The opinion of the court was delivered by: William C. Conner, Senior District Judge.
The relevant provisions of the SEC Release are clear and
unambiguous. Further, they are in accord with numerous decisions
in this Circuit holding that "it is the NASD Code in existence at
the time an action is commenced that governs." Hall v. MetLife
Resources, No. 94 Civ. 0358(JFK), 1995 WL 258061, at *4
(S.D.N.Y. May 3, 1995) (citing Scher v. Equitable Life Assurance
Soc., 866 F. Supp. 776 (S.D.N.Y. 1994)); see also Moore v.
Interacciones Global, Inc., No. 94 Civ. 4789(RWS), 1995 WL
33650, at *5 (S.D.N.Y. Jan.27, 1995) (phrase "as amended from
time to time" in Form U-4 means plaintiff "must comply with the
NASD Code as it existed at the time [he] commenced the action").
Indeed, plaintiff admits that the effective date of the amendment
is January 1, 1999 but argues that compelling arbitration of
plaintiff's claims would "fly in the face of public policy." This
Court cannot, however, disregard legal precedent and the clear
intent of the SEC to apply the amendment only to claims filed in
court on or after January 1, 1999. Plaintiff is bound by the NASD
Code as it existed on June 9, 1998.
B. The NYSE Constitution and Rules
At the time Hart signed his Form U-4 and on the date he
commenced this action (June 9, 1998), NYSE Rule 347 required the
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." Similarly, NYSE Rule 600(a) required arbitration
On December 29, 1998, the SEC amended NYSE Rules 347 and 600 "to
exclude claims of employment discrimination, including sexual
harassment, in violation of a statute from arbitration unless the
parties have agreed to arbitrate the claim after it has arisen."
See SEC Release No. 34-40858, 64 Fed.Reg. 1051, 1999 WL 3315.
Unlike the NASD, the NYSE rule change is silent on the issue of
retroactivity and the SEC Release did not provide an effective
date other than the date of approval, here December 29, 1998. The
SEC Release provides some guidance, however, by comparing the
NASD and NYSE rule changes. In its response to comment letters,
the SEC "noted that its proposal is substantially similar to the
NASD's recent rule change, since both leave parties' substantive
rights and remedies largely unchanged." 64 Fed.Reg. at 1053. The
only differences discussed pertain to the NYSE's strict
prohibition of pre-dispute arbitration agreements versus the
NASD's approach of enforcing private pre-dispute agreements. See
id. It would have been logical to discuss a difference in the
retroactivity of the rule changes as well. Given the silence of
the release on this point, and in light of the SEC's knowledge of
the NASD amendments, we find that the NYSE amendments apply to
all claims filed in court on or after December 29, 1998.
Plaintiff is, therefore, bound by the NYSE Code as it existed on
June 9, 1998.
C. Scope of the Arbitration Agreement
In accordance with the "liberal federal policy favoring
arbitration agreements," the FAA requires courts to construe the
NASD and NYSE arbitration provisions as broadly as possible and
to resolve "any doubts concerning the scope of arbitrable issues
. . . in favor of arbitration." Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74
L.Ed.2d 765 (1983). Indeed, broadly worded arbitration provisions
create a presumption of arbitrability such that a court must
compel arbitration "unless it may be said with positive assurance
that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute." Oldroyd v.
Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998) (quotation
and citation omitted).
Applying these principles, all of plaintiff's claims fall
within the scope of the NASD and NYSE compulsory arbitration
provisions as they existed when this action was commenced. This
conclusion is overwhelmingly supported by case law and is
seemingly unchallenged by plaintiff. See, e.g., Gilmer,
500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (ADEA claim within scope
of NYSE Rules); Fleck, 891 F.2d at 1053-54 (employment-related
defamation and other tort claims within scope of NASD and NYSE
arbitration rules); Schuetz, 1997 WL 452392, at *3 (Title VII
claims within scope of NASD Code) (collecting cases); Hall,
1995 WL 258061, at *3 (same); Chisolm v. Kidder, Peabody Asset
Mgmt., Inc., 810 F. Supp. 479 (S.D.N.Y. 1992) (breach of
contract, breach of implied contract and age discrimination
claims within scope of NASD and NYSE rules).
III. Arbitrability of ADEA Claims
Hart must be compelled to arbitrate his age discrimination
claim unless he can show "that Congress intended to preclude a
waiver of a judicial forum for ADEA claims" as evidenced by "the
text of the ADEA, its legislative history, or an `inherent
conflict' between arbitration and the ADEA's underlying
purposes." Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Plaintiff's
burden in this respect is a heavy one given the Supreme Court's
dictate that "questions of arbitrability must be addressed with a
healthy regard for the federal policy favoring arbitration."
Id. (quoting Moses H. Cone, 460 U.S. at 24, 103 S.Ct. 927).
As in Gilmer, plaintiff "concedes that nothing in the text of
the ADEA or its legislative history explicitly precludes
arbitration." 500 U.S. at 26, 111 S.Ct. 1647.
Rather, plaintiff argues that arbitration is inconsistent with
the ADEA because of the inadequacy of arbitration procedures.
