# Opposition Brief — Zosky v. Boyer

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0515%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1989
- **Citation:** 488 U.S. 1042

## Text

Supreme Court, U.S.
FILED

?) pec 30 1908 =f

JOSEPH F. SPANIOL, JR.
No. 88-906 CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1988

DOROTHY ZOSKY,
Petitioner
Vv.

DANIEL BOYER AND
BOENNING & SCATTERGOOD, INC.,
Respondents

On Petition for Writ of Certiorari
to the United States Court of Appeals
for the Third Circuit

BRIEF FOR RESPONDENTS
DANIEL BOYER AND
BOENNING & SCATTERGOOD, INC.

Tom P. Monteverde

Jean C. Hemphill

Monteverde, Hemphill,
Maschmeyer & Obert

2230 The Fidelity Building

123 South Broad Street

Philadelphia, PA 19109-1022

(215) 735-1900

Attorneys For Respondents
Daniel B. Boyer, III and
Boenning & Scattergood, Inc.

TABLE OF AUTHORITIES..........

COUNTERSTATEMENT OF QUESTION
pe ks : Sry ere Tre Tee

OPINIONS tk rrr Pre a ee

JURLBUEGCE Bocce ceesecdsececneeec

COUNTERSTATEMENT OF THE CASE..

REASONS FOR DENYING THE WRIT..

I.

THE DECISION OF THE

THIRD CIRCUIT COURT OF
APPEALS IN THIS MATTER
PROPERLY FOLLOWED THE
LONG-STANDING PRECEDENTS
OF BOTH THIS COURT AND
THE THIRD CIRCUIT.........

A. BACKGROUND AND
SUMMARY OF ARGUMENT.......

B. PETITIONER'S
COMPLAINT WITH THE
DECISION OF THE COURT

OF APPEALS DOES NOT
CHALLENGE THE

CORRECTNESS OF THE LAW
APPLIED BUT RATHER THE
FACTUAL CONCLUSIONS OF
THE COURT UPON
APPLICATION OF THE LAW....

11

..& :

Page

C. THIS COURT'S DECISION

IN GULFSTREAM AEROSPACE

CORP. v. MAYACAMAS CORP.

DID NOT ALTER THE PRE-
VAILING LAW IN THE THIRD
CIRCUIT WITH RESPECT TO

THE APPEALABILITY OF

FINAL DECISIONS UNDER
SECTION 129l.ccccesscesess 16

D. THE GULFSTREAM

DECISION ONLY AFFECTS

THE LAW UNDER SECTION
1292(a)(1) AND THE

THIRD CIRCUIT DID NOT

BASE ITS DECISION HERE

ON SECTION 1292(a)(1)..... 18

E. THE THIRD CIRCUIT

COURT OF APPEALS

DECISION IS CONSISTENT

WITH ESTABLISHED POLICY

OF THIS COURT. ccccccccsccee 21

CONCLUSION..... Coe eeeecesccces 22

aije

’

324 U.S. 229, 223, 65
S.Ct. 631, 633, 89 L.Ed.
911 CROSS) ccccccecccccccccccelslO

Corp., 337 U.S. 541, 69
S.Ct. 1221, 93 L.Ed.

DTT <5 bbeecs ce « isteaue
Denley _v. Shearson/

733 F.2d 39 (6th Cir.

B9BE) cccccscccccccccose re, fe fe © 15
Diematic Mfg. Corp. v.

516 F.2d 975 (2d Cir.),

cert. denied, 423 U.S.
913 C2975) ccccccces ere © eeeee#see#se« 15

Wee SID (3299S) cccccccccsecces 10,18,20

Ettelson v. Metropolitan
Life Insurance Co, 317

U.S. 188 (1842).............-10,18,20

Gavlik Construction Co.

v.H.F. Campbell Co.,

526 F.2d 777 (3d Cir.

a ee 19

Corp. v. Mayacamas Corp.,
U.S. , 108 S.Ct.
1133, 99 L.Ed.2d 296 (1988)..9,10,16,

eoccccccccccccssccseccccccccceitt,18,20,21

Limbach Co. v. Gevyn
Constructio -

544 F.2d 1104, cert.
denied, 430 U.S. 916
(lst cir. Bev ebaeecoceasciaceead

Matter of Chicago,
Milwaukee, St. Paul

& Pacific R. Co., 784

F.2d 831 (7th Cir.

