588 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices

10 15 U.S.C. 78o-3(b)(4).

11 17 CFR 240.19b–4(e)(6).

12 15 U.S.C. 78s(b)(3)(A)(iii).

13 17 CFR 240.19b–4(e)(6).

1The NASD filed Amendment Nos. 1, 2, 3 and

4 to the proposed rule change on July 15, 1997, July

21, 1997, December 3, 1997, and December 19,

1997, respectively, the substance of which is

incorporated into the notice. See letters from to

Elliot R. Curzon, Assistant General Counsel, NASD

Regulation, to Katherine A. England, Assistant

Director, Market Regulation, Commission, dated

July 14, 1997 (‘‘Amendment No. 1’’), July 18, 1997

(‘‘Amendment No. 2’’), and December 18, 1997

(‘‘Amendment No. 4’’); and letter from Joan C.

Conley, Secretary, NASD Regulation, to Katherine

A. England, Assistant Director, Market Regulation,

Commission, dated December 3, 1997 (and

attachments) (‘‘Amendment No. 3’’).

grievance procedures currently set forth

in the Rule 4000 Series. Finally, other

conforming changes are being made to

correct existing cross references to the

Rule 9700 Series to those of the new

Rule 4800 Series.

2. Statutory Basis of Rule Change

The Association believes that the

proposed rule change is consistent with

Section 15A(b)(4) of the Act 10 in that it

assures a fair representation of its

members in the selection of its directors

and administration of its affairs and

provides that one or more directors shall

be representatives of issuers and

investors and not be associated with a

member of the Association, a broker, or

a dealer.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Association does not believe that

the proposed rule change will result in

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has been

filed by the Association as a ‘‘noncontroversial’’ rule change under Rule

19b–4(e)(6).11 Consequently, the rule

change shall become operative 30 days

after the date of this filing, or such

shorter time as the Commission may

designate if the change: (i) Will not

significantly affect the protection of

investors or the public interest; and (ii)

will not impose any significant burden

on competition, pursuant to Section

19(b)(3)(A)(iii) of the Act 12 and

subparagraph (e)(6) of Rule 19b–4

thereunder.13 To ensure conformity

with the revised Nasdaq By-Laws,

however, which are scheduled to

become effective at the conclusion of

the January 1998 annual meeting of the

NASD, the Association requests

acceleration of the operative date of the

changes contained in this rule filing, so

that the revised Rules of the Association

and related corporate governance

documents will be in force

simultaneously.

At any time within 60 days of this

filing, the Commission may summarily

abrogate this proposal if it appears to

the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

For the reasons stated, and since such

action is in the public interest, does not

significantly affect the protection of

investors or impose any significant

burden on competition, and because the

changes in this rule filing conform the

Rules of the Association to the by-laws

recently approved by the Commission

(which will become effective at the

conclusion of the NASA’s annual

meeting), the Commission finds good

cause to accelerate the operative date of

the changes contained herein, and

designate such changes to become

operative at the conclusion of the

annual meeting of the NASD.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by January 27, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–161 Filed 1–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39487; File No. SR–NASD–

97–44]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the Eligibility

of Claims for Arbitration

December 23, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on June 24, 1997,1 the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend Rules 10304, 10307 and 10324 of

the NASD’s Code of Arbitration

Procedure (‘‘Code’’) to establish that all

arbitration claims are eligible unless

challenged, and to establish a procedure

for challenging the eligibility of claims.

Below is the text of the proposed rule

change. Proposed new language is in

italics; proposed deletions are in

brackets.

10304. Time Limit on Eligibility of

Claims for Arbitration; Procedures for

Determining Eligibility Under This Rule

[Time Limitation Upon Submission]

This rule describes when a claim must

be filed in order to be eligible for

arbitration, how and when parties may

challenge the eligibility of claims, and

the Director’s role in determining

eligibility.

[No dispute, claim, or controversy

shall be eligible for submission to

arbitration under this Code where six (6)

years have elapsed from the occurrence
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices 589

or event giving rise to the act or dispute,

claim or controversy. This Rule shall

not extend applicable statutes of

limitations, nor shall it apply to any

case which is directed to arbitration by

a court of competent jurisdiction.]

(a) Claims eligible for arbitration and

the Director’s role in determining the

eligibility of claims.

(1) Any filed claim is eligible for

arbitration unless the Director decides it

is ineligible. The Director may decide a

claim is ineligible only if:

(A) a party that is responding to a

claim, the responding party, asks the

Director to decide that the claim is

ineligible; and

(B) the Director determines that the

claim is based on an occurrence or

event that took place 6 years or more

before the claim was filed.

(2) The 6-year eligibility period in

paragraph (a)(1)(B) will be extended

only for the length of time that a claim

is pending in court. (The eligibility

period will not be extended during any

period in which a responding party

fraudulently concealed facts from the

claimant.)

(b) Procedures for challenging

eligibility and new time periods for

answering and delivering documents.

(1) If a responding party wants the

Director to decide whether a claim is

ineligible:

(A) a responding party must serve a

written request on the Director and all

the other parties to the arbitration; and

(B) a responding party must serve the

written request no later than 30 days

after the responding party was served

the Statement of Claim. (Rule 10314(c)

explains how to serve a document.)

(2) To oppose the written request, a

party must serve a written response on

the Director and all the parties. This

written response must be served no later

than 14 days after the party was served

the written request.

(3) The Director will try to determine

eligibility issues within 30 days of

receiving the written request. The

Director will serve the decision on all

the parties.

(4) The Director’s determination is

final. No party to the arbitration may

seek review of the determination in any

forum, in an action to vacate the

arbitration award, or in any other

proceeding

(5) If a claimant amends a Statement

of Claim filed in arbitration, a

responding party may challenge the

eligibility of any new claim in the

amended Statement of Claim.

(6) The parties do not have to file an

answer or any other documents until 45

days after the Director serves the

decision on eligibility.

