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HART v. CANADIAN IMPERIAL BANK OF COMMERCE

March 26, 1999

LEWIS J. HART, JR., PLAINTIFF,
v.
CANADIAN IMPERIAL BANK OF COMMERCE, CIBC, INC., CIBC WOOD GUNDY SECURITIES, INC., CIBC WOOD GUNDY SECURITIES CORP. AND CIBC OPPENHEIMER CORP. (SUCCESSOR IN INTEREST TO CIBC WOOD GUNDY SECURITIES, CORP.), DEFENDANTS.



The opinion of the court was delivered by: William C. Conner, Senior District Judge.

  OPINION AND ORDER

BACKGROUND

The following facts are undisputed. In 1990, plaintiff commenced his employment with defendant CIBC, Inc.*fn1 as a Vice President and Director. Hart was hired to develop the company's capabilities in the area of electric power financing and related advisory services. He was promoted to Managing Director of CIBC, Inc. in 1992 and then to Co-Head of the Global Power Group in 1995. As Co-Head of the Global Power Group, Hart was responsible for developing and implementing a plan to turn CIBC Wood Gundy Securities, Corp. ("Wood Gundy Corp.") into a full-service provider of investment banking services and products in the global power industry. To this end, in or about January of 1996, Hart was asked to serve as Managing Director of Wood Gundy Corp., the American investment banking/brokerage subsidiary of the Bank.*fn2

As Managing Director of Wood Gundy Corp., Hart was required by the NASD and NYSE Rules to take the Series 7 examination and register with the NASD and NYSE.*fn3 Plaintiff passed his Series 7 exam on March 7, 1996, and registered with the NASD and NYSE by signing a Uniform Application for Securities Industry Registration or Transfer, commonly referred to as a Form U-4. Under a caption warning that "THE APPLICANT MUST READ THE FOLLOWING VERY CAREFULLY" paragraph 5 of the Form U-4 provides:

  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 indicated in item 10
  [here the NASD and NYSE] as may be amended from time
  to time and that any arbitration award rendered
  against me may be entered as a judgement in any court
  of competent jurisdiction.

On October 29, 1997, plaintiff's employment with Wood Gundy Corp. was terminated, allegedly for performance reasons.

Plaintiff filed charges with both the Equal Employment Opportunity Commission ("EEOC") and the New York State Division of Human Rights ("NYSDHR"), and received a "Notice of Right to Sue" dated May 28, 1998. On June 8, 1998, Hart filed the complaint in this action alleging claims of: (i) age discrimination in violation of the ADEA; (ii) national origin discrimination under Title VII; and other claims entitled (iii) breach of implied contract; (iv) breach of course of dealing contract to pay bonus; (v) attempt to force plaintiff into arbitration; and (vi) damage to plaintiff's reputation, against his former employers, CIBC, Inc. and Wood Gundy Corp. and their parent corporation, the Bank.*fn4

At the time Hart signed his Form U-4 and when he filed the instant complaint, the NASD and NYSE rules provided for compulsory arbitration of employment related disputes, including statutory discrimination claims. Accordingly, on October 15, 1998, defendants moved to dismiss Count V of the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim and, simultaneously, for an order pursuant to Section 3 of the FAA, staying this action and compelling arbitration of all causes of action not dismissed by the Court. Since then, the Securities and Exchange Commission ("SEC") has approved changes to NASD and NYSE arbitration rules creating an exception to mandatory arbitration of employment disputes. According to the amendments, arbitration of statutory employment discrimination claims may only be compelled if the parties agreed to arbitration after the dispute had arisen. The NASD rule change went into effect January 1, 1999 and applies to claims filed on or after that date. See SEC Release No. 34-40109, 63 Fed.Reg. 35299, 1998 WL 339422. The NYSE rule change was approved by the SEC on December 29, 1998 and is silent on the issue of retroactivity. See SEC Release No. 34-40858, 64 Fed. Reg. 1051, 1999 WL 3315.

DISCUSSION

The Second Circuit has enumerated the following factors to be considered when deciding whether to compel arbitration: (1) whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) whether Congress intended the plaintiff's statutory claims to be nonarbitrable; and (4) if not all claims are arbitrable, the court must determine whether to stay the balance of the proceedings pending arbitration. See Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116, 118 (2d Cir. 1991) (citing Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 844 (2d Cir. 1987)).

I. Plaintiff's Agreement to Arbitrate

It is well established that a signed Form U-4 constitutes an express arbitration agreement enforceable under the FAA. See, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 22-25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Haviland v. Goldman, Sachs & Co., 947 F.2d 601, 604 (2d Cir. 1991). Plaintiff does not deny that he signed a Form U-4; however, he claims that the arbitration agreement is unenforceable because it was signed under duress and was the result of unequal bargaining power.*fn5 Further, he alleges that the waiver of his federal forum rights was neither voluntary or knowing as required by federal law.

A. Coercion or Duress


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