IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

__________________________

No. 00-20917 

__________________________

PAINEWEBBER INCORPORATED,

Petitioner-Appellee,

versus

THE CHASE MANHATTAN PRIVATE BANK (SWITZERLAND),

Respondent-Appellant.

___________________________________________________

Appeal from the United States District Court

For the Southern District of Texas

___________________________________________________

July 31, 2001

Before SMITH, DUHÉ, and WIENER, Circuit Judges.

WIENER, Circuit Judge:

Respondent-Appellant The Chase Manhattan Private Bank

(Switzerland) (“Chase-Switzerland”) appeals the district court’s

order to arbitrate third-party claims brought against it by

PaineWebber Incorporated (“PaineWebber”), contending that the

district court lacked personal jurisdiction over it. We agree, and

vacate the district court’s order.

I.

FACTS AND PROCEEDINGS
1For simplicity, we will refer to the Lerma family and their

company as “the Lermas.”

2

This dispute had its genesis in 1994 when PaineWebber, a

financial services firm specializing in private wealth management,

approached Chase-Switzerland, a Swiss bank, to secure its services

for PaineWebber customers. After protracted negotiations, the

parties entered into an agreement in June 1994 whereby PaineWebber

would refer its customers who wished to house their assets in a

Swiss bank to Chase-Switzerland (the “Referral Agreement”). Under

the Referral Agreement, a PaineWebber customer would open a

custodial account at Chase-Switzerland, which would in turn open an

omnibus brokerage account at PaineWebber. PaineWebber would then

execute transactions for the customer in the omnibus account. Most

importantly for the instant case, the Referral Agreement provides:

Any dispute between [Chase-Switzerland] and

PaineWebber which cannot be resolved by good

faith negotiations shall be submitted to the

appropriate arbitrator or court in the United

States. 

Not long after negotiating the Referral Agreement, PaineWebber

referred the Lerma family of Mexico to Chase-Switzerland. A

company controlled by the Lermas1 opened an account with ChaseSwitzerland, and Enrique Ernesto Perusquia (“Perusquia”), then a

PaineWebber vice president, was designated by the Lermas as the

“Independent Asset Manager” of their account. Chase-Switzerland

opened an omnibus account at PaineWebber pursuant to the Referral
3

Agreement and executed a PaineWebber trading authorization form. 

The account-opening documents gave PaineWebber no authority to

trade options in the omnibus account. Nevertheless, approximately

nine months after Chase-Switzerland opened the omnibus account, at

least one such transaction was executed in the account.

PaineWebber belatedly sought Chase-Switzerland’s retroactive

approval by requesting its signature on a one-page form contract

entitled “Client Option Agreement and Qualification Form” (the

“Option Agreement”). In fine print on the form, the Option

Agreement contained the following boilerplate arbitration clause:

I agree and by carrying an account for me you

agree, that any and all controversies which

may arise between you and me concerning any

account, transaction, dispute or the

construction, performance, or breach of this

or any other agreement whether entered into

prior, on or subsequent to the date shall be

determined by arbitration. Any arbitration

under this agreement shall be held under and

pursuant to and be governed by the New York

Exchange, Inc., or the National Association of

Securities Dealers, Inc. I may also select

any other national securities exchange’s

arbitration forum upon which PaineWebber is

legally required to arbitrate the controversy

with me, including, where applicable, the

Municipal Securities Rule Making Board. Such

arbitration shall be governed by the rules of

the organization convening the panel. I may

elect in the first instance the arbitration

forum.

Over the course of one month, Chase-Switzerland signed three such

Option Agreements, each containing the identical arbitration
2The parties dispute the authenticity of the first Option

Agreement, dated March 3, 1995. Chase-Switzerland points out that

unlike the other two Option Agreements, the March 3 Option

Agreement does not contain basic information such as the account

title, the PaineWebber branch maintaining the account, the account

number, or the PaineWebber broker. PaineWebber counters that

Chase-Switzerland simultaneously faxed both the March 28 Option

Agreement, which Chase-Switzerland does not question, and the March

3 Option Agreement, which it does question, to PaineWebber on June

1, 1995. PaineWebber offers us no explanation for why it would

have asked Chase-Switzerland to sign two more Option Agreements if

the March 3 agreement had been sufficiently broad in scope and

duration. Nevertheless, as Chase-Switzerland does not expressly

deny that it executed the March 3, 1995 Option Agreement, and as

our decision does not rely either on its authenticity or the lack

thereof, we will assume for the purpose of deciding this appeal

that Chase-Switzerland did execute the March 3 Option Agreement.