(c) Challenges to eligibility when a

claimant files a claim or claims in court.

(1) If a court orders a claim to

arbitration at the request of the

responding party, then the responding

party may not challenge the claim’s

eligibility in arbitration.

(2) The responding party may

challenge the eligibility of a claim in

arbitration that a claimant initially filed

in court when:

(A) the court orders the claim to

arbitration and the responding party did

not request the order, or

(B) the claimant moves the claim from

court to arbitration without a court

order.

(d) Determinations of eligibility and

statutes of limitation.

(1) All statutes of limitation or any

other time limitations that may apply to

a claim are extended from the time a

Statement of Claim is filed until 45 days

after the Director serves a decision on

eligibility or the Association no longer

has jurisdiction over a claim, whichever

is later. The parties agree that they will

not assert a statute of limitations

defense in court that is inconsistent with

this subparagraph.

(2) The Director’s determination that

a claim is eligible or ineligible does not

determine whether a claim was filed

later than the time allowed by a statute

of limitations. The parties may still

assert to the arbitrators or the court that

has jurisdiction over a claim any statute

of limitations defense that applies to a

claim.

(3) A claimant may pursue a claim in

court even if a court or the Director

determines the claim is ineligible for

arbitration.

(e) Consolidation of eligible and

ineligible claims. If the Director decides

that one or more of the claims is not

eligible for arbitration, a customer

claimant may:

(1) pursue all of the claims included

in the Statement of Claim in court; or

(2) pursue the eligible claims in

arbitration and the ineligible claims in

court.

(f) Definitions.

(1) ‘‘Claim’’—For purposes of this

Rule, the term ‘‘claim’’ means any

dispute or controversy described in a

Statement of Claim, including Counterclaims, Cross-claims, and Third-party

claims, for which the claimant is

seeking any form of relief, damages or

other remedy.

(2) ‘‘Occurrence or event’’—For

purposes of this Rule, the term

‘‘occurrence or event’’ means:

(A) the date of the transaction upon

which the claim is based; or,

(B) if the claim does not arise from a

transaction, the date of the occurrence

of the act or omission upon which the

claim is based.

* * * * *

10307. Reserved. [Tolling of Time

Limitation(s) for the Institution of Legal

Proceedings and Extension of Time

Limitation(s) for Submission to

Arbitration]

[(a) Where permitted by applicable

law, the time limitations which would

otherwise run or accrue for the

institution of legal proceedings shall be

tolled where a duly executed

Submission Agreement is filed by the

Claimant(s). The tolling shall continue

for such period as the Association shall

retain jurisdiction upon the matter

submitted.]

[(b) The six (6) year time limitation

upon submission to arbitration shall not

apply when the parties have submitted

the dispute, claim or controversy to a

court of competent jurisdiction. The six

(6) year time limitation shall not run for

such period as the court shall retain

jurisdiction upon the matter submitted.]

* * * * *

10324. Interpretation of Provisions of

Code and Enforcement of Arbitrator

Rulings

[The arbitrators shall be empowered

to interpret and determine the

applicability of all provisions under this

Code and to take appropriate action to

obtain compliance with any ruling by

the arbitrator(s). Such interpretations

and actions to obtain compliance shall

be final and binding upon the parties.]

The arbitrators may interpret and apply

the provisions of this Code and take

appropriate action to obtain compliance

with any ruling that they make, except

as provided in other provisions of this

Code. The interpretations and actions of

the arbitrators to obtain compliance

shall be final and binding upon the

parties.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.
590 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices

2Equitable tolling based on fraudulent

concealment is a legal doctrine that permits a

plaintiff to pursue a claim after a time limitation for

filing the claim has run out. Under the doctrine,

when it appears that a defendant intentionally hid

(fraudulently concealed) certain facts that would

have alerted the plaintiff to the existence of a legal

claim for damages, a court or arbitrator may

determine that, in the interests of equity and

fairness, the running of a time limitation for the

filing of a claim should be tolled (stopped) during

the time period when the facts were concealed.

3Some recent court rulings have held that if a

claim submitted to arbitration under a predispute

agreement to arbitrate is ineligible for arbitration,

the claim may not be litigated in court because the

customer (investor) had elected arbitration as the

sole remedy. See Calabria v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 855 F. Supp. 172 (N.D. Tex.

1994); Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Shelapinsky, No. 93–1553 (E.D. Pa. Mar. 16,

1994); Piccolo v. Faragalli, 1993 WL 331933 (E.D.

Pa. Aug. 24, 1993); and, Castellano v. PrudentialBache Securities, Inc., 1990 WL 87575 (S.D.N.Y.

June 19, 1990). Other courts have held there is no

election of remedies. See Smith Barney, Harris

Upham & Co. v. St. Pierre, 1994 WL 11600 (N.D.

Ill., Jan. 4, 1994); Prudential Securities v. LaPlant,

829 F. Supp. 1239 (D. Kan. 1993).

4The rationale for holding that eligibility is for

the courts to decide, and not the arbitrators, is that

the arbitrators only have jurisdiction to hear claims

the parties have agreed to submit to arbitration and

that it is for the courts to determine what the parties

have agreed to arbitrate. See, e.g., Cogswell, Merrill

Lynch, Pierce, Fenner & Smith, Inc., 78 F.3d 474

(10th Cir. 1996); Edward D. Jones & Co. v. Sorrells,

957 F.2d 509, 514 (7th Cir. 1992). Other courts have

held, however, that the parties may agree to permit

the arbitrator to determine if a case is arbitrable. See

PaineWebber Incorporated v. Elahi, 87 F.3d 589 (1st

Cir. 1996); Smith Barney Shearson, Inc. v. Boone,

47 F.3d 750 (5th Cir. 1995).

The Supreme Court’s recent decisions in

Mastrobuono v. Shearson Lehman Hutton, 514 U.S.

