Opinion ID: 784240
Heading Depth: 2
Heading Rank: 1

Heading: The Exchange-Related Requirement

Text: 12 Although the FAA expresses a strong federal policy favoring arbitration, see Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d Cir.1998), arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); see also Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir.2002). SG argues that the constitution and rules of the Exchange, which bind FSP, provide the requisite arbitration agreement in this case. 13 The constitution of the NYSE provides in relevant part, any controversy between a member ... and any other person arising out of the business of such member... shall at the instance of any such party, be submitted for arbitration. NYSE Const. art. XI, § 1. Furthermore, Rule 600(a) of the NYSE Arbitration Rules provides that [a]ny dispute, claim or controversy between a ... non-member and a member ... arising in connection with the business of such member ... shall be arbitrated under the Constitution and Rules of the New York Stock Exchange ... upon the demand of the ... non-member. These provisions are sufficient in and of themselves to compel arbitration of covered disputes under § 3 [of the FAA]. Paine, Webber, Jackson & Curtis, Inc. v. Chase Manhattan Bank, N.A., 728 F.2d 577, 580 (2d Cir.1984). Non-members of the Exchange may invoke these rules in certain cases as third party beneficiaries. See Spear, Leeds & Kellogg v. Central Life Assur. Co., 85 F.3d 21, 26 (2d Cir.1996) (stating that decisional law recognizes that the FAA requires the enforcement of an arbitration agreement not just in favor of parties to the agreement, but also in favor of third party beneficiaries of the members' agreement to abide by the Exchange's Constitution and Rules when they join the NYSE). 14 This Court has, on several occasions, considered whether a particular dispute is covered by the Exchange's constitution and rules. We have held that when a member of the Exchange accuses a non-member of wrongdoing, the non-member may compel arbitration of that dispute only when the dispute arises out of the member's exchange-related business. Paine, Webber, 728 F.2d at 580. The difference in this case is that the member, rather than the non-member, is being accused of wrongdoing. We have expressly left open the question of whether the underlying dispute in a case such as this, where it is the member's conduct at issue, also must be exchange-related. See id. at n. 5 (We wish to note that we are not deciding today whether a non-member could compel arbitration of a dispute in an action in which the alleged wrongdoer is an exchange member and the transaction is not related to exchange business. We acknowledge that, depending on the facts, such a situation might come within the purview of an arbitration agreement adopted in light of the Congressional mandate to exchanges of self-regulation.). 15 In Haviland v. Goldman, Sachs & Co., 947 F.2d 601 (2d Cir.1991), plaintiff, a member of the NYSE, accused a non-member affiliate of Goldman Sachs of wrongdoing. The affiliate's motion to stay the action in favor of arbitration was denied by the district court, and this Court affirmed, based on the absence of an exchange-related dispute. We noted in passing that if the non-member affiliate had alleged misconduct by the plaintiff a broader reading of the arbitration rules may be warranted, because of the Exchange's interest in the business conduct of its members. Id. at 607. In that case, however, it was not necessary to decide that question, because no misconduct by [the plaintiff] has been put in issue. Id. 16 In a more recent case where, like the present case, a non-member accused a member of misconduct, this Court reversed the district court's grant of a preliminary injunction enjoining arbitration, because the underlying dispute was exchange-related. See Spear, Leeds & Kellogg, 85 F.3d at 23. In light of that finding, we declined to decide whether the exchange-related requirement ought to apply generally in cases where the non-member alleges misconduct by the member. See id. at 29.