Opinion ID: 477852
Heading Depth: 2
Heading Rank: 2

Heading: Applicability to the Individual Defendants

Text: 12 Letizia argues that, even if Bache may submit this dispute to arbitration, the individual defendants, who are nonsignatories to the Customer Agreement, may not. The question is one of first impression in this circuit, and it is reviewed de novo as a question of law. Because the issue involves the arbitrability of a dispute, it is controlled by application of federal substantive law rather than state law. Bayma v. Smith Barney, Harris Upham & Co., 784 F.2d 1023, 1025 (9th Cir.1986). 13 Other circuits have held consistently that nonsignatories of arbitration agreements may be bound by the agreement under ordinary contract and agency principles. See, e.g., Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 938 (3d Cir.1985); In re Oil Spill by Amoco Cadiz, 659 F.2d 789, 795-96 (7th Cir.1981); Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir.1975), cert. denied, 423 U.S. 1054, 96 S.Ct. 785, 46 L.Ed.2d 643 (1976); cf. Alyeska Pipeline Serv. Co. v. International Bhd. of Teamsters, 557 F.2d 1263, 1267 (9th Cir.1977) (local union bound by arbitration clause in its collective bargaining agreement even though it did not represent the particular employees involved in picketing activities at the time the agreement was signed). The rule is an outgrowth of the strong federal policy favoring arbitration. See generally Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., --- U.S. ----, 105 S.Ct. 3346, 3353-54, 87 L.Ed.2d 444 (1985). 14 Several courts have addressed the problem of nonsignatories in cases factually similar to this one. In virtually every case, they have held the brokerage firm employees bound by the arbitration agreement. See, e.g., Barrowclough, 752 F.2d at 938; Brown v. Dean Witter Reynolds, Inc., 601 F.Supp. 641, 644 (S.D.Fla.1985); see also Hartford Fin. Sys., Inc. v. Florida Software Serv., Inc., 550 F.Supp. 1079, 1086 (D.Me.1982), app. dismissed, 712 F.2d 724 (1st Cir.1983); but see Bengiovi v. Prudential-Bache Securities, Inc., [1984-85 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 92,012, at 91,013, 91,017 n. 9 (D.D.C.1985) (holding employee was not entitled to rely on the arbitration agreement but citing no authority). We find the majority view persuasive. All of the individual defendants' allegedly wrongful acts related to their handling of Letizia's securities account. Bache has clearly indicated its intention to protect its employees through its Customer Agreement. We conclude that the arbitration clause is applicable to Kwee and Selbst.