52, 131 L.Ed.2d 76, 115 S.Ct. 1652 (1996), and First

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

131, L.Ed.2d 985, 115 S.Ct. 1920 (1995), among

others, favoring arbitration and giving full effect to

agreements to arbitrate, suggest that the Supreme

Court would resolve the split between the circuits

by affirming agreements that give decisionmakers

other than the courts (e.g., the Director or the

arbitrators) the power to decide eligibility issues.

5 In October 1996, NASD Regulation filed SR–

NASD–96–47 with the SEC setting forth its revised

policy that, effective August 1, 1996, the staff of the

Office of Dispute Resolution would no longer make

preliminary eligibility determinations and, instead,

would refer eligibility issues to the arbitrators. The

SEC published the proposed rule change for

comment in the Federal Register. NASD Regulation

responded to the comments received by the SEC in

a letter from John M. Ramsay to Katherine A.

England dated July 1, 1997.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Purpose

Background

Origins of the Eligiblilyt Rule. A time

limitation on matters eligible for

arbitration has existed in the Code since

it was first adopted in 1968. Originally

set at two (2) years, the time limit had

been extended to six years by the time

the Rule was added to the original

Uniform Code of Arbitration developed

by the Securities Industry Conference

on Arbitration (‘‘SICA’’) in 1978.

Currently, Rule 10304 of the Code

provides, ‘‘No dispute, claim, or

controversy shall be eligible for

submission to arbitration under this

Code where six (6) years have elapsed

from the occurrence or event giving rise

to the act or dispute, claim or

controversy.’’

The original purpose of the rule was

to prevent aged claims from being

litigated in arbitration. The six-year time

limitation was consistent with the SEC’s

books and records rule, SEC Rule 17a–

4, which required certain significant

broker/dealer records to be retained for

no more than six years, and members

may have believed that they would be

disadvantaged if forced to arbitrate

claims if records were not available.

Moreover, the securities industry

believed that the inherently equitable

nature of arbitration posed a greater risk

that arbitrators might not strictly apply

legal defenses such as statutes of

limitation, thereby permitting a

customer (investor) to recover in a case

that would have been dismissed had it

been brought in court.

Resolving Eligibility Issues. Until

about seven or eight years ago, relatively

few cases called for the application of

the eligibility rule; however, as public

investor claims relating to limited

partnerships increased in the late 1980s,

with many filed more than six years

after the public investor’s original

purchase, member firm respondents

employed the eligibility limitation of

Rule 10304 to avoid arbitrating those

claims.

Member firms’s efforts to defeat

claims in arbitration on eligibility

grounds have had mixed success

because arbitrators tend to delay

eligibility decisions until the hearing on

the merits. Member firms have had

greater success when they have taken

eligibility issues to the courts in the

form of actions to enjoin the arbitration

of a claim as ineligible, particularly

because courts have not applied the

equitable tolling doctrine 2 to eligibility

decisions. The success has been

augmented by an increasing number of

courts that have decided that a

predispute arbitration agreement

amounts to an election of remedies

barring the claim from being heard in

court, when it is ineligible for

arbitration.3

As a result, eligibility issues have

become the subject of intense and

contentious litigation, both in court and

in arbitration, and member firms and

customers (investors) often view the

resolution of an eligibility dispute as the

major strategic issue of a case. If a claim

is found to be ineligible for arbitration,

it may be either too costly or difficult for

the customer (investor) to pursue in

court, or it may be more susceptible to

a statute of limitations defense in court.

The customer (investor) may settle the

case for an amount the customer

(investor) believes is less than what

could have been recovered in arbitration

in order to avoid the expense of court

litigation or the risk of losing the case.

If the case is found to be eligible, the

member firm may be more likely to

settle because it believes that the

equitable nature of arbitration renders

one of its most valuable procedural

defenses—statutes of limitation—less

reliable and increases the risk of an

adverse award.

Tactical maneuvering on the

eligibility issue also resulted because

the courts, the Director of Arbitration

(‘‘Director’’), and the arbitrators, all have

asserted jurisdiction over eligibility

issues, or directed the issue to another

forum. Parties attempt to gain an

advantage by filing a claim or a motion

in the forum they believe will produce

a favorable ruling. The result is

significant confusion about who should

decide eligibility issues. Some courts

have held that eligibility was for the

courts to decide; others have held that

the arbitrators could decide the issue.4

In some cases, the courts have declined

to decide the issue if the claim was

clearly less than six years old and,

instead, deferred to the decision of the

Director or the arbitrators.

Until recently, the Director would

examine arbitration claims to determine

if they were eligible.5 If the Director

rejected a claim as clearly ineligible, the

customer (investor) could ask a court to

compel arbitration or attempt to litigate

the claim in court. If the director

determined that the claim was clearly

eligible, the member firm could ask the

arbitrators to reexamine the issue. If the

arbitrators dismissed the claim as

ineligible, the customer (investor) could

ask a court to compel arbitration or

attempt to litigate the claim in court.

Moreover, some courts, arbitrators,

and the Director permitted certain

claims to be arbitrated even though they

appeared to be based on events more

than six years old under a theory akin

to equitable tolling. Other courts, some

arbitrators, and, several years ago, the

Director, applied a ‘‘bright line’’

transaction date test holding that the

date of the transaction was

determinative of the eligibility of a

claim and that the limit could not be
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices 591

6Under either standard, if there were a close

question or if the facts about the eligibility of a

claim were unclear, the Director would refer the

decision to the arbitrators.

7The Task Force’s specific recommendations

were to: (1) Suspend the eligibility rule for three

years (and repeal the rule if the pilot were

successful) and adopt procedures to ensure that

statute of limitations issues would be resolved early

in a case; (2) suspend and repeal the rule

prospectively only so that the eligibility of claims

older than six years old at the time the suspension

took effect would still be resolved under the old

rule; (3) direct the arbitrators to resolve statute of

limitations issues based on applicable law and train

arbitrators to do so; and (4) prohibit parties from

litigating procedural arbitrability issues in court

until after an award is rendered.

