employee-employer relationship between plaintiff and KP.
Secondly, the U-4 Form admittedly signed by plaintiff states that plaintiff's firm is KP, does not list any other firm as plaintiff's employer, and states that plaintiff's employment commenced with KP on April 18, 1957. It appears that plaintiff was employed initially with KP in 1957, and after leaving KP to work for CDM, was given credit for his prior employment when CDM was acquired by KP in 1974.
Finally, plaintiff's letter of resignation specifically states: "Please accept my resignation from all positions at (KP) and (KPAM). I have decided to take early retirement under the Kidder, Peabody Plan. . . . ." Plaintiff does not dispute that the retirement plan was a KP Plan and that KPAM had no retirement plan.
Inasmuch as plaintiff's claims arise out of his employment or termination of employment, the court finds that plaintiff is bound to arbitrate under NYSE Rule 347. (See, Haviland v. Goldman, Sachs & Co., 947 F.2d 601 (2d Cir. 1991), aff'd 736 F. Supp. 507 (S.D.N.Y. 1990); Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047 (2d Cir. 1989).
Plaintiff argues that he does not have to arbitrate his claims against KPAM because KPAM is not a party to the U-4 Form, and the NYSE rules do not require him to arbitrate. Based upon the facts herein, the court finds that Rule 347 is applicable to KPAM as well. This whole dispute arose out of plaintiff's employment and constructive termination thereof. All the circumstances surrounding this dispute, including plaintiff's own arguments, clearly tie KP and KPAM together for the purposes of resolving this dispute.
Moreover, the court finds that arbitration of this dispute with KPAM is mandated by Rule 600(a) of the NYSE. Rule 600(a) provides:
"Any dispute, claim or controversy between a customer or non-member and a member, allied member, member organization and/or associated person arising in connection with the business of such member, . . . . and/or associated person in connection with his activities as an associated person shall be arbitrated under the Constitution and Rules of the (Exchange) as provided by a duly executed and enforceable written agreement or upon the demand of the customer or non-member."
As a registered representative, and officer and officer and employee of KP, Plaintiff is an "associated person" within the Rule's meaning (see, 15 USC section 78c (a)(18) and (a)(21); Haviland v. Goldman, Sachs & Co., 947 F.2d 601 (2d Cir. 1991; Fleck v. E.F. Hutton, supra, at 1054). Even assuming, arguendo, that KPAM was not so closely allied with KP as to allow KPAM to pursue arbitration as KP could under Rule 347, KPAM, as a non-member may demand arbitration against plaintiff under Rule 600(a).
Plaintiff's argument that Rule 600(a) is inapplicable here since the "exchange-relatedness" requirement is not met in this case, is unavailing. Plaintiff's claims and defendants' defenses, arise out of plaintiff's activities as an associated person, i.e., his activities as an employee, thus the subject dispute is arbitrable under Rule 600(a). (See, Pearce v. E.F. Hutton Group, Inc., 264 U.S. App. D.C. 246, 828 F.2d 826, 829).
Defendants further contend that plaintiff is bound by the U-4 Form to arbitrate all disputes arising out of his employment, or the termination thereof, including his claims of age discrimination, pursuant the New York State Human Rights Law, under the Federal Arbitration Act. (9 U.S.C. sec. 1 et seq.).
Section 2 of the FAA provides:
"A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, . . . . shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
Plaintiff argues against arbitration on the grounds that a U-4 Form is a contract of employment and, thus, is exempt from the scope of the Federal Arbitration Act. Section 1 of the Federal Arbitration Act provides that "nothing herein shall apply to contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce." (U.S.C. Sec. 1).
Plaintiff also argues that the public policy of New York State requires a judicial remedy for claims of discrimination and that he will be deprived of his right to seek punitive damages if forced to arbitrate since under this state's law, arbitrators are prohibited from awarding punitive damages.
In a recent decision, the Supreme Court, New York County concluded that plaintiff's claim of discrimination under the State Human Rights Law must be arbitrated (Schackman, J.). It was noted that "the arbitration provision at issue herein is governed by the FAA which applies to any written agreement to arbitrate where interstate commerce is involved (U.S.C. Sec. 2) and includes disputes arising out of employment in the securities market ( Singer v. Jeffries & Co., Inc., 70 N.Y.2d 76, 81). The "emphatic" national policy favoring arbitration is binding on state courts (ibid; see also Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 74 L. Ed. 2d 765, 103 S. Ct. 927; Perry v. Thomas, 482 U.S. 483, 489-91, 96 L. Ed. 2d 426, 107 S. Ct. 2520)." (Reid v. Goldman, N.Y.L.J., April 22, 1992, p. 21, col. 5-6, p. 22, col. 1) That court rejected the identical argument that is put forth by plaintiff herein, i.e., that the agreement to arbitrate was part of an employment contract, and, thus, was excluded from FAA coverage.
It was correctly pointed out that a recent decision by the United States Supreme Court held that an arbitration clause identical to the one at bar "is a contract with the securities exchanges, not with the employer) ( Gilmer v. Interstate/Johnson Lane Corp. U.S. (1991), 114 L. Ed. 2d 26, 111 S. Ct. 1647 at 1651-FN.2, see also Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991)." The fact that plaintiff's claims in Reid were made under State law, similar to the claims at bar, did not change the result. It was noted that the New York courts must apply the FAA as interpreted by the Supreme Court. (Singer v. Jefferies & Co. Inc., supra 78 N.Y.2d at 81; Flanagan v. Prudential Bache Securities Inc., 67 N.Y.2d 500, 505-506, cert. den. 479 U.S. 931, 93 L. Ed. 2d 355, 107 S. Ct. 402 (1986).
Finally, this court rejects plaintiff's argument that the potential for an award of punitive damages, mandates that all of plaintiff's claims must be determined in a judicial proceeding. When arbitrable claims may be separated from non-arbitrable claims, it is proper to separate them and to allow the arbitration to proceed ( Sam Reisfeld & Son Import Co. v. S.A. Eteco, 530 F.2d 679; Sibley v. Tandy Corp., 543 F.2d 540, cert. den. 434 U.S. 824, 54 L. Ed. 2d 82, 98 S. Ct. 71 ; Fox v. Merrill Lynch & Co., Inc., 453 F. Supp. 561). Further, public policy prohibiting an arbitrator from awarding punitive damages does not automatically prevent all claims arbitrable under Federal law which allow punitive damages from being heard (see e.g., Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 96 L. Ed. 2d 185, 107 S. Ct. 2332 (1987); Matter of Helmsley Enterprises, Inc. ( Lepercq, Deneuflize & Co., Inc., 168 A.D.2d 224, 562 N.Y.S.2d 113). At the conclusion of the arbitration, this court may adjudge the punitive damage claim, if necessary.
Accordingly, defendants' motion to stay this action and compel arbitration is granted.
Dated: MAY 7 1992
Burton S. Sherman