Court Opinion

ID: 15341
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:44:07+00
Date Added: 2024-06-11T16:46:13.160335
License: Public Domain

UNITED STATES COURT OF APPEALS
                         For the Fifth Circuit

                             No. 97-30895

                            ANDRE MOUTON,

                                                  Plaintiff-Appellee,

                                versus

      METROPOLITAN LIFE INSURANCE COMPANY; RODNEY SCHMIDT,

                                                  Defendants-Appellants.

             Appeal from the United States District Court
                 for the Western District of Louisiana
                            July 31, 1998
Before WISDOM, KING, and DAVIS, Circuit Judges:
WISDOM, Circuit Judge:

                           I. Introduction

     This case presents a matter of first impression in this Court.

It requires us to decide whether a securities dealer who agreed to

arbitrate “any dispute, claim or controversy that may arise between

[himself] and [his] firm” is compelled to arbitrate his Title VII

discrimination claim against his employer.

     Andre    Mouton   (“Mouton”)   worked   as   a   sales   agent   for
Metropolitan Life Insurance Co. (“Metropolitan”), a member firm of

the National Association of Securities Dealers (“NASD”).             As a

seller of mutual funds, he was required to be licensed by the NASD.

In 1989, he submitted a Uniform Application of Securities Industry

Regulation, also known as a U-4 Registration, to the NASD for the

purpose   of   procuring   a   license.   Under   the   terms   of    the

application, Mouton agreed to:

     arbitrate any dispute, claim or controversy that may arise
     between me and my firm, or a customer, or any other person,
     that is required to be arbitrated under the rules,
     constitutions or by-laws of the [NASD] as may be amended
     from time to time.

At the time Mouton submitted his application, § 1 of the NASD Code

provided, in pertinent part, that arbitration was required for:

     any dispute, claim or controversy arising out of or in
     connection with the business of any member of the
     Association, with the exception of disputes involving the
     insurance business of any member which is also an insurance
     company:

     (2) between or among members and public customers, or
     others.

Section 8 of the Code further provided, in pertinent part, that:

     any dispute, claim or controversy ... between or among
     members and/or associated persons, and/or certain others,

                                    2
     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:

     (2) a member against a person associated with a member of a
     person associated with a member against a member.

“Section 1 [of the NASD Code] defines the general universe of

issues that may be arbitrated, and § 8 describes a subset of that

universe that must be arbitrated under the [NASD] Code.”1

     In 1993, the Securities and Exchange Commission amended § 1 of

its NASD rules to provide for:

     the arbitration of any dispute, claim or controversy arising
     out of or in connection with the business of any member of
     the [NASD] or arising out of the employment or termination
     of employment of associated person(s) with any member, with
     the exception of disputes involving the insurance business
     of any member which is also an insurance company.

Mouton did not file a second U-4 Registration after the 1993

amendments to the NASD Code took effect.

     In July 1995, Mouton testified against Metropolitan in a Title

VII sexual harassment action brought by one of his co-workers.   At

     1
       Armijo v. Prudential Insurance Co. of America, 72 F.3d 793,
798 (10th Cir. 1995).

                                 3
the time of his testimony, Mouton was on disability leave stemming

from a work-related accident that occurred in 1994. Mouton alleges

that when he attempted to return to work in 1995, Metropolitan

embarked on a course of unlawful employment action against him in

retaliation for the unfavorable testimony he gave earlier in the

year. This retaliation, says Mouton, culminated in the termination

of his employment in February 1996.    Mouton received a right to sue

letter from the EEOC, and filed his own Title VII complaint against

Metropolitan on December 18, 1996.

     Metropolitan   sought   summary   judgment   under   the   Federal

Arbitration Act2 on the basis that Mouton had entered into a

binding agreement with the NASD to arbitrate all claims arising

from his employment with Metropolitan.     The district court denied

the motion on the ground that a genuine issue of material fact

existed regarding whether the 1989 NASD Code, which, unlike the

     2
       9 U.S.C. § 1 et seq. The Federal Arbitration Act provides
the authority for the enforcement of arbitration clauses as a
matter of federal law. In re Prudential Insurance Co. of America
Sales Practice Litigation, 133 F.3d 225, 230 (3d Cir. 1998).