8Not all member firms include predispute

arbitration clauses in their new account agreements;

however, such clauses are the industry norm.

9 If the arbitrators err or refuse to apply a statute

of limitation in the same manner as would a court,

it is extremely difficult for respondents to overturn

the decision because the standard of review for an

arbitration award is much more limited than the

standard of review on appeal from a court decision.

10As a member of SICA, NASD Regulation

participated in considering several proposals to

amend the eligibility rule advanced by other

members of SICA. One proposed eligibility rule was

adopted by SICA; however, upon further review,

NASD Regulation became concerned about a

number of unresolved issues and determined not to

adopt the SICA rule language. Nevertheless, NASD

Regulation has considered the concerns of SICA

and its members in developing its proposed rule.

While SICA has not adopted NASD Regulation’s

proposed rule, and some SICA members have

indicated they are not in favor of the proposed rule,

NASD Regulation believes that the proposed rule

adequately addresses the issues raised by SICA and

others.

11The Task Force recommended adopting a rule

permitting punitive damages with a cap, but did not

recommend a pilot period for the punitive damages

rule.

tolled.6 In the last few years (until

August 1996, when NASD Regulation’s

Office of Dispute Resolution (‘‘Office’’)

changed the procedure for deciding

eligibility issues and sent them to the

arbitrators for eligibility determinations)

the Office has declined the apply

equitable theories tolling as a basis for

finding a claim eligible for arbitration

and, instead, has required the basis of a

claim for relief to be a transaction or an

act that occurred within six years of the

filing of the claim.

Arbitration Policy Task Force

Recommendations. In January 1996, the

NASD’s Arbitration Policy Task Force

(‘‘Task Force’’) released its report on

Securities Arbitration Reform. The Task

Force’s report identified eligibility

disputes as one of the most important

areas for reforming the arbitration

process. The Task Force noted that: (1)

The eligibility rule has resulted in

frequent court litigation; (2) the

eligibility rule, as presently written and

applied, creates great uncertainty as to

who is to decide eligibility and what the

triggering event should be; (3) when the

bright line transaction date test is not

applied, fact intensive inquiry and

discovery may be required to determine

whether the claim is eligible for

arbitration; and (4) the eligibility rule

creates the potential for a bifurcated

process. In considering its

recommendations for resolving the

problems with the eligibility rule, the

Task Force was confronted with an

apparently unbridgeable split of

opinion. Customers (investors) want to

eliminate the eligibility rule entirely;

member firms want to keep the rule and

apply it with a bright line test and no

equitable tolling.7

From the standpoint of some, the rule

is viewed as a burdensome, unfair

impediment preventing customers

(investors) from obtaining a hearing on

their claims. The costs and delays

involved in resolving eligibility disputes

affect the ability of customers (investors)

to receive complete recovery on their

claims. Under some circumstances,

customers (investors) are discouraged or

prevented from seeking recovery for

their claims because the costs and

delays of litigating eligibility claims

approach or exceed the value of their

claims. Moreover, customers (investors)

question the fairness of being forced

into arbitration under a predispute

agreement that they are required to sign

as a condition of opening a securities

account 8 and then being forced to

litigate the eligibility of their claim. This

circumstance appears especially unfair

to customers (investors) who find

themselves out of arbitration, but also

barred from court under the election of

remedies doctrine.

One byproduct of eligibility decisions

is that if one of several claims filed in

arbitration is found to be ineligible, the

customer (investor) would be forced to

litigate the ineligible claim in court and

pursue arbitration of the remaining

claims. The cost of litigating claims in

two forums may preclude the customer

(investor) from pursuing some of the

claims. Indeed, the customer (investor)

may find that it is uneconomical to

pursue any of the claims if some must

be litigated in arbitration and others

litigated in court.

Some member firms argue that the

original reason for the rule still prevails;

members should not be forced to

arbitrate claims if the records relating to

the claim may no longer exist because

the SEC’s rules do not require them to

keep the records. In addition, some

argue that with the increasing mobility

of associated persons in the securities

industry, the individuals responsible for

the actions alleged by customers

(investors) often are no longer employed

by the respondent member firm if the

claim is filed many years later, making

obtaining witnesses and information in

aid of the defense increasingly difficult

as time passes. Member firms also argue

that arbitrators are not strictly bound to

apply statutes of limitation 9 and,

therefore, often allow customers

(investors) to assert and recover for

claims that would be barred if brought

in court. Finally, respondents argue that

the resulting uncertainty about

arbitrator application of statutes of

limitation makes analyzing the risks of

litigating a claim much more difficult

and makes decisions about disposing of

records much riskier.

Consideration of Task Force

Recommendations by NASD Regulation.

NASD Regulation, through its National

Arbitration and Mediation Committee,

and in consultation with SICA,

considered the Task Force’s

recommendations at length. NASD

Regulation initially developed proposed

rule changes designed to give effect to

the Task Force’s recommendations and

consulted with SICA, the Public

Investors Arbitration Bar Association

(‘‘PIABA’’), the Securities Industry

Association (‘‘SIA’’), the staff of the

SEC, and others about the efficacy of the

proposals.10

The Task Force recommended

suspending the eligibility rule for three

years as a pilot and, ultimately,

repealing it. The Task Force also

proposed adopting procedures to ensure

that statute of limitations issues would

be resolved early in a case and directing

the arbitrators to resolve statute of

limitations issues based on applicable

law. Finally, the Task Force

recommended prohibiting parties from

litigating procedural arbitrability issues

in court until after an award was

rendered. The recommendations

generated significant opposition.

First, customers (investors) objected

that if the rule was reinstated after three

years, customers (investors) who filed

their claims after the rule was reinstated

might have their claims dismissed as

ineligible while those who filed

identical claims before the change

would not. Customers (investors) also

argued that it was unfair to repeal the

eligibility rule only temporarily while

permanently adopting a rule capping

punitive damages.11 Member firms

argued that repealing the rule either

temporarily or permanently would

eventually expose them to very old

claims and they would be unable to

predict or manage the risks of such

claims.
592 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices

12See Federal Arbitration Act, 9 U.S.C. 10(d). 13See Rule 3110(f) of the NASD’s Conduct Rules.

