Source: http://www.leagle.com/decision/19951096903FSupp193_11055/PAINEWEBBER,%20INC.%20v.%20LANDAY
Timestamp: 2017-07-24 00:56:42
Document Index: 501898015

Matched Legal Cases: ['§ 35', '§ 15', '§ 35', '§ 15', '§ 15', '§ 15', '§ 35', '§ 15', '§ 21']

903 F.Supp. 193 (1995) | PAINEWEBBER, INC. v. LANDAY | Leagle.com
903 F.Supp.
Citing Case 903 F.Supp. 193 (1995)
FootNotes 1. PaineWebber is a Delaware corporation with its principal place of business in New York; the Landays are residents of Massachusetts. The amount in controversy, exclusive of costs and interests, exceeds $50,000.
2. Charles Landay had inherited a large block of stock in Stride Rite Corporation from his grandfather, the founder of the corporation. (See Landay Aff. ¶ 2; Verified Compl. ¶ 9.) In 1982, this stock was Charles Landay's "sole significant asset (apart from [his] house)". (Landay Aff. ¶ 2.)
4. (See Pl.'s Mem. in Supp. of Mot. for Prelim.Inj., Ex. A, Statement of Claim at 2-3 (providing list with dates of investments, fourteen of which are indicated as prior to 1988.))
5. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ohnuma (Sumi), ___ A.D.2d ___, 630 N.Y.S.2d 724 (1 Dept.1995); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. DeChaine, 194 A.D.2d 472, 600 N.Y.S.2d 459 (1 Dept.), leave to appeal denied, 82 N.Y.2d 657, 624 N.E.2d 694, 604 N.Y.S.2d 556 (1993); Prudential Bache Securities v. Archard, 179 A.D.2d 652, 579 N.Y.S.2d 890 (2 Dept.), leave to appeal denied, 80 N.Y.2d 754, 600 N.E.2d 633, 587 N.Y.S.2d 906 (1992); but see Rockland County v. Primiano Const. Co., Inc., 51 N.Y.2d 1, 409 N.E.2d 951, 431 N.Y.S.2d 478 (1980).
6. In Volt, however, the Court did not itself interpret the terms of the parties' agreement; rather it accepted without review the California Court of Appeal's determination that, in choosing that the contract would be governed by the law of California, the parties intended for California rules of arbitration to also apply. Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 472, 109 S.Ct. 1248, 1252, 103 L.Ed.2d 488 (1989). Compare Mastrobuono v. Shearson Lehman Hutton, Inc., ___ U.S. ___, ___, 115 S.Ct. 1212, 1218, 131 L.Ed.2d 76 (1995) (finding that if contractual intent is ambiguous, doubts should be resolved by arbitration following the FAA).
7. I note that the Eighth Circuit in FSC Securities Corp. v. Freel, 14 F.3d 1310, 1312-1313 (1994) has concluded, by contrast, that § 35 was sufficient evidence that the parties clearly intended for arbitration to decide all issues of timeliness.
8. While noting a split among the courts over the characterization of § 15 as a procedural time bar (a matter for arbitrators) or as a substantive "eligibility" requirement (a matter for courts), the Eighth Circuit in Freel declined to address the issue "head-on", and instead relied entirely on § 35. 14 F.3d at 1312, n. 2. See also Bakk v. Principal Financial Securities, Inc., 892 F.Supp. 1206 (D.Minn.1995). As will appear below, I find the "procedural"/"substantive" distinction does not, in any event, assist in a clear-eyed analysis of the issues.
9. Indeed, on the question of tolling, the NASD's excerpted statement of intention concerning the purpose of the Section 18 amendment admits of a different interpretation than that given it by the Seventh Circuit. In stating that prior to the amendment it could not accept six-year old matters for arbitration, but that thereafter the time limit would be "co-extensive with various state statutes of limitations", permitting all "disputes eligible for a judicial disposition to be resolved by arbitration", the NASD arguably saw itself as extending the availability of tolling considerations to the courts.