4

clause.2 Chase-Switzerland sent a signed Option Agreement dated

March 16, 1995 to PaineWebber with a transmittal cover letter

stating that “this document is only valid on a temporary basis.”

Chase-Switzerland’s letter also informed PaineWebber that if it

“would like to just trade options on this account or others, we

will need to modify the legal doc [sic] which is the Referral

Agreement[.]” Chase-Switzerland signed another Option Agreement on

March 28, 1995, again with a notation that the Option Agreement

would be “valid until April 30, [19]95 only.” 

Chase-Switzerland did not grant PaineWebber general authority

to trade options in the omnibus account until May 2, 1995 (the “May

1995 Authorization”). In the May 1995 Authorization, the parties

drew a line through the phrase in the form agreement providing that

options transactions would be conducted in accordance with

PaineWebber’s standard terms and conditions, and typed in its place
5

a provision directing that such transactions be conducted according

to the Referral Agreement.

In December 1998, the Lermas instituted arbitration to resolve

a claim against PaineWebber, Perusquia, and Lehman Brothers

(Perusquia’s former employer) before the National Association of

Securities Dealers (the “NASD”). The Lermas alleged that

Perusquia, acting first as the employee of Lehman Brothers and then

as the employee of PaineWebber, defrauded them of more than 80

million dollars. The Lermas’ claim advanced multiple theories of

liability including fraud, conversion, forgery, theft, breach of

fiduciary duty, churning, self-dealing, violation of state and

federal securities laws, and breach of contract. PaineWebber and

the Lermas agreed to stay the NASD arbitration for 16 months while

they attempted to sort out the complex relationships and

transactions at issue.

In May 2000, PaineWebber answered the Lermas’ claim, filed a

cross-claim against Lehman Brothers, and asserted third-party

claims against Chase-Switzerland and UBS AG, another Swiss Bank.

PaineWebber’s claims against Chase-Switzerland arose out of

Perusquia’s purchase for the Lermas of more than 21 million dollars

worth of shares in Northern Orion Exploration (“Northern Orion”),

a gold mining company. PaineWebber contends, inter alia, that

Perusquia acted outside the scope of his employment in transacting

the Northern Orion purchases for the Lermas, and that PaineWebber

relied on Chase-Switzerland’s representations in permitting
6

Perusquia to execute the transactions. Chase-Switzerland, in turn,

informed PaineWebber in writing on two occasions that it did not

believe that the third-party claims were arbitrable, but if they

nevertheless proved to be arbitrable, Chase-Switzerland would elect

to arbitrate in New York City before the New York Stock Exchange

(the “NYSE”).

In June 2000, a rapid series of steps was instituted by

PaineWebber and the Lermas. First, PaineWebber and the Lermas

agreed to place the NASD arbitration on inactive status; almost

immediately thereafter, the Lermas initiated an arbitration before

the NYSE against PaineWebber, Perusquia, and Lehman Brothers based

on the same allegations and theories of liability advanced before

the NASD; and, in its equally immediate response filed June 22,

2000, PaineWebber denied all liability and asserted third-party

claims against Chase-Switzerland seeking contribution for any

liability resulting from the Lermas’s allegations that the Northern

Orion purchases were unauthorized and unsuitable. In the final

step of the series, PaineWebber requested the NYSE to set the

arbitration hearing in Houston, Texas. A mere six days later, the

NYSE granted PaineWebber’s request (not objected to by the Lermas)

to hold the arbitration in Houston. 

Chase-Switzerland promptly filed a petition in New York state

court seeking to stay arbitration of the third-party claims.

Chase-Switzerland asserted that it had not agreed to arbitrate

these claims; alternatively, that if such claims were arbitrable,
7

they should be arbitrated in New York City. 

