Amicus Curiae Brief — Gilmer v. Interstate/Johnson Lane Corp.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

<>

ROBERT D. GILMER,

Petitioner,

—VvV.—

INTERSTATE/ JOHNSON LANE CORPORATION,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

BRIEF OF SECURITIES INDUSTRY ASSOCIATION,

INC. AS AMICUS CURIAE

IN SUPPORT OF RESPONDENT

A. ROBERT PIETRZAK

Counsel of Record

CHARNA L. GERSTENHABER

BROWN & WooD

One World Trade Center

New York, New York 10048

(212) 839-5300

Attorneys for Securities

Industry Association, Inc., as

Amicus Curiae

Of Counsel:

WILLIAM J. FITZPATRICK SECURITIES INDUSTRY

GERARD J. QUINN ASSOCIATION

i? wy

D-

TABLE OF CONTENTS

SUMMARY OF ARGUMENT ...........cccceceees

I ShbdNeaeewdtceeie sk ceneicndsectedsees

POINT I. Congress Did Not Intend To Preclude

Binding Arbitration of ADEA Claims .

POINT Il. Arbitration Is Not In Conflict With The

Policies Underlying The ADEA .......

A. Petitioner’s Criticisms of Arbitration Have

Been Rejected By The Courts ...........

B. Petitioner’s Criticisms of NYSE Arbitra-

tion Are Factually Unfounded...........

POINT III. The Statutory Exclusion Contained In

The Arbitration Act Does Not Apply

re 5 Se ee

SEED G0 0d.bebnvss cennsndcassvctcsecesess

PAGE

10

18

20

TABLE OF AUTHORITIES

Cases: PAGE

Alexander v. Gardner-Denver Co., 415 U.S. 36

GUO ios ve badevnnenenceonedasie Eee 8,9

Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, Inc.,

847 F.2d 475 (8th Cir. 1988) ..................... 6n

Atchison, Topeka & Santa Fe Railway Co. v. Buell,

GP Wee ee EN 6.044 GU cauccdcseadaiceuvuecias 9

Barrentine v. Arkansas-Best Freight System, Inc., 450

te. CP EE ss uka ae deb ec aodbube se bGras Koneas 8, 9

Barrowclough v. Kidder, Peabody & Co., Inc., 752

ne ee ss oe oe 6n

Bird v. Shearson Lehman/American Express, Inc., 871

F.2d 292 (2d Cir.), vacated and remanded, 110 S.

Se SE ce dadh hadkasscndaedbnudosbaceo. 6a

Cindy’s Candle Company, Inc. v. WNS, Inc., 714 F.

BS SS One 6n

Coenen v. R.W. Pressprich & Co., 453 F.2d 1209 (2d

Cir.) cert. denied, 406 U.S. 949 (1972) ............ 19

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213

664s sbdnccaqedénnudedvedssdeeabivcséseccns 10, 11

Dickstein v. duPont, 443 F.2d 783 (1st Cir. 1971).... 19

Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047 (2d

Gs TD hsp eaten peensekeasecevesvecsecssocesss 19

Garfield v. Thomson McKinnon Securities, Inc., 731

Pee, GEG GE TE BRED cc cccccccccccccvceces 7

Gilmer v. Interstate/Johnson Lane Corporation, 895

Pee GOP GUE GAS DOMED sev cccccccesccesccesceces 1, 5

PAGE

Gremco Latinoamerica, Inc. v. Seiko Time Corp., 671

F. Supp. 972, 979 (S.D.N.Y. 1987) .......-..-+4-- 6n

Haviland v. Goldman, Sachs & Co., 736 F.Supp. 507

EELS FOTTTTTTLTLETELETT TE 19

Henderson v. Tucker, Anthony and RL Day, 721

OP CiPuMcds BUUOD ccccccccccccccccccoccecs 19

Iacono, M.D., Inc. v. Drexel Burnham Lambert, Inc.,

ee ee , BE ccccccccccccececess 6n

Jeske v. Brooks, 875 F.2d 71 (4th Cir. 1989), cert.

i Ci ED oo cccoccccscccoocceses 6n

Kowalski v. Chicago Tribune Co., 854 F.2d 168 (7th

i i aaa eee tee geeeeetoeeseeoccoces 6n

Legg, Mason & Company, Inc. v. Mackall & Coe,

Inc., 351 F. Supp. 1367 (D.D.C. 1972)............ 19

Malison v. Prudential-Bache Securities, Inc., 654 F.

