### FI LED U.S. COURT O F APP EALS ELEVENTH CIRCUIT Octob er 6 , 2 004 THO MAS K. KAH N CL ERK

Honora ble Fe rn M. Smith, Unit ed States District Judge f or the Nor

thern District of * California, sitting by

desig nation. [PUBLIS H] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ N o. 03- 1507 8

____ ____ ____ ____ ____ ____ D. C. Docket N o. 03-00103 -CV -O RL -22-KR S MULTI-FINANCI AL SECURITIES, CORP., (f.n .a. IFG Net wor k S ecu rit ie s, In c.) Pl ai nti ff -Appe llant,
ve rs us RUA L. KING,
De fendant-Appellee.

____ ____ ____ ____ ____ ____ Appeal f rom the United State s District Court fo r the Mi ddl e D istri ct

of F lor ida

____ ____ ____ ____ ____ ____ _ (O ct ob er 6, 200 4) Before BL ACK

and MAR CUS , C ircuit Judg es, and SMIT H , D istrict Judg e. * SMIT H, District Judge:Although it should g o without saying, w e point out that the validity of King ’s under lying 1 claim is irrele vant t o the ar bitration issues on appea l. We hereby deter mine only whether the district court c orre ctly

compelled I FG to de fend King ’s claims in the arbitra l f orum, not whether

we de em those claims meritorious. See U nited Steelworkers of Am. v . Am. Mfg. Co. , 363 U.S. 564, 567-68, 80 S. Ct . 1343, 1346, 4 L . Ed. 2d 1403 (1960). 2 IF G N etw ork S ec ur iti es , I nc . ( “ IF G ”) appe al s th e distri ct co urt’ s Se pte m be r 3, 2003 , or de r co m

pe lli ng arb itr at ionof

it s dispu te w ith Re x Ki ng, now de ce as ed , a nd Ru a K ing ( “ K ing ”)
. O n a ppe al , I FGa rg ue s th at

the distri ct co urt e rr ed

by f ind ing King entitled to arbitrati o n u nder the Na tional Association of Sec urities Dea lers (“ NA SD ”) C ode of Arb i t ra t i on Procedure ( “ Code”) and by ref using to condu ct an
ev ide nti ar

y he ar ing to re sol ve a lle ge d f ac t i ssu es . W e hol d, ge ne ra lly , tha t the Co de is a w ri tte n a gr ee m en t bi ndi ng I FGto ar bitra te an d, sp ec if

ic al ly , tha t the ins tant dis put e is b etw ee n a m em be r (I FG ) an d ac ust om er ( K ing ) an d ari se s inc onne ct ion
w ith tha t m em be r’ s b us in es s, t he reb y

sat is fy in g t he Co de ’s e num er at ed r eq uir em ents. 1 W e, c onse que ntl y , a ff

irm the dis tr ic t c ourt’ s or de r co m pe lli ng arb itr at ion
. I. BACKGROUND A t the ti m e IF G fi le d its co m pla int , it w as a m em

be r of the N A SD
. F oll ow ing th e ad vi ce o f Ant ho ny Micc ic he (“ Mi cci c h e ” ) , a reg is te red rep res en ta ti ve of I FG, Kin g a nd he r la te hu sb an d e nt ered in to a trus t ag reem en t wi th Int rad os , S.A. (“ In tr ad os” ), a Pana m an ian co m pa ny . O n May 2, 1999 , K ing te nde red two c he ck s totaling $45,800.00 to Intrados. Intrados, in turn, invested that m oney in Ever green3

