Petition for Writ of Certiorari — Heily v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

* ~

g 22 |

No.

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1988

KATHRYN A. HEILY,

Petitioner,

VS.

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., et al.

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE CALIFORNIA COURT OF APPEAL,

FIRST APPELLATE DISTRICT

*SHAND S. STEPHENS

Evviot L. BIEN

Jose H. GARCIA

BRONSON, BRONSON &

McKINNON

555 California, Suite 340

San Francisco, CA 94104

Telephone: (415) 986-4200

Attorneys for Petitioner

Kathryn A. Heily

*Attorney of Record

BOWNE OF SAN FRANCISCO. INC. + '@O NINTH ST + SF. CA @4103 + (415) 86642300

.

r\

ee i aa em A li

QUESTIONS PRESENTED

A.

When a state court plaintiff presented sworn evidence of actual

bias against her by the New York Stock Exchange (“NYSE”)

arbitration forum, and invoked general state law unconscionability

principles of contracts and equity to resist the defendants’ motion

to compel such an arbitration of her state law wrongful discharge

and other claims, did the court below, following the Ninth Circuit

in Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th Cir.

1988), correctly refuse to hear such evidence by holding that the

Federal Arbitration Act, 9 U.S.C. § 2 (“FAA”), completely pre-

empts any such state law challenges to the fairness of the

prospective arbitration?

B.

Assuming that this Court’s recent decision in Perry v. Thomas,

482 US. , 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), rejects

any such sweeping pre-emption, does the FAA preserve peti-

tioner’s specific challenges on the basis of (1) state law uncon-

scionability principles, as applied to the arbitral forum selection

provisions of the contract; (2) state law equitable principles of

unclean hands, as applied to the respondents’ prehearing conduct

below which undermined the integrity of an NYSE arbitration in

this particular case; or (3) state law principles of fraud in the

inducement to the contract?

C.

Even if all of petitioner’s state law challenges are pre-empted,

is the order compelling an NYSE arbitration in this case reconcil-

able with the FAA itself, and if not then with due process

principles, where five experienced NYSE arbitrators submitted

declarations stating that wrongful termination claimants against

NYSE members could not obtain a fair NYSE arbitration hear-

ing; where respondents forwarded those declarations to the

NYSE; where all five declarants were immediately terminated by

the NYSE as arbitrators; where the NYSE’s director of arbitra-

tion—the same person who will select the NYSE arbitrators

herein—submitted a declaration against petitioner in the proceed-

ings below; and where the NYSE itself has launched an investiga-

tion of petitioner concerning the subject matter of the instant

litigation?

ii

TABLE OF CONTENTS

Page

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Bentutes Tavs... occ ncciecsiviiannsn eee 2

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1. Proceedings In The Trial Court................. 2

2. The Appellate Proceedings ...........0ssesee00: 6

Reasons for Granting the Wie ooo sissies taae eee 7

|. Notwithstanding Perry v. Thomas, This Court Needs

To Clarify The Extent To Which The Federal Arbi-

tration Act Pre-empts State Law Defenses To The

Enforcement Of Arbitration Agreements ......... 7

2. This Court Needs To Reaffirm That Federal Arbitra-

tions Must Be Fair, Whether That Fairness Is To Be

Ensured Through Federal Or State Law Standards 11

COmctMSIOR . wo. so ene eceedpassaee asa 13

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TABLE OF AUTHORITIES

Cases

Page

Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th

I a i al 6, 7, 8,9

Commonwealth Coatings Corp. v. Continental Cas. Co., 393

U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968), reh. den.,

Commonwealth Coatings Corp. v. Continental Casualty

Co., 393 U.S. 1112, 89 S.Ct. 848, 21 L.Ed.2d 812 (1969) 11

Downs v. Prudential-Bache Securities, Inc., 202 Cal.App.3d

GO, BOW GM, FOO CEDUOD co cccccccccccscsccseses 9

French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784

es crs dsc cece eedescoesess « 13

Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 171 Cal.Rptr.

i ee oes kecetosccesccesees 10

Heily v. Superior Court, 202 Cal.App.3d 255 (1988) ..... 1,8

Idlewild Liquor Corp. v. Epstein, 370 U.S. 713 82 S.Ct.

I Ue ED oa soc ceceseccacdeccnssnc 2

Liddington v. The Energy Group, Inc., 192 Cal.App.3d 1520,

ED ors. na vcccceeesscteessenees 9

Marshall v. Jerrico, Inc., 446 U.S. 238, 100 S.Ct. 1610, 64

Les cea ket deacenbasseenen 11

Perdue v. Crocker National Bank, 38 Cal.3d 913, 216

Cal.Rptr. 345, 702 P.2d. 503 (1985), app. dismd. Crocker

Nat'l Bank v. Perdue. 475 U.S. 1001, 106 S.Ct. 1170

i ee ee ced céeeccescheooonsesacesc 10

Perry v. Thomas, 482 U.S. —__., 107 S.Ct. 2520, 96

ET a nc cnn cccsecsecsesncunce 5, 7, 8, 10

Precision Instrument Manufacturing Co. v. Auto M. Ma-

chine Co., 324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381

(1945) reh. dend. Precision Inst. Mfg. Co. v. Automotive

Maintenance Machinery Co. 325 U.S. 893, 65 S.Ct. 1189,

coe cena aenucees ccecesee 10, 11

Shearson/ American Express, Inc. v. McMahon, ____ US.

, 107 S. Ct. 2332, 96 L.Ed.2d 185 (1987) ........ 8,11

Taylor v. Fields, 178 Cal.App.3d 653, 224 Cal.Rptr. 186

ene eke weeeebeceseccescaves 10

Thomas v. Perry, 200 Cal.App.3d 510 (1988) ........... 9

iv

TABLE OF AUTHORITIES

CASES

Page

United Retail & Wholesale Emp. v. Yahn & McDonnell,

787 F.2d 128 (3rd Cir. 1986), affirmed, i} Se

107 S.Ct. 2171, 95 L.Ed.2d 692 (1987) .............. 12

Statutes

9 U.S.C. §§ 1 et seq. (Federal Arbitration Act)

Juaudedacusnsdtannsecestesceueteasee 2, 4, 6, 10, 11, 12

UR Us ro nah oosdeaduhasanectcsastsenatenaan 2

PC i. Vcuee as asian eeu eeseeseeeeueeeetes 2

ee Se aS alae edge koe esau baal ON l

Re BY I node tesees cédecaunuscaatenaanss 7

Rules oi Court

UY GA ED EGR hid Sdedéoscesucdsaneeseecaes 10

No.