                                  4
1993 amended version, did not specifically require arbitration of

employment-related disputes, required him to arbitrate his Title

VII claim.      The district court did, however, grant Metropolitan’s

subsequent motion to stay further proceedings pending its appeal of

the denial of its motion for summary judgment.          We hold that Mouton

is   required    to   submit   his   Title   VII   action   to   arbitration.

Metropolitan is therefore entitled to a summary judgment in its

favor.

                               II. Discussion

      We review the denial of summary judgment de novo, applying

the same standard the district court applied.3

          A. Scope of the pre-1993 NASD Arbitration Provisions

      Our first task is to decide whether the pre-1993 NASD Code

required arbitration of employment disputes such as that brought

by Mouton.      If we conclude that it did, we need not decide what

      3
          Blackwell v. Barton, 34 F.3d 298, 301 (5th Cir. 1994).

                                       5
effect, if any, the 1993 amendments to the Code had on Mouton’s

licensing agreement.   The majority of circuits which have

considered this precise issue have concluded that the pre-1993

NASD Code mandated arbitration of employment-related disputes.4

For the following reasons, we side with the plain weight of

authority.

     First, the NASD, itself, has made it abundantly clear that

the pre-1993 Code’s arbitration provisions encompassed

employment-related controversies.    In 1987, it stated that

employment disputes between its members and their registered

representatives, such as securities dealers, were subject to

     4
       See Seus v. John Nuveen & Co., Inc., 1998 WL 294020 (3d Cir.
(Pa.)); Thomas James Associates, Inc. v. Jameson, 102 F.3d 60 (2d
Cir. 1996); Armijo v. Prudential Insurance Co. of America, 72 F.3d
793 (10th Cir. 1995); Kidd v. Equitable Life Assurance Society of
the United States, 32 F.3d 516 (11th Cir. 1994). See also
Association of Investment Brokers v. Securities and Exchange
Commission, 676 F.2d 857, 861 (D.C. Cir. 1982) (NASD rules mandate
arbitration of employer-employee disputes, and did so, to the same
extent, as they do now, before the development of [U-4
forms])(dicta). But see Duffield v. Robertson Stephens & Co., 1998
WL 227469 (9th Cir. (Ca.)); Farrand v. Lutheran Brotherhood, 993
F.2d 1253 (7th Cir. 1993).

                                 6
compulsory arbitration.5    Furthermore, at the time the Code was

amended in 1993, it explained that the inclusion of new language

in § 1 was not intended to broaden the category of matters

subject to compulsory arbitration, but rather to clarify that

employer-employee disputes indeed fell within the ambit of the

Code’s arbitration provisions.6

     Second, “questions of arbitrability must be addressed with a

healthy regard for the federal policy favoring arbitration... The

Arbitration Act establishes that, as a matter of federal law, any

doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration.”7       We have no doubt that the

pre-1993 Code contemplated that employment-related claims were

subject to mandatory arbitration.        Even if, however, we were to

     5
         52 Fed.Reg. 9232 (1987).
     6
         58 Fed.Reg. 39071 (1993).
     7
       Moses H. Cone Hospital v. Mercury Construction Corp., 460
U.S. 1, 24-25 (1983). See also Rojas v. TK Communications, Inc.,
87 F.3d 745, 747 (5th Cir. 1996) (whenever the scope of an
arbitration clause is in question, the court should construe the
clause in favor of arbitration).