August 2, 2000 was a busy day for PaineWebber. On that day,

PaineWebber (1) as defendant, removed Chase-Switzerland’s statecourt suit to the Southern District of New York, (2) filed a motion

in that court to transfer Chase-Switzerland’s suit to the Southern

District of Texas, and (3) as plaintiff, filed the instant action

in the Southern District of Texas where it was assigned to the

Honorable Lynn N. Hughes. Chase-Switzerland objected to the

transfer of its New York suit on the ground, inter alia, that the

Southern District of Texas lacked jurisdiction over ChaseSwitzerland. Likewise, Chase-Switzerland moved to dismiss the suit

that PaineWebber filed in Texas as the plaintiff (the case here on

appeal) for lack of personal jurisdiction, or, in the alternative,

to transfer this case to the Southern District of New York. 

Instead, Judge Hughes ordered Chase-Switzerland to arbitrate

the third-party claims after concluding that Chase-Switzerland “is

within this court’s jurisdiction because it agreed to arbitrate in

the United States, it elected arbitration through the exchange, and

the exchange sent the arbitration to Houston, where PaineWebber has

begun to add [Chase-Switzerland] as a third party defendant.”

Judge Hughes did not specify which of the numerous agreements

between the parties was the basis for his ruling that ChaseSwitzerland “elected arbitration through the exchange.” 

On the very same day that Judge Hughes signed the order to

compel arbitration in Houston, the district court in New York, over
8

the objection of Chase-Switzerland, granted PaineWebber’s motion to

transfer Chase-Switzerland’s New York suit to the Houston division

of the Southern District of Texas, where it was assigned to the

Honorable Melinda Harmon. After its suit was transferred to the

Southern District of Texas, Chase-Switzerland filed a motion to

retransfer the case to New York. PaineWebber opposed the motion

and also filed a motion for summary judgment, arguing that the

judgment rendered by Judge Hughes works as a res judicata bar to

Chase-Switzerland’s suit (even though it had been filed in New York

before PaineWebber’s suit was filed in Judge Hughes’s court).

Chase-Switzerland responded by filing a cross-motion for a stay of

all proceedings in Judge Harmon’s court pending this appeal from

Judge Hughes’s ruling, or in the alternative, requesting that she

decide Chase-Switzerland’s transfer motion first. To date, all the

motions before Judge Harmon are pending. 

After Judge Hughes entered the arbitration order in the

instant case, Chase-Switzerland timely filed a notice of appeal and

sought a stay pending appeal. Judge Hughes denied the stay, after

which Chase-Switzerland sought a stay from this court. We too

denied the stay, and this appeal followed.

II.

ANALYSIS

A. Standard of Review

We review the district court’s jurisdictional determinations
3Mink v. AAAA Development LLC, 190 F.3d 333, 335 (5th Cir.

1999).

4Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139

F.3d 1061, 1065 (5th Cir. 1998).

5It is undisputed that Chase-Switzerland has no other “minimum

contacts” with Texas sufficient to satisfy due process.

9

de novo.

3 We also review the district court's grant of a motion to

compel arbitration de novo.

4

B. Personal Jurisdiction

As an initial matter, we note that our analysis is complicated

by the interrelatedness of the jurisdictional and substantive

issues in this case. PaineWebber asks us to affirm the district

court’s ruling that Chase-Switzerland impliedly consented to the

district court’s jurisdiction by entering into an agreement to

arbitrate before the NYSE. We obviously cannot do so, however,

without initially ascertaining that Chase-Switzerland agreed to

arbitrate these claims in the first place.5 On appeal, PaineWebber

urges us to consider two additional bases for the Houston-based

court’s jurisdiction over Chase-Switzerland that do not depend on

the existence of a valid arbitration agreement between the parties.

We will begin, therefore, by discussing these alternative grounds

for jurisdiction. 

1. Submission to Jurisdiction by Conduct as a Plaintiff

PaineWebber contends that Chase-Switzerland has submitted to

the jurisdiction of the Southern District of Texas by its conduct

as a plaintiff in the suit currently pending before Judge Harmon.
6See General Contracting & Trading Co., LLC v. Interpole,

Inc., 940 F.2d 20, 23 (1st Cir. 1991).