In the Supreme Court

OF THE

United States

OcTOBER TERM, 1988

KATHRYN A. HEILY,

Petitioner,

VS.

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., et al.

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE CALIFORNIA COURT OF APPEAL,

FIRST APPELLATE DISTRICT

PARTIES

The parties to the proceeding below are petitioner Kathryn A.

Heily, and respondents Merrill Lynch, Pierce, Fenner & Smith,

Inc., Paul F. Hayes, and Peter S. Sansevero.

OPINION BELOW

The opinion below is reprinted in the Appendix. It has been

certified for publication, and appears in the California Advance

Sheets as Heily v. Superior Court, 202 Cal.App.3d 255 (1988),

review denied. (Appendix A)

SUPREME COURT JURISDICTION

The opinion of the California Court of Appeal was filed on

June 20, 1988. A petition for review was filed on June 29, 1988,

and review was denied by the California Supreme Court on

September |, 1988. This petition is therefore timely under 28

EE

2

U.S.C. §2101(c), and jurisdiction lies because petitioner has

been placed “effectively out of court,” Idlewild Liquor Corp. v.

Epstein, 370 U.S. 713, 715 n.2, 82 S.Ct. 1294, 8 L.Ed.2d 794

(1962), by the highest court of the State of California in which a

decision could be had. 28 U.S.C. 1257.

STATUTES INVOLVED

(1) 9US.C. $2

A written provision in any maritime transaction or a contract

evidencing a transaction involving commerce to settle by arbitra-

tion a controversy thereafter arising out of such contract or

transaction, or the refusal to perform the whole or any part

thereof, or an agreement in writing to submit to arbitration an

existing Controversy arising out of such a contract, transaction, or

refusal, shall be valid, irrevocable, and enforceable, save upon

such grounds as exist at law or in equity for the revocation of any

contract.

STATEMENT OF THE CASE

1. Proceedings In The Trial Court

Petitioner, Kathryn A. Heily (“Heily”), brought this action in

the Superior Court of the State of California, naming respondents

Mermill Lynch, Pierce, Fenner & Smith and several individuals

(together, “Merrill Lynch”) as defendants. The pertinent plead-

ing at the time of the decision below was Heily’s Second

Amended Complaint (“complaint”), filed on April 23, 1987.

The complaint alleged that Heily worked as a stockbroker for

Mermill Lynch for over 18 years, with an unblemished record.

Starting in 1985, Merrill Lynch ordered Heily to deceive her

client/investors about losses they had suffered in an investment

program sponsored by Merrill Lynch. When she refused to take

part in this deception, Merrill Lynch unlawfully withheld her

commissions and demanded that she reimburse her investors for

their losses with her personal funds. Merrill Lynch threatened her

with financial ruin, and called her a liar in an attempt to

3

intimidate her into participating in the deception against her

clients. Finally, she was fired.

Heily’s complaint asserted California state law theories of

wrongful termination, breach of contract, defamation, willful

failure to pay her wages, and fraudulent inducement and undue

influence to agree to the arbitration clauses. Because she suffered

personal financial losses in the Merrill Lynch investment scheme,

her complaint also alleged a common law cause of action against

Merrill Lynch for negligence. (Exhibit 1)'

Following initial discovery, on March 6, 1987 Merrill Lynch

filed a petition in the Superior Court to compel arbitration before

the New York Stock Exchange (“NYSE”) or the National

Association of Securities Dealers (“NASD”). The petition was

based on arbitration clauses in Heily’s applications for approval of

employment, required for registration with the NYSE, and in an

option agreement Heily had signed with Merrill Lynch.

(Exhibit 2)

Heily opposed the motion to compel arbitration on a number of

grounds. She asserted that enforcement of the arbitration clauses

at issue would be unconscionable under California law, because

the forums in which Merrill Lynch sought arbitration were

actually biased in favor of Merrill Lynch. She further contended

that Merrill Lynch should be barred from seeking specific per-

formance of the arbitration clauses by reason of its unclean hands

in the course of seeking arbitration. In addition, she argued that

the arbitration clauses were unenforceable because of fraud and

undue influence in their inducement.

In support of her contentions, Heily submitted sworn declara-

tions by five highly experienced and well respected securities

industry arbitrators for the NYSE and NASD. Together, they

had conducted over 300 arbitrations. Their declarations stated

that NYSE arbitrations were biased against employees in disputes

with securities industry employers. (Exhibit 4) This conclusion

was supported by specific references to the composition of panels,

' Exhibits to the petition below to the California Court of Appeal for a

writ of mandate or prohibition will be referred to as “Exhibit _”.

4

the industry and management bias of the arbitrators, the arbitra-

tors’ interest in a favorable reputation with brokerage houses, and

the general interdependence and business connections necessary

to succeeding in this industry.

Merrill Lynch not only defended the NYSE arbitration but

concedes that it immediately sent the five declarations to the

NYSE and NASD. It notified both organizations that the declar-

ants had “attacked” the arbitration process. Within six hours after

the declarations were received, all five arbitrators were termi-

nated. An NASD witness admitted in deposition that the arbitra-

tors were fired because they had submitted their declarations in

this case. (Exhibit 5)

The Director of NYSE Arbitration, at Merrill Lynch’s request,

compiled statistics and submitted a declaration in support of the

Merrill Lynch motion in this action. (Exhibit 5) This is the same

Director who, under NYSE Rules, is directly responsible for

hand-picking the arbitrators who would decide Heily’s fate in

NYSE arbitration. (Exhibit 2)

A 30-year employee of Merrill Lynch, one of Heily’s former

co-workers, testified in deposition that he had been told, by a

Merrill Lynch officer, that if it could be documented that the

employee had provided assistance to Heily in her suit, he would

be fired, too. (Exhibit 4)

The trial court refused to consider Heily’s evidence. It accepted

Merrill Lynch’s argument that the Federal Arbitration Act, 9

U.S.C. § 1 et seq. (“FAA”) pre-empts all state law challenges to

the arbitrability of claims subject to the FAA.

MR. STEPHENS [counsel for Heily]: Your Honor, we

have submitted the declarations from five arbitrators from

the New York Stock Exchange, the American Stock Ex-

change, and NASD.

THE COURT: I read every word of those and it was real

interesting and I got out of the market immediately. But

under Federal law, it’s an appropriate forum.