14NASD Regulation estimates that as many as

one-third of all claims filed involve a pro se party.

See Securities Arbitration Commentator, Vol. VIII,

No. 9 (February 1997). The number of pro se parties

is much higher for smaller claims; more than threequarters of claims involving $10,000 or less

involved pro se claimants. Id.

15NASD Regulation is also proposing to amend

Rule 10324 of the Code to clarify that the arbitrators

have no power to decide eligibility issues under the

proposed amendments to Rule 10304.

Second, customers (investors) and

member firms believed that adopting a

prehearing procedure for resolving

statute of limitation issues would add

unnecessary burdens and delays, and

would aggravate the current trend

toward formalization of arbitration

proceedings. They also argued that

requiring arbitrators to resolve statue of

limitations issues on the basis of

applicable law would create a

contractual limitation on the authority

of the arbitrator to decide these issues

and make it easier to overturn an

arbitration award, because the losing

party would have to show only that the

arbitrator exceeded the contractual

limitation by failing to apply the law

rigorously. The usual, more onerous,

standard of review that would apply in

the absence of a contractual limitation

established in the rule would be that the

arbitrators so imperfectly exercised their

powers by manifestly disregarding the

law that a valid award was not

rendered.12

Finally, some customers (investors)

argued that permitting eligibility

decisions to be reviewed after an award

undermines certainty and finality of

arbitration awards. Member firms

argued that prohibiting review of

eligibility decisions until after an award

would cause both sides to expend

resources litigating a claim that might

ultimately be dismissed. Both customers

(investors) and member firms agreed

that eligibility decisions should occur

early in a case and should be final, but

member firms wanted the decisions to

be immediately reviewable in court.

As a result of these concerns, NASD

Regulation ultimately determined not to

adopt the Task Force’s

recommendations concerning the

eligibility rule. NASD Regulation

concluded that repealing the rule could

create more problems for both

customers (investors) and member firms

than were solved and that the original

purpose for the rule remained valid.

Also, the Task Force’s

recommendations, in the opinion of

some, would ultimately work as a

greater disadvantage to public investor

claimants than to members and

associated persons. Consequently, the

proposed amendments reestablish the

gatekeeping function and eliminate the

aspects of the current rule that may be

unfair to public investors.

In addition, NASD Regulation

believes that the proposed rule

addresses the concerns of customers

(investors) and enhances the hallmarks

of arbitration as an efficient, costeffective, fair method of resolving

disputes. Under the proposed rule,

customers (investors) will be assured

that their claims will be heard either in

court or in arbitration, and that they will

not be subjected to repeated, costly,

time-consuming, and indeterminate

battles over the eligibility of their claim

for arbitration. First, by presuming that

all filed claims are eligible for

arbitration, the proposed rule eliminates

the need for customers (investors) to

fight their way in to arbitration if that

is where they want to have their claims

adjudicated. Second, by providing that

the Director is the sole and final arbiter

of eligibility issues, the parties will

know in advance that they will not be

engaged in a lengthy, indeterminate,

multi-forum fight. Finally, by

preventing the potentially costly and

involuntary bifurcation of eligible and

ineligible claims, the proposed rule will

provide customers (investors) with a

single forum (either court or arbitration)

for the resolution of their disputes.

Accordingly, NASD Regulation is

proposing to amend the eligibility rule

to provide a clear, quick, and final

mechanism to resolve eligibility issues,

prevent bifurcation of claims, and

permit customers (investors) to pursue

ineligible claims in court (and in

arbitration under some circumstances).

Description of Proposed Rule

The proposed rule, which applies to

all claims (public investor-member and

intra-industry) filed in arbitration, the

provisions of which are described in

more detail below, would:

(1) Retain the current six-year

eligibility rule but establish that all filed

claims are eligible unless successfully

challenged; (2) establish a bright line

transaction date test for eligibility (i.e.,

it would preclude the application of the

equitable tolling doctrine) and permit

separate claims for non-transactionbased occurrences; (3) give investor

claimants the option, in the face of a

successful eligibility challenge, to

consolidate their ineligible and eligible

claims in court to avoid bifurcation; and

(4) establish that an ineligible claim is

not barred from court under the election

of remedies doctrine. In the same

manner that other provisions of the

Code supersede the terms of a

predispute arbitration agreement,13 the

proposed changes to Rule 10304 will

supersede provisions in any existing or

future arbitration agreements between

members and others on issues relating

to eligibility and statutes of limitations.

The proposed rule has been drafted

using the ‘‘plain English’’ principles of

written communication that the

Commission has encouraged. NASD

Regulation believes the proposed rule

will be easier for all arbitration

participants to understand, most notably

participants who represent themselves

(pro se parties). Unlike the NASD’s

Conduct Rules, which are mainly

referred to and applied by member

firms, their compliance offices, and

their attorneys, the Code of Arbitration

Procedure is often used by pro se parties

who are not attorneys and who by

seeking arbitration are usually coming

into contact with the dispute resolution

process for the first time.14 In such

circumstances, plain English rules are

particularly important.

Eligibility Determinations. Paragraph

(a)(1) provides that a claim filed with

NASD Regulation’s Office of Dispute

Resolution (‘‘Office’’) is eligible for

submission to arbitration unless the

Director determines that the claim is

ineligible. A determination by the

Director can occur only if a respondent

challenges a claim as ineligible,

triggering the Director’s action. The

Director cannot act in the absence of a

challenge. Moreover, in the absence of

a challenge, and in contrast to the

current rule, the proposed rule does not

operate in any manner to preclude the

arbitration of a claim. Thus, the rule

fundamentally alters the legal effect and

procedure surrounding eligibility by

changing it from a substantive

jurisdictional time limitation on the

dispute that could be arbitrated to a

presumption that all claims are eligible.

