The opinion of the court was delivered by: Robert W. Sweet, Judge.
Defendants Samuel Masucci ("Masucci") and Bear Stearns & Co., Inc.
("Bear Stearns") (collectively, the "Defendants") have moved to compel
plaintiff Steven Marcus ("Marcus") to arbitrate this dispute and
dismissing or, alternatively, staying this action pending arbitration
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and the
Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and the
By-laws of the National Association of Securities Dealers Inc. ("NASD").
For the reasons set forth below, the motion will be granted, arbitration
is compelled, and this action is dismissed with leave granted to reopen
if necessary upon completion of the arbitration.
Marcus is employed by Chase Securities, Inc. ("Chase Securities"). Bear
Stearns is a registered broker-dealer of securities.
Masucci is employed by Bear Stearns as a Managing Director.
This action was commenced on May 8, 2000 by Marcus by the filing of a
complaint alleging fifteen causes of action against the Defendants
arising out of their use of an investment product called Shared
Application Mortgage Securities ("SAMS"), including misappropriation of
trade secrets, unfair competition, and unjust enrichment. Marcus seeks
damages, the imposition of a construction trust and an accounting.
The instant motion was filed on July 10, 2000, and submissions were
received through August 12, 2000, at which time the matter was deemed
For the purposes of a motion to dismiss, the factual allegations of the
complaint are taken as true, though it is appropriate when considering
jurisdictional issues to consider matters outside the parameters of the
pleadings. See Cargill Intern. S.A. v. M/T Pavel Dybenko, 991 F.2d 1012,
1019 (2d Cir. 1993); Kamen v. A.T. & T. Co., 791 F.2d 1006, 1011 (2d
Cir. 1986); Exchange Nat. Bank of Chicago v. Touche Ross & Co.,
544 F.2d 1126, 1130-31 (2d Cir. 1976), modified on other grounds by
Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930 (2d Cir. 1981).
According to the complaint, Marcus and Masucci were previously employed
at SBC Warburg Pincus Dillon Read ("Warbury Pincus") where they worked on
the development of SAMS. Warburg Pincus abandoned the project in October
1998, terminated Marcus and Masucci, and granted them a release
concerning the SAMS materials.
According to Marcus, he and Masucci then formed a joint venture
to develop and promote SAMS.
The complaint further alleges that from November 1998 until March
1999, Marcus and Masucci sought to interest investment firms in the
project. Bear Stearns was one of these firms. Bear Stearns negotiated
with both Masucci and Marcus. In April 1999, Bear Stearns hired Masucci
as a managing director. Marcus was not hired and remained unemployed
until April 10, 2000, when he was hired by Chase Securities.
Chase Securities is a member of the NASD and Marcus is a
NASD-registered employee of Chase Securities. The Defendants allege
without contradiction by Marcus that in order to become a registered
employee of Chase Securities, Marcus would have been required to sign a
"Form U-4 Uniform Application For Securities Industry Registration or
Transfer" ("Form U-4"). Form U-4 provides that the registered employee
to arbitrate any dispute, claim or controversy that may
arise between [the employee and his] firm, or a customer,
or any other person, that is required to be arbitrated
under the rules, constitutions, or ...