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BERGER v. CANTOR FITZGERALD SECS.

April 30, 1997

BRIAN BERGER, Plaintiff, against CANTOR FITZGERALD SECURITIES, and PRUDENTIAL SECURITIES, INC., Defendants.


The opinion of the court was delivered by: SCHEINDLIN

 SHIRA A. SCHEINDLIN, U.S.D.J.:

 On April 18, 1996, plaintiff Brian Berger filed an action alleging claims under the Americans with Disabilities Act, Title VII of the Civil Rights Act, Section 1985 of the Civil Rights Act, the New York State Human Rights Law, and the New York City Human Rights Law. *fn1" Defendants moved to compel arbitration of these claims pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 2-4. On November 1, 1996, I ruled that plaintiff's allegations of coercion, fraud and unequal bargaining power required further factual development of the record and denied defendants' motions with leave to renew following the required discovery. See Berger v. Cantor Fitzgerald Securities et al., 942 F. Supp. 963, 966 (S.D.N.Y. 1996) (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 114 L. Ed. 2d 26, 111 S. Ct. 1647 (1991) ("courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds for the revocation of any contract") (quotation omitted)).

 Discovery is now complete, and defendants renew their motions to compel arbitration. Furthermore, defendant Prudential Securities, Inc. ("Prudential") now moves for the award of sanctions. For the reasons set forth below, defendants' motions to compel arbitration are now granted. Prudential's motion for sanctions is denied.

 I. Factual Background

 The facts of this case have already been described in Berger, 942 F. Supp. at 963-65, and need not be repeated here.

 A. Arbitration Agreements

 Federal law and policy strongly favors arbitration as an alternative dispute resolution process. See Doctor's Associates, Inc. v. Distajo, 107 F.3d 126, 130 (2d Cir. 1997); Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 45 (2d Cir. 1993) (citing Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 480-81, 104 L. Ed. 2d 526, 109 S. Ct. 1917 (1989) and Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983)). The Federal Arbitration Act *fn2" provides that written arbitration provisions in any contract involving interstate or international commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Consequently, where a court is satisfied that a dispute is arbitrable, it must stay proceedings and order the parties to proceed to an arbitration. See Progressive Casualty Ins. Co., 991 F.2d at 45.

 In determining the arbitrability of a dispute, a court must first decide "whether the parties agreed to arbitrate, and if so, whether the scope of that agreement encompasses the asserted claims." David L. Threlkeld & Co. v. Metallgesellschaft, Ltd., 923 F.2d 245, 249 (2d Cir.), cert. dismissed, 501 U.S. 1267 (1991). As plaintiff denies that he ever agreed to arbitrate disputes with defendants, state law determines whether the parties in fact have agreed to arbitrate. See Perry v. Thomas, 482 U.S. 483, 492 n.9, 96 L. Ed. 2d 426, 107 S. Ct. 2520 (1987). The parties agree that New York law applies in this case.

 B. Grounds for Revocation Under New York Law

 Under New York law, a person who signs a contract is presumed to know its contents and to assent to them. See Progressive Casualty Ins. Co., 991 F.2d at 45; Schmidt v. Magnetic Head Corp., 97 A.D.2d 151, 468 N.Y.S.2d 649, 654 (2d Dep't 1983). Plaintiff does not dispute that he willingly signed a U-4 Form containing an arbitration clause *fn3" , but rather argues that the arbitration clause in the U-4 should be revoked because Cantor induced him to sign the form through fraudulent misrepresentations as to the form's content. Plaintiff does not expressly state that Cantor misrepresented the nature of the U-4 Form with the intent to deceive him. Thus, his fraud claim appears to be one of negligent misrepresentation.

 The elements of negligent misrepresentation are (1) carelessness in imparting words; (2) upon which others were expected to rely; (3) upon which they did justifiably rely; (4) to their detriment; and (5) the author must express the words directly, with knowledge they will be acted upon, to one whom the author is bound by some relation or duty of care. See Mallis v. Bankers Trust Co., 615 F.2d 68, 81-82 (2d Cir. 1980) (Friendly, J.), cert. denied, 449 U.S. 1123, 67 L. Ed. 2d 109, 101 S. Ct. 938 (1981); Ultramares Corp. v. Touche, Nevin, & Co., 255 N.Y. 170, 174 N.E. 441 (1931) (Cardozo, J.); Glanzer v. Shepard, 233 N.Y. 236, 239-241, 135 N.E. 275 (1922) (Cardozo, J.). New York courts require such a claim to be proven by clear and convincing evidence. See Katara v. D.E. Jones Commodities, Inc., 835 F.2d 966, 971 (2d Cir. 1987); Geler v. National Westminster Bank, USA, 770 F. Supp. 210, 212-13 (S.D.N.Y. 1991); Gordon v. Bialystoker Center and Bikur Cholim, Inc., 45 N.Y.2d 692, 412 N.Y.S.2d 593, 595, 385 N.E.2d 285 (1978).

 Plaintiff also argues that he signed the U-4 Form under duress or coercion. *fn4" Under New York law, to establish such a claim a plaintiff must show: (1) a threat, (2) which was unlawfully made, and (3) which caused involuntary acceptance of contract terms, (4) because the circumstances permitted no other alternative. See, e.g., Kamerman v. Steinberg, 891 F.2d 424, 431 (2d Cir. 1989); Pilanski v. ...


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