Securities, Ltd. (“ Ever green”). Ever green now is bankrupt and King has los t her entire investm ent. I n connection with his association with Evergree n, Micc iche pled gui lty to the c ri m e of

se lli ng u nr eg ist er ed

se cu ri tie s. A cc o r d i n g t o K i n g , s h e r e l i e d , a tl e a s ti n p a rt , o n M i c c i c h e ’ s a f f i l i a t i o n w i th IFG in m aking the investm ents at i ssue. In s uppo rt o f th at reliance , K ing su bm itted to the dis tr ic t co urt a co py of an IF G busi ne ss card w hic h Mi cci ch e al le gedly provided her in the course of their bus iness dealings. On its face , the bus iness card ind ic at es tha t M ic ci ch e is af fi lia te d w ith IF G
. Mi cc ic he co unt er ed : “ I did not pr ovi de [K ing ] w ithabus ine ss c ar d or c or re spon d w ith[ K ing ] on l et terh ead r ef er ri ng t o IF G
. . . . I did

not pr ovi de [ K ing ] w itha ny doc um en ts re fe rr ing to IF G
. . . or ind ic at ing tha t I FG
. . . w as inv olv ed w ith[ he r] of

fs hor e tr ust , it s tr ust ee . . . or

the Ever green Se curity Ltd. investm ent the trustee m ade in their trust.” Micciche never
re ported hi s a ct ivi tie s in vol vin g K ing , I ntr ad os, or E ve rg re ento IF G , I FGdid not approve of the sale of E vergreen by its representatives, IFG does not h ave any rec ord of the pur ch as e of thi s inv es tm en t by or fo r K ing , K ing ne ve r ope ne d an a cc ount w ith IF G , K ing doe s not ha ve an y w ri tte n co ntr ac t w ith IF G , an d IF G did not re cei ve or dis bur se f unds f or thi s tr an sa ct ion
. On Se pt em

be r 4, 2 00 2, Ki ng in it ia te d a n a rb i t r a t io n p ro ceed in g a ga in st IFG, cl ai m in g th at it vio la te d f ed er al a nd s ta te se cu ri tie s law s, br ea ch ed ac ontra ct ,4

e n g a ge d i n fr au d, n eg li ge nc e, an d g ro ss ne gl ig en ce, an d b reac he d a fid uc ia ry du t y. King ’s s u bstantiv e claim , in essence, is that IFG failed to supervise Micciche, contrary to its ob ligation s, r esulting in her losses throu gh the failed Everg re en investm ent. A l t h o u g h King did no t have a contract w ith IFG, she dem anded arbitration under Rules 1010 1(c) and 1030 1(a) of the Code. In response, on January 27, 2003, IFG filed this action agains t King dem anding a declar atory j udgm ent that
ar bitra bil ity is an is sue f

or j udi ci al de te rm ina tio n, tha t the part ie s have no v al id ag re em en t t o arb itr at e, tha t Micc ic he had no auth or ity to ac t onI FG ’ s be ha lf

w ith
res pe ctto Ever gr een , and th at“ IFG [] di d n ot vi ol at e th e fed eral sec ur it ie s l aws .” IF G’ s com

pla int a lso se ek s an in

j unc tio n a ga ins t the the n- pe ndi ng arb itr at ion pr oc eed in gs . Ki ng , i n res po ns e, fil ed a m ot io n t o c om pe l arbi tra ti on un de r th e FAA. A m ag i s t ra t e ju d g e r ec o m m en d ed t h at t h e d i s t ri ct co u rt d e n y b o t h IF G’s injunction request and King’ s m otion to com pel arbitration because “ there is disputed
ev ide nc e on the que sti on of w he the r Mi cc ic he tol d [K ing ] tha t he w as a ff ili at ed w ith IF G , or ga ve he r oth er

ind ic ia of his af

fi lia tio n wi th IF G
. . . . ” Bo th p ar tie s ob j ec te d. On Se ptem

ber 3, 2003 , the district court refused to hold an evid entiary hearing or trial and c om pe l l e d a r bi t r a t i on , ho l di ng t ha t “ a c us t om e r ’ s di r e c t de a l i ng s w i th an associated person of a[n] NA SD m em ber are sufficient to c om

pel a[n] NA SD m em

ber int o arb itr at ion ” an d tha t K ing ’ s “ cl ai m ha s a ‘ suf fi ci en t ne xus’ to IF G [’ s] [] bus ine ss5

ac tiv iti es so a s to e nti tle [ K ing ] to ar bitra tio n in co nf

orm an ce w iththe N A SD Co de of A rb it rat io n Proce dur e. ” T he a rb itr at ionpane l he ld a he ar ing a nd f

