Court Opinion

ID: 72172
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:27:44+00
Date Added: 2024-06-11T11:50:31.045469
License: Public Domain

United States Court of Appeals,

                                         Eleventh Circuit.

                                           No. 96-3074.

AMERICAN EXPRESS FINANCIAL ADVISORS, INC. f.k.a. IDS Financial Services, Inc., and
IDS Life Insurance Company, Plaintiffs-Appellants,

                                                 v.

              Dennis MAKAREWICZ, and Travis Tucillo, Defendants-Appellees.

                                           Sept. 9, 1997.

Appeal from the United States District Court for the Northern District of Georgia. (No. 95-1718-
CIV-T-23A), Stephen D. Merryday, Judge.

Before TJOFLAT and BARKETT, Circuit Judges, and HOWARD*, Senior District Judge.

       TJOFLAT, Circuit Judge:

       American Express Financial Advisors, Inc. ("American Express"), and IDS Financial

Services, Inc. ("IDS") appeal the district court's denial of injunctive relief and its administrative

closure of their lawsuit pending industry arbitration. We hold that we lack jurisdiction over the

appeal from the district court's decision to compel arbitration as to the damages claims. Regarding

the district court's denial of injunctive relief, however, we find that we have jurisdiction, and we

reverse.

                                                 I.
       Appellants American Express and IDS provide financial services and insurance to individual

and organizational clients nationwide. Appellees Dennis Makarewicz and Travis Tuccillo worked

as financial advisors for appellants until September 14, 1995, when they ended their relationships

with American Express and IDS and started their own financial consulting business. According to

the appellants' original complaint, filed October 16, 1995, Makarewicz and Tuccillo took

approximately 200 of appellants' clients with them when they left, departures which allegedly

resulted in the withdrawal of approximately $20 million in investments managed by the appellants.

   *
   Honorable Alex T. Howard, Jr., Senior U.S. District Judge for the Southern District of
Alabama, sitting by designation.
In luring away these customers, appellees allegedly violated contractual agreements that they had

signed as an original condition of employment by appellants.1

   1
    Section IV(1) of the agreements signed by Makarewicz and Tuccillo stated, in part, the
following:

              (a) You must not ...:

                    (1) Encourage or induce anyone to terminate an agreement with
              [American Express or IDS] without [American Express'] consent;

                      (2) Encourage or induce any Client to stop carrying out any action related
              to a Product or Service it acquired from or through [American Express] ...;

                      (3) Promote or make unwarranted claims against [American Express or
              IDS];

                     (4) Encourage or induce any Client to sell, surrender or redeem any
              Product or Service distributed or offered by [American Express or IDS] without
              [American Express'] consent.

              (b) All of the above provisions apply while the Agreement is in effect and after it
              ends.

              (c) All Records and Materials are the property of [American Express or IDS]. All
              rights to Records and Materials that you prepare or create in connection with the
              performance of this Agreement are hereby assigned to [American Express]. You
              agree that you will not reproduce or allow the reproduction of the Records and
              Materials in any manner whatsoever, except pursuant to written policy or consent
              of [American Express].

              (d).... Such Records and Materials are open to inspection by [American Express]
              at any time during your normal business hours. You must return them and all
              copies of them to [American Express] at any time on request. When this
              agreement ends, all of these items remain [American Express] property. You
              must return all of them, together with any licenses you have or control, without
              demand or compensation.

              (e) While this agreement is in effect and after it ends, you agree that you will not
              reveal the contents of any [American Express] property or allow them to be
              revealed, except in connection with carrying out your duties under the
              Agreement. You will not reveal the names and addresses of [American Express]
              Clients or any other information about them, including financial information. You
              also will not reveal any of this information about potential Clients, to whom a
              presentation has been made by an [American Express] Planner, who might
              reasonably be expected to do business with [American Express or IDS]. You will
              not allow any of this information about Clients or potential Clients to be revealed.

              (f) You agree that the identity of Clients and potential Clients is confidential
              information. For one year after this Agreement ends, you agree not to use any

                                               2
       On October 16, 1995, appellants brought this diversity suit against Makarewicz and Tuccillo

in the United States District Court for the Middle District of Florida. They sued for breach of

contract, misappropriation of trade secrets, breach of fiduciary duty, conversion, and intentional

interference with prospective business relationships. Appellants sought both injunctive relief and

compensatory and punitive damages. With regard to damages, however, the complaint admitted that

"[p]ortions of this dispute may be arbitrable pursuant to the [National Association of Securities

Dealers' ("NASD') ] Code of Arbitration Procedure." Nevertheless, appellants sought both

preliminary injunctive relief to preserve the status quo pending arbitration and permanent injunctive

relief for whatever claims were not arbitrable.

