arbitration agreement did not have to be submitted to arbitration. The Court in Kaplan was faced with the issue of whether the court or the arbitrator should decide the question of whether a non-party to an arbitration agreement had agreed to arbitrate a dispute. 115 S. Ct. at 1923-25. In this case, Thomas was in fact a party to the arbitration agreement with Blair, and Roby, and the other cases cited above, make clear that in such circumstances the arbitration agreement can also be relied upon by the agents and employees of an entity which is a party to the agreement.
Thomas also argues that the claims against Davis are not arbitrable because they arose out of different conduct than the claims against Blair. Thomas is correct that in order to be covered by their employer's arbitration agreement, the claims against the employee must arise under the same facts as the claims against the entity itself. See Perry, 866 F. Supp. at 121; see also Roby, 996 F.2d at 1360. However, Thomas has made no factual assertions specifying conduct by Davis, distinct from his role within Blair, with respect to the transactions at issue in the Complaint. The claims against Davis arise from the same facts as the claims against Blair, and all of these claims are covered by the arbitration clause.
Thomas argues that even if his claims against the defendants were originally subject to arbitration, the defendants have waived any right to arbitration. The Court of Appeals has "emphasized that there is a strong presumption in favor of arbitration . . . and that waiver of arbitration is not to be lightly inferred." Cotton, 4 F.3d at 179 (internal citations and quotations omitted); see also Doctor's Associates, Inc. v. Distajo, 107 F.3d 126, 130 (2d Cir. 1997). However, "waiver will be inferred when a party engages in protracted litigation that results in prejudice to the opposing party." Cotton, 4 F.3d at 179 (internal citations omitted); see also Doctor's Associates, 107 F.3d at 131. This prejudice can take the form of unnecessary delay or expense. See Doctor's Associates, 107 F.3d at 131; Cotton, 4 F.3d at 179.
Thomas argues that the defendants have waived their right to arbitration because they waited until a year and a half after he filed his complaint to seek arbitration. This argument is without merit. Both parties stipulated to stay this action pending resolution of the motion to dismiss in Baxter. Thus, any delay in litigating the case is the responsibility of both parties. Moreover, because of the stay, no actual litigation of this case has occurred. The delay of this action has not prejudiced Thomas by forcing him to incur litigation expenses that would be rendered unnecessary by the case ultimately being referred to an arbitrator. Thomas chose to save litigation expenses by awaiting the outcome of the motion in the Baxter case. Thus, there are no grounds to infer a waiver by the defendants. See Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 122 (2d Cir. 1991); McDonnell Douglas Finance Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 833 (2d Cir. 1988).
As explained above, all of the claims against the defendants are subject to arbitration. The Cash Account Agreement affords Thomas the first opportunity to elect the body before which the arbitration shall be conducted, stating that he "may elect in the first instance whether arbitration shall be by the New York Stock Exchange, Inc or the National Association of Securities Dealers, Inc., or otherwise as provided in this paragraph, but if the undersigned fails to make such election, . . . then [the defendants] may make such election." The defendants argue that Thomas failed to make such an election and therefore, under the terms of the Cash Account Agreement, they should be allowed to determine the body before which the arbitration should be conducted.
This waiver argument is without merit. In a letter dated November 11, 1996, Thomas contested whether his claims against the defendants were subject to arbitration. (November 11, 1996 letter, attached as Exhibit D to Notice of Motion). At the same time, however, Thomas stated that if his claims were subject to arbitration, he elects that the arbitration be conducted by the American Arbitration Association ("AAA") or the National Association of Securities Dealers ("NASD"). (Id.). This election was sufficient to exercise his rights under the agreement. Thus, because this election was valid, but the defendants are not members of the AAA, and therefore the arbitration cannot be conducted before that body, the arbitration shall be conducted before the NASD in accordance with that association's rules.
All of the claims against Blair and Davis are subject to arbitration in accordance with this Opinion. Therefore, Blair and Davis's motion to stay the claims against them and for this Court to compel arbitration is granted. The arbitration shall be conducted before the NASD in accordance with that association's rules.
Dated: New York, New York
June 3, 1997
John G. Koeltl
United States District Judge