ound in favor of K ing
. IFG ap p ea l ed to this Cou rt the district court’ s Septem ber 3, 2003 order
co m pe lli ng arb itr at ion
. II. JUR ISDICTI ON IF G ’ s a ppe al is tim el y , thi s C ourt ha s a ppe lla te j ur isd ic tio n, 28 U
. S. C. § 12 91,
an d th e fe de ra l c ourts h av e subj ec t m at te r juri sdi ct ion
. 28 U
. S. C. § 13 31; se e als o H ouse hold B ank

v . J F S G roup , 320 F. 3d 1249 , 125 9 (11th Cir. 2003) (“ [A ] feder al district court has subj ect-m atter j urisdictio n over a declar atory j udgm ent action if, a s he re , apla int if

f’ s w el l- ple ad ed co m

pla int al le ge s fa ct s dem onstra tin g the de fe ndant could file a coerc ive action arising un der fe deral law .” ). III. STANDARD OF REVIEW T his Co urt r ev ie w s de novo qu es t i o n s o f l aw , s u c h a s a d i s t ri ct co u rt ’s int er pr et at ionof

a n a gr eem en t t o arb itr at e (and w he the r it bin ds the part ie s to
ar bitra te ), bu t acce pts the dis tr ic t c ourt’ s f ind ing s of

f ac t tha t are not

c le ar ly
erro ne ou s. F

irs t O pti ons of Ch ic ago, In c. v. Ka pla n , 514 U. S. 938, 947-948 , 115 S. Ct. 1920 , 1926, 131 L. Ed. 2d 985 (1995). IV
. AN AL YS IS6

T he F ed eral Arb it rat io n Act , pre li m in ari ly, on ly app li es if t he pa rti es ag reed “ to
ar bitra te und er a w ri tte n ag re em en t fo r ar bitratio n. ” 9 U
. S. C. §§ 2 , 4. “ [A ] rb itr at ion is a m at te r of

c ontra ct a nd a party ca nn ot be r equir ed to subm it to arb itr at iona ny d i s p u t e wh i ch he has not agreed so to sub m it. T his axiom rec ogni zes the fa ct that
ar bitra tor s de ri ve the ir

auth or ity to re sol ve dis put es o nl y be ca use the part ie s have
a gr e e d i n a dv a nc e t o su

bm i t su c h gr i e vanc e s t o a r bi t r a t ion.” AT

& T Te chs., Inc. v. Co mmun ic at io ns W

orker s of Am. , 475 U
. S. 643 , 648 -4 9, 106 S
. Ct
. 141 5, 141 8, 89 L
. E d. 2d 6 48 ( 1986 ) (c ita tio ns and quot at ion m ar ks om itt ed ). A lth oughthe re is no dir ec t w ri tte n a gr ee m en t t o arb itr at e be tw ee n I FGa nd K ing , the Co de se rves a s a suf fi ci en t w ri tte n a gr ee m en t t o arb itr at e, bin din g it s m em be rs to ar bitra te avari ety

of cl ai m s wi th th ird -p art y

cla im an ts . Se e Ki dde r, P ea body& Co
. v . Z ins m ey er T rus ts P ’s hip , 41 F. 3d 86 1, 863-64 (2d Cir. 1994). T o de te rm ine w he the r IF G ’ s w ri tte n a gr ee m en t to arb itr at e gove rn s it s di sput e
w ithK ing , the Co urt mus t in te rp re t the Co de a s it w oul d ac ontra ct

und er the ap pl ic ab le st at e la w, P erryv . T hom as , 482 U
. S. 483 , 492 n. 9, 107 S
. Ct
. 252 0, 252 7
n. 9, 96 L
. E d. 2d 4 26 ( 1987 ), giv ing e ff ec t ( as it doe s w he n in te rp re tin g any c ontra ct ) to the part ie s’ int en t e xpr es se d by the or din ar

y m eaning o f the langua ge the y use d. B ea ns v . Ch ohon is , 740 So
. 2d 65, 67 (F la
. D ist
. Ct
. App. 199 9) ; Interfirst Fed. Sav. B ank v. B urke , 672 So.2d 90, 92 (F la. Dist. Ct. App. 1996 ). But, unlik e other7