5

If I find that the contract itself is enforceable, / don’t think,

as a State court, I can even look at that.... (Exh. 10)

(Emphasis added)

Thus, the trial court entered an order compelling arbitration

before the NYSE, and staying proceedings in the state court, on

July 6, 1987. (Appendix B)

Heily then moved for reconsideration, on the basis of recently

discovered evidence that the NYSE had lodged an investigation

of her in connection with the same investment losses involved in

the instant case. Heily also requested the court, in the alternative,

to consider ordering the arbitration to be conducted by the

American Arbitration Association (“AAA”), rather than the

NYSE. Heily based this request on the evidence of the clear bias

by the NYSE towards her individually. Heily submitted a decla-

ration of the Regional Director of the AAA, confirming that the

AAA was qualified to arbitrate all of Heily’s claims against

Merrill Lynch. (Exhibit 7)

At the hearing, the court again refused to consider Heily’s

evidence as a basis for either rejecting arbitration or ordering an

alternate forum. The court believed that it had no power to do so

in light of this Court’s recently decided opinion in Perry v.

Thomas, as shown by the transcript of proceedings.

MR. STEPHENS:

It is your Honor’s choice. The contract doesn’t mandate that

choice.

THE COURT: I don’t agree with you. I don’t think I have

got that choice. After Perry, I don’t think I have got that

choice. Federal law,...as to the enforceability of forum

selection clauses is pretty clear.

Later in the hearing, the Court again opined that it did not

believe it had the authority:

MR. STEPHENS:

What we have presented Your Honor with is the up front

evidence from 5 different arbitrators, to the effect that their

experiences in all of these disputes put together, tell them

6

that in this kind of a dispute, a wrongful termination case,

there is unfortunately a bias that exists against the Plaintiff.

And why incur that risk? Someone with an 18 year career is

entitled to the limited benefit of an impartial hearing. And

that is all that is being requested here, the particular forum,

which Your Honor has the power to do.

THE COURT: I don’t agree that I do... . (Exhibit 11)

Accordingly, the court again ordered Heily to arbitrate her claims

before the NYSE. (Appendix C)

2. The Appellate Proceedings -

Heily filed a petition for a writ of mandate or prohibition from

the California Court of Appeal for the First District. Her petition

was summarily denied, and she sought a review before the

California Supreme Court. The Court granted review, but re-

transferred the case to the Court of Appeal with instructions to

hear the matter on the merits. (Appendix D) Following briefing,

the Court of Appeal denied Heily’s petition. (Appendix A)

In a sweeping ruling, the Court of Appeal held that, in light of

the Ninth Circuit’s opinion in Cohen v. Wedbush, Noble, Cooke,

Inc., 841 F.2d 282 (9th Cir. 1988), under no circumstances can

federa) or state courts entertain challenges raising bias of NYSE

or NASD arbitration panels, irrespective of whether the challenge

is based on presumptive bias or actual bias. Furthermore, in a

brief concluding paragraph, the court rejected Heily’s challenges

based on unclean hands and fraud in the inducement, assuming,

incorrectly, that the Superior Court had ruled on those challenges

on the merits.

Heily again petitioned for a review in the California Supreme

Court, but this time review was denied. (Appendix “E”) This

petition follows.

7

REASONS FOR GRANTING THE WRIT

1. Notwithstanding Perry v. Thomas, This Court Needs To

Clarify The Extent To Which The Federal Arbitration Act

Pre-empts State Law Defenses To The Enforcement Of

Arbitration Agreements

The opinion below dramatically demonstrates the need for

further guidance from this Court regarding the interplay between

federal and state law on motions to compel arbitration under the

Federal Arbitration Act, 9 U.S.C. § 1 et seg. (“FAA”). Perry v.

Thomas, 482 U.S. ___, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987),

seemingly preserves a significant role for state law in determining

the enforceability of arbitration agreements. However, the opinion

below, purporting to follow the Ninth Circuit in Cohen v.

Wedbush, Noble, Cooke, Inc., supra, 841 F.2d 282, holds that the

FAA pre-empts any state law challenges to the enforcement of

arbitration agreements on the grounds that the proceeding will be

unfair. Other courts have differed, as this petition will note.

In Perry, this Court examined a California statute exclusively

addressing arbitrations. The statute, Cal: Labor Code § 229,

permitted court actions to be maintained irrespective of arbitra-

tion agreements. Perry held that such a statute was pre-empted by

the FAA.

However, Perry stopped well short of a conclusion that state

law had no role to play in determining the enforceability of

arbitration agreements. To the contrary, in a lengthy footnote, the

opinion explained that the FAA did not pre-empt general princi-

ples of state law which might affect the enforcement of an

agreement to arbitrate:

An agreement to arbitrate is valid, irrevocable, and enforcea- ©

ble, as a matter of federal law, ... “save upon such grounds

as exist at law or in equity for the revocation of any

contract.” [FAA § 2] ... Thus state law, whether of legisla-

tive or judicial origin, is applicable if that law arose to govern

issues concerning the validity, revocability, and enforceability

of contracts generally. A state law principle that takes its

meaning precisely from the fact that a contract to arbitrate is

8

at issue does not comport with this requirement (96 L.Ed.2d

at 437, fn.9) (Emphasis in original.)

Thus, Perry seemingly reaffirmed the traditional authority of the

states to apply their general legal and equitable principles to this

type of dispute. Only “arbitration specific” state laws were pre-

empted.

Nonetheless, in Cohen v. Wedbush, Noble, Cooke, Inc., supra,

841 F.2d 282, the Ninth Circuit held that the FAA did pre-empt

a challenge to an arbitration based on general state law principles

of unconscionability. Cohen reasoned that, in Shearson/American

Express, Inc. v. McMahon, US. __., 107 S.Ct. 2332, 96

L.Ed.2d 185 (1987), this Court had recognized the “virtually

plenary authority” (841 F.2d at 286) of the Securities and

Exchange Commission (“SEC”) over the arbitration procedures

adopied by national securities exchanges and associations. Thus,

according to Cohen:

Because Congress has committed to the SEC the task of

ensuring that the federal rights established by the Securities

Acts are not compromised by inadequate arbitration proce-

dures, we are bound by the Commission’s determination that

the procedures at issue here are satisfactory.... Any con-

trary holding would frustrate this carefully crafted federal

regulatory scheme. (841 F.2d 286)

Cohen thus rejected state law arguments of unconscionability,

stating that the “strong federal policy favoring arbitration, cou-

pled with the extensive regulatory oversight performed by the

SEC in this area, compel the conclusion that agreements to

arbitrate disputes in accordance with SEC-approved procedures

are not unconscionable as a matter of law.” 841 F.2d at 286.

