Opinion ID: 597876
Heading Depth: 2
Heading Rank: 2

Heading: Arbitration of Claims Against Chica

Text: 13 The initial question raised is whether the law of Minnesota, governs the arbitrability of this case. Chica argues that he should not be a party to this action because he did not sign the customer agreement and Minnesota law would not enforce the terms of a contract between Lee and Engler-Budd against Chica. Kost v. Peterson, 292 Minn. 46, 193 N.W.2d 291 (1971). Chica relies on Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (Perry ), to argue that the contract is not enforceable against him. The Supreme Court in Perry stated in a footnote that when this type of standing issue presents itself, courts, in determining whether to apply state or federal law, are to apply state law if that law arose to govern issues concerning validity, revocability, and enforceability of contracts generally. Id. at 492 n. 9, 107 S.Ct. at 2527 n. 9 (emphasis in original). Furthermore, the Supreme Court stated that courts are to examine arbitration agreements in the same light they would examine any other contractual agreement. Id. 14 Perry involved a dispute over the amount of commissions due on the sale of securities between a former employee and his former employer and two of its employees. The former employee argued that his dispute could be heard by the California courts under the California Labor Code, 3 while the two employees argued that according to the employment contract the dispute had to be heard by an arbitration panel. The former employee argued that the two employees were not parties to the agreement, and therefore lacked standing to force him to arbitrate the dispute. Id. at 488, 107 S.Ct. at 2524. 15 While Chica relies on Perry for support, his argument is misplaced. In Perry, the specific issue was whether the parties could be compelled to arbitrate according to the contract provisions. In contrast, the present case is an action seeking to confirm an award already made by an arbitration panel in accordance with a provision in a contract. It is not an issue of validity, revocability or enforceability of the arbitration agreement within the contract. 16 Arbitrability of contracts evidencing interstate commerce is governed by federal substantive law rather than state law. Southland Corp. v. Keating, 465 U.S. 1, 15-16, 104 S.Ct. 852, 861, 79 L.Ed.2d 1 (1984) (Keating ); Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (Cone ); Prima Paint v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-05, 87 S.Ct. 1801, 1805-06, 18 L.Ed.2d 1270 (1967) (Prima Paint ); Letizia v. Prudential Bache Secur., Inc., 802 F.2d 1185, 1187 (9th Cir.1986) (Letizia ); Bayma v. Smith Barney, Harris Upham & Co., 784 F.2d 1023, 1025 (9th Cir.1986); see also I.S. Joseph Co. v. Michigan Sugar Co., 803 F.2d 396, 399 n. 2 (8th Cir.1986). 4 17 Federal courts have found that an arbitration agreement between a customer and a brokerage firm can also be binding on the agent who represented or traded in the customer's account even if the agent had not signed the customer agreement. Letizia, 802 F.2d at 1188 (nonsignatory employees of brokerage firm are bound by the customer agreement between brokerage firm and customer); Scher v. Bear Stearns & Co., 723 F.Supp. 211, 216 (S.D.N.Y.1989) (Acts by employees of one of the parties to a customer agreement are equally arbitrable as acts of the principals as long as the challenged acts fall within the scope of the customer agreement.); Brener v. Becker Paribas Inc., 628 F.Supp. 442, 451 (S.D.N.Y.1985) (arbitration clause that called for arbitration of any disputes arising out of the customers' accounts was broad enough to include the agent who actually did the transactions); see also Nesslage v. York Secur., Inc., 823 F.2d 231, 233 (8th Cir.1987) (disclosed agents of the broker could enforce an arbitration agreement between the broker and the customer). 5 18 In addition, the plain language of the arbitration clause reveals that Lee's claims against Chica are subject to arbitration even though Chica did not sign the customer agreement. The arbitration clause provides that any controversy aris[ing] out of [the customer] agreement will be settled by arbitration. It is not disputed that Chica was employed by Engler-Budd, that Lee knew of the employment relationship between Chica and Engler-Budd, and that Chica was responsible for the transactions in Lee's account. All of Lee's allegations against Chica arise out of his actions as Engler-Budd's employee in connection with the management of her account. Thus, we hold that Chica can be compelled to arbitrate Lee's claims against him as the disclosed agent of Engler-Budd, arising out of the customer agreement, even though he did not sign the customer agreement and we affirm the district court's order confirming the compensatory damages and attorney's fees.