contracts, “ any doub ts concerning the scope of arbitrable issues sho uld be resolved in favor of arbitration.” M oses H
. Co ne M em ’l H osp. v . M er cu ryCo nstr. Co rp. , 460 U. S. 1, 24-25, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983). Ru le 101 01( c) pr ovi de s: T his Co de of A rb itr at ion Pr oc ed ur e is pr es cr ibe d an d ad opt ed pur suant to A rt ic le V II , S ec tio n 1( a) (i v) of the By -L aw s of the A sso ci at ionf or the ar bitra tio n of

a ny dis put e, c la im , or

c ontro ve rs y

a ri sin g ou t of

or in co nn ect io n wi th th e b us in es s o f an y me mb e r of th e Ass oc ia ti on . . . be tw ee n or am ong m em

be rs or a sso ci at ed

pe rs ons an d publi c cu sto m er s, orot he rs . . . . N A SD Co de of

A rb itr at ionP ro ce dur e Ru le 101 01( c)
. A nd, Ru le 103 01( a) pr ovi de s: A ny dis put e, c la im , or

c ontro ve rs y el ig ib le f

or sub m iss ionund er

the Rule 10100 Ser ies betwee n a custom er and a m em ber and/or associated pe rs on ari sin g inc onne ct ionw iththe bus ine ss o f suc h m em ber or in co n n e c t i o n w i t h t h e a c t i v i t i e s o f s u c h a s s o c i a t e d p e r s o n s s ha ll be ar bitrated under

thi s C ode , a s pr ovi de d by a ny dul y e xe cu te d and en fo rcea bl e wri tt en ag reem en t o r up on th e de m an d o f th e cu st om er. . . . N A SD Co d e o f

A r b i t r a t i o n P r o c e du r e R

u l e 1 0 3 0 1 ( a )
. T o c o m

p e l a r b i t r a t i o n, the re fo re , a n inve sto r m

ust show tha t his or her cl ai m : invol ve s a disput e betw ee n a
m em be r an d a cust om er or an as soc ia te d per son of the m em be r an d ac ust om er ; and,
ar ise s inc onne ct ionw iththe busi ne ss ac tiv iti es of the m em be r or in c onne ct ionw ith the a ct ivi tie s of

the a sso ci at ed

pe rs on. A. Customer D isput es8

K ing ’ s dis p u t e w i t h I F G i s o n e b e t w e e n ac u s t o m e r a n dam e m

b e r . R u le 1010 1(c) only applies to “ dispu tes . . . betwee n or am ong m em be rs o r a s s o ci ated persons and p ublic custo m ers, or o thers” and Rule 1 0301 (a) onlyapplies to “ dispu tes

. . . b e t w e e n ac u s t o meran damemb e r a n d/ o r a s s o c i a t e dp e r s o n . ” P r e l i mi n a r i l y,
w he the r K ing is anI FGc ust om er , a s d efi ne d by the Co de , is a le ga l qu es tio n of
co nt ract in te rp ret at io n fo r th e Co ur t, se e Aetna Ca s. & Su r. Co . v. W ar re n Br os . Co., Div. of Ashland Oil, I

nc. , 355 So.2d 785, 787 (Fla. 1978 ), and, un der th e circ um stance at bar, the Co urt do es not req uir e ane vid en tiary

he ar ing be ca

use the und er ly ing fa ct ua l c ir cu m stanc es a re undi sput ed (the pa rt ie s agr ee tha t Ki ng wa s ac ust om er of Micciche and that Micc iche wa s a person associated with IF G)
. The instant m atter i s d i s t i n g u i s h ab l e f