The proposed rule establishes that all

claims are eligible for arbitration unless

the Director decides otherwise and it

removes the courts and the arbitrators

from any role in determining the

eligibility of a claim.15 Consequently,

the proposed rule will eliminate much

of the delay and uncertainty that has

surrounded the resolution of eligibility

issues.

Bright Line Standard for Eligibility

Determination. Once a responding party

has requested an eligibility

determination, the Director, to decide

that a claim is ineligible under

paragraph (a)(1)(B) of the proposed rule,

must find that the claim is based on an

occurrence or event that took place

more than six years before the claim was

filed. The term ‘‘occurrence or event’’ is
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices 593

defined in paragraph (f)(2) of the

proposed rule to mean either the

transaction date or, if no transaction is

involved, the date of the act or

occurrence which is the subject of the

claim. This provision and the definition

are intended to establish that the sixyear limitation in the proposed rule is

a ‘‘bright line.’’

Further, under paragraph (a)(2), the

six-year limitation period cannot be

extended or ‘‘tolled’’ even if the

claimant alleges that the respondent

fraudulently concealed the facts that

would have alerted the claimant to the

existence of a claim. For example, if the

customer’s claim is for losses from the

purchase of a limited partnership from

a member in 1987, the claim will be

ineligible for arbitration even if the

member continued to send account

statements to the claimant that showed

the investment to be worth more than

that current market value. If, however,

the customer’s claim is for losses

suffered from the misrepresentations

contained in the account statements

sent less than six years before the claim

was filed, the claim would be eligible

for arbitration.

If the claim is based on an act or

occurrence other than a transaction, the

six-year period will run from the date of

the act or occurrence. This point can be

illustrated with the above-described

example, assuming the following facts:

(1) The claimant asked the member

about the value of the limited

partnership in 1992; (2) the member

misrepresented the value to the

claimant; (3) the claimant alleges that

the misrepresentation caused the

claimant not to sell the security; and (4)

the claimant asks for damages for the

difference between what the member

represented as the actual value of the

security at the time and the value at the

time the claim is filed. A claim under

these facts would be based on the

misrepresentation made in 1992, not the

original purchase in 1987, and thus

would be eligible for arbitration.

While fraudulent concealment will

not extend the eligibility period,

proposed paragraph (a)(2) provides that

if the claimant files a claim in court that

is eventually moved to arbitration,

either voluntarily or by court order, the

six-year period will be tolled for as long

as the claim remains in court. For

example, if the claimant files a claim in

court five years and eleven months after

the claim arose and the court ordered

the claim to arbitration six months later,

the claim will be eligible for arbitration.

Procedure for Challenging Eligibility.

Under paragraph (b) of the proposed

rule, a respondent (called a ‘‘responding

party’’ in the proposed rule) who wants

to challenge the eligibility of a claim

must serve a request on the Director and

all the other parties no later than thirty

calendar days after receiving the

Statement of Claim. A claimant who

wants to oppose the respondent’s

request must serve a response on the

Director and all other parties no later

than fourteen days after receiving the

respondent’s request. The Director will

attempt to determine the eligibility of

the claim within thirty days after

receiving the respondent’s request.

This requirement is intended to force

eligibility issues to be raised, responded

to, and decided early in a proceeding.

Because of an early eligibility

determination, parties will know early

in the process whether a claim is

eligible and will be able to decide where

and how to litigate their claims,

pursuant to the options provided by

other provisions of the proposed rule.

If a claimant amends a Statement of

Claim, under paragraph (b)(5) a

respondent may challenge the eligibility

of any new claim. This provision is

intended to prevent respondents from

being foreclosed from challenging a new

claim after the time to challenge the

initial claim has expired. Under this

provision, if a claimant adds a new

transaction to the claim, the respondent

will have the opportunity to challenge

the eligibility of the new claim. For

example, if a claimant alleges that the

respondent misrepresented certain facts

to the claimant related to the sale of

security A and purchase of security B

five years before the claim was filed,

that claim would be eligible. But if the

claimant then amended the Statement of

Claim to ask for damages relating to the

original purchase of security A ten years

before the claim was filed, the

respondent could challenge the

eligibility of that claim insofar as it is

related to the purchase. This provision

is not intended, however, to prevent or

discourage a claimant from including or

adding facts to the Statement of Claim

that relate to events more than six years

before the claim was filed if the facts are

relevant to the claim. Because eligibility

determinations belong exclusively to the

Director under the proposed rule, any

decision about what constitutes a new

claim will necessarily be a part of that

decision and also will belong

exclusively to the Director.

Paragraph (b)(6) also provides that the

parties need not file an answer or other

documents that may be required by the

Code until forty-five days after the

Director serves an eligibility decision.

This provision delays the start of the

proceedings until decisions about the

eligibility of a claim are made, and

permits the parties sufficient time to

consider how to proceed according to

the various options provided by the

proposed rule.

Finality of Director’s Decision.

Paragraph (b)(4) of the proposed rule

provides that the Director’s

determination of eligibility issues is

final and that the parties are prohibited

from seeking review of the decision in

any forum, in any action to vacate the

arbitration award, or in any other

proceeding. This provision is intended

to establish conclusively that eligibility

issues are gatekeeping issues only,

internal to the Association’s forum, and

not a jurisdictional matter that would

prevent arbitration of a claim. Providing

finality on eligibility decisions early in

the process will substantially reduce the

expense, time, and uncertainty currently

associated with eligibility

determinations. Under this provision,

parties cannot ask the arbitrators to

revisit the Director’s eligibility decision;

nor can they ask to court to overturn it,

either immediately or after the award.

Thus, the current practice of seeking an

injunction or writ of mandate to prevent

or force the arbitration of an eligible or

ineligible claim will be prohibited.