10

PaineWebber relies on the well-established rule that parties who

choose to litigate actively on the merits thereby surrender any

jurisdictional objections.6 But that rule has no application to

the facts of this case.

To reiterate, Chase-Switzerland commenced its suit in state

court in New York, and —— after PaineWebber removed to federal

court there —— opposed transfer to Texas on the ground that the

Southern District of Texas lacked jurisdiction. Following transfer

to the Southern District of Texas after its objection to transfer

was overruled, Chase-Switzerland specially appeared for the limited

purpose of asking Judge Harmon to retransfer the case to New York,

pointing out that it had opposed transfer from New York on the

ground that “the Southern District of Texas has no personal

jurisdiction over Chase-Switzerland.” When Paine-Webber filed a

motion in Judge Harmon’s court for summary judgment on grounds of

res judicata after Judge Hughes had entered the order to arbitrate,

Chase-Switzerland did not respond on the merits, but filed a crossmotion for a stay of the summary-judgment motion and all

proceedings in Judge Harmon’s court pending this appeal. When

viewed in the light of these facts, PaineWebber’s contention that

Chase-Switzerland has submitted to the jurisdiction of the Southern

District of Texas by “actively litigating” the merits of the

arbitrability issue before Judge Harmon is not merely misleading
7PaineWebber intimates that Chase-Switzerland’s decision not

to move for dismissal of its action immediately upon transfer is

another indication of its submission to the jurisdiction of the

Southern District of Texas. What PaineWebber conveniently fails to

mention, however, is that Chase-Switzerland’s suit was transferred

from New York to Judge Harmon’s court after Judge Hughes ruled that

“[t]his court has jurisdiction over [Chase-Switzerland].” Thus, it

is hardly surprising that Chase-Switzerland would not seek

dismissal of its action for lack of personal jurisdiction in light

of Judge Hughes’s contrary ruling. “By submitting to the

jurisdiction of the court for the limited purpose of challenging

jurisdiction, the defendant agrees to abide by that court's

determination on the issue of jurisdiction: That decision will be

res judicata on that issue in any further proceedings.” Insurance

Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456

U.S. 694, 706 (1982). In any event, a motion for transfer is fully

consistent with an objection to personal jurisdiction, as a court

may transfer a case even though it lacks personal jurisdiction.

See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962).

8See Interpole, 940 F.2d at 21.

9See Bel-Ray Co., Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435,

443 (3d Cir. 1999).

10See Grupke v. Linda Lori Sportswear, Inc., 174 F.R.D. 15

(E.D.N.Y. 1997) (party contesting jurisdiction had litigated in the

transferee court for three years and amended its complaint

following transfer to add new defendants).

11

but is flatly contradicted by the record in that case.7

It is no wonder, then, that the cases cited by PaineWebber are

inapposite. This is not a case in which the party seeking to avoid

the court’s jurisdiction has chosen to commence the action or a

related action in the very forum in which it is contesting personal

jurisdiction;8 neither is this a case in which the party contesting

jurisdiction has asserted counterclaims for affirmative relief;9

and this is not a case in which a party has litigated extensively

on the merits before making any jurisdictional objections.10 In
11See Alger v. Hayes, 452 F.2d 841, 844 (8th Cir. 1972).

12See Bel-Ray, 181 F.3d at 443.

12

short, neither the law nor the facts justify the exercise of

jurisdiction over Chase-Switzerland on the basis of its conduct in

its suit before Judge Harmon.

2. Submission to Jurisdiction by Conduct as a Defendant

PaineWebber also contends that Chase-Switzerland has submitted

to the jurisdiction of the Southern District of Texas by its

conduct in the instant case. More specifically, PaineWebber argues

that Chase-Switzerland has waived any objection to personal

jurisdiction by seeking the “affirmative relief” of a stay pending

appeal and an injunction to prevent PaineWebber from proceeding

with arbitration of the third-party claims during the pendency of

this appeal. 

Paine-Webber is right that a party may waive any

jurisdictional objections if its conduct does “not reflect a

continuing objection to the power of the court to act over the

defendant’s person.”11 PaineWebber is also right that when “a party

seeks affirmative relief from a court, it normally submits itself

to the jurisdiction of the court with respect to the adjudication

of claims arising from the same subject matter.”12 But PaineWebber

is dead wrong in suggesting that Chase-Switzerland, by making a

motion based on the defense of personal jurisdiction, has thereby

submitted to the court’s jurisdiction.
13See Bayou Steel Corp. v. M/V Amstelvoorn, 809 F.2d 1147, 1149

(5th Cir. 1987).