The court below, with Cohen as its sole authority, rejected

petitioner’s argument that Perry preserved her state law chal-

lenges to the prospective arbitration. The opinion below quotes

Perry's choice-of-law language at length, but dismisses it as

“dicta in a footnote.” (A-4)

We agree with the Cohen analysis. Under Cohen’s inter-

pretation of Shearson/American Express, the SEC is respon-

9

sible for ensuring the fairness of arbitration proceedings

under the NYSE and NASD. To the extent that federal or

state judges, applying federal law, may have previously been

permitted to entertain challenges raising institutional bias of

these arbitration panels..., such challenges are no longer

permitted. (A-8)

Other courts, however, have reached a different result.

Nine days after the opinion below was first issued, California's

Fourth District Court of Appeal held in Downs v. Prudential-

Bache Securities, Inc., 202 Cal.App.3d 616, 248 Cal.Rptr. 734

(1988), that a prospective NYSE arbitration was indeed subject

to scrutiny under state law principles of unconscionability. In an

opinion by Justice Patricia Benke, the court remanded the matter

to permit the plaintiff to show any actual bias in the prospective

arbitration. Interestingly, Downs also held that, if actual bias were

found, the defendant brokerage house would nevertheless be

entitled to arbitration under the rules of the American Arbitration

Association—relief which petitioner sought below, as an alterna-

tive to a complete denial of respondents’ motion.

In Liddington v. The Energy Group, Inc., \92 Cal.App.3d 1520,

238 Cal.Rptr. 202 (1987), another California Appellate District

construed Perry v. Thomas the way petitioner does:

[S]o long as the state law principles in question have a

general application . . . state law provides the relevant rule of

law with respect to issues such as formation and enforcement

of an arbitration agreement. (192 Cal.App.2d at 1527.)

In addition, the Second District Court of Appeal in Thomas v.

Perry, 200 Cal.App.3d 510 (1988), on remand from this Court,

also left the door open to challenges to arbitration based on

evidence of actual bias. The court observed that the party chal-

lenging arbitration did not “suggest that he could prove actual

bias.” 200 Cal.App.3d at 515. Accordingly, the court followed

Cohen v. Wedbush, et al., and other cases finding that the NYSE

rules at issue were not presumptively biased. Petitioner in the

instant case, of course, has alleged and submitted evidence of

actual bias.

10

Finally, the court below felt constrained to disregard Heily’s

argument based on the California Supreme Court's opinion in

Graham vy. Scissor-Tail, Inc., 28 Cal.3d 807 (1981), on the

grounds that it “directly affronts the analysis of Perry v. Thomas

...” (A-5) It saw Graham as a “state law decision weaving

together principles of adhesion contracts and state statutes gov-

erning the neutrality of arbitrators.” (A-5) But it failed to apply

the Perry analysis—to see whether the general principles of state

law enunciated in Graham would independently support peti-

tioner’s position in the instant case.

In point of fact, Graham's analysis of the California doctrine of

unconscionability shows that it applies generally to any kind of

contract. See also, Perdue v. Crocker National Bank, 38 Cal.3d

913, 925, 216 Cal.Rptr. 345, 702 P.2d 503 (1985), app. dismd.

Crocker National Bank v. Perdue, 475 U.S. 1001, 106 S.Ct. 1170

(1986), and California Civil Code Section 1670.5. In other words,

the unconscionability doctrine in California is not confined to

arbitration contracts. Accordingly, under Perry v. Thomas, the

FAA does not pre-empt challenges under that doctrine, at least in

the form it takes in California.

The same holds true as to petitioner’s other state law chal-

lenges, invoking the general principles of unclean hands and

fraudulent inducement to enter into a contract. There can be no

doubt about the general applicability of the latter doctrine. As to

the former, California law provides generally that is a “basic

principle of equity that one who seeks equity must have clean

hands; therefore a court will not aid the commission of a fraud by

enforcing a contract... . Moreover, any unconscionable conduct

in the transaction may give rise to the defense.” Taylor v. Fields,

178 Cal.App.3d 653, 666, 224 Cal.Rptr. 186 (1986). This Court,

too, has explained that “this maxim is far more than a mere

banality.” Precision Instrument Manufacturing Co. v. Auto M.

Machine Co., 324 U.S. 806, 814, 65 S.Ct. 993, 89 L.Ed.2d 1381

(1945), reh. dend. Precision Inst. Mfg. Co. v. Auto M. Machine

Co., 325 U.S. 893, 65 S.Ct. 1189, 8 L.Ed. 2005 (1945), and has

not hesitated to close the courts of equity to those whose behavior

is tainted relative to the subject matter of their equitable petition.

1]

[O]ne’s misconduct need not necessarily have been of such a

nature to be punishable as a crime or so as to justify legal

proceedings of any character. Any willful act concerning the

cause of action which rightfully can be said transgresses

equitable standards of conduct is sufficient cause for the

invocation of the maxim by the chancellor. (324 U.S. at

815)

The continued role of state law in this area is surely a “special

and important reason” warranting certiorari pursuant to Supreme

Court Rule 17.1.

2. This Court Needs To Reaffirm That Federal Arbitrations

Must Be Fair, Whether That Fairness Is To Be Ensured

Through Federal Or State Law Standards

As this Court has observed in Commonwealth Coatings Corp.

v. Continental Cas. Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d

301 (1968), reh. den. Commonwealth Coatings Corp. v. Conti-

nental Casualty Co., 393 U.S. 1112, 89 S.Ct. 848, 21 L.Ed.2d 812

(1969), the FAA reflects “a desire of Congress to provide not

merely for any arbitration but for an impartial one.” id. at 147

(Emphasis in original) Due Process certainly requires no less.