Likewise, neither customers (investors)

nor member firms may ask a court, in

an action subsequent to an award, to

reconsider the Director’s eligibility

decision.

NASD Regulation also is considering

amending its rules (Rule 10106 and IM–

10100 of the Code) to clarify its

authority to discipline members and

associated persons who attempt to seek

review of eligibility decision. Under the

plan being considered, if a member or

associated person raises an eligibility

issue in a motion to vacate an award or

in an action to compel or bar an

arbitration proceeding (or with the

arbitrators, even though such an action

is precluded by this rule), such persons

may be subject to disciplinary action.

While NASD Regulation does not have

jurisdiction over non-members,

members and associated persons should

be able to use the plain language of the

rule and any descriptive provisions

contained herein to oppose any attempt

by non-member parties to litigate

eligibility rules.

Bifurcation. In considering how to

draft a rule that would retain the sixyear eligibility period yet permit parties

to litigate ineligible claims in court,

many participants in the drafting

process became concerned that the

eligible and ineligible claims of public

investors might be bifurcated between

arbitration and court. As noted above,

the cost of litigating claims in two

forums may preclude customers

(investors) from pursuing some or all of
594 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices

16Paragraph (d)(2) does not force a customer

(investor) to litigate ineligible claims in court if the

customer (investor) determines to arbitrate eligible

claims. Rather, the customer (investor) could

choose to abandon any ineligible claims.

17As noted in part 6 of this rule filing, the

amendments to Rule 10304 proposed herein will

not take effect until the SEC approves yet-to-be-filed

amendments to Rule 3110 (f) of the NASD’s

Conduct Rules governing the provisions of

predispute arbitration agreements.

their claims in either forum.

Accordingly, the proposed rule will not

require customers (investors) to

bifurcate their ineligible and eligible

claims in different forums. If the

Director determines that some of a

customer’s (investor’s) claims are

ineligible, paragraph (e) of the proposed

rule gives the customer (investor) the

option either to pursue the eligible

claims in arbitration and the ineligible

claims in court, thereby permitting

customers (investors) to voluntarily

bifurcate the claims,16 or to consolidate

all of the claims in court.

NASD Regulation is also concerned

that if a customer (investor) files an

action in court, members may attempt to

bifurcate claims by selectively

compelling only some of the claims to

arbitration. In order to prevent such

actions, NASD Regulation will be

amending Rule 3110(f) to, among other

things, require predispute arbitration

agreements to include a provision

prohibiting members from seeking to

compel only some of a customer’s courtfiled claims.17

In addition, NASD Regulation is

aware that some members may view the

proposed rule change as limiting their

ability to defend against a customer’s

court-filed action. Accordingly, NASD

Regulation notes that it will not be a

violation of this proposed rule if a

member asks a court to dismiss some of

a customer’s court-filed claims on

statute of limitations grounds prior to

asking the court to compel arbitration.

NASD Regulation believes that

permitting members to seek such

dismissals is consistent with the goal of

judicial economy. There is no reason to

force a member to seek to compel

arbitration of a claim that could

otherwise be dismissed by the court

upon the application of the appropriate

statute of limitation.

Paragraph (c) of the proposed rule

provides that if the member firm asks

that court to compel the arbitration of

the claims, the member firm will be

barred from challenging the eligibility of

those claims once they reach arbitration.

However, if the customer (investor)

moves the claims to arbitration either by

voluntarily withdrawing them and

refiling in arbitration or by asking the

court to order the claims to arbitration,

or the court on its own motion orders

the claims to arbitration, the member

firm may challenge the eligibility of the

claims once they reach arbitration.

The intended effect of these

provisions is to give the customer

(investor) control over whether claims

are bifurcated. Member firms will be

required to choose whether to challenge

the eligibility of a claim in arbitration,

recognizing that they may be forced to

litigate eligible claims in court as a

result of their challenge. Similarly, if a

customer (investor) files an action in

court first, member firms, in deciding

whether to compel arbitration, will have

to choose whether they want to litigate

all of the claims in court or all of the

claims in arbitration. If they choose to

compel arbitration, they must seek to

compel arbitration of all of the

customers’ (investors’) claims, including

claims that may be ineligible, and they

will be precluded from challenging the

eligibility of the claims once they reach

arbitration.

Statutes of Limitation Defenses.

Paragraph (d) of the proposed rule tolls

any applicable statutes of limitation

from the time the claim is filed in

arbitration until forty-five days after the

Director serves a decision on eligibility.

For example, if the statute of limitations

on a particular case would have run out

the day after a claim was filed in

arbitration, the statute will be tolled

from the time the claim is filed. If the

claim is eligible for arbitration and

remains in arbitration, there is no

statute of limitations defense because

the claim was filed in time. If, however,

the Director decides the claim is

ineligible, the customer (investor) has

forty-five days after the decision is

served to refile the claim in court before

the statute of limitations begins to run

again.

In addition, the proposed rule

provides that ‘‘the parties agree that

they will not assert a statute of

limitations defense that is inconsistent

with [the tolling provision].’’ While

NASD Regulation believes that all of the

provisions of the Code are part of the

‘‘agreement to arbitrate’’ between the

parties, it is especially important to

preserve statute of limitation defenses

for parties who are subject to the

procedures specified in this rule.

Therefore, the provision has been

phrased as an express agreement

between the parties and precludes the

parties from asserting the defense in a

manner that is inconsistent with the

tolling provisions of this rule. NASD

Regulation would regard a violation of

this provision to be a violation of Rule

2110 of the NASD’s Conduct Rules

because it would violate and express

agreement between the parties and,

therefore, would be inconsistent with

high standards of commercial honor and

just and equitable principles of trade.