       On October 17, appellees initiated NASD arbitration.2 On October 18, appellants moved for

a temporary restraining order ("TRO") pursuant to Fed.R.Civ.P. 65. On October 19, the appellees

moved for a hearing on this motion, and on October 27, they moved for "an order pursuant to the

Federal Arbitration Act staying this action and compelling arbitration."3 The district court granted

the appellees' motion for a hearing on the issue of preliminary injunctive relief. At the November

               such information in connection with any business in competition with [American
               Express or IDS].

               (g) For one year after this Agreement ends, you agree that you will not ... directly
               or indirectly offer for sale, sell or seek an application for any Product or Service
               issued or provided by any company to or from a Client you contacted, dealt with
               or learned about while you represented [American Express or IDS] or because of
               that representation.

       (emphasis added).
   2
    Appellees have never answered the appellants' complaint. Instead, they have adopted the
position, in response to various motions filed by the appellants, that all of the claims the
appellants have asserted—both legal and equitable—are subject to mandatory NASD arbitration.

   3
    Appellees were apparently referring to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (1994)
("FAA"). Both parties apparently accept that this act applies to the present case, and we find no
reason to disagree. See generally Volt Info. Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., 489 U.S. 468, 476, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 (1989) ("It is
undisputed that this contract falls within the coverage of the FAA, since it involves interstate
commerce....").

                                                  3
1, 1995 hearing, the district court listened to the arguments of both sides, but it did not rule on either

the appellant's motion for a preliminary injunction or the appellees' motion to compel arbitration.

        Months passed. On April 8, 1996, appellants moved for a declaration that no elements of

the dispute were subject to NASD arbitration; they argued that the appellees had misrepresented

their standing to initiate NASD arbitration. The district court did not respond. On June 30, 1996,

the district court finally issued a terse order in which it concluded that "all of the claims raised in

this action are encompassed by the standard NASD arbitration agreements executed by the parties."

The court reached this conclusion "[f]or the reasons discussed by the defendants (1) in their October

27, 1995, memorandum, (2) at the November 1, 1995, oral argument, (3) in their May 1, 1996,

memorandum opposing the plaintiffs' motion for a ruling of non-arbitrability, and (4) in their other

filings." The district court therefore granted appellees' motion to compel arbitration as to all claims

and denied appellants' motion for injunctive relief. The court administratively closed the case and

removed it from its docket. American Express and IDS took this appeal.

                                                   II.

        As an initial matter, we must address our jurisdiction over the present appeal. The FAA

currently governs the appealability of orders disposing of requests to compel arbitration. See 9

U.S.C. § 16 (1994). Section 16(b) of the act provides as follows: "Except as otherwise provided

in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order ... granting a

stay of any action under section 3 of this title...." 9 U.S.C. § 16(b) (1994). The district court in this

case granted a stay under section 3 of the FAA.4 The district court did not certify this decision for

   4
    Section 3 states the following:

                If any suit or proceeding be brought in any of the courts of the Unites States upon
                any issue referable to arbitration under an agreement in writing for such
                arbitration, the court in which such suit is pending, upon being satisfied that the
                issue involved in such suit or proceeding is referable to arbitration under such an
                agreement, shall on application of one of the parties stay the trial of the action
                until such arbitration has been had in accordance with the terms of the
                agreement....

        9 U.S.C. § 3 (1994). Although the district court did not cite any authority for its order to

                                                    4
interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Therefore, we have no jurisdiction over the

district court's decision to stay the present action pending arbitration.5 We cannot, at present, resolve

the merits of the defendants' claims for relief.

        We do have jurisdiction, however, to review the district court's denial of appellants' request

for preliminary and permanent injunctions. The district court explicitly denied appellants' motions

for injunctive relief. As stated in 28 U.S.C. § 1292 (1994), the courts of appeals have jurisdiction

over "[i]nterlocutory orders of the district courts ... refusing or dissolving injunctions." § 1292(a)(1).

Therefore, we may review this aspect of the district court's order.

                                                   III.

         The district court apparently denied appellants' motion for preliminary and permanent

injunctions on the ground that the NASD arbitrator should decide this issue.6 When the district court

submitted appellants' equitable claims to the arbitrator, the court in effect held that the parties had

agreed to arbitrate the question of injunctive relief. We reverse, however, because the plain terms

of the contracts in this case contradict the district court's conclusion.

