Opinion ID: 1702553
Heading Depth: 1
Heading Rank: 4

Heading: Inapplicability of NASD Code of Arbitration Procedure

Text: As noted, the record contains a copy of section 10101 of the NASD Code of Arbitration Procedure, captioned Matters Eligible For Submission (emphasis added). This is the only section of that code placed in the record, and the defendants relied on it only in arguing to the trial court their entitlement to demand arbitration through the NASD, and likewise have argued only it on appeal as the basis for mandatory arbitration under the auspices of the NASD. However, we have discovered through our independent research that another section of the Code of Arbitration Procedure specifies, as a subset of the matters merely eligible for arbitration under section 10101, those matters for which arbitration can be required That other section of the code is 10201. Rule 10101 of the NASD Code expansively defines the issues and subject matters that may be arbitrated.... Rule 10201(a) of the NASD Code in turn describes a subset of issues as to which certain specified parties may compel arbitration.... Accordingly, unless [the party moving for arbitration] is a party that can avail itself of Rule 10201, it has no power to force the [dispute] to arbitration, regardless of whether the substantive dispute is eligible for submission pursuant to Rule 10101. Burns v. New York Life Ins. Co., 202 F.3d 616, 619 (2d Cir.2000). Rule 10101 `defines the general universe of issues that may be arbitrated'.... Rule 10201 mandates arbitration for [a] subset of the universe of disputes outlined in Rule 10101.... Williams v. Imhoff, 203 F.3d 758, 762-63 (10th Cir.2000) (footnote omitted). Rule 10101 merely defines which disputes are eligible for arbitration. The next issue is whether a given dispute is required to be arbitrated. Remember, a person who submits a Form U-4 merely agrees `to arbitrate any dispute ... that is required to be arbitrated under the rules, constitutions, or by-laws of the [NASD] as may be amended from time to time.' Jin v. Metropolitan Life Ins. Co., (No. 95 Civ. 4427) (S.D.N.Y., April 4, 2000)(not published in F.Supp.). Rule 10201 is entitled Required Submissions. See, e.g., Burns, 202 F.3d at 619. Rule 10101 of the NASD Code ... expansively defines the matters that may be eligible for arbitration.... . . . . NASD Rule 10201(a) in turn describes a narrower range of matters as to which certain specified parties may compel arbitration.... Thus, Rule 10101 describes `the scope of permissive arbitration,' while `Rule 10201 limits the scope of mandatory arbitration to disputes that are initiated by certain classes of persons ... against specified classes of persons and that are between [a limited class of parties].' Goldstein v. Visconti, (No. 00 Civ. 5729)(S.D.N.Y., May 31, 2001)(not published in F.Supp.). Although we have access to the text of certain versions of Rule 10201 as that rule existed at different times, as set out in the cases cited above, we cannot take judicial notice of rules promulgated by a national securities organization just because they were properly made a part of the record in a case in another jurisdiction. `The NASD is a registered national securities association with congressionally delegated self-regulatory authority.' J.C. Bradford & Co. v. Vick, 837 So.2d 271, 275 (Ala.2002) (quoting Merrill Lynch, Pierce, Fenner & Smith v. National Ass'n of Sec. Dealers, Inc., 616 F.2d 1363, 1365 (5th Cir.1980)). See also Austin Mun. Sec., Inc. v. National Ass'n of Sec. Dealers, Inc., 757 F.2d 676 (5th Cir.1985), for a fuller discussion of the nature, status, and structure of the NASD. Nothing in the record in this case alludes in any way to Rule 10201, and, from all that appears, none of the parties were aware of its existence, or, if they were, they chose not to broach it with the trial court. For all of these reasons, we conclude that the trial judge could not properly have based his ruling compelling arbitration on the purely permissive, but not mandatory, scope of arbitration of Rule 10101 of the NASD Code of Arbitration Procedure.