1986)...... i aed ain win a a 15

New Englan ower Co.

v. Asiati oleum

Corp., 426 F. 183 (list

Gees M6 666 46646460 0400%08 14,15

Quinn v. CGR, 828 F.2d 1463
(10th Cir. 1987) .cccrvcase eeeeel5S

Rogers v. Schering Corp.,
262 F.2d 180 (3d Cir.),
cert. denied, 359 U.S.
991, 79 $.Ct. 1121, 3

Recs m WOO CAPER) cc cacsccice 11,19,20
Shearson/American Express,
Inc. v. McMahon, U.S.
, 107 S.Ct. 2332, 96
~~ %& SF 2, | eae 4, 5

-iv-

Cases (Cont'd.):
Stateside Machinery Co.

: v. Alperin, 526 F.2d 480
(3d cir. BPPOpcacceccec e*eee#eee 15
N

Wr2n v. Sletten Const.

Co., 654 F.2d 529 (9th

) ee ae ae 15
; Statutes:
| 9 U.S.C. Section 10...........14
9 U.S.C. Section: 12s 660is.s00024
. 28 U.S.C. Section 1254(1)..... 2
i; --* 28°U.8.C. Section 1291........ 11,16,17
28 U.S.C. Section 1292(a)(1)..18
Rules:
; F.R.App.P. 42(b)..... OSes 7
| U.S. Supreme Court Rule 17....2,8
i
i
-
P

-V=

3

This Brief is filed on behalf of
respondents Daniel Boyer and Boenning &

Scattergood, Inc.’

COUNTERSTATEMENT OF QUESTION INVOLVED

Was the Court of Appeals correct in

dismissing Petitioner's appeal of the
district court's order staying a federal
court securities fraud action and
compelling industry arbitration of the
Claims pursuant to the agreement of the
parties on the basis that it was an

. unappealable interlocutory order?

OPINIONS BELOW
A reproduction cf the Third Circuit
Court of Appeals opinion below is

provided in the Appendix to Petition for

Writ of Certiorari ("P-App."). The Court
Boenning & Scattergood, Inc.
("Boenning") is a privately owned

Pennsylvania corporation.

-l-

OT

of Appeals decision is now published at

856 F.2d 554 (3d Cir. 1988).

JURISDICTION
The Petition for Writ of Certiorari

states that jurisdiction of this Court
rests upon 28 U.S.C. Section 1241(1) and
Rule 17 of this Court. There being no
such section, respondents believe
petitioner meant to state that
jurisdiction of this Court rests upon 28

U.S.C. Section 1254(1).

COUNTERSTATEMENT OF THE CASE

Respondent Boenning and Scattergood,
Inc. ("Boenning") is a regional
securities brokerage firm and a member of
the National Association of Securities
Dealers ("NASD"). Daniel B. Boyer, III
("Boyer"), a registered securities
representative employed by Boenning, was

Petitioner's broker having followed him

-2-

to Boenning from his previous brokerage
firm. At the commencement of her
business relationship with Boenning,
petitioner signed a Customer Agreement
agreeing, inter alia, "to submit to
arbitration any controversy between us
arising out of your business or this
agreement" (P-App. 71-72). Petitioner
made several investments in her account
at Boenning. One investment of twenty
thowsand dollars in a small start-up
computer company was lost, however, when
the company failed. Petitioner then sued
the firm and her broker alleging
misrepresentation and fraud based on
respondents' sale of an allegedly
unsuitable investment.

