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DEAN WITTER REYNOLDS INC. v. PROUSE

September 14, 1993

DEAN WITTER REYNOLDS INC., Petitioner,
v.
BRUCE and CAROLYN PROUSE, MICHAEL and CATHERINE KETTENRING and ROBERT R. and MARY JANE DURKIN, Respondents.


Conner


The opinion of the court was delivered by: WILLIAM C. CONNER

CONNER D.J.:

 Dean Witter Reynolds Inc. ("Dean Witter"), petitions this Court for a declaratory judgment stating that it is not required to arbitrate Michael and Catherine Kettenring's ("the Kettenrings") claims against the firm before the American Arbitration Association ("AAA"). The Kettenrings' cross-petition seeks to compel Dean Witter to arbitrate before the AAA in New York City or, in the alternative, before the National Association of Securities Dealers Inc. ("NASD") in New York City. Dean Witter's petition is granted and the Kettenrings' cross-petition is denied.

 BACKGROUND

 On November 29, 1983, the Kettenrings entered into a customer agreement governing their account with Dean Witter which contained the following arbitration provision:

 
Any controversy between you and the undersigned arising out of or relating to this contract or the breach thereof, shall be settled by arbitration, in accordance with the rules, then obtaining, of either the Arbitration Committee of the Chamber of Commerce of the State of New York, or the American Arbitration Association, or the Board of Arbitration of the New York Stock Exchange, as the undersigned may elect.

 On April 5, 1987, the Kettenrings entered into a second customer agreement covering the same account *fn1" which contained the following arbitration clause:

 
Arbitration of Controversies. I agree and you agree by carrying any account in which I have an interest that all controversies between me and you or your agents, representatives or employees arising out of or concerning any such account, any transactions between us or for such account, or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date below, shall be determined by arbitration in accordance with the rules of the National Association of Securities Dealers, Inc. or the New York Stock Exchange, or any other arbitration facility provided by any other exchange of which you are a member and in which a transaction giving rise to a claim took place, as I may elect.

 Respondents, Bruce and Carolyn Prouse ("the Prouses") and Robert and Mary Jane Durkin ("the Durkins") have not signed a Dean Witter customer agreement containing an arbitration provision.

 In late 1985, respondents purchased investment vehicles in the Capital Housing Partners-CLXI ("CHP-CLXI") through Dean Witter. Alleged misrepresentations and omissions made by Dean Witter in connection with these investments form the basis of respondents' underlying claim. In late January, 1993, respondents filed a Demand for Arbitration and Statement of Claim with the AAA in Washington, D.C. in which Dean Witter, the petitioner in this action, was named among the respondents. *fn2" Dean Witter filed this petition seeking both a stay of respondents' arbitration before the AAA in Washington, D.C. and a declaratory judgment and injunction precluding the Prouses and the Durkins from arbitrating against Dean Witter before the AAA in Washington, D.C. and precluding the Kettenrings from arbitrating against Dean Witter before the AAA in any locale. *fn3"

 This initial dispute has been largely resolved by an agreement between the parties. All respondents have agreed not to pursue their claims against Dean Witter before the AAA in Washington, D.C.. The Prouses and the Durkins will refile their claim against Dean Witter, if at all, with the AAA in New York City, and Dean Witter does not object to this forum. *fn4" The present dispute is centered on the Kettenrings' cross-petition to compel Dean Witter to arbitrate before the AAA in New York City or, in the alternative, the NASD in New York City. Dean Witter opposes the Kettenrings' cross-petition and seeks only declaratory relief stating that it is not obligated to arbitrate the Kettenrings' claims before the AAA.

 DISCUSSION

 Dean Witter is not required to arbitrate the Kettenrings' claims before the AAA because the AAA is not among the arbitral fora listed in the applicable customer agreement. Further, the Kettenrings are not entitled to an order compelling Dean Witter to arbitrate before the NASD in New York City because Dean Witter has expressed a willingness to proceed before that forum without any compulsion from the ...


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