Due Process requires an opportunity to be heard before an

unbiased and impartial tribunal. As this Court stated in Marshall

v. Jerrico, Inc., 446 U.S. 238, 242, 100 S.Ct. 1610, 64 L.Ed.2d

182 (1980):

This requirement of neutrality in adjudicative proceedings

safeguards the two central concerns of procedural due pro-

cess, the prevention of unjustified or mistaken deprivation

and the promotion of participation and dialogue by affected

individuals in the decisionmaking process. [Citation] The

neutrality requirement helps to guarantee that life, liberty, or

property will not be taken on the basis of an erroneous or

distorted conception of the factors or the law. [Citation] At

the same time, it preserves both the appearance and reality

of fairness, “generating the feeling, so important to a popular

government, that justice has been done,” [citation] by en-

suring that no person will be deprived of his interests in the

absence of a proceeding in which he may present his case

12

with assurance that the arbiter is not predisposed to find

against him.

The requirement of neutrality has been jealously guarded by

this court.

Bias in an adjudicatory system is the antithesis of due process,

It would be anomalous indeed if federal law mandated that

evidence of bias in an arbitration system was inadmissible and

beyond judicial consideration in deciding whether to compel

arbitration.

This principle is more crucial today—and regrettably more in

jeopardy today—in the wake of this Court’s application of the

FAA to the securities industry in McMahon. The dissenters, for

example, did not share the majority’s confidence in SEC oversight

of such organizations as the NYSE. Justice Blackmun’s dissent-

ing opinion observed the danger that arbitrations would be in “a

forum controlled by the securities industry,” 96 L.Ed.2d at 215,

and quoted one expert’s view that the brokerage houses own a

“stacked deck.” Jd. at 216.

That is the specific allegation here, and petitioner has adduced

specific evidence to support it. Moreover, her claims of bias are

founded not merely on the composition and procedures of the

NYSE and NASD, but on their and respondents’ actions in this

very case.

Moreover, the ability to challenge the bias of an arbitral forum

at this stage is critical. As the Third Circuit recently held in an

analogous context, the decision of a biased decisionmaker is

difficult if not impossible to cure on a deferential post-decision

review. In United Retail & Wholesale Emp. v. Yahn & McDonell,

787 F.2d 128 (3rd Cir. 1986), affirmed without opinion by an

equally divided court, US. anny 107 SEX. 2171, 95

L.Ed.2d 692 (1987), the Third Circuit struck down a section of

the Multiemployer Pension Plan Amendments Act of 1980 be-

Cause it deprived employees of an impartial decision maker. At

issue were procedures which required the initial decisionmaker’s

holding to be given a deferential review by an arbitration panel.

The court thus concluded that “[n]Jeither the appearance nor

13

reality of fairness is served when a tainted verdict is presumed

correct in subsequent review.” 787 F.2d at 141.

That same deference is required on a post-arbitration review of

awards under the FAA. French v. Merrill, Lynch, Pierce, Fen-

ner & Smith. Inc., 784 F.2d 902, 906 (9th Cir. 1986).

CONCLUSION

A grant of certiorari is appropriate in this case to define the

extent to which state law applies to challenges to arbitration based

on the actual bias of an arbitral forum. This case demonstrates the

need for this Court to affirm that federal arbitrations must be fair,

and to specify the standards by which that fairness is to be

ensured. A review in this Court should therefore be granted.

Respectfully submitted,

SHAND S. STEPHENS

E.viot L. BIEN

Jose H. GARCIA

BRONSON, BRONSON &

McKINNON

By SHAND S. STEPHENS

555 California Street

34th Floor

San Francisco, CA 94104

(415) 986-4200

Attorneys for Petitioner

Appendix A

Certified for Publication

In the Court of Appeal of the State of California

First Appellate District, Division Three

Kathryn A. Heily,

Petitioner,

Vv.

The Superior Court of the City and

County of San Francisco

Respondent;

Merrill Lynch, Pierce, Fenner & Smith, Inc., et at.,

Real Parties in Interest

A040522

(Super. Ct. No. 868892

City and County of San Francisco)

Filed June 20, 1983

Petitioner, the plaintiff in a wrongful discharge action, chal-

lenges a court order requiring her to arbitrate her dispute under

procedures established by the New York Stock Exchange

(NYSE hereinafter). She contends both that her agreement to

arbitrate was procured by fraud and that it should be set aside as

unconscionable because of institutional bias in arbitration con-

ducted under the auspices of the NYSE. We reject her

contentions.

Petitioner has filed an action against real parties in interest,

Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch here-

inafeter) and two individual Merrill Lynch employees. The com-

plaint alleges that after 18 years of service as a securities broker

petitioner was discharged by real parties for failure to participate

in a scheme to conceal from her clients the real reason they

sustained losses in a Merrill Lynch sponsored options investment

program. Merrill Lynch’s position is that petitioner was dis-

charged because she divulged confidential information about the

settlement of claims for investment losses.

A-2

Shortly after petitioner filed the complaint, real parties peti-

tioned the court for an order compelling arbitration. Real parties

cited arbitration provisions in several agreements signed by peti-

tioner during her employment with Merrill Lynch. These provi-

sions called for arbitration under the procedures of either the

NYSE or the National Association of Securities Dealers (NASD

hereinafter).

Petitioner opposed the petition to compel arbitration on several

grounds. She argued that the arbitration agreements were unen-

forceable adhesion contracts, that they were procured through

fraud and use of undue influence, and that real parties could not

seck an order compelling arbitration because they were barred by

their “unclean hands.” She presented declarations from persons

who had served as arbitrators for the NASD and NYSE and who

would testify that employer/employee arbitrations are biased in

favor of securities industry employers. Real parties filed a reply

memorandum, supported by extensive deposition testimony, doc-

umentary evidence, and declarations. Real parties also moved to

strike petitioner's declarations as “speculative, hearsay, irrelevant

or otherwise inadmissible.” The court did not rule on the motion

to strike.

After hearing, the court granted real parties’ motion to compel

arbitration. Petitioner then moved for reconsideration. The court

heard the motion to reconsider, reexamined its ruling on the

merits, and denied the motion.

Petitioner sought a writ of mandate and/or prohibition from

this court. We denied the petition. Petitioner then sought review

in the Supreme Court. That court granted review and retrans-

ferred the matter to this court with the following directions: “to

issue an alternative writ to be heard before that court when the

proceeding is ordered on calendar. (See Tonetti v. Shirley (1985)

173 Cal.App.3d 1144; Marc Rich & Co. v. Transmarine Seaways

Corp. (S.D.N.Y. 1978) 443 F.Supp. 386, 388; and Corporate

Printing Co. v. N.Y. Typographical Union (S.D.N.Y. [1984] 601

F.Supp. 323, 328, fn. 8.) We issued the alternative writ and

heard the matter. We again deny the petition.

ee

A-3

Citing a mixture of state law and federal law decisions, peti-

tioner contends that an agreement to arbitrate may be set aside if

the designated arbitrator or arbitral body is biased or not neutral.