In their answer to the Complaint,
respondents alleged as a defense the
arbitration agreement and, at the same

time, asked petitioner's counsel to

-3-

Peete te Le.

submit the claim to arbitration, which
request was refused by petitioner. No
motion to enforce the arbitration
agreement was filed because such
agreements were viewed as unenforceable
by the Third Circuit Court of Appeals in
investor securities fraud complaints at
that time. See Opinion of the Court of
Appeals (P-App. 26-27 and n.2).
Accordingly, the case proceeded to
Federal Court arbitration and the
arbitrators entered an award in favor of
respondents on October 24, 1986, which

was appealed, de novo, by petitioner.

Shortly before the matter was to be
tried, by consent, before the United
States Magistrate, with direct right of
appeal to the Court of Appeals, this
Court filed its decision in

Shearson/American Express, Inc. v.
McMahon, U.S. , 107 S.Ct. 2332, 96

-4=-

L.Ed.2d 185 (1987), confirming the
enforceability of customer/broker
arbitration agreements even in cases
alleging violations of the anti-fraud
provisions of at least some of the
federal securities laws. Immediately
thereafter, respondents prepared and
filed a Motion to Compel Arbitration,
which petitioner opposed. On September
4, 1987, Magistrate Leomporra denied
respondents' Motion to Compel
Arbitration. The respondents filed a
Notice of Appeal of the Order in the
Third Circuit Court of Appeals.
Magistrate Leomporra requested
further argument on the Motion to Compel
Arbitration stating at the time that
Since an appeal had been filed he had no
authority to alter his Order but he
wished to hear further regarding the

parties' legal positions in connection

-5-

with his preparation of an Opinion for
review by the Court of Appeals. The
Magistrate also requested further
memoranda with respect to the issues
raised in the Motion to Compel
Arbitration. On October 13, 1987, Judge
Leomporra issued a Memorandum Opinion in
which he concluded that his decision |
denying the Motion to Compel Arbitration
was erroneous. The Magistrate did not
vacate the Order, however, acknowledging
that he had no authority to do so because
of the pending appeal, but he suggested
that the respondents might withdraw their
appeal so that the case would be returned
to him for revision of the Order.

Based on that suggestion,
respondents filed a Praecipe to withdraw
the appeal on or about November 5, 1987
and the Clerk of the United States Court

of Appeals of the Third Circuit dismissed

the appeal under the authority conferred
upon the Clerk by Rule 42(b) of the
Federal Rules of Appellate Procedure on
November 17, 1987.

On November 25, 1987, respondents
filed a Motion for Reconsideration of the
Order denying their motion to compel
arbitration and after receipt of an
answer by petitioner, Magistrate
Leomporra, on December 1, 1987, granted
the Motion to Compel Arbitration and
directed the appellant to proceed to
arbitration before the NASD or the
Philadelphia Stock Exchange. On December
17, 1987, petitioner filed a Notice of
Appeal in the Court of Appeals of the
Third Circuit of the Magistrate's
December 1, 1987 decision.

On September 8, 1988, the Court of
Appeals for the Third Circuit dismissed

the appeal for lack of appellate

-7=

jurisdiction holding that a district
court order compelling arbitration was
interlocutory and, therefore, not
immediately appealable. On September 30,
1988, the Court of Appeals denied the
petitioner's Petition for Rehearing. On
December 1, 1988, petitioner filed the

subject Petition for Writ of Certiorari.

R F ' . The writ

Rule 17 of this Court provides:

A review on Writ of Certiorari

is not a matter of right, but

of judicial discretion, and

will be granted only where

there are special and important

reasons therefor.

The Rule goes on to describe "the
character of the reasons" the court will
consider in passing upon a Petition for
Writ of Certiorari, such as (1) conflicts
and decisions between federal courts of

appeals on the same issue; (2) wide

departures by a federal court of appeals

=-8-

from the “accepted and usual course of

judicial proceedings"; and (3) a decision

by a federal court of appeals on an

important question of federal law which
has not been, but should be, settled by
this Court, or which has been decided in

a way in conflict with applicable

decisions of this Court.

When measured by the foregoing
standards, the present Petition is
clearly want of merit.