Supp. 101 CW.D.N.C. 1967)... ccccccccccccccccees 18

McDonald v. West Branch, 466 U.S. 284 (1984) ..... 8, 9

McGinnis v. E.F. Hutton and Company, Inc., 812

F.2d 1011 (6th Cir. 1987), cert. denied, 484 U.S. 824

DUE tei cendecseneesoseeosooeccocecoocss 19

Miller Brewing v. Brewery Workers Local Union No.

9, 739 F.2d 1159 (7th Cir. 1984), cert. denied, 469

Di PME «cc cccnceeseeoccececcoecooccess 18

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614 (1985). ......6 0c ee eee 3, 4, 7-8, 9, 10

Monahan v. Paine Webber Group, Inc., 724 F.Supp.

TAA CS.D.N.Y. 198). cccccccccccccccccvccccccces 19

Moses H. Cone Hospital v. Mercury Construction

Corp., 460 U.S. 1, 24 (1983). ... 2... c cece eee eeeee 4

iv

PAGE

Nesslage v. York Securities, Inc., 823 F.2d 231 (8th

Se Se econakusadnsilnsdadadteedastadibeis 6n

Nicholson v. CPC International, 877 F.2d 221 (3d Cir.

Soc cddsanndedbedsdbdateocencakedcudneuceses 7, 8

Pearce v. E.F. Hutton Group, Inc., 828 F.2d 826

Ss SE cateccennsetniendbetnsiuscenneus 11, 19

Perry v. Thomas, 482 U.S. 483 (1987)............ 4, 11, 19

Pierce v. Shearson Lehman Hutton, Inc., 52 Fair

Empl. Prac. Cas. (BNA) 1882 (April 26, 1990)..... 7, 11

Pihl v. Thomson McKinnon Securities, Inc., 48 Fair

Empl. Prac. Cas. (BNA) 922 (May 24, 1988) ...... 7, 11

Rodriguez De Quijas v. Shearson/American Express,

Inc., U.S. , 109 S.Ct. 1917 (1989) ...... >» &

6n, 7, 8, 11

Sacks v. Dean Witter Reynolds, Inc., 627 F. Supp. 377

See adbdccdiacdccsdakentonststieeee 6n

Shearson/American Express Inc. v. McMahon, 482

ee i ha ee eee es alae passim

Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698 (2d

Cir. 1985), cert. denied, 475 U.S. 1067 (1986), reh’g

GE, Goo Gee Te Ge ctccccccoccscscoesss 19

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

F> FF fe TT eee 19

Tenney Engineering v. United Electrical Radio &

Machine Workers of America, 207 F.2d 450 (3d Cir.

PAGE

Statutes:

Age Discrimination in Employment Act, 29 U.S.C.

Ge GM, ccccccdccccecccccscccccscosscvcsecs passim

Federal Arbitration Act, 9 U.S.C. § 1 ef seq. ....... passim

Federal Employers’ Liability Act 45 U.S.C. § 51 ef

| PPPPPPTTOTTITITITITIITITTTT TTT TTL 9

Racketeer Influenced and Corrupt Organizations Act,

8B U.S.C. © IBGE OE GUM. ccccccccccccccccccccscees 6

Railway Labor Act 45 U.S.C. § 151 ef seq. ......... 9

Securities Act of 1933, 15 U.S.C. § 77a ef seq. ...... 6

Securities Exchange Act of 1934, 15 U.S.C. § 78a ef

GU, ccnccccccccecnnssdaccscectecccsoesccecss 6, 12, 13

Sherman Act, 15 U.S.C. § 1 ef Seg. ........2eeeees 4, 6

Legislative Materials:

136 Cong. Rec. H12967-71 (October 26, 1990)....... 6n

136 Cong. Rec. S 11101-086 (July 30, 1990)......... 6n

Age Discrimination in Employment Amendments of

1986, Pub. L. 99-592 (October 31, 1986).......... 5

H.R. Rep. No. 96, 68th Cong., Ist Sess., 1-2 (1924) . 10

Older Workers Benefit Protection Act, Pub. L. 101-433

(October 17, 1990) .......ccccccccccccccccccccess 5-46

New York Stock Exchange Rules:

2 N.Y.S.E. Guide (CCH) 4 2345 (Rule 345) ......... 5, 14n

2 N.Y.S.E. Guide (CCH) 4 2347 (Rule 347) ......... 12, 18

vi

PAGE

2 N.Y.S.E. Guide (CCH) 4 2607 (Rule 607) ......... 13n

2 N.Y.S.E. Guide (CCH) 4 2607(a)(3) (Rule 607 (a)(3)) =13

2 N.Y.S.E. Guide (CCH) 4 2610 (Rule 610) ......... 14

2 N.Y.S.E. Guide (CCH) 44 2614-15 (Rules 614-15) .. 14

2 N.Y.S.E. Guide (CCH) 44 2619-20 (Rules 619-20) .. 14

2 N.Y.S.E. Guide (CCH) 4 2623 (Rule 623) ......... 14

2 N.Y.S.E. Guide (CCH) 44 2632 (Rule 632) ........ 13n

Articles:

