Opinion ID: 716729
Heading Depth: 2
Heading Rank: 1

Heading: Events Giving Rise To This Appeal.

Text: 10 In July, 1987, the Bybyks opened an investment account with PaineWebber. On March 14, 1990, in connection with that account, the Bybyks executed a client agreement (the Agreement) which recites in relevant part as follows: 11 Arbitration is final and binding on the parties. 12 The parties are waiving their right to seek remedies in court, including the right to jury trial. 13 .... 14 I agree, and by carrying an account for me PaineWebber agrees, that any and all controversies which may arise between me and PaineWebber concerning any account, transaction, dispute or the construction, performance, or breach of this or any other agreement, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. Any arbitration under this agreement shall be held under and pursuant to and be governed by the Federal Arbitration Act, and shall be conducted before an arbitration panel convened by the New York Stock Exchange, Inc., or the National Association of Securities Dealers, Inc. I may also select any other national securities exchange's arbitration forum upon which PaineWebber is legally required to arbitrate the controversies with me, including, where applicable, the Municipal Securities Rule Making Board. Such arbitration shall be governed by the rules of the organization convening the panel.... The award of the arbitrators, or of the majority of them, shall be final, and judgment upon the award rendered may be entered in any court of competent jurisdiction. 15 The Agreement also contains a choice of law provision which provides that [t]his agreement and its enforcement shall be construed and governed by the laws of the State of New York. PaineWebber drafted the Agreement. 16 On July 16, 1993, the Bybyks filed a uniform submission agreement with the NASD to initiate arbitration with PaineWebber. On September 24, 1993, the Bybyks filed a statement of claim with the NASD against PaineWebber. The statement of claim alleges, among other things, that PaineWebber recommended and executed unsuitable transactions, failed to supervise the account, and breached its fiduciary duty to the Bybyks. 17 PaineWebber promptly commenced a special proceeding in New York Supreme Court pursuant to N.Y.Civ.Prac. L. & R. 7502 and 7503 (McKinney 1980 & Supp.1996), seeking a permanent stay of arbitration with respect to those claims arising from investments made six years prior to September 24, 1993, the date the Bybyks filed their statement of claim. PaineWebber alleged that section 15 of the NASD Code rendered those claims untimely. Section 15 states as follows: 18 No dispute, claim, or controversy shall be eligible for submission to arbitration under this Code where six (6) years have elapsed from the occurrence or event giving rise to the act or dispute, claim or controversy. This section shall not extend applicable statutes of limitation, nor shall it apply to any case which is directed to arbitration by a court of competent jurisdiction. 19 National Association of Securities Dealers, Inc., Code of Arbitration Procedure, NASD Manual p 3715 (1994). PaineWebber also sought to enjoin arbitration of any claims for punitive damages or attorneys' fees. The Bybyks removed this proceeding to federal district court and filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that the Agreement expressly reserved all questions of arbitrability for arbitration, including issues of timeliness. 20 In a pithy Endorsement Order dated October 20, 1994, Judge Duffy ruled as follows: 21 Plaintiff seeks to forestall any arbitration by contending that the NASD statute of limitations precludes recovery. This obviously is a question for the arbitrators. See 9 U.S.C. § 2; see also Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987). 22 The motion to dismiss is granted. 23