Finally, paragraph (d) provides that

an eligibility decision does not affect the

application of a statute of limitations to

a claim. This provision is intended to

establish clearly the difference between

eligibility and statutes of limitation, a

distinction that has occasionally been

overlooked by courts, arbitrators, and

other participants. Thus, even if a claim

is found to be eligible for arbitration

after a challenge under the proposed

rule (i.e., it was filed less than six years

after the transaction), it may have been

filed after an applicable statute of

limitations have expired (e.g., it was

filed more than three years after the

transaction and, therefore, too late

under the absolute three-year limitation

on claims under Section 10(b) of the

Securities Exchange Act of 1934).

Therefore, the arbitrators could dismiss

the claim. Similarly, if a claim is found

to be ineligible for arbitration and then

is filed in court, it may have been filed

in court within the time required by the

applicable statute of limitations.

Election of remedies. As noted in the

background discussion above, some

courts have held under the current rule

that, if a claim is ineligible for

arbitration, the customer (investor) may

not pursue the claim in court. The

rationale for these decisions is that, by

agreeing to arbitration, customers

(investors) have ‘‘elected’’ arbitration as

their sole remedy for resolving their

disputes. NASD Regulation believes that

this result may be unfair to public

investors particularly because they often

are required to arbitrate through

predispute agreements in account

opening documents. Paragraph (d) of the

proposed rule provides that a customer

(investor) may pursue a claim in court

even if the Director or a court decides

the claim is not eligible for arbitration,

thereby eliminating the effect of the

election of remedies doctrine.

Elimination of Other Tolling

Provisions. Finally, NASD Regulation is

proposing to repeal Rule 10307 to

eliminate the tolling provisions

contained therein. The tolling

provisions in Rule 10307 are now

contained in provisions of the

amendments to Rule 10304.

NASD Regulations notes, however,

that users of the arbitration forum

should be aware that, with the

elimination of Rule 10307(a), the filing

of an executed Submission Agreement

will no longer be sufficient to toll a

statute of limitations. Under the

proposed amendments to Rule 10304,
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Notices 595

18NASD Regulation consents to an extension of

the time periods specified in Section (19)(b)(2) of

the Act until the SEC is prepared to approve NASD

Regulation’s yet-to-be-filed rule filing proposing to

amend Rule 3310(f) to revise the requirements for

customer predispute arbitration agreements used by

members. NASD Regulation intends to amend the

rules governing customer predispute arbitration

agreements to give effect to the eligibility rule

proposed herein and the punitive damages rule

proposed in SR–NASD–97–47. The purpose of the

extension is to permit the SEC to act simultaneously

on this rule filing, the yet-to-be-filed rule filing

proposing to amend Rule 3310(f), and the punitive

damages rule proposed in SR–NASD–97–47.

19U.S.C. 78o–3.

20See supra note 18.

only the filing of a Statement of Claim

will toll a statute of limitations.

Effectiveness of Proposed Rule

Change. NASD Regulation plans to

make the proposed rule change effective

thirty days after SEC approval.18

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act 19 because it will eliminate

many of the substantive and procedural

issues that have cause eligibility issues

to interfere with the fair, efficient, and

cost effective resolution of disputes, and

will improve the arbitration process for

the benefit of public investors, broker/

dealer members, and associated person

who are the user of the process.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents,20 the Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–97–44 and should be

submitted by January 27, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–162 Filed 1–5–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings, Agreements

filed during the week of December 26,

1997

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C.

Section 412 and 414. Answers may be

filed within 21 days of date of filing.

Docket Number: OST—97—3281.

Date Filed: December 23, 1997.

Parties: Members of the International

Air Transport Association.

Subject: PTC23/123 Telex Mail Vote

903, Australia-Europe excursion fares

r1–071II r2–071oo. Intended effective

date: January 15, 1998.

Docket Number: OST—97—3282.

Date Filed: December 23, 1997.

Parties: Members of the International

Air Transport Association.

Subject: PTC COMP 0201 (Report)

dated December 19, 1997, PTC COMP

Fares 0114 dated December 19, l997,

Resolution 015n—US-TC12/123 Add-on

Amounts, (US-Europe (except UK),

Africa, Middle East, TC3). Intended

effective date: April 1, 1998.

Carol Kelley,

Documentary Services.

[FR Doc. 98–163 Filed 1–5–98; 8:45 am]

BILLING CODE 4910–62–P

DEPARTMENT OF TRANSPORTATION

Notice of Application for Certificates of

Public Convenience and Necessity and

Foreign Air Carrier Permits Filed Under

Subpart Q During the Week Ending

December 26, 1997

The following Applications for

Certificates of Public Convenience and

Necessity and Foreign Air Carrier

Permits were filed under Subpart Q of

the Department of Transportation’s

Procedural Regulations (See 14 CFR

302.1701 et. seq.). The due date for

Answers, Conforming Applications, or

Motions to Modify Scope are set forth

below for each application. Following

the Answer period DOT may process the

application by expedited procedures.

Such procedures may consist of the

adoption of a show-cause order, a

tentative order, or in appropriate cases

a final order without further

proceedings.

Docket Number: OST–97–3275.

Date Filed: December 22, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: January 20, 1998.

Description: Application of Harlequin

Air Corporation, pursuant to 49 U.S.C.

40102 and Subpart Q of the Regulations,

for issuance of a Foreign Air Carrier

permit to engage in charter foreign air

transportation of persons, property and

mail between points in Japan and points

in the United States.

Docket Number: OST–97–3274.

Date Filed: December 22, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: January 20, 1998.

Description: Application of Britannia

Airways, GmbH pursuant to 49 U.S.C.

41301 and Subpart Q of the Regulations

to engage in charter foreign air carrier

transportation of persons and their

accompanying baggage, and property

between a point or points in the Federal

Republic of Germany and a point or

points in the United States.

Carol Kelley,

Documentary Services.

[FR Doc. 98–164 Filed 1–5–98; 8:45 am]

BILLING CODE 4910–62–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

[CGD08–97–48]

Houston/Galveston Navigation Safety

Advisory Committee Meeting

AGENCY: Coast Guard, DOT.

ACTION: Notice of meetings.