In order to evaluate this contention we must first determine

whether state or federal law controls. Recent case law has

provided a clear answer.

In Merrill Lynch, Pierce, Fenner & Smith v. Ware (1973) 414

U.S. 117, decided without consideration of the Federal Arbitra-

tion Act (FAA), 9 United States Code section | et seq., the

United States Supreme Court upheld application of a state law

that authorized employees to bring actions to collect wages

without regard to private arbitration agreements. (/d., at pp. 134-

140.) The Ware decision opened the door to arguments that state

law might govern arbitrability of agreements such as petitioner's.

However, in Perry v. Thomas (1987) 482 U.S. ___ [96 L.Ed.2d

426, 107 S.Ct. 2520], the court directly confirmed that the FAA

controls lawsuits brought by employees against securities broker-

age firms.

In Perry the employee's action arose from a dispute over

commissions on the sale of securities. Relying on a signed

arbitration agreement, the employer sought arbitration under the

authority of section 2 of the FAA: “A written provision in... a

contract evidencing a transaction involving commerce to settle by

arbitration a controversy thereafter arising out of such contract or

transaction, or the refusal to perform the whole or any part

thereof, . . . shall be valid, irrevocable and enforceable, save upon

such grounds as exist at law or in equity for the revocation of any

contract.” (9 U.S.C. §2.) Citing Moses H. Cone Memorial

Hospital v. Mercury Construction Corp. (1983) 460 U.S. 1, and

Southland Corp. v Keating (1984) 465 U.S. 1, the Perry court

concluded that the effect of section 2 is to“. . . ‘create a body of

federal substantive law of arbitrability, applicable to any arbitra-

tion agreement within the coverage of the Act.’ [Citation.]”

(Perry v. Thomas, supra, 482 U.S. at p. — [96 L.Ed.2d at p. 435,

107 S.Ct. at p. 2525].)

Prior to Perry, state and federal courts disagreed among them-

selves about whether federal law governed questions of interpreta-

tion, validity and enforcement of arbitration agreements. Through

EE till

A-4

dicta in a footnote, the Perry court shed some light on this

question: “We also decline to address Thomas’ claim that the

arbitration agreement in this case constitutes an unconscionable,

unenforceable contract of adhesion. This issue was not decided

below, see nn 4 and 6, supra, and may likewise be considered on

remand. [{]] We note, however, the choice-of-law issue that

arises when defenses such as Thomas’ so-called ‘standing’ and

unconscionability arguments are asserted. In instances such as

these, the text of §2 provides the touchstone for choosing

between state law principles and the principles of federal common

law envisioned by the passage of that statute: An agreement to

arbitrate is valid, irrevocable, and enforceable, as a matter of

federal law, see Moses H. Cone Memorial Hospital v. Mercury

Construction Corp. 460 US 1, 24, 74 L Ed 2d 765, 103 S Ct 927

(1983), “save upon such grounds as exist at law or in equity for

the revocation of any contract.’ 9 USC § 2... (emphasis added).

Thus state law, whether of legislative or judicial origin, is applica-

ble if that law arose to govern issues concerning the validity,

revocability, and enforceability of contracts generally. A state law

principle that takes its meaning precisely from the fact that a

contract to arbitrate is at issue does not comport with this

requirement of § 2. See Prima Paint, supra, [ Prima Paint Corp. v.

Flood & Conklin Mfg. Co. (1967) 388 U.S. 395], at 404, 18 L Ed

2d 1270, 87 S Ct 1801; Southland Corp. v. Keating 465 US, at 16-

17, n 11, 79 L Ed 2d 1, 104 S Ct 852. A court may not, then, in

assessing the rights of litigants to enforce an arbitration agree-

ment, construe that agreement in a manner different from that in

which it otherwise construes nonarbitration agreements under

state law. Nor may a court rely on the uniqueness of an agreement

to arbitrate as a basis for a state-law holding that enforcement

would be unconscionable, for this would enable the court to effect

what we hold today the state legislature cannot.” (Perry v.

Thomas, supra, 482 U.S. at p. — [96 L.Ed.2d at p. 437, fn. 9, 107

S.Ct. at p. 2527]; see also Liddington v. The Energy Group, Inc.

(1987) 192 Cal.App.3d 1520, 1527-1528.)

Petitioner argued below, and argues here too, that under

Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, the NYSE.

because of its status and identity, is presumptively biased in favor

of real parties in interest, and that the arbitration agreement is

—

A-5

therefore unconscionable and should not be enforced. This argu-

ment directly affronts the analysis of Perry v. Thomas because

Graham is a state law decision weaving together principles of

adhesion contracts and state statutes governing the neutrality of

arbitrators. (/d., at pp. 820-828.) Perry teaches that a court may

not rely upon anything that is unique to an agreement to arbitrate

when assessing unconscionability of an agreement governed by

the FAA. State law concerning arbitration or arbitrators cannot

form a basis for evaluating state law enforceability of the contract.

(Accord Thomas v. Perry (1988) 200 Cal.App.3d 510, 515, on

remand after decision in Perry v. Thomas, supra, 482 U.S. .)

Having concentrated on state law, petitioner has ignored deci-

sions applying federal law to questions of bias in arbitration. The

California Supreme Court’s retransfer order directed our atten-

tion to decisions applying federal law.

The first case cited, Tonetti v. Shirley, supra, 173 Cal.App.3d

1144, a California decision, explains one of the differences be-

tween state and federal law. There a stockbroker sued his em-

ployer for defamation and related causes of action. The employer

sought arbitration under the rules of the NYSE, but the tral

court denied the request, relying on a state law decision that

found a similar brokerage/account executive contract provision

unconscionable. Tonetti reversed, concluding that federal law

preempted and that the arbitration provision was not unconscion-

able under federal law. (/d., at pp. 1146-1147.)

The court examined California law on unconscionability of

arbitration under the rules of the NYSE, noting that in Hope v.