10. Another circuit arguably aligned with PaineWebber's position, the Third Circuit in PaineWebber v. Hartmann, 921 F.2d 507 (3rd Cir. 1990), did not address the question of tolling. In that case, the court was asked to construe Rule 603 of the New York Stock Exchange Department of Arbitration Rules, which contains language identical to § 15. In light of the Seventh Circuit's reading of § 15 as an "eligibility" requirement, the court concluded that it was "satisfied that the district court did not commit clear error in interpreting Rule 603 [similarly]." Id. at 514. "However," the court stated, "our holding is no more expansive than this. Language less distinct than `eligible for submission to arbitration' might well be insufficient to overcome the strong jurisprudential pull towards arbitration." Id.
11. Moreover, insofar as the Seventh Circuit's interpretation leads it to conclude that the only possible key to lifting the six-year bar is to apply first to a court for judicial dispensation, and that by proceeding straight to arbitration a claimant will foreclose even that option, such an interpretation is perversely at odds with "the federal policy favoring arbitration" and "Congress' clear intent, in the Arbitration Act, to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 22, 103 S.Ct. 927, 941, 940, 74 L.Ed.2d 765 (1983).
12. But see PaineWebber Inc., v. Richardson, No. 3104, 1995 WL 236722 (S.D.N.Y. Apr. 21, 1995) (choosing not to follow Wagoner and stating, incorrectly, that no federal Court of Appeals has found § 15 to be an issue for arbitrators).
13. See also Bakk, 892 F.Supp. at 1209-11 (noting § 35 of the NASD Code providing that arbitrators are empowered to interpret the applicability of all Code provisions, including § 15, is evidence of the parties' clear intent that the timeliness issue go to arbitration; citing First Options); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Shaddock, 822 F.Supp. 125 (S.D.N.Y. 1993) (FAA requires that question of time-bar be submitted to arbitrator notwithstanding parties' choice-of-law provision).
14. In John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S.Ct. 909, 918, 11 L.Ed.2d 898 (1964), the Supreme Court held that once it is determined that the "substantive" nature of the claim compels arbitration, "procedural" questions regarding whether the proper grievance procedures were timely followed are for the arbitrator to resolve. Several circuits, including the First, have thus found that such time limit defenses are for arbitrators. See, e.g., Local 285, Service Employees Inter. Union, AFL-CIO v. Nonotuck Resource Assoc., Inc., 64 F.3d 735, 738 (1st Cir.1995) ("substantive arbitrability refers to whether a dispute involves a subject matter that the parties have contractually agreed to submit to arbitration.... Procedural arbitrability, on the other hand, concerns such issues as [whether procedures have been followed]") (emphasis added) (citing Wiley). It may be argued that these cases are distinguishable as involving only "procedural" time limits, as opposed to "substantive" ones. It is apparent, however, courts differ as to whether statutes of limitations (or "eligibility" requirements) are properly considered "substantive" or "procedural". Moreover, given that the scope of an arbitrator's jurisdiction is defined ab initio by the terms of the parties' agreement, I find it difficult to discern a justification for leaving to arbitrators those matters involving mere "procedural" time limits explicitly defined by the parties, while reserving to courts defenses invoking so-called "substantive" time limits that may or may not have been contemplated by the parties. This is particularly the case where, as here, there is an argument that the arbitral body which established the "substantive" time limit and before whom the parties agreed to arbitrate has explicitly reserved the application thereof to itself.
15. The Court observed that the NASD rules nowhere prohibit the award of punitive damages. In fact, the Court took note of the Seventh Circuit's observation that NASD arbitrators receive a manual outlining the frequency of punitive damages as a remedy in arbitration. Mastrobuono, 115 S.Ct. at 1218.
16. The parties here, of course, have elected to arbitrate under the NASD Code. And, unlike the AAA Rules at issue in Raytheon, the NASD Code does not speak explicitly to the matter of damages. The Landays observe that the NASD Rules of Fair Practice Article III, § 21f(4) provides that