I. e isi e) j ircuit
Court Of Appeals In This Matter ,
Properly Followed The Long-Standing
Precedents Of Both This Court And
The Third Ci x

Bie dad Summa Of
Argument

Prior to this Court's decision in

Gulfstream Aerospace Corp. v. Mayacamas
Corp., U.S. , 108 S.Ct. 1133, 99

L.Ed.2d 296 (1988), the Third Circuit

routinely accepted jurisdiction over

-93-

interlocutory appeals from orders
granting or denying motions to compel
arbitration under the Enelow-Ettelson’
rule. Following that rule's abrogation
in Gulfstream, the present case prompted
the Third Circuit Court of Appeals to re-
review the Court's jurisdiction over such
orders under 28 U.S.C. Sections 1291 and
1292.

The Court of Appeals correctly
concluded that neither Section 1291 nor
Section 1292 provided a basis for
interlocutory review of the Magistrate's
Order. The Court's decision is solidly
grounded in the established precedent of
this Court in Catlin v. United States,
324 U.S. 229, 223, 65 S.Ct. 631, 633, 89

L.Ed. 911 (1945) and the Third Circuit in

Enelow v. New York Life Insurance
Company, 293 U.S. 379 (1935); Ettelson v.

Metropolitan Life Insurance Co., 317 U.S.
188 (1842).

-10-

Rogers v. Schering Corp., 262 F.2d 180
(3d Cir.), cert. denied, 359 U.S. 991, 79
S.Ct. 1121, 3 L.Ed.2d 980 (1959).

In its decision in this case, the
Court of Appeals for the Third Circuit

followed the leading case in the Circuit,

Rogers v. Schering Corp., 262 F.2d 180
‘(3d Cir.), cert. denied, 359 U.S. 991, 79

S.Ct. 1121, 3 L.Ed.2d 980 (1959). In
Rogers, the Third Circuit Court of
Appeals, en banc, established the
following guidelines to determine when an
order staying a proceeding pending
arbitration or compelling arbitration is
a final order under Section 1291:

An order requiring arbitration

is appealable as final under 28

U.S.C. Section 1291 'where it

-ll-

is not merely a step in the
judicial enforcement of a claim
nor auxiliary to the main
proceeding but is the full
relief sought' .... Such cases
are to be distinguished from
those in which an order for
arbitration is made in the
course of a continuing suit for
other relief. (Citations
omitted.) Id., 262 F.2d at
182.

In her Brief, Petitioner concedes
that Rogers is the controlling case
(Petitioner's Brief, pp. 10-11).
Petitioner and the Court of Appeals part
company, however, on the application of
Rogers to this case. In that connection,
the Third Circuit made the following
factual analysis:

This case, in which the
defendant in a suit for
statutory and common law
damages has moved to compel
arbitration, would appear to
fall clearly withir. the rule of
Rogers that orders arising out
of a lawsuit, 'such as a suit
for damages', are interlocutory
and not appealable as final
orders. Arbitration is not the
full relief sought by the
plaintiff; indeed, the

-12-

plaintiff opposes arbitration.
The magistrate retains
jurisdiction and may be
expected in the ordinary course
of proceedings to issue the
further orders necessary to
effectuate the result of
arbitration. When a final
order is entered in this case,
the issue of whether or not the
magistrate properly ordered
arbitration will be ripe for
review. (P-App. 44-45)

Petitioner, on the other hand,
argues:

If the order compelling
arbitration stands and the
parties carry out an
arbitration, the arbitration
award will not require judicial
approval or a court decree to
put it into effect. The
decision of the arbitrators
will be binding. Therefore,
unless petitioner now has a
right to appeal from the order
compelling arbitration, she
will, in all probability, never
be able to secure an appellate
review of that order.
(Petitioner's Brief, 10-11)

Petitioner's statements are
incorrect. If the parties proceed to

arbitration, petitioner would not lose

-13-

her right to a review of the propriety of
the referral to arbitration at the
conclusion of the suit--the lower court
could review not only that issue, but any
other issue which would be the
appropriate subject of review by a court
after an arbitration proceeding.°

Nor is petitioner irreparably harmed
by the denial of the interlocutory
appeal. The only prejudice to petitioner
is the expense and delay arising out of
an arbitration on the merits in the
arbitration forum. The Third Circuit
correctly noted that such expense and
delay has never been a valid reason for

an immediate appeal of an interlocutory

order. New England Power Co. v. Asiatic
Petroleum Corp., 426 F. 183 (1st Cir.