13

Chase-Switzerland timely and properly asserted its

jurisdictional objection by making a threshold motion to dismiss

for lack of personal jurisdiction. It has asserted no

counterclaims and engaged in no third-party practice. It premised

its motion for a stay and an injunction pending appeal on the

argument that “an improper exercise of personal jurisdiction over

Chase-Switzerland constitutes irreparable injury as a matter of law

[as a violation of due process].” Try as we might, we cannot see

how such actions manifest anything but a “continuing objection” to

the district court’s exercise of personal jurisdiction over ChaseSwitzerland. 

Not surprisingly, PaineWebber does not cite, and we have not

found, a single case holding that a motion for a stay pending

appeal waives an objection to personal jurisdiction. Neither have

we found even one case that supports PaineWebber’s contention that

a defendant submits to the jurisdiction of a court by seeking to

enjoin further legal proceedings on the ground that to require

participation in such proceedings in the absence of personal

jurisdiction would violate due process. Indeed, merely to state

this argument is to refute it. 

Inasmuch as, in this circuit, the filing of a counterclaim,

cross-claim, or third-party claim does not, without more, waive an

objection to personal jurisdiction,13 we cannot fathom how a motion
14Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985)

(internal quotation marks and citations omitted).

15See Insurance Corp. of Ireland, 456 U.S. at 704 (noting that

“lower federal courts have found such consent implicit in

agreements to arbitrate”).

16See Victory Transport Inc. v. Comisaria General de

Abastecimientos y Transportes, 336 F.2d 354, 363 (2nd Cir. 1964).

14

premised on a jurisdictional objection could simultaneously operate

as a waiver of that very objection. Accordingly, we reject out of

hand PaineWebber’s argument that Chase-Switzerland, by its conduct

in either lawsuit, has submitted to the district court’s exercise

of personal jurisdiction.

3. Implied Consent to Jurisdiction

The sole remaining ground urged by PaineWebber for the

district court’s exercise of personal jurisdiction over ChaseSwitzerland is implied consent. Because the requirement of

personal jurisdiction is a waivable right, “there are a variety of

legal arrangements by which a litigant may give express or implied

consent to the personal jurisdiction of the court.”14 An agreement

to arbitrate is one such “legal arrangement” by which a litigant

may impliedly consent to personal jurisdiction.15 

The Second Circuit, for example, has long held that a party

who expressly agrees to arbitrate in one state has impliedly

consented to the jurisdiction of the courts in that state, on the

theory that only that state’s courts have jurisdiction to compel

arbitration in that state.16 Extending this reasoning, one line of
17See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc., v.

Lecopulos, 553 F.2d 842 (2d Cir. 1977); Dain Bosworth, Inc. v.

Fedora, No. 92 Civ. 7813 (JSM), 1993 WL 33642 (S.D.N.Y. Feb. 3,

1993); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Noonan, No. 92

Civ. 3770 (SWK), 1992 WL 196741 (S.D.N.Y. Aug. 3, 1992).

18We note that another line of New York cases has expressly

rejected this reasoning and held that such clauses do not consent

to personal jurisdiction at all. See, e.g., Koob v. IDS Financial

Services, Inc., 213 A.D.2d 26, 629 N.Y.S.2d 426 (1st Dept. 1995);

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. McLeod, 208 A.D.2d

81, 622 N.Y.S.2d 954 (1st Dept. 1995); Merrill Lynch, Pierce,

Fenner & Smith, Inc. v. Barnum, 162 Misc.2d 245, 616 N.Y.S.2d 857

(N.Y. Sup. Ct. 1994).

