to be arbitrated under the

[NASD rules]” did not require arbitration because plaintiff’s dispute involved “the

insurance business of any member which is also an insurance company,” which is

specifically excepted by NASD Rules); see also Gelco Corp. v. Baker Indus. Inc., 779

F.2d 26, 28 (8th Cir. 1985) (per curiam) (affirming district court’s order denying

petition to compel arbitration after finding contract narrowly drawn and relevant

contractual provisions clear and unambiguous). Because the RRA’s arbitration clause

was not drafted to specifically limit the agreement to arbitrate to those matters that

NASD rules required to be arbitrated, the reference to the NASD rules appears to

relate only to the manner in which the arbitration shall be conducted, not which

matters are subject to arbitration.

Those cases interpreting similar contract clauses support this interpretation of

the RRA’s arbitration clause. In Bailey v. Chase, No. 01-Civ. 7222, 2002 WL 826816

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(S.D.N.Y May 1, 2002) (unpublished), the plaintiff moved to compel arbitration of his

employment-discrimination action. In 1997, the plaintiff had signed a Registered

Representative Employment Notice (RREN), which stated that, “Any claim or

controversy between [plaintiff] and [the company] arising out of or relating to this

Agreement, or the breach thereof and/or [plaintiff’s] employment or the termination

thereof shall be submitted to arbitration in accordance with the Code of Arbitration

Procedure of the NASD.” See id. at *1. The district court granted the plaintiff’s

motion to compel arbitration, holding that because the RREN--which was signed prior

to the 1999 amendment that created Rule 10201(b)--unambiguously stated that all

employment-related claims were to be arbitrated, the agreement “existed independent

of the parties’ association with the NASD, and thus the 1999 amendment does not

affect the arbitrability of [plaintiff’s discrimination claims].” See id. at *3. The court

further noted that:

[T]hough the agreement states that disputes between plaintiff and [the

company] shall be submitted to arbitration “in accordance with the Code

of Arbitration Procedure of the NASD,” this reference to the NASD

Code merely sets forth the procedural rules under which the arbitration

is to be conducted. It does not . . . provide a basis to apply the amended

version of the NASD code and thus undermine the agreement’s clear

intent to require that all employment-related disputes between plaintiff

and [the company] shall be arbitrated.

See id.

In Zouras v. Goldman Sachs Group, Inc., No. 02-Civ. 9249, 2003 WL

21997745 (S.D.N.Y. Aug. 22, 2003), the plaintiff claimed that following the 1999

amendment, the NASD did not provide a forum for the arbitration of her Title VII

claim. However, the court held that plaintiff’s discrimination claim was arbitrable

because the parties had previously agreed, in an employment application (before the

1999 amendment), to arbitrate “any controversy . . . that may arise out of my

employment . . . in accordance with the rules [of the NASD].” See id. at *1-*3.

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While the contracts in Bailey and Zouras were entered into before the 1999

amendment added Rule 10201(b), we find these cases consistent with the

interpretation of the RRA language requiring “any” dispute to be arbitrated “in

accordance with” NASD rules to mean only that the parties will follow NASD

procedural rules.

Finally, to the extent that the RRA’s arbitration provision is ambiguous as to

the interplay of arbitrating “any dispute” and the effect of Rule 10201(b), the clause

must be interpreted to favor arbitration, see Moses H. Cone, 460 U.S. at 24-25 (when

issue concerns construction of contract language itself, any doubts concerning scope

of arbitrable issues should be resolved in favor of arbitration), and against the drafter,

ING, see Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62-63 (1995)

(court should construe ambiguous language against the interest of the party that

drafted it; reason for rule is to protect party who did not choose language from

unintended or unfair result; drafter of ambiguous document cannot claim benefit of

doubt).

Consequently, we hold that the district court erred by granting summary

judgment to ING and by permanently enjoining Johansen from pursuing her

arbitration claims. See Manion v. Nagin, 255 F.3d 535, 538 (8th Cir. 2001) (when

ruling on requests for injunctive relief, court reverses only for clearly erroneous

factual determinations, errors of law, or abuse of discretion). Although the court did

not make any factual errors, it was mistaken in concluding that Rule 10201(b)

overrode the arbitration clause in the RRA. The RRA provided for arbitration

between the parties and referenced the NASD procedural rules for the purpose of 

indicating how the arbitration would be conducted. The RRA is thus consistent with

the strong federal policy favoring arbitration.

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 Accordingly, we reverse the district court’s order granting summary judgment,

vacate its order of permanent injunction, and remand for further proceedings.

______________________________

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