. The Federal Arbitration Act, 9
U.S.C. Sections 10 and 11, outlines the
power of the court, following the
arbitration hearing, to vacate, modify or
confirm an arbitration award.

-14-

1972); Stateside Machinery Co. v.
Alperin, 526 F.2d 480 (3d Cir. 1975).

The Third Circuit's conclusion that
the instant order was not a final order
appealable under 28 U.S.C.S. Section 1291
is also consistent with decisions in most
other circuits. Quinn v. CGR, 828 F.2d
1463 (10th Cir. 1987); Matter of Chicago,
Milwaukee, St. Paul & Pacific R. Co., 784
F.2d 831 (7th Cir. 1986); Denley v.
Shearson/American Express, Inc., 733 F.2d
39 (6th Cir. 1984); Wren v. Sletten
Const. Co., 654 F.2d 529 (9th Cir. 1981);

imba Vv Vv ucti orp.,
544 F.2d 1104, cert. denied, 430 U.S. 916
(lst Cir. 1976); Diematic Mfg. Corp. v.

Packaging Industries, Inc., 516 F.2d 975
(2d Cir.), cert. denied, 423 U.S. 913
(1975).

This Court, in Gulfstream Aerospace
Corp. v. Mayacamas Corp., ____—sU.S. ___,
108 S.Ct. 1133, 99 L.Ed.2d 296 (1988),
reaffirmed the well established general
rule which is the foundation of the

Rogers decision, namely, *:

* In the Gulfstream case, this Court
further opined that the order there was
also not reviewable under the "small class
of exceptions" carved out of Section 1291

by the Court in Cohen v. Beneficial Loan

Corp., 337 U.S. 541, 69 S.Ct. 1221, 93
L.Ed. 1528 (1949) (the "collateral order
doctrine"). The Gulfstream decision

repeated the three requirements of the
Cohen collateral order exception to the
finality rule:

The order must’_ conclusively
determine the disputed question;
resolve an important '§ issue
completely separate from the
merits of the action; and be
effectively unreviewable on
appeal from a final judgment.

The Court found that the Gulfstream

-16-

A district court's decision is

appealable under Section 1291

only when the decision ends the

litigation on the merits and

leaves nothing for the court to

do but execute the judgment.

Quoting

States, 324 U.S. 229, 233, 65

S.Ct. 631, 633, 89 L.Ed. 911

(1945).

Thus, the Petitioner is correct when
she states that Gulfstream did not alter
the clearly established precedents under
Section 1291. As stated above, however,
the Court of Appeals did not find that
Gulfstream changed Section 1291 and it
did not depart from the established

precedents under that Section.

——

Order did not "conclusively determine the
disputed question" and thus failed the
first prong of the collateral order
exception test. Here, the Court of
Appeals found no basis for applying the
collateral order rule (P-App. 54-55) and
Petitioner has not’ challenged that
finding.

-l17-

In the second portion of its Opinion
in Gulfstream, this Court found that the
district court order was not appealable
under Section 1292(a)(1). In doing so,
this Court expressly overruled its

earlier decisions in Enelow v. New York

Life Insurance Company, 293 U.S. 379
(1935) and Ettelson v. Metropolitan Life

Insurance Co., 317 U.S. 188 (1942) (the
so called "Enelow-Ettelson rule") and
held that orders granting or denying
stays of "legal" proceedings on
"equitable" grounds were not
automatically appealable under 28 U.S.C.
1292(a) (1). |

In the present case, the Third

Circuit Court of Appeals noted that:

