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TOWNSEND v. SMITH BARNEY SHEARSON INC.

November 2, 1995

PHYLLIS J. TOWNSEND, Plaintiff,
v.
SMITH BARNEY SHEARSON INC. (formerly Shearson Lehman Brothers Inc.), Defendant.



The opinion of the court was delivered by: LARIMER

 This is a Title VII case. Plaintiff Phyllis Townsend ("Townsend") alleges that her employer, defendant Smith Barney Shearson ("Smith Barney"), subjected her to a hostile environment, sexual harassment and retaliation because of her sex.

 Presently before me is Smith Barney's motion to compel arbitration and to stay this action pending the results of arbitration. *fn1" Smith Barney asserts that, upon her employment with Smith Barney, Townsend signed two separate contracts containing arbitration provisions that encompass her present claims. Thus, asserts Smith Barney, plaintiff is bound by those provisions and this lawsuit must be stayed pending arbitration. On March 23, 1989, Townsend signed a document entitled "Uniform Application for Securities Industry Registration or Transfer", commonly referred to as a "Form U-4". This document, used throughout the securities industry by virtually every prospective broker/dealer employee registering for membership in any securities exchange or other organization, contains the following provision:

 
I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register... Form U-4, p. 4, P 5.

 One of the organizations with which Townsend registered was the New York Stock Exchange ("NYSE"). See Form U-4, p.1. According to Smith Barney, Article XI, Section 1 of the NYSE Constitution provides that:

 
any controversy between . . . a member... or member organization and any other person arising out of the business of such member .. or member organization ... shall at the instance of any such party be submitted for arbitration in accordance with the provisions of this Constitution and such rules as the Board may from time to time adopt. 2 NYSE Guide (CCH) P 1501 (Smith Barney Brief at 3-4).

 The NYSE Rules (Rules 347) requires arbitration of:

 
any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization.... Id., at P 2347 (Smith Barney Brief at 3-4).

 Smith Barney asserts that Townsend must arbitrate this dispute pursuant to the Form U-4.

 In addition, Smith Barney asserts that Townsend is bound by an arbitration provision contained in the Smith Barney employment application signed by Townsend on January 18, 1989. That application states, in pertinent part, as follows: "I hereby agree that any controversy arising out of or in connection with my compensation, employment or termination of employment shall be submitted to arbitration before the National Association of Securities Dealers, Inc., the New York Stock Exchange, Inc. or the American Stock Exchange, Inc..."

 Townsend opposes Smith Barney's motion. She does not dispute that she signed the Form U-2 (Townsend Aff't at P 3) but she asserts that it is inapplicable to her because she never performed the job responsibilities of a broker. Townsend claims that she was hired as a secretary and remained so until her departure from Smith Barney. As such, Townsend claims the provisions of the Form U-4 are inapplicable to her. Townsend does not address the provision found in the Smith Barney employment application.

 DISCUSSION

 A court deciding a motion to compel arbitration and to stay proceedings should consider four factors: whether there has been an agreement to arbitrate; the scope of that agreement; whether the federal statutory claims, if any, were intended by Congress to be non-arbitrable; and, if only some of the claims are subject to arbitration, whether to stay the remainder of the proceedings pending arbitration. Creative Securities Corp. v. Bear Stearns & Co., 671 F. Supp. 961, 965 (S.D.N.Y. 1987), aff'd, 847 F.2d 834 (2d Cir. 1988).

 The arbitrability of the parties' dispute is for the court, not the arbitrator, to decide at the outset. AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986). In determining arbitrability, the court must take into account the strong federal policy favoring enforcement of agreements to arbitrate. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 96 L. Ed. 2d 185, 107 S. Ct. 2332 (1987); Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). This policy is intended to prevent "contracts to arbitrate [from being] ...


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