arbitration," he does not say what relevance this has to the current dispute. Additionally, as Judge Leisure pointed out in Pompano, 698 F. Supp. at 516-17, the alleged partiality must be attributable to the arbitrators, not the forum. Alter alleges only that Amex would be biased; he does not set forth who the potential arbitrators are -- if indeed they have yet been appointed. Moreover, the claim that the allegedly tainted forum -- Amex -- would cause the appointment of biased arbitrators is extremely attenuated. See id. at 517-18. Finally, if the arbitration does turn out to be biased, Alter will be able to challenge it at the appropriate time pursuant to 9 U.S.C. § 10(a)(2). See Pompano, 698 F. Supp. at 519.
Thus, the Court finds no reason to prevent this matter from proceeding to arbitration under the auspices of Amex.
Whether Alter is Bound by Either Arbitration Clause
The original Aegis partnership agreement contained the following provision: "Any question or controversy arising out of or pertaining to this agreement shall be submitted to and settled by arbitration pursuant to the Constitution and Rules of the Exchange, except as otherwise provided in [this agreement]." The Amex Constitution states, at Article VIII, P9062: "Members, member firms, partners of member firms, member corporations and officers of member corporations shall arbitrate all controversies arising in connection with their business between or among themselves . . . ."
Regardless of whether, as Alter asserts, the arbitration clause in the original Aegis agreement is inapplicable on the grounds that the agreement itself is no longer in force, he is bound by the arbitration clause in the Amex Constitution. There is a "weighty presumption that arbitration is proper in disputes between members of self-regulatory organizations." Creative Securities Corp. v. Bear Stearns & Co., 671 F. Supp. 961, 967 n.9 (S.D.N.Y. 1987) (citing N. Donald & Co. v. American United Energy Corp., 746 F.2d 666, 670 (10th Cir. 1984)), aff'd, 847 F.2d 834 (2d Cir. 1988). Indeed, the general rule is that "arbitration agreements between members of self-regulatory organizations are valid and enforceable." Creative Securities, 671 F. Supp. at 966 n.9. Alter does not appear to dispute that he is an "officer of [a] member corporation," and that the defendants are all either "members, member firms, partners of member firms, member corporation, [or] officers of member corporations." He does, however, dispute that this is a "controversy arising in connection with their business between or among themselves" because Alter's corporation is no longer an Aegis partner.
However, the Amex clause has been held to be very broad, see, e.g., Muh v. Risher, 38 N.Y.2d 441, 444, 343 N.E.2d 742, 743, 381 N.Y.S.2d 23, 25 (1975); Neiman v. Becker Securities Corp., 91 A.D.2d 536, 536, 457 N.Y.S.2d 8, 8 (1st Dept. 1982), as have similar clauses applicable to members of the National Association of Securities Dealers ("NASD"), see, e.g., McMahan Securities Co. L.P. v. Forum Capital Markets L.P., 35 F.3d 82, 88 (2d Cir. 1994); Creative Securities, 671 F. Supp. at 967, and the New York Stock Exchange ("NYSE"), see, e.g., Kelleher v. Reich, 532 F. Supp. 845, 849 (S.D.N.Y. 1982); Nomura Sec. Intern. Inc. v. Citibank, N.A., 81 N.Y.2d 614, 620-21, 619 N.E.2d 385, 387-88, 601 N.Y.S.2d 448, 450-51 (1993); Dunay v. Weisglass, 54 N.Y.2d 25, 34, 429 N.E.2d 92, 96, 444 N.Y.S.2d 573, 577 (1981).
For example, in Muh, 38 N.Y.2d at 443, 343 N.E.2d at 743, 381 N.Y.S.2d at 24, the chairman of an Amex member firm agreed to sell his shares in the firm to other officers of the firm in contemplation of the chairman's retirement. When the purchasers defaulted, the chairman commenced a litigation. See id. at 443, 343 N.E.2d at 743, 381 N.Y.S.2d at 25. The New York Court of Appeals held that the chairman was obligated to arbitrate his claims because of the Amex provision. See id. at 444, 343 N.E.2d at 743, 381 N.Y.S.2d at 25.
In McMahan, 35 F.3d at 84-85, an NASD member firm sued another member firm and several former employees who had left to form the defendant firm. The claims involved alleged improprieties by the former employees, including misappropriation of trade secrets, breach of fiduciary duty, breach of contract, unfair competition, and copyright infringement. See id. at 85. The court noted that defendants allegedly misappropriated, inter alia, plaintiff's computer system, an "integral component of a brokerage business." Id. at 88. The court held that the plaintiff's claims of misappropriation "easily [fell] within the broad scope of affairs arising in connection with the business' of" both firms. Id.
Here, the 1990 agreement concerned profits and commissions from trading in four securities in which Aegis was the registered specialist. Alter claims that monies due him under the agreement were not calculated correctly and that the defendants breached the agreement by not using their best efforts to keep the securities on Amex. These claims therefore relate directly to defendants' business because they concern the performance of securities traded on the exchange, securities for which Aegis was the registered specialist. Moreover, the claims relate to the former, if not current, business of Alter's.
Additionally, this case arises out of a dispute concerning the internal structure of an exchange member. The dispute revolves around the agreement that accompanied, and was a critical component of, one partner's departure. Therefore, it "relates to the functioning of" Aegis, an Amex member, and to its "management and control." Kelleher, 532 F. Supp. at 849; Dunay, 54 N.Y.2d at 34, 429 N.E.2d at 96, 444 N.Y.S.2d at 577. As the Second Circuit has written: "Clearly, the substantial interest of the exchange in the sound and proper management of its member firms justifie[s] submission of [such a] dispute to exchange arbitration." Paine, Webber, Jackson & Curtis, Inc. v. Chase Manhattan Bank, N.A., 728 F.2d 577, 581 (2d Cir. 1984). The broad language of the Amex provision, therefore, encompasses the instant dispute.
Defendants' motion to stay the proceedings and compel arbitration is granted insofar as arbitration is compelled. Because in these circumstances it would serve no purpose to stay the action, see Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); Hart Enterprises International, Inc. v. Anhui Provincial Import & Export Corp., 888 F. Supp. 587, 591 (S.D.N.Y. 1995), it is dismissed without prejudice.
DATED: New York, New York
October 23, 1995
SIDNEY H. STEIN, U.S.D.J.
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