r o m B en sado un v . J

obe -R iat , 316 F. 3d 17 1 (2d Cir. 2003 ), wher e the Se co nd Cir cu it fo und tha t w he the r ce rt ai n in ve sto rs a ct ua lly w er e cu sto m er s a t a ll pr es en te d a tri ab le is su e o f m at eri al fact
. Id . a t 177-78
. Unlike B en sado un , the re is no p ro ff er of f ac ts t o c ontra dic t K ing ’ s a lle ga tio ns tha t sh e de al t di re ct ly w ith Mi cc ic he , w hom IF G co nc ed es w as its r ep re se nta tiv e; r athe r, the dif fe re nt que sti on posed to this Court is whether K ing was a “ custom er, ” as that term is used in Rules 1010 1( c) a nd 1 0301 (a ), sol el y be ca use she is a cu sto m er

of ape rs on a sso ci at ed

w ith IFG.There is no dispute that, at all releva nt times, I FG w as a “ member” and Micc iche was a n 2 “assoc iated per son,” as those te rms are used in Rules 10101(c) and 10301(a ). The Court will not consider the e x trin s i c ev i d en ce presente d by I FG r eg ardingthe 3 purported intent of the NASD beca use the rules at issue are clea r and una mbiguous. See B ombardier Capital Inc. v . Progressive M

ktg. Group, Inc

. , 801 So.2d 131, 134 (Fla. D ist. Ct . App. 2001).

9 W e co nc lud e tha t K ing is a “ cu sto m er , ” as tha t t er m is de fi ne d and u se d by

the N A SD
. T he N A SD ge ne ra lly de fi ne s th e te rm “ cu sto m er ” as a ny one w ho i s no t a 2 broker or a dea ler. N AS D R ule 0120 (g). A lthou gh it conce d es t hat King wa s Micciche’ s “ custom er, ” as that term is used in th e Code, IFGargues that King w as not its custom er. Rul es 1 0 1 0 1 (c ) a n d1 0 3 0 1 (a ), h o we v er , u n amb i g u o u s l y p ro v i d e t h at the K ing is a cu sto m er as lon g as she is not a br oke r or de al er ; nothin g in the Code dir ec ts o the rw ise or

r equir es m or e. En fo rci ng the li m ita tio n I FGse ek s w oul d be 3 tantam ount to reading language int o the Code that is consp icuousl y ab s en t. O ther ina ppl ic ab le N A SD r

ule s do m ak e a disti nc tio n be tw ee n c ust om er s ge ne ra lly a nd
cus t o m er s of the m em

ber. T he NA SD rule pertaining to dis closure of financial
co ndi tio n to cu sto m er s, fo r ex am ple , de fi ne s “ cu sto m er ” as “ an y pe rs on w ho, in the
re gul ar c our se of suc h m em

be r’ s busin es s, ha s ca sh o r se cu ri tie s inthe pos se ssi on o f
suc h m em be r. ” N A SD Ru le 2270 (b ). T he N A SD ru le re ga rd ing m ar ginr equir em en ts sim ilarl y pr ovi de s th at

“ cu sto m er ” m eans
an y pe rs on f or w hom se cu ri tie s are pur ch as ed or so ld or to w hom se cu ri tie s are pur ch as ed

or sol d w he the r on a re gul ar w ay , w he n is sue d,10

de la y ed or f utu re de liv er

y ba sis
. I t w ill a lso inc lud e an y pe rs on f or whom securities are held or carr ied and to or fo r wh o m a m em ber or ga ni z a t i o n e x t e n d s , a rr a n g e s o r m a i n t a i n s a n y

c r e d i t . N A S D R

u le 25 20 (a)( 3)
. Rules 2270 (b) and 2520 (a)( 3) show that the NA SD could lim it the term “ custom er” spe ci fi ca lly to thos e w ith w hom the m em be r ha s a dire ct

r el at ion shi p. I ts c le ar

a nd
una m big uous c hoi ce to le av e the te rm a s def ine d gene ra lly im

m ed ia te ly le ad s to the conclusio n that King satisfies the “ custom er” requirem ent because she is not a broker
ora de al er, ev en th ou gh sh e m ay no t h av e b een a di rect cu st om er o f IFG. O ur int er pr et at ionof

the Co de ’ s un am

big uous langua ge f

i n d s s u p p o r t i n a lm ost
ev er y oth er de ci sio n on thi s issue
. I n Jo hn H anc oc k Li fe In s. Co
. v. W