Numerous arguments with respect to arbitration procedures were
rejected by the Gilmer Court and the ADEA was held not to
preclude compulsory arbitration. Thus, unless plaintiff can
exceed the proof of such "inherent conflict" offered by the
plaintiff in Gilmer, the same result must follow here.*fn11
IV. Arbitrability of Title VII Claims
The Supreme Court has not yet ruled on whether its reasoning in
Gilmer should be extended to the arbitration of disputes
arising under Title VII. However, the majority of circuit courts
have held that Title VII, as amended, does not preclude
arbitration. See, e.g., Rosenberg v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 170 F.3d 1, 6-11 (1st Cir. 1999); Seus,
146 F.3d at 179, 182-83 (3d Cir. 1998); Paladino v. Avnet
Computer Techs., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998);
Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126,
1130 (7th Cir. 1997); Patterson v. Tenet Healthcare, Inc.,
113 F.3d 832, 837 (8th Cir. 1997); Cole v. Burns Int'l Sec. Servs.,
105 F.3d 1465, 1467-68 (D.C.Cir. 1997); Austin v. Owens-Brockway
Glass Container, Inc., 78 F.3d 875, 882 (4th Cir. 1996); Metz
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482,
1487 (10th Cir. 1994); Willis v. Dean Witter Reynolds, Inc.,
948 F.2d 305, 308, 312 (6th Cir. 1991); Alford v. Dean Witter
Reynolds, Inc., 939 F.2d 229, 230 (5th Cir. 1991). Only the
Ninth Circuit has arrived at the opposite conclusion. See
Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir.),
cert. denied, ___ U.S. ___, 119 S.Ct. 445, 142 L.Ed.2d 399 and
___ U.S. ___, 119 S.Ct. 465, 142 L.Ed.2d 418 (1998) (Nos. 98-237
and 98-409). The Court of Appeals for the Second Circuit has not
yet considered the issue, but the weight of authority within the
circuit supports the conclusion that mandatory arbitration of
Title VII claims is not precluded by the statute. See, e.g.,
Desiderio, 2 F. Supp.2d at 520; Rand v. J.C. Bradford & Co.,
No. 98 Civ. 4906(DLC), 1998 WL 872421, at *4 (S.D.N.Y. Dec. 15,
1998) (citing cases); Bishop v. Smith Barney, Inc., No. 97 Civ.
4807(RWS), 1998 WL 50210, at *7 (S.D.N.Y. Feb.6, 1998) (citing
Relying primarily on Duffield and the district court's
decision in Rosenberg, plaintiff argues that the 1991 Civil
Rights Act ("1991 CRA"), amending Title VII, demonstrates a
congressional intent to prohibit enforcement of pre-dispute
agreements to arbitrate Title VII claims.*fn12 Section 118 of
the 1991 CRA provides:
[w]here appropriate and to the extent authorized by
law, the use of alternative means of dispute
resolution, including . . . arbitration, is
encouraged to resolve disputes arising under the Acts
or provisions of Federal law amended by this title.
Civil Rights Act of 1991, Pub.L. No. 102-166, § 118, 105 Stat.
1071, 1081 (1991). In Rosenberg, the district court found that
the language and legislative history of this section
"unambiguously reject mandatory arbitration agreements."
Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, 995 F. Supp. 190,
201 (D.Mass. 1998), aff'd on other grounds,
(1st Cir. 1999). In particular, the court held that the phrase
"where appropriate and to the extent authorized by law" codified
94 S.Ct. 1011, 39 L.Ed.2d 147 (1974) which allegedly created an
absolute prohibition of prospective waivers of the right to a
judicial forum for employment discrimination claims. The Ninth
Circuit reached a similar conclusion in Duffield,
144 F.3d 1182.
First, it should be noted that the First Circuit affirmed
Rosenberg on different grounds and expressly rejected the
district court's finding with respect to the arbitrability of
Title VII claims. See Rosenberg, 170 F.3d at 4-11 ("We find no
conflict between the language or purposes of Title VII, as
amended, and arbitration"). Second, the decision of the Ninth
Circuit Court of Appeals in Duffield is not binding on this
Court, and we decline to adopt its reasoning, as the courts of
appeals for most other circuits have done. It is more likely that
the language "where appropriate and to the extent authorized by
law" is a reference to the FAA and the current state of the law
of arbitrability with regard to federal statutory employment
discrimination claims, rather than a snapshot of the law as it
existed when the 1991 CRA was drafted (i.e., a reference to a
particular Supreme Court case).*fn13 See Seus, 146 F.3d at 183
(noting its disbelief that "this straightforward declaration of
the full Congress [§ 118] can be interpreted to mean that the FAA
is impliedly repealed"); Koveleskie v. SBC Capital Markets,
Inc., 167 F.3d 361, 365 (7th Cir. 1999). Indeed, the legislative
history referenced by plaintiff shows that Congress was aware of
the Gilmer decision, and the growing concern over compulsory
pre-dispute arbitration agreements, yet chose not to alter the
wording of § 118 to preclude arbitration in such instances. We
therefore hold that neither the text of Title VII, as amended,
nor its legislative history evince a congressional intent to
preclude compulsory arbitration of Title VII claims.
V. Challenges to the Adequacy of the Arbitral Forums
Hart asserts that "[t]he Second Circuit has recently
acknowledged the inadequacies existent in the arbitral forum in
an ADEA case where arbitration was compelled pursuant to a Form
U-4 Agreement." (Plaintiff's Mem. at ¶ 80 citing Halligan v.
Piper Jaffray, Inc., 148 F.3d 197 (2d Cir. 1998), cert.
denied, ___ U.S. ___, 119 S.Ct. 1286, ___ L.Ed.2d ____ (1999)).
Plaintiff's reliance on Halligan, however, is misplaced. The
court expressly stated that it did "not address Mrs. Halligan's
generalized challenge to arbitrations conducted under the aegis
of the NASD." Halligan, 148 F.3d at 203. Rather, the arbitral
award at issue was vacated upon the Second Circuit's conclusion
that the particular arbitrators involved had "manifestly
disregarded the law or the evidence or both." Id. at 204. As
defendants correctly point out, the Halligan decision, if
anything, confirms that an individual's statutory rights are not
waived by submitting claims to arbitration because a district
court has the authority to vacate any award issued in manifest