Court Opinion

ID: 9626677
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:21:10.053816+00
Date Added: 2024-06-11T18:06:32.187318
License: Public Domain

Lockett, J.,
dissenting: In our system, determining the rights
of the parties is based on a maxim, a doctrine, a precedent, a statute, or public policy. In order of importance, the legislature’s declaration of public policy is primary. It is the duty of the court, whenever possible, to uphold the public policy of the state.
The Kansas Legislature stated the public policy as to arbitration when it enacted the Kansas Uniform Arbitration Act, K.S.A. 5-401 et seq. The Act provides that a written agreement to submit any existing controversy to arbitration is valid, enforceable, and irrevocable except upon such grounds as exist at law or in equity for the revocation of any contract. K.S.A. 5-401(a). The Act then specifically states it does not apply to (1) contracts of insurance; (2) contracts between an employer and employees, or their respective representatives; or (3) any provision of a contract providing for arbitration of a claim in tort. K.S.A. 5-401(c). By enacting K.S.A. 5-401(c), our legislature clearly stated the public policy of this state is that parties cannot contract to arbitrate a claim in tort. The majority fails to uphold the legislature’s statement of public policy.
The majority correctly states that Skewes, when he began his employment with Shearson, executed a Form U-4, which required him to arbitrate any dispute, claim, or controversy that may arise between him and his firm, a customer, or any other person that is required to be arbitrated under the rules, constitutions, or bylaws of the organization with which he registered. Skewes was registered with the National Association of Securities Dealers, Inc. (NASD).
Section 1, Part I of the NASD Code requires arbitration of any dispute, claim, or controversy arising out of or in connection with the business of any member of NASD, with the exception of disputes involving the insurance business of any member which *589is also an insurance company: (1) between or among members; and (2) between or among members and public customers, or others.
Section 8(a) of the NASD Code states in part:
“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
By contrast, Rule 347 of the New York Stock Exchange provides in part: “Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization shall be settled by arbitration, at the instance of any such party.” Unlike the NASD Code, the rules of the New York Stock Exchange clearly require arbitration of controversies arising out of employment or termination of employment. NASD dofes not require that the parties arbitrate termination of employment.
In A.G. Edwards & Sons, Inc. v. Clark, 558 So. 2d 358 (Ala. 1990), Clark, a stockbroker, sued Thompson, another stockbroker, and A.G. Edwards & Sons, Inc., Thompson’s employer, alleging defamation based upon comments made by Thompson and then repeated by A.G. Edwards in a newspaper advertisement. As a stockbroker, Clark had signed an agreement to arbitrate any dispute between him and another broker or firm. The defendants moved the trial court for a stay and for an order compelling Clark to submit to arbitration; the trial court denied the motion. Thompson had never had any business transactions with Clark or any dispute about any securities transaction or any investment banking transaction. Both defendants sought review.
The Alabama Supreme Court noted two general principles governing the determination of arbitrability: First, the duty to arbitrate is a contractual obligation; only those disputes which a party has agreed to submit to arbitration must be so resolved. Arbitrability is thus a matter of contract interpretation. It must be ascertained whether the parties intended the particular dispute to be arbitrated as evidenced by the language contained in the agreement. Second, when contract language is ambiguous or un*590clear, a “healthy regard” for the federal policy favoring arbitration requires that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” 558 So. 2d at 361. The court noted the NASD Code does not define “business,” but it does define “[investment banking or securities business” as “the business, carried on by a broker or dealer, of underwriting or distributing issues of securities, or of purchasing securities and offering the same for sale as a dealer therein, or of purchasing and selling securities upon the order and for the account of others.” “Member” is defined as “either any broker or dealer admitted to membership in the [National Securities Clearing] Corporation or any officer or partner of such a member.” 558 So. 2d at 363.
The Alabama court stated that although the arbitration clauses in the NASD Code talk of “business,” it is clear that all the persons that must abide by the arbitration clauses are defined in terms of participants in the “securities business.” By its very nature, the “business” of the members of NASD is the trading of securities and, while arbitration clauses are to be interpreted broadly, they are not limitless and cannot be interpreted to include matters that clearly fall outside the scope of the contract or agreement. The court determined that despite the facts the allegedly defamatory remarks had some connection with Clark’s business as a stockbroker and the remarks had an adverse effect on Clark’s business, it remained that this alleged defamation did not arise in connection with any business between Clark and the defendants. 558 So. 2d at 363-64.
The majority chose not to follow the rationale of the Alabama Supreme Court that NASD does not require torts to be arbitrated. By doing so, the majority departs from the stated public policy of our legislature and adopts the rationale of cases contrary to that public policy.
Arbitration is a matter of contract, and a party cannot be required to submit to arbitration any dispute the party has not agreed to submit. See City of Beverly v. White, Hamele & Hunsley, 224 Kan. 386, 580 P.2d 1321 (1978). The district court correctly determined that under the NASD Code, Skewes contracted only to arbitrate disputes with his employers or others that arise out of the sale of stock, and not tort claims.
*591I Would affirm the district court.
Allegrucci, J., joins the foregoing dissenting opinion.