15

New York cases holds that arbitration clauses that identify an

organization before which arbitration may be held, without

expressly designating the specific geographic location for the

arbitration, may be deemed to imply the parties’ consent to the

jurisdiction of courts in the state where the arbitral organization

is based.17 Under the logic of these cases, parties who agree to

arbitrate before the NYSE or the NASD have impliedly consented to

the jurisdiction of courts in New York, where those organizations

are based.18

The district court extended this reasoning even further by

ruling that Chase-Switzerland “is within this court’s jurisdiction

because it agreed to arbitrate in the United States, it elected

arbitration through the exchange, and the exchange sent the

arbitration to Houston, where PaineWebber has begun to add [ChaseSwitzerland] as a third party defendant.” Chase-Switzerland

insists, however, that as it never agreed to arbitrate

PaineWebber’s third-party claims in the first place, its consent to
19United Steelworkers of America v. Warrior & Gulf Nav. Co.,

363 U.S. 574, 582 (1960).

20Pennzoil, 139 F.3d at 1065.

21See Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 676 (5th Cir.

1999).

16

jurisdiction cannot thereby be implied. 

Arbitration is “a matter of contract and a party cannot be

required to submit to arbitration any dispute which he has not

agreed so to submit.”19 In determining whether the parties have

agreed to arbitrate the dispute in question, we must consider “(1)

whether a valid agreement to arbitrate between the parties exists;

and (2) whether the dispute in question falls within the scope of

that arbitration agreement.”20 In doing so, we must bear in mind

the strong federal policy favoring arbitration and resolve any

ambiguity as to the availability of arbitration in favor of

arbitration.21 Here, PaineWebber contends that Chase-Switzerland

agreed in four separate agreements —— the Referral Agreement and

the three Option Agreements —— to arbitrate all disputes with

PaineWebber, including the third-party claims. 

As to the Referral Agreement, we cannot agree with PaineWebber

that the dispute resolution clause in that contract —— stating that

“any dispute between [Chase-Switzerland] and PaineWebber which

cannot be resolved by good faith negotiations shall be submitted to

the appropriate arbitrator or court in the United States” ——

constitutes an agreement to arbitrate, even when read in light of
17

the strong federal policy favoring arbitration. The Referral

Agreement merely provides that the parties will attempt to

negotiate any disputes in good faith and, absent a resolution,

shall conduct dispute resolution proceedings in the United States.

Importantly, the Referral Agreement does not state that any

dispute shall be submitted “either” to arbitration or the courts,

as PaineWebber insists. Rather, it states that disputes between

PaineWebber and Chase-Switzerland shall be submitted “to the

appropriate arbitrator or court in the United States.” How then,

we ask rhetorically, can this provision be deemed a binding

agreement to arbitrate any and all disputes (which precludes by its

very terms any court resolution) when it identifies “court” and

“arbitration” as equals in that very provision? Significantly,

there is no mention of a specific geographic location for

arbitration, no selection of an arbitral forum such as the NYSE or

the NASD, and no language requiring arbitration. The dispute

resolution clause in the Referral Agreement, then, simply leaves

too many critical elements unaddressed to support PaineWebber’s

contention that the Referral Agreement, standing alone, amounts to

a binding arbitration agreement between the parties.

The weakness of PaineWebber’s argument becomes even clearer

when we compare the dispute resolution clause in the Referral

Agreement to the arbitration clauses in the Option Agreements:

I agree and by carrying an account for me you agree, that

any and all controversies which may arise between you and

me concerning any account, transaction, dispute or the
22Compare, e.g., Doctor’s Associates, Inc. v. Stuart, 85 F.3d

975, 977 (2d Cir. 1996) (“‘Any controversy or claim arising out of

or relating to this contract or the breach thereof shall be settled

by arbitration in accordance with the Commercial Arbitration Rules

of the American Arbitration Association at a hearing to be held in

Bridgeport, Connecticut, or whichever city in which the Company is

then headquartered[.]’”); Lecopulos, 553 F.2d at 844 n.1 (“‘It is

agreed that any controversy between us arising out of your business

or this agreement, shall be submitted to arbitration conducted

under the provisions of the Constitution and Rules of the Board of

Governors of the New York Stock Exchange[.]’”); Merrill Lynch,

Pierce, Fenner & Smith Inc. v. Shaddock, 822 F. Supp. 125, 127

(S.D.N.Y. 1993) (“‘It is agreed that any controversy between us

arising out of your business or this agreement shall be submitted

to arbitration conducted under the provisions of the Constitution

and Rules of the Board of Governors of the New York Stock Exchange,

Inc., or pursuant to the Code of Arbitration Procedure of the

National Association of Securities Dealers, Inc., as the

18

construction, performance, or breach of this or any other

agreement whether entered into prior, on or subsequent to

the date shall be determined by arbitration. Any

arbitration under this agreement shall be held under and

pursuant to and be governed by the New York Exchange,

Inc., or the National Association of Securities Dealers,

Inc. 