ils on , 254 F
. 3d 48 (2d Cir. 2001), f

or exam ple, the S econd Circuit held that inv estors could com pel
ar bitration agains t a m em ber notwithstandin g the lack of a direc t transactional rel at io ns hi p. Se e id
. at 58- 60. T he re , the c ourt he ld tha t the pla in l an gua ge of Ru le 1030 1( a) sup ports the vie w tha t the te rm “ cu sto m er ” re fe rs to ei th er a m em be r’ s or
ana sso ci at ed

pe rs on’ s cust om er , a ff

or din g c ust om er s of

a n a sso ci at ed

pe rs on a r igh t to co m pe l arb it rat io n ag ai ns t a m em be r. Id
. Num erous other courts have interpreted th e Co de si m il arl y . Se e, e . g. , Ca lif orni a F ina G roup , I

nc . v . H errin , 379 F
. 3d 3 11, 318 (5 th C ir
. 200 4) (“ ‘ [C ] ust om er ’ a s us ed in Ru le 1030 1( a) is pla inl y br oa d e noug h to includ e persons who purchased secu ri ties from a re gistered representative of an11

NA SD -m em

ber fir m , a .k. a. an ‘ associ at ed person,’ and who are not them selves br oke rs or

de al er s. ”) ; V

es taxSe cs . Co rp. v . M

cW ood , 280 F. 3d 10 78, 1082 (6th Cir. 2002 ) (r ej ecting the argum ent that the Code requires th e d efendant-investors be direct
cu stom er s of

the N A SD m em

be r fi rm in or de r to c om

pe l arb itr at iona ga ins t the
m em ber) ; D augh erty v. W

ashin gton Squa re Secs., Inc. , 271 F
. S upp. 2d 6 81, 690 (W
. D
. P a. 200 3) ( “ T he m aj or ity of fe de ra l co urts f ac ed w ithint er

pr et ing N A SD Ru le 1030 1(a) conclud ed that NA SD m em bers m ust arbitrate disputes raised by custom ers of the ir a sso ci at ed

pe rs ons. ”) ; W

ashi ngt on Squar e Se cs . , I nc . v . A une , 253 F. S upp. 2d 839, 841 n .1 (W .D .N .C. 2003 ) (“ The m aj ority view is stated in the John Hancock opin ion .
. . hold ing that custom ers of the NA SD m em ber fi rm’s
re pr es en ta tiv e/ as soc ia te d pe rs on c an r equir e the N A SD m em be r to s ubm it to
ar bitra tio n. ”) ; B

M A F in. Se rv s., Inc. v. Gu in , 164 F. Supp. 2d 813, 820 (W .D . L a. 2001 ) (“ Rule 10301 (a) d o es not require the De fendant-Investors to be direct
cu sto m er s of

[ the m em

be r]
. I nst ead, th ey fit wi thi n th e co nf ine s of the Ru le
-- an d th er ef or e m ay r equir e [the m em

be r] to ar bitra te -- ev enif

the y are onl y c ust om er s of [the m em be r’ s] ‘ as soc ia te d pe rs on’ a nd n ot [ the m em be r]
. ”) ; F in. Ne tw ork

I nv . Co rp.
v. Becker , 7 6 2 N
. Y
. S
. 2 d 2 5 , 2 7 ( N
. Y
. Ap p . D i v . 2 0 0 3 ) ( “N A S D ’ s d e f i n i tio n of

‘ cu sto m er ’ is br oa d, e xc lud ing onl y abro ker or

de al er , a nd p la inl y

inc lud ing custom ers of an associated person as well as of the m em ber itself. ”).12

The c ase lawis not un anim ous. A t l ea st one federal c ourt has taken an oppo sit e vie w . I n Investors Capita l Corp. v. Brown , 145 F. Supp. 2d 1302 (M. D. Fla. 2001 ), the Middle District of Florida, from which th e in stant m atter arises, held that

