Court Opinion

ID: 6961489
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:46:19.793732+00
Date Added: 2024-06-11T16:08:26.970290
License: Public Domain

GREENBERG, Circuit Judge,
dissenting in part.
While I agree with the majority that Prudential may seek enforcement of the arbitration clause, I respectfully dissent from its conclusion that the plaintiffs’ claims are subject to arbitration. I will set forth my reasons briefly. The NASD Code, following its 1993 amendment, reads as follows:
This Code ... is prescribed ... for the arbitration of any dispute, claim or controversy arising out of or in connection with the business of any member of the Association, or [dispute, claim or controversy] 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 ...
The underscored words were added in 1993 and I have inserted “dispute, claim or controversy” within them for clarity because obviously arbitration is of a dispute, claim or controversy.
Prudential, which contends that the insurance exception is inapplicable in an employment dispute, see br. at 18, effectively would rewrite the Code so that it reads as follows:
This Code ... is prescribed ... for the arbitration of 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, or [for the arbitration of any dispute, claim or controversy] arising out of the employment or termination of employment of associated person(s) with any member.
I say that Prudential would rewrite the Code to read as I have indicated because the rewritten version renders the exception for “disputes involving the insurance business” inapplicable in disputes arising out of employment or its termination. Relying on its rewritten version of the Code, Prudential explains that “[o]nly disputes predicated directly on Prudential’s contractual or other insurance-related obligations to policyholders, rather than its role and obligations as an employer, properly fall within the scope of the business of insurance exception.” Br. at 3.
Prudential’s position is untenable. I am well aware that the courts look generously at the scope of arbitration clauses. Nevertheless, except in certain situations in which statutes require arbitration, a party only need arbitrate disputes which he or she agrees to arbitrate. Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1294 (3d Cir.), cert. denied, - U.S. -, 117 S.Ct. 583, 136 L.Ed.2d 513 (1996). In my view, it is perfectly clear that the exception from arbitration for disputes involving the insurance business must apply to employment disputes because the exception directly follows the provision for their arbitration. While it could be argued that the exception does not apply to disputes “arising out of or in connection with the business of any member of the Association,” as that phrase is more re*236mote than the employment disputes provision from the exception, it cannot be argued tenably that the exception jumps over the immediately preceding employment disputes provision to modify only the more remote phrase. It is one thing to construe a contract to require the arbitration of a dispute. But it is quite another to rewrite a contract to require arbitration. A court simply cannot do that.
The majority indicates that “[t]he plaintiffs cannot recover under their various theories of liability without necessarily implicating the illegal nature of Prudential’s insurance practices.” Majority Opinion at 231. The majority thus sets forth that “the grievances cited by the plaintiffs are accurately described as arising out of the employment or termination of employment, but they nevertheless implicate the legality of certain insurance practices.” Id. at 231. I agree with these points and thus I would affirm because the obligation to arbitrate employment disputes excludes “disputes involving the insurance business of any member which is also an insurance company.” (Emphasis added.) Indeed, I regard this case as fairly straightforward. After all, a dispute implicating the legality of insurance practices surely is a dispute involving an employer’s insurance business.
The majority concludes that there must be arbitration here in part because of ambiguities in the Code. It indicates that “it is not clear whether the business of insurance exception applies to employment related disputes, to disputes in connection with a member’s business, or to both,” id. at 232, and that is uncertain “whether employment disputes that implicate a member’s insurance business fall under the insurance business exception.” Id. at 233. I respectfully disagree because as I have indicated the provision for arbitration of employment disputes directly precedes the insurance business exception.
The majority expresses concern about the scope of the insurance business exception. I certainly agree that the scope could be a problem if the insurance business aspects of the dispute are tangential to the main controversy. But in this case insurance disputes are at the heart of the controversies for, as the majority points out, the plaintiffs “cannot recover ... without necessarily implicating the illegal nature of Prudential’s insurance practices” and the plaintiffs’ grievances, though arising out of the employment or its termination, “nevertheless implicate the legality of certain insurance practices.” Id. at 231. Indeed, if the exception to the obligation to arbitrate employment controversies for disputes involving the insurance business is inapplicable here, it is difficult to understand when it ever would be applicable.
I respect the majority’s point concerning the presumption in favor of arbitration and, as I have indicated, I am aware that in eases of doubt it is appropriate to order arbitration. But to me this case is fairly clear and the generalized policy in favor of arbitration cannot overcome the plain meaning of the Code.
I also point out that the New Jersey state courts would resolve this case differently. In Young v. Prudential Ins. Co., 297 N.J.Super. 605, 688 A.2d 1069, certif. denied, 149 N.J. 408, 694 A.2d 193 (1997), the Superior Court of New Jersey, Appellate Division, construed the same Code provision involved here to permit an action in court in a similar case. In fact, Young found the district court opinion in this very case to be “compelling” and followed it. Id. at 1079. Accordingly, I have no doubt that the New Jersey state courts will follow Young and not this case. See Dewey v. R.J. Reynolds Tobacco Co., 121 N.J. 69, 577 A.2d 1239, 1244 (1990) (holding that “decisions of a lower federal court are no more binding on a state court than they are on a federal court not beneath it in the judicial hierarchy”) (citation omitted).' It thus appears that in New Jersey the determination of whether there will be arbitration in controversies of the nature involved here, even against the same employer, now will depend on whether a state or federal court makes the determination.
In sum, I conclude that the district court opinion at In re: Prudential Ins. Co. of Am. Sales Practices Litig., 924 F.Supp. 627, 640-42 (D.N.J.1996), is right on the mark as is the opinion of the state court in Young, 297 *237N.J.Super. 605, 688 A.2d 1069. Thus, I would affirm.