Masucci and Morris, ‘‘Arbitration at the National

Association of Securities Dealers and the New York

Stock Exchange,’’ Securities Arbitration 1989 (Prac-

eee ieeeees 15n

Serota, The Unjustified Furor Over Securities Arbitra-

tion, 16 Pepperdine L. Rev. 5105 (May 1989)...... 12n

Books:

Goldman, Samuel P., A Handbook of Stock Exchange

Laws (Matthew Bender & Company 1915), pp. 6,

DP ccuaindeuiniddd edteened lid dcdueuetengaese 12n

Miscellaneous:

SEC Order Approving Changes to the Arbitration Pro-

cess, Securities Exchange Act Release Ne. 34-26805

I Ce ec cccageneed ce 12-13, 14

Securities Industry Conference on Arbitration

(“‘SICA’’), Report #6 (August 1989) .............. 14

Securities Arbitration Commentator Award Reporter. . 16

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

No. 90-18

-

ROBERT D. GILMER,

Petitioner,

—V.—

INTERSTATE/JOHNSON LANE CORPORATION,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

>

BRIEF OF AMICUS CURIAE

SECURITIES INDUSTRY ASSOCIATION

IN SUPPORT OF THE RESPONDENT

PRELIMINARY STATEMENT

The Securities Industry Association, Inc. (‘‘SIA’’) submits

this brief as amicus curiae in support of the Respondent, and

urges this Court to affirm the decision of the United States

Court of Appeals for the Fourth Circuit in Gilmer v.

Interstate/Johnson Lane Corporation, 895 F.2d 195 (4th Cir.

1990). Pursuant to Rule 37.3 of the Rules of this Court, the

written consents of Petitioner Robert D. Gilmer and Respon-

dent Interstate/Johnson Lane Corporation have been

obtained and are being filed with the Clerk of the Court.

2

INTEREST OF AMICUS CURIAE

SIA is the principal trade association of the securities

industry. It has as members more than six hundred securities

firms in the United States and Canada.

The rules and registration applications of the self-

regulatory organizations in the securities industry, including

the New York Stock Exchange, Inc. (‘“‘NYSE’’), require arbi-

tration of employment and termination disputes between

securities firms and registered representatives. These disputes

can involve claims arising under the Age Discrimination in

Employment Act (‘‘ADEA’’), 29 U.S.C. § 621 ef seg. This

Court’s decision on whether arbitration of such claims can be

compelled pursuant to written agreement and to self-

regulatory organization rules will thus have a substantial

impact upon SIA, its member firms and those associated with

them.

SIA firmly believes that the Fourth Circuit was correct in

its interpretation of prior decisions of this Court, of the Fed-

eral Arbitration Act, 9 U.S.C. § 1 ef seq. (the ‘‘Arbitration

Act’’), and of the legis‘ative history of the ADEA in directing

enforcement of the arbitration agreenient in this case.

STATEMENT OF THE CASE

SIA defers to the statement of prior proceedings and of the

facts underlying this dispute contained in the brief of the

Respondent.

SUMMARY OF ARGUMENT

Petitioner’s arguments ignore the recent sea-change in judi-

cial attitudes toward arbitration. In a series of decisions since

1985 (largely involving securities arbitration), this Court has

put aside unfounded suspicion of the arbitral process and has

unambiguously mandated enforcement of agreements to arbi-

trate disputes whenever possible.

3

The mere fact that a statutory right is in issue does not

preclude the enforceability of an arbitration agreement. See,

Rodriguez De Quijas v. Shearson/American Express, Inc.,

U.S. ____, 109 S.Ct. 1917 (1989) (claims under Securi-

ties Act of 1933); Shearson/American Express Inc. v. McMa-

hon, 482 U.S. 220 (1987) (claims under Racketeer Influenced

and Corrupt Organizations Act, Securities Exchange Act of

1934); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614 (1985) (antitrust claims). Unless Petitioner

can show a legislative intent to preclude arbitration of claims

under the ADEA, his arguments must fail. See, Mitsubishi,

473 U.S. at 628. Petitioner has not met his burden. He has

not, and cannot, point to any legislative history of the ADEA

to support his position. Nor has he met his burden merely by

pointing to Title VII cases that have declined to enforce arbi-

tration agreements. Those cases are distinguishable from this

one. (POINT I)