“ be ing ac ust om er

of a n a sso ci at ed

pe rs on i s no t, in its el f, a su ffi ci en t ba sis f or
com pelling arbitration with a m em ber. ” Id
. a t 13 07. T ha t c ourt r equir ed som e ind ic ia of a direc t custom er relationship betwee n the NA SD m em ber firm and the invest or. Id
. a t 13 08 (“ [I ] n j oin ing the N A SD , [the m em be r] ag re ed

to ar bitra te dis put es w ith its cu sto m er s, ra the r than the cu sto m er s of ev er y pe rs on as soc ia te d w ith [ the
m em be r]
. T he opp osi te c onstru ct ionof Ru le 103 01( a) , the Co urt c onc lud es , w oul d do s ign if ic an t i nj ust ic e to the r ea sona ble ex pe ct at ion s of

N A SD m em

be rs ” (quot at ion
m arks and citation s o m i tted)). A noth er c ase in that district followed the In vesto rs Ca pital ho ld in g. Mony Secs. Corp. v. Vasquez , 2 38 F. Supp . 2 d 1 30 4, 1 30 6- 08 (M.D. Fla. 2002 ). T he rea sonin g of these decisions is not p ersuasive, how ever, because they read a l i mi t a t i on in to th e Co de th atis ab se nt fro m it s l an gu ag e. The NASD,
m oreover, has been on notice at least since 2001 -- when the Se cond Circuit issu ed John Hancock

- - of the br oa d m eanin g th e co urts would a ttr ibu te to the langua ge
use d. T he N A SD c oul d have pr ev en te d an y pur porte d “ sig nif

ic an t i nj ust ic e” m er el y by includin g sim

ple lim iting language, as it did with Rules 227 0(b) and 2520 (a)( 3). The N AS D has not do ne so, and this Court onl y can conclude that the John Hancock13

int er pr et at ionis co nsi ste nt w iththe N A SD m em be rs ’ r ea sona

ble e xpe ct at ion s. Fi na lly , the Co de ’ s se co nd r equir em en t, that the dis put e ar ise in con ne ct ion w iththe b u s i n es s o f t h e m emb er , p ro v i d es fo r t h e g en er al co n n ec t i o n b et we en t h e c u s t o m er ’s di sp ut e a nd

t he m e m be r ’ s c on du c tt ha tt he se d e c i si on s i m po se upo n t he c us t om e rm em be r re qui re m en t. E ve n if the Co de w er e not

w ri tte n so br oa dly

a nd a m em be r co uld onl y be
com pelled into arbitration by its ow n custom ers, King still could have com pelled IFG int o arb itr at ion
. Whe n an in ve sto r de al s w itham em be r’ s a ge nt o r re pr es en ta tiv e, the in ve st or de al s wi th th e m em be r. V es tax , 280 F
. 3d a t 10 81; Oppenheimer & Co. I nc.
v. Ne idh ardt , 56 F
. 3d 3 52 ( 2d C ir
. 199 5) ; see also W ashin gton Squa re Secs. Inc. v. Sow er s , 218 F. Supp. 2d 1108, 1116 (D
. Minn. 2002 ) (“ Federa l case lawplainly states tha t w he n th e inv es tor

de al s w itha n a ge nt o r re pr es en ta tiv e [of am em be r] , the inv es to r de al s with th e m em be r, a nd o n th at

ba sis the inv es tor

is en tit le d to ha ve
res olv ed in ar bitratio n any

dis put e tha t ari se s ou t of tha t r el at ion shi p” ( quot at ion
m ar ks and c ita tio n om itt ed )) ; Summit B rokerage Servs., Inc. v. Cooksley , N o. CA 02- 1113 7 AO , 2002 W L 3147 8190 (F la
. Ci r. Ct
. N ov. 6, 2002 ) (“ [B ] y de al ing w ith [the firm ’ s] registered r epresentative, [the investor] becam e a c ustom er of that f irm fo r pur pose s of N A SD a rb itr at ionobl iga tio ns. ”)
. T he part ie s a gr ee tha t K ing de al t
w ithMi cc ic he , so K ing , in tur n, de al t w ith IF G
. T he Co urt, the re fo re , hol ds tha t K ing14

ha s sa tis fi ed the fi rs t re qui re m en t of Ru le s 1010 1( c) an d 1030 1( a) by de m onstra tin g that she is a custom er and that IFG is a m em ber. B
. M em be r’ s B usi ness Ru le 101 01( c) onl y

appl ie s to dis put es “ ar isi ng o ut of or in con ne ct ion w iththe busi ne ss o f an y

m em be r” an d 10301( a) onl y

appl ie s to dis put es “ ar isi ng i n c onne ct ion
w iththe bus ine ss of su chm em be r. ” U nli ke the Co de ’ s br oa d “ m em be r” a nd

