Court Opinion

ID: 9463017
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:56:21.015987+00
Date Added: 2024-06-11T17:37:54.113924
License: Public Domain

ORRICK, District Judge
(concurring):
I concur. I have no doubt that the agreement to arbitrate which existed by virtue of both parties’ membership in the New York Stock Exchange at the time that the purchase and consultancy contracts were executed survived Muh’s resignation and the withdrawal of Newburger, Loeb & Co., Inc. (Newburger) from the New York Stock Exchange. See Bear v. Hayden, Stone, Inc., 526 F.2d 734 (9th Cir. 1975); Isaacson v. Hayden, Stone, Inc., 319 F.Supp. 930 (S.D. N.Y.1970). I am also in accord that the agreement to arbitrate was not revoked by any “boilerplate” language in the various agreements executed by the parties to the transaction.
Moreover, assuming arguendo that California law applies, I reject Muh’s contention that this suit for unpaid consulting fees is a dispute about wages which may be maintained under state law notwithstanding any private agreement to arbitrate. Cal.Labor Code § 229.
In Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 24 Cal.App.3d 35, 100 Cal. Rptr. 791 (1972), the California Court of Appeal determined that a suit by a former stock broker against his former employer concerning the entitlement of the plaintiff to payments from a profit-sharing plan could be maintained in state court regardless of any agreement to arbitrate. The defendant moved to stay the action pending arbitration, relying on the New York Stock Exchange rules requiring the arbitration of disputes growing out of the termination of employment. The state court found that a valid agreement to arbitrate existed. However, while taking note of California’s strong policy favoring arbitration, the court held that the action involved a dispute about “wages” within the meaning of Section 229 of the California Labor Code, and that the code section gave plaintiff a right to bring the action in state court despite any agreement to arbitrate.
This ruling was affirmed by the United States Supreme Court in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 94 S.Ct. 383, 38 L.Ed.2d 348 (1973). The Court noted that Section 229 of the Labor Code was enacted to protect wage earners from the potential exploitation of employers who might require a prospective employee to sign away in advance rights to resort to the judicial system for redress of an employment grievance. Id. at 131, 94 S.Ct. 383. The Court rejected the argument that allowing the state court action to proceed in the face of the Stock Exchange agreement to arbitrate contravened federal securities laws which preempted the field. The Court similarly rejected the contentions that the institution of the state court action violated the Supremacy Clause and constituted an unreasonable burden on interstate commerce.
Notwithstanding the broad definition of “wages” under state law, I am convinced that the plaintiff here is not within the intended class of beneficiaries of the state’s statutory scheme to protect wage earners. Therefore, his reliance on Ware is misplaced.
Under the consulting agreement, Muh’s entitlement to fees was to be entirely waived if he was paid the sums due to him under the stock purchase agreement through June, 1973. In effect, the consultancy contract functioned as a guarantee of the purchaser’s obligations under the stock purchase agreement. Thus, this is not a case where an employee has performed labor for which he was not paid and turns to the courts to get his due. Accordingly, I *975agree that arbitration is not foreclosed by Section 229 of the California Labor Code,