Opinion ID: 3010745
Heading Depth: 2
Heading Rank: 1

Heading: The 1982 NASD Code of Arbitration Procedure

Text: Seus argues that the district court improperly dismissed her action against Nuveen because employment disputes were not covered by the NASD Code of Arbitration Procedure in effect at the time she signed her Form U-4. As we have noted, section 1 of that Code provided for arbitration of: any dispute . . . claim or controversy arising out of or in connection with the business of any member of the [NASD], with the exception of disputes involving the insurance business of any member which is also an insurance company: (1) between or among members; (2) between or among members and public customers, or others; and (3) between or among members [and] registered clearing agencies . . . . Although the 1982 Code did not explicitly provide for the arbitration of employment disputes, we are persuaded that it encompassed such disputes and that Seus thus agreed to submit her Title VII and ADEA claims to arbitration. 17 As the district court pointed out, [t]he majority of courts which have examined the pre-amendment NASD Code also have concluded that it covers employment disputes, while only the Seventh and Ninth Circuits have held otherwise. D. Ct. Op. at 10. The three different lines of reasoning that courts considering the issue have espoused were concisely explained by the Court of Appeals for the Second Circuit thus: In Farrand v. Lutheran Brotherhood, 993 F.2d 1253 (7th Cir. 1993), the Seventh Circuit held that S 1's three subsections ((1)-(3)) qualified the phrasearising out of or in connection with the business of any member of the [NASD], see id. at 1254; that an employee suing a member-employer fell into none of these subsections (most particularly that such an employee was not an other[ ] within the meaning of S 1(2)), see id. at 1254-55; and that employment- related disputes were therefore not arbitrable, see id. at 1255. In Kidd v. Equitable Life Assurance Soc'y of the United States, 32 F.3d 516 (11th Cir. 1994), the Eleventh Circuit disagreed and held that employmentrelated disputes are arbitrable. The Eleventh Circuit reasoned that S 1's three subsections applied, not back to that section's initial clause, but rather only to the adjoining insurance exception clause. See id. at 519. It therefore read S 1 to require[ ] arbitration for any dispute connected to an NASD member's business, except for disputes involving the insurance business of an NASD member that are (1) between NASD members or (2) between NASD members and public customers or others. Id. The court thus found that an employee's claim against a member-employer is arbitrable under S 1's unqualified (as the court read it) opening clause. See id. at 519 & n. 5. The Tenth Circuit, in [Armijo v. Prudential Ins. Co. of Am, 72 F.3d 793 (10th Cir. 1995)], added fuel to the fire. It rejected the Eleventh Circuit's reasoning that S 1's subsections applied only to the insurance exception clause; it agreed with the Seventh Circuit that the three subsections modified the initial clause. 18 See Armijo, 72 F.3d at 798-99 n. 6. Contrary to Farrand, however, the court found that others in S 1(2) necessarily encompassed associated persons as used in S 8, and therefore included an aggrieved employee. See id. at 798-99. The court accordingly held that employment-related disputes are arbitrable, but not for the reason given by the Eleventh Circuit. See id. at 798. Thomas James Assocs., Inc. v. Jameson, 102 F.3d 60, 64 (2d Cir. 1996). In Jameson, the Second Circuit, like the Tenth Circuit, concluded that S 1's subsections apply to that section's opening clause, and not just to the insurance exception clause, id., and that the termothers as used in that section includes employees having employment-related disputes with a member firm, id. at 65. With respect to the application of S 1's subsections, we adopt the Second Circuit's line of reasoning on this issue. As the Jameson court explained: We cannot fathom any possible reason why the NASD would except insurance business disputes from arbitration, but then only when those disputes involved certain parties. Rather, the NASD probably meant to exempt any dispute involving the insurance business of an insurance company member from compulsory arbitration, not just those involving specific classes of individuals. To put it in the language of a grammarian, we therefore interpret the insurance exception clause as something more akin to a parenthetical within the section rather than an independent clause modified by the language following the colon. Id. at 64-65 (citations omitted). We agree, and likewise hold that S 1's subsections modify that section's opening clause, not the insurance exception clause. With respect to the meaning of others, the Armijo and Jameson courts pointed to several considerations which led them to conclude that the term encompasses employees with employment-related disputes. See Jameson, 102 F.3d at 65-66; Armijo, 72 F.3d at 798-800. First, to conclude otherwise would create a conflict between S 1 and S 8 of the 19 pre-Amendment NASD Code.3 As the Jameson court explained: Unless he qualifies as an other[ ] under S 1(2), it is plain that Jameson does not fall into any category within S 1's subsections. And, on the other hand, S 8 clearly contemplates that Jameson, as an associated person, will arbitrate his disputes with an NASDmember employer. If we were to read others to exclude Jameson, S 1 would take what S 8 gives, rendering S 8 utterly superfluous in this respect. Therefore, to avoid construing one provision as negating the other, we must give Section 1 an interpretation at least as broad as that clearly called for in Section 8. 102 F.3d at 65. Second, interpreting others to include employees with employment-related disputes gives meaning to the language of the Form U-4, which clearly indicates that the applicant agrees that at least some disputes between her and her firm would be arbitrable. See id. at 65; Armijo, 72 F.3d at 799. Third, the NASD itself indicated as early as 1987 that the pre-Amendment Code applied to employment-related disputes between employees and member firms. See Jameson, 102 F.3d at 65; Armijo, 72 F.3d at 799. Based on these considerations, we cannot say`with positive assurance' that `others' does not include an employee with an employment-related dispute against a _________________________________________________________________ 3. Section 8 of the pre-Amendment NASD Code provided: Any dispute, claim or controversy eligible for submission under Part I of this Code between or among members and/or associated persons, and/or certain others, arising in connection with the business of such member(s), or in connection with the activities of such associated person(s), shall be arbitrated under this Code, at the instance of: (1) a member against another member; (2) a member against a person associated with a member or a person associated with a member against a member; and (3) a person associated with a member against a person associated with a member. NASD Manual - Code of Arbitration Procedure S 1 (reprint ed. May 1982). 20 member firm. Jameson, 102 F.3d at 65. It is at least ambiguous whether that term encompasses employees with employment-related disputes. However, to acknowledge the ambiguity is to resolve the issue, because all ambiguities must be resolved in favor of arbitrability. Armijo, 72 F.3d at 798. Accordingly, we find that the district court correctly concluded that the pre amendment NASD Code provided for arbitration of employment disputes.