Superior Court (1981) 122 Cal.App.3d 147, the court had cited

Graham vy. Scissor-Tail, Inc. supra, 28 Cal.3d 807, and had

concluded that the arbitration procedures of the NYSE failed to

meet minimal levels of integrity. (Tonetti v. Shirley, supra, 173

Cal.App.3d at pp. 1149-1150.) The Tonetti court then found that

“i]n contrast to California’s position, federal cases have held the

procedures to be fair and enforceable.” (/d., at p. 1150.) One

federal decision found the composition of the NYSE arbitration

tribunal to be within the “rule of reason” and not a violation of

the antitrust laws (Drayer v. Krasner (2d Cir. 1978) 572 F.2d

348, 360, cert. den. 436 U.S. 948), and another decision rejected

ET

A-6

a claim of an employee-broker that the NYSE arbitration proce-

dures were unconscionable (Pelzman v. Paine, Webber, Jackson

& Curtis, Inc. [1983-1984 Transfer Binder] Fed. Sec. L. Rep.

(CCH) § 99408 (D.D.C. 1983)). The Tonetti court concluded

that unlike state law, federal law placed the burden of showing

institutional bias upon the person resisting arbitration. (/d., at p.

1150). “The trial court received no evidence on the actual

operation of the NYSE arbitration procedures as they apply to

Tonetti.... Thus, the case must be remanded so the issue of

unconscionability can be properly determined under federal law

and the NYSE rules as they exist at the time of the new hearing.”

(/d., at p. 1151.)

Two other federal decisions, not mentioned by Tonetti, but |

cited in the California Supreme Court’s transfer order here, show |

that under federal law as it was then applied, a litigant could )

assert bias of the arbitrator or arbitral panel as a basis for avoiding

arbitration or replacing the arbitrator. In Marc Rich & Co. v.

Transmarine Seaways Corp., supra, 443 F.Supp. 386, the court

was asked to disqualify an arbitrator selected by one party because

the arbitrator was currently involved in an unrelated dispute with

the selector’s adversary. In order to prevent repeated pre-arbitra-

tion attacks upon a party’s designation of the arbitrator, the Marc

Rich & Co. court found that it lacked jurisdiction to rule on the

issue. However, in the course of its ruling, it noted that a different

rule would apply if the contract had specifically named the

arbitrator, as in Erving v. Virginia Squires Basketball Club

(E.D.N.Y. 1972) 349 F.Supp. 716, 719, affirmed (2d Cir. 1972)

468 Fi2d 1064, and Siedman v. Merrill Lynch, unreported deci-

sion (S.D.N.Y. Aug. 24, 1977) 75 Civil No. 6316. In Siedman,

according to the Marc Rich & Co. court, the court found jurisdic-

tion, prior to the commencement of arbitration, to consider the

qualifications of the NYSE as arbitrator of a dispute. Subsequent

history of the case reveals that though the court considered the

allegation of bias, it declined to order the NYSE replaced by the

American Arbitration Association as the arbitral body. (see

Siedman v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

(S.D.N.Y. 1979) 465 F. Supp. 1233, 1235 [ Note that the court in

March Rich & Co., supra, misspelled Siedman “Seidman.”.” ].)

area

A-7

In Corporate Printing Co. v. N.Y. Typographical Union, supra,

601 F.Supp. 323, the last decision cited by the California Su-

preme Court’s transfer order, the court also found a pre-arbitra-

tion attack upon the institutional bias of an arbitrator premature.

However, a footnote acknowledged a different approach where

the arbitrator was named in the agreement, citing Erving and

Marc Rich & Co. (/d., at p. 328, fn. 8.)

Marc Rich & Co., Corporate Printing Co., and particularly

Siedman, show that under federal law, as it had been stated

before the Supreme Court transferred this case to us, a litigant

could make a pre-arbitration showing that the NYSE or other

designated arbitral panel was institutionally biased, but that

unlike the situation under California law, no presumption of

institutional bias would obtain. But more recent 9th Circuit

authority holds otherwise.

In Cohen v. Wedbush, Noble, Cooke, Inc. (9th Cir. 1988) 841

F.2d 282, the court rejected a challenge similar to petitioner’s,

finding that “agreements to arbitrate disputes in accordance with

SEC-approved procedures are not unconscionable as a matter of

law.” (/d., at p. 286.) In Cohen, margin account customers

sought to avoid arbitration of a dispute over the broker’s sale of

some collateral in their margin account. Citing Lewis v. Merrill

Lynch, Pierce, Fenner & Smith, Inc. (1986) 183 Cal.App.3d 1097,

and Lewis v. Prudential-Bache Securities, Inc. (1986) 179

Cal.App.3d 935, decisions relied upon heavily by petitioner here,

they argued that the arbitration agreement was unconscionable.

Because of a recent United States Supreme Court decision,

Cohen rejected plaintiffs’ contention: “We respectfully disagree,

however, with the conclusion of the California courts that the

doctrine of unconscionability is applicable under these circum-

stances. Cf. Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334,

339 (7th Cir. 1984) (rejecting claim that agreements to arbitrate

securities claims was unconscionable where plaintiffs made no

showing that agreement was commercially unreasonable or that

they had no reasonable opportunity to understand it). As the

Supreme Court has recognized, the Securities and Exchange

Commission has virtually plenary authority over the arbitration

procedures adopted by the national securities exchange and secur-

A-8

ities associations. See Shearson/American Express, Inc. v. McMa-

hon, ___. U.S. —__, 107 S.Ct. 2332, 2341, 96 L.Ed.2d 185

(1987). This authority includes the power to ‘abrogate, add to,

and delete from’ the arbitration rules adopted by such bodies if

necessary or appropriate to-protect the rights created by the

Securities Acts. /d.; 15 U.S.C. § 78s(c) (1982). The SEC has

explicitly approved the NYSE and NASD arbitration rules and

procedures at issue in this case. McMahon, 107 S.Ct. at 2341.

Because Congress has committed to the SEC the task of ensuring

that the federal rights established by the Securities Acts are not

compromised by inadequate arbitration procedures, we are bound

by the Commission’s determination that the procedures at issue

here are satisfactory. [Citation.] Any contrary holding would

frustrate this carefully crafted federal regulatory scheme. [4] Our

conclusion is not affected by the Cohens’ contention that the

arbitration agreement is part of a contract of adhesion. We have

previously held that state law adhesion contract principles may

not be invoked to bar arbitrability of disputes under the Arbitra-

tion Act. Bayma, [Bayma v. Smith Barney, Harris Upham & Co.

(9th Cir. 1986) ] 784 F.2d [1023] at 1024-25. We reaffirm that

holding today.” (Cohen v. Wedbush, Noble, Cooke, Inc., supra,

841 F.2d at pp. 285-286, fn. omitted.)

We agree with the Cohen analysis. Under Cohen's interpreta-

tion of Shearson/American Express the SEC is responsible for

ensuring the fairness of arbitration proceedings under the NYSE

and NASD. To the extent federal or state judges applying federal

law may have previously been permitted to entertain challenges

raising institutional bias of these arbitration panels (as in

Siedman, supra, for instance), such challenges are no longer

permitted. We sustain the superior court’s order here.

We have not addressed petitioner’s assertions that there was

fraud in the inducement to enter the arbitration agreements and

that real parties were barred from equitable relief by their unclean

hands. Though petitioner argues these issues extensively in her

petition. she does so as if she were arguing them to the trier of

fact. not to an appellate court. Petitioner fails to even advise this

court of the considerable evidence contrary to her positions. Thus,

she fails to demonstrate how the trial court abused its discretion

A-9

and why its rulings on any factual disputes were not supported by

substantial evidence. We reject her claims.

The alternative writ is discharged and the petition for peremp-

tory writ is denied.

Certified for Publication.

Mermill, J.

Counsel for Petitioner. SHAND S. STEPHENS

PATRICIA H. CULLISON

BRONSON, BRONSON &

McKINNON

555 California Street

Suite 3400

San Francisco, CA 94104

No appearance for Respondent

Counsel for Real Party W. REECE BADER

in Interest: FREDERICK BROWN

Jay M. CUTLER

OrRICK, HERRINGTON &

SUTCLIFFE

600 Montgomery Street

San Francisco, CA 94111

A-10

Appendix B

W. Reece BADER

FREDERICK BROWN

Jay M. CUTLER

ORRICK, HERRINGTON & SUTCLIFFE

600 Montgomery Street

San Francisco, California 94111

Telephone: (415) 392-1122

Attorneys for Defendants

MERRILL LYNCH, PIERCE, FENNER &

SMITH INc., PAUL F. HAYES AND

PETER F. SANSEVERO

The Superior Court of the State of California

In and for the City and County of San Francisco

Kathryn A. Heily,

Plaintiff,

Vv.

Mermill Lynch, Pierce, Fenner & Smith Inc.,

Paul F. Hayes, an individual, Peter F. Sansevero,

and individual, and Does One through Fifty,

Defendants.

No. 868892

Order Compelling Arbitration and

Staying Procedures

Defendants’ Petition For Order Compelling Arbitration and

Motion For Order Staying Proceedings came on for hearing on

June 10, 1987, W. Reece Bader and Jay M. Cutler of Orrick,

Herrington & Sutcliffe appearing on behalf of the moving parties

and Shand S. Stephens of Bronson Bronson & McKinnon appear-

ing on behalf of plaintiff. The Court having considered the

arguments of counsel, the memoranda, declarations, exhibits and

deposition excerpts filed by the parties, and all of the pleadings

and papers on file herein, and good cause appearing therefor.

A-11

IT IS HEREBY ORDERED AS FOLLOWS:

1. The Petition to Compel Arbitration before the New

York Stock Exchange is granted; and

2. All proceedings herein are stayed pending arbitration.

Dated: July 2, 1987

Lucy Kelly McCabe

Judge of the Superior Court

Approved as to form:

BRONSON, BRONSON & MCKINNON

Shand S. Stephens

Attorneys for Plaintiff

A-12

Appendix C

W. REECE BADER

FREDERICK BROWN

Jay M. CUTLER

OrRICK, HERRINGTON & SUTCLIFFE

600 Montgomery Street

San Francisco, California 94111

Telephone: (415) 392-1122

Attorneys for Defendants

MERRILL LYNCH, PIERCE, FENNER &

SMITH INCc., PAUL F. HAYES and

PETER F. SANSERVERO

In the Superior Court of the State of California

In and For the City and County of San Francisco

Kathryn A. Heily

Plaintiff,

wy

Merrill Lynch, Pierce, Fenner & Smith Inc.,

Paul F. Hayes, an individual, Peter F. Sansevero,

an individual, and Does One through Fifty

Defendants.

No. 868892

Order Denying Motion for Reconsideration

of Order Compelling Arbitration

Plaintiffs Motion For Reconsideration of the Order Compel-

ling Arbitration came on for hearing on August 25, 1987. Shand

S. Stephens of Bronson, Bronson & McKinnon appearing on

behalf of plaintiff and moving party and W. Reece Bader of

Orrick, Herrington & Sutcliffe appearing on behalf of defendants;

and the Court having considered the arguments of counsel, the

memorandum, declarations and exhibits filed by the parties, and

all of the pleadings and papers on file herein, and good cause

appearing therefor,

A-13

IT IS HEREBY ORDERED that the Motion for Reconsidera-

tion be, and the same hereby is, DENIED.

Dated: August 25, 1987

Lucy Kelly McCabe

Judge of the Superior Court

A-14

APPENDIX D

Order Granting Review

After Judgment by the Court of Appeal

First District, Division Three, No. A040522, S003424

In the Supreme Court of the State of California

In Bank

Heily, Petitioner,

v.

Superior Court of the City and County of San Francisco,

Respondent,

Merrill Lynch, Pierce, Fenner & Smith, Inc., et al.,

Real Parties in Interest

[ Filed February 25, 1988]

Petition for review granted. The matter is transferred to the

Court of Appeal, First Appellate District, Division Three, with

directions to issue an alternative writ to be heard before that court

when the proceeding is ordered on calendar. (See Tonetti v.

Shirley (1985) 173 Cal.App.3d 1144; Marc Rich & Co. v.

Transmarine Seaways Corp. (S.D.N.Y. 1978) 443 F.Supp. 386,

388; and Corporate Printing Co. v. N.Y. Typographical Union

(S.D.N.Y.) 601 F.Supp. 323, 328, fn. 8.)

Chief Justice

MOSK

Associate Justice

BROUSSARD

Associate Justice

ARGUELLES

Associate Justice

EAGLESON

Associate Justice

KAUFMAN

Associate Justice

Associate Justice

A-15

Order Denying Review

After Judgment by the Court of Appeal

Ist District, Division 3, No. A040522, S003424

In the Supreme Court of the State of California

In Bank

Kathryn A. Heily, Petitioner,

v.

Superior Court of the City and County of San Francisco,

Respondent;

Merrill Lynch, etc., et al.,

Real Parties in Interest.

[Filed September 1, 1988]

Petition for review Denied.

LUCAS

Chief Justice