(emphasis added). Unlike this arbitration clause, the dispute

resolution clause in the Referral Agreement does not make

arbitration compulsory; neither does it so much as mention an

arbitral forum, much less a specific geographic location. True

enough, the Referral Agreement’s dispute resolution clause appears

under the heading “INTERPRETATION OF CONTRACT AND ARBITRATION OF

DISPUTES,” but the mere mention of the word “arbitration” in a

contract’s section heading cannot a binding arbitration agreement

make, especially when, as here, the language of the agreement

itself conspicuously lacks any of the universal indicia of an

arbitration clause.22
undersigned may elect.’”).

19

Even if we were willing to accept PaineWebber’s tortured

argument that (1) the Referral Agreement compels Chase-Switzerland

to arbitrate this dispute, (2) the NYSE is an “appropriate”

arbitrator, and (3) jurisdiction is therefore proper in the

Southern District of Texas because that is where the NYSE sent the

arbitration between PaineWebber and the Lermas, we would still have

to stretch this already strained logic beyond the breaking point to

conclude that Chase-Switzerland, a foreign corporation with no

other meaningful connection to Texas, impliedly consented to the

jurisdiction of the Southern District of Texas by entering into an

arbitration agreement that does not even mention an arbitral forum

much less designate a geographic location more specific than the

entire United States of America. The links of this daisy chain are

simply too weak to bind Chase-Switzerland to arbitrate this dispute

in the Southern District of Texas. 

Neither can we agree with PaineWebber that Chase-Switzerland

impliedly consented to jurisdiction in the Southern District of

Texas on the basis of the arbitration clauses in the Option

Agreements. Certainly, the extremely broad language of these

clauses, if read in a vacuum, would appear to bind the parties to

arbitrate any and all disputes that may arise between them. When

read in context as they must be, however, the reach of the

arbitration clauses in the Option Agreements is simply not capable
23Likewise, PaineWebber impliedly acknowledged the short fuse

on the Option Agreements by requesting that Chase-Switzerland

execute a series of such agreements when and as new options

transactions were instituted.

20

of such an expansive grasp.

First, the Option Agreements were executed for short durations

and were expressly limited to (1) the purchases of options (2) at

the time executed. Perusquia’s purchases of the Northern Orion

shares, out of which PaineWebber’s third-party claims against

Chase-Switzerland arose, had nothing whatsoever to do with options

and were not transacted during the effective dates of any of the

three Option Agreements. Second, Chase-Switzerland made clear when

it signed the Option Agreements that they in no way modified or

superseded the Referral Agreement;23 similarly, when ChaseSwitzerland agreed to the May 1995 Authorization which finally

granted PaineWebber general authority to trade options in the

account, Chase-Switzerland inserted a clause specifically providing

that all such trades would be executed in accordance with the terms

of the Referral Agreement, and crossed out a clause in the form

agreement providing that PaineWebber’s standard terms and

conditions, such as the arbitration clauses in the Option

Agreements, would control. 

Simply put, when read in the context of the dealings between

the parties, the number of times the documents were executed, the

purposes for their execution, and the nature of the transactions

consummated under them, the arbitration clauses in the Option
21

Agreements, which are strictly limited in both duration and scope,

cannot reasonably be interpreted to require Chase-Switzerland to

arbitrate PaineWebber’s third-party claims arising out of the

Northern Orion purchases, none of which had anything to do with

options.

III.

CONCLUSION

As the district court lacked jurisdiction to enter its order

compelling Chase-Switzerland to arbitrate PaineWebber’s third-party

claims in Houston, we vacate that order and remand with

instructions to dismiss this case for lack of personal jurisdiction

over Chase-Switzerland.

VACATED and REMANDED with instructions.