                                     7
acknowledge an that the arbitration provisions at issue were

ambiguous, we would nevertheless be compelled to conclude that

they covered employment-related disputes.     Indeed, “to

acknowledge the ambiguity is to resolve the issue, because all

ambiguities must be resolved in favor of arbitrability.”8

     Third, we have already stated that an arbitration clause

need not speak directly to employment-related disputes for it to

mandate arbitration of Title VII claims.9     In Rojas v. TK

Communications, Inc.,10 we considered whether a radio station

employee was compelled to submit her sexual harassment claim to

arbitration under the terms of her employment contract.        When the

plaintiff executed her contract, she agreed that “any action

contesting the validity of [the contract], the enforcement of its

financial terms, or other disputes [would] be submitted to

     8
          Armijo v. Prudential Insurance Co. of America at 798.
     9
          Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir.
1996).
     10
          Id.

                                   8
arbitration.    We held that the “other disputes” language in the

arbitration clause was sufficiently broad to encompass Title VII

claims.11    Even though we did not decide Rojas in the context of

the NASD’s arbitration provisions, its reasoning should apply to

the case at bar.    Mouton agreed to arbitrate “any dispute, claim

or controversy that may arise between [himself] and

[Metropolitan].”    This language, like that at issue in Rojas, is

broad, and, we conclude, is sufficiently broad to encompass Title

VII claims.

                          B. Remaining Issues

     Mouton argues that his claim is not subject to compulsory

arbitration because it falls within § 1's exception for “disputes

involving the insurance business of any member which is also an

insurance company.”     Two circuits have already rejected this

     11
          Id. at 749.

                                   9
argument.12     We reject it, too.   In In re Prudential Insurance

Co. of America Sales Practice Litigation, the Third Circuit held

that the NASD Code reflected “one clear expression of intent --

that employment disputes are subject to arbitration while

intrinsically insurance claims are not.”13      Accordingly, it

concluded that a plaintiff’s retaliation claim, which was wholly

unrelated to Prudential’s insurance business, was subject to

compulsory arbitration.14     Likewise, in Armijo v. Prudential

Insurance Co. of America, the Tenth Circuit dismissed the

plaintiff’s assertion that employment-related controversies

involving insurance companies were ineligible for submission to

arbitration.15     It reasoned:

     Although Prudential is an insurance company, there is

     12
       In re Prudential Insurance Co. of America Sales Practice
Litigation, 133 F.3d 225 (3d Cir. 1998); Armijo v. Prudential
Insurance Co. of America, 72 F.3d 793 (10th Cir. 1995).
     13
          In re Prudential Insurance Co. at 234.
     14
          Id.
     15
          Armijo at 800.

                                     10
     nothing unique about these discrimination claims by
     plaintiffs that involve the insurance business of
     Prudential.... Illegal employment discrimination, if it
     exists, involves an employer’s statutory obligations as an
     employer rather than an insurer.16

We find this line of reasoning particularly persuasive.    Mouton’s

Title VII claims involve Metropolitan’s obligations as an

employer rather than an insurer.    As such, § 1's insurance

business exception is inapposite here.    Furthermore, were we to

conclude otherwise, we would render virtually meaningless any

arbitration agreements between companies involved in the

insurance business and their NASD-licensed employees.    That is,

an expansive reading of the insurance business exception would

deprive a company such as Metropolitan of the benefits of the

arbitration system as embodied within the NASD Code.

     Finally, Mouton argues that he cannot be compelled to

arbitrate his Title VII claim because he did not knowingly and

voluntarily waive his access to a judicial forum.    We implicitly

     16
          Id.

                               11
rejected this argument in Rojas, as has every court that has

concluded that the pre-1993 NASD Code mandated arbitration of

employment-related disputes.    Mouton agreed to arbitrate “any

dispute, claim or controversy that may arise between [himself]

and [Metropolitan]” (emphasis added).   We hold him to that

agreement.

                          III. Conclusion

     For the reasons stated, Mouton is compelled to submit his

Title VII claim to arbitration should he choose to go forward.

The district court’s denial of Metropolitan’s motion for summary

judgment is REVERSED.   We REMAND for further proceedings

consistent with this opinion.

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