At the time the briefs were
filed in this court, the

doctrine, under
which certain orders staying or
refusing to stay judicial
proceedings were treated as
appealable injunctions, was an
accepted feature of the law of
appellate jurisdiction.
(Citations omitted.) (P-App.
at 29-30)

After further analysis, the Court of

Appeals concluded:

In the wake of Gulfstream's
abrogation of the Enelow-

Ettelson doctrine, it will once
again be imperative to analyze
appealability of orders
effecting arbitration under the
various sources of appellate
jurisdiction. (P-App. at 37-
38)

In the analysis that followed, the

Third Circuit distinguished its earlier

decision in Gavlick Construction Co. v.
H. F. Campbell Co., 526 F.2d 777 (3d Cir.

1975), to the extent that it is
inconsistent with the Rogers decision,
with the following note:

5. We note however that
because the stay portion of

-19-

Gavlick was appealable under

= , the
distinction made between the
stay and the order compelling
arbitration was unnecessary.
For example, in Formigli Corp.
v. Alcar Builders, Inc., 329
F.2d 79, 80 (3d Cir. 1964),
this court, faced with the same
situation, treated an order
both compelling arbitration and
staying proceedings as an
interlocutory stay order. The
entire order in Gavlick was
interlocutory in nature and was
entirely appealable at the time
under the then prevailing
precedent. We could thus
regard Gavlick's Section 1291
rationale as dictum had it not
spawned a following of its own.
(P-App. 47)

Thus, the only consideration given
to the Gulfstream decision by the Third
Circuit Court of Appeals in this case was
its effect on the Enelow-Ettelson
doctrine. The remainder of the analysis
by the Third Circuit related entirely to
its own precedent in Rogers and other
authorities. Accordingly, petitioner's

discussions regarding the distinctions

-20-

between this case and the Gulfstream case

are misplaced and unnecessary.

E. The Third Circuit Court Of

As noted by the Court of Appeals,
the result reached in this case is
consistent with the policy considerations
articulated by this Court relating to
limiting the appealability of
interlocutory orders. The Court of
Appeals reasoned:

Although we are not makers
cf policy, we cannot avoid
consideration of the practical
effect of our decision that
orders staying proceedings or
compelling the parties in an
ongoing lawsuit to arbitrate
are nonappealable interlocutory
orders. Arbitration is an
expeditious and inexpensive
mode of alternative dispute
resolution. Allowing
interlocutory appeals of such
orders would defeat the
attractiveness of arbitration
by imposing delay and
additional expense. Immediate
appealability would thus

-21i-

SS SEE

detract from the broad federal
policy in favor of arbitration,
emphasized repeatedly by the
Supreme Court.

Our holding is also
consistent with the Supreme
Court's limitation of
appealability of interlocutory
orders in other contexts. As
the Court has stated,
permitting wholesale appeals of
orders entered in the course of
proceedings ‘would constitute
an unjustified waste of scarce
judicial resources' *** We are
thus satisifed that our holding
is supported by important
policy concerns about the
allocation of judicial business
between district courts and the
court of appeals. (Citations
omitted.) (P-App. 56-57)

CONCLUSION

The Court of Appeals decision in
this case is consistent with the
precedents of this Court and the Courts
of Appeals and in no way departs from the
accepted and usual course of judicial
proceedings.

The Court of Appeals decision in no

way conflicts with the applicable

-22<

decisions of this Court and does not
involve an unresolved question of federal
law which requires the review of this
Honorable Court. Accordingly,
respondents respectfully request the
Court to deny Petitioner's Writ of

Certiorari.

nt as”

TOM P. MONTEVERDE

JEAN C. HEMPHILL
Attorneys For Respondents,
Daniel Boyer and Boenning
& Scattergood, Inc.

OF COUNSEL:

MONTEVERDE, HEMPHILL, MASCHMEYER & OBERT
Suite 2230, The Fidelity Building
123 South Broad Street
Philadelphia, PA 19109-1022
(215) 735-1900

-23-

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0515%3A2. Public record. Not legal advice.