“ custom er” requirem ents, the “ in c onnection with” elem ent focuses Rules 1010 1(c)
an d 10 301( a) on p ar

tic ular ty pe s of dis put es . O the rw ise sta te d, in the unive rs e of
m emb er -c u s t o m erd i s p u t es , o n l y a p o rt i o n wi l l ar i s e in co n n ec t i o n wi t h t h e mem b er ’s busi ne ss and o nly

tho se sa tis fy

the Co de ’s a rbitr at ionpr ovi sio ns. K ing ’ s c au se of
ac tio n, f or e xa m ple , a ri se s f

ro m the a ct ion s of

Mi cc ic he in giv ing advic e re ga rd ing inv es tm en ts a t a

ti m e w he n he w as ape rs on a sso ci at ed w ithI FG , abr oke ra ge f

irm in t h e b u s i n es s o f p ro v i d i n g i n v es t m en ta d v i ce t h ro u g h i t s re p re s en t at i v es . Ki n g ’s pr im ar y c la im , spe ci fi ca lly , is tha t IF G ne gli ge ntl y sup er vis ed Mi cc ic he , r es ult ing in the tr oubl ed

E ve rg re eninv es tm en t. T he N A SD re qui re s that it s m em be rs sup er

vis e the a ct ivi tie s of

the ir a sso ci at ed

pe rs ons, as pa rt of the ir

bus ine ss. N A SD Co de of Conduct Rule 30 10. W e conclude that King’ s claim of negligent su pervision satisfies th e Co de ’s sec on d a rb it rat io n c on di ti on . Se e V es tax , 280 F. 3d a t 1082 (holdin g that
a dis put e tha t ar ise s fr om a m em be r’ s la ck of supe rv isi on o ve r its a sso ci at ed pe rs ons15

ar ise s “ in c onne ct ionw ithit s bu sin es s” ); John Hancock , 254 F. 3d at 58-59 (sam e); M O NY S ecs. Co rp. v . B orns te in , 250 F
. S upp. 2d 1 352, 135 7 ( M. D
. F la
. 200 3) (s am e) ; H

or no r, T ow nse nd &Ke nt, I

nc . v . H am ilt on , 218 F
. S upp. 2d 1 369, 138 4 (N
. D
. G a. 200 2) ( sa m e) ; F ir st M ontauk Se cs . Co rp. v . F

our M ile R anc h D ev . Co
. , Inc. , 65 F
. S upp. 2d 1 371, 137 9 ( S. D
. F la
. 199 9) ( sa m e) ; se e als o 1 Th om as H. O e h mk e , C o mme r c i a l A rb i t r a t i o n § 2 8 : 1 4 ( 2 0 0 3 ) ( “A d i s p u t e t h a ta r i s e s f r o m a
se cu ri tie s br oke ra ge fi rm ’ s lac k of supe rv isi on o ve r its br oke rs a ri se s inc onne ct ion with its busin ess (for purposes of NA SD rules com pelling arbitration of dispu tes). ”). V. CONCLUSION For the re asons stated above, th e Court concludes that IFG is a “ m em ber, ” that Micciche is an “ associate person,” and that King is a “ custom er, ” as those term s are
use d inthe Co de , a nd tha t K ing ’ s di sput e ar ise s inc onne ct ionw ithI FG ’ s bu sin es s. Ru le s 10101( c) a nd 1 0301 (a ) of the Co de , ava lid

w ri tte n a gr ee m en t t o arb itr at ion , th eref or e, pr ov id e th atKin g m ay de m an d a rb it rat io n fo r it s d is pu te wit h IF G. A c c o r d i n g l y, w e a f

f i rm. AFFIRMED.