        Under the FAA, upon motion of a party, district courts must compel arbitration of all claims

subject to arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218—19, 105 S.Ct.

1238, 1241—42, 84 L.Ed.2d 158 (1985). On the other hand, "the FAA does not require parties to

arbitrate when they have not agreed to do so, ... nor does it prevent parties who do agree to arbitrate

        stay the present action, section 3 clearly provided such authority.
   5
    Section 16(a)(3) provides the courts of appeals with jurisdiction over "a final decision with
respect to an arbitration that is subject to this title." 9 U.S.C. § 16(a)(3) (1994). Appellants
might argue that the district court's decision to submit appellants' claims to arbitration was a final
decision. We have held, however, that "orders granting or denying requests to compel
arbitration are not final decisions if entered in the course of ongoing actions for legal or
equitable relief on the underlying claims." Thomson McKinnon Sec., Inc. v. Salter, 873 F.2d
1397, 1399 (11th Cir.1989) (per curiam). Hence, we have no jurisdiction over this order.
   6
    Because of its brevity, the district court's order is unclear on this point. One of the
arguments made by appellees, however, was that appellants should seek injunctive relief from
the NASD arbitrator rather than the district court. The court's order incorporated this argument
by reference. We find that the district court denied appellants' request for injunctive relief
because the court decided that this claim should be arbitrated.

                                                    5
from excluding certain claims from the scope of their arbitration agreement." Volt Info. Sciences,

Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 1255,

103 L.Ed.2d 488 (citations omitted). Because parties are free to structure their arbitration

agreements as they see fit, "they may limit by contract the issues which they will arbitrate." Id. at

479, 109 S.Ct. at 1256. "When deciding whether the parties agreed to arbitrate a certain matter ...,

courts generally ... should apply ordinary state-law principles that govern the formation of

contracts." First Options of Chicago, Inc., v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 1924, 131

L.Ed.2d 985 (1995).

        Under Florida law, the terms of the contract should control where the rights and interests

of the parties are definitely and clearly stated. Atlanta & St. A.B. Ry. Co. v. Thomas, 60 Fla. 412,

53 So. 510, 513 (1910). Section IV(3)(b) of the agreements signed by Makarewicz and Tuccillo

provided as follows:

       If a dispute involving this Agreement is submitted for arbitration under the Code of
       Arbitration Procedure of the National Association of Securities Dealers or otherwise, you
       agree that [American Express] is entitled to an injunction from a court of competent
       jurisdiction to keep you from violating these restrictions while the arbitration is pending.

This provision leaves no room for ambiguity: the parties intended to allow "a court of competent

jurisdiction"—the United States District Court for the Middle District of Florida—to provide

injunctive relief. Therefore, we hold that the district court erred in denying injunctive relief on the

ground that the parties intended the arbitrator to decide whether to grant such relief.7

                                                 IV.

   7
    Appellees might argue that the district court merely submitted to the NASD arbitrator the
issue of who should decide whether appellants were entitled to an injunction. Given that their
agreement indicates that they intended to arbitrate certain issues, appellees might argue that the
issue of who should grant injunctive relief should be committed to the arbitrator in the absence
of clear evidence that such issues should be decided by the district court. The Supreme Court,
however, has held otherwise: "Courts should not assume that the parties agreed to arbitrate
arbitrability unless there is "clear and unmistakabl[e]' evidence that they did so." First Options
of Chicago, 514 U.S. at 944 115 S.Ct. at 1924 (quoting AT & T Technologies, Inc. v.
Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418—19, 89 L.Ed.2d 648
(1986)). We find, to the contrary, that the parties in this case deliberately assigned to the district
court the question whether appellants would be entitled to injunctive relief.

                                                  6
       On remand, the district court should determine as soon as possible8 whether to grant

appellants' request for preliminary and permanent injunctions. In conclusion, the appeal from the

district court's order staying appellants' damages claims is DISMISSED, but the district court's order

denying appellants' requests for temporary and permanent injunctive relief is REVERSED.

   8
    Appellants' claims for temporary and permanent injunctive relief remained pending for 81/2
months. The two provisions which barred appellees from competing with appellants, sections
IV(1)(f) and IV(1)(g), by their terms lasted for only one year after the date of appellees'
separation. By the time appellants reached oral argument before this court, therefore, the two
provisions central to their claim for injunctive relief had been mooted—principally because of
the district court's delay in ruling on their motions. Luckily for appellants, the one-year time bar
did not apply to all of the provisions of their agreements with appellees. It is these remaining
provisions which the district court must consider on remand.

                                                  7