Petitioner similarly fails to establish that the policies under-

lying the ADEA are inconsistent with arbitration of claims

under the ADEA. Petitioner’s arguments in this regard

amount to attacks on the efficacy and fairness of the arbitral

process itself. Those arguments have been rejected by this

and numerous other courts in recent decisions involving arbi-

tration generally and securities arbitration in particular. As

those decisions have found, the securities arbitration process,

as currently constituted and as regulated by the Securities and

Exchange Commission (‘‘SEC’’), is not only fair but offers

significant benefits, including speedy access, relative infor-

mality and broader evidentiary scope, that can be of benefit

to a claimant employee. (POINT I)

Finally, there is no merit in the arguments of various amici

curiae in support of Petitioner, who question for the first

time on this appeal the applicability of the Arbitration Act.

Neither the statutory language nor the case law is on their

side. While the asserted statutory exclusion refers to employ-

ment contracts, the arbitration provisions in this case are not

contained in an employment contract. Moreover, this Court,

among others, has applied the Arbitration Act to employees

4

of securities firms. Perry v. Thomas, 482 U.S. 483 (1987).

(POINT III).

ARGUMENT

POINT I

CONGRESS DID NOT INTEND TO PRECLUDE

BINDING ARBITRATION OF ADEA CLAIMS

During the last decade, this Court has repeatedly recog-

nized a ‘‘federal policy favoring arbitration.’’ Moses H. Cone

Hospital v. Mercury Construction Corp., 460 U.S. 1, 24

(1983); see also, e.g., McMahon, 482 U.S. 220, 226 (1987).

The Court has stated that the ‘‘federal substantive law of

arbitrability’’ counsels

that questions of arbitrability must be addressed with a

healthy regard for the federal policy favoring arbitra-

tion. . . . The Arbitration Act establishes that, as a

matter of federal law, any doubts concerning the scope

of arbitrable issues should be resolved in favor of arbi-

tration, whether the problem at hand is the construction

of the contract itself or an allegation of waiver, delay,

or a like defense to arbitrability.

Mitsubishi, 473 U.S. 614, 626 (quoting Moses H. Cone

Memorial Hospital, 460 U.S. at 24-25).

In Mitsubishi, a case brought under the Sherman Act, 15

U.S.C. § 1 et seqg., the Court refused to infer from the Arbi-

tration Act a presumption against the arbitration of statutory

claims. At the same time it recognized that the Arbitration

Act embodies a policy which ‘‘guarantee[s] the enforcement

of private contractual arrangements.’’ 473 U.S. at 625.

In Perry, 482 U.S. 483 (1987), the Court enforced the same

arbitration provisions at issue in this case—those in the Uni-

form Application for Securities Industry Registration (Form

U-4) (Joint Appendix (‘‘JA’’) 15-18) and Rule 347 of the

5

NYSE—concluding that the Arbitration Act pre-empted state

legislation that required resolution of the dispute in court.’

The trend favoring the enforcement of arbitration agree-

ments culminated recently in Rodriguez, in which this Court

overruled its decision in Wilko v. Swan, 346 U.S. 427 (1953),

which had foreclosed arbitration of certain securities law

claims, as reflecting ‘‘the outmoded presumption of disfavor-

ing arbitration proceedings.’’ Rodriguez, 109 S.Ct. at 1920.

In light of these decisions of the Court, Petitioner’s argu-

ment that arbitration is inappropriate under the ADEA can-

not rest solely on the fact that a statutory right is sought to

be enforced. As this Court stated in Rodriguez, the Arbitra-

tion Act requires that ‘‘the party opposing arbitration carries

the burden of showing that Congress intended in a separate

statute to preclude a waiver of judicial remedies, or that such

a waiver of judicial remedies inherently conflicts with the

underlying purposes of that other statute.’’ 109 S.Ct. at 1921

(citing McMahon, 482 U.S. at 226-27). Petitioner has failed

to meet this burden.

As was thoroughly addressed by the Court below, Congress

has neither explicitly nor implicitly expressed a disapproval

of arbitration of ADEA claims. 895 F.2d at 197-201. The

ADEA is silent on the question of arbitration. So too is its

legislative history. Had Congress intended to create a federal

statutory right as to which arbitration would be inimical, it

would have stated so when enacting the original legislation,

or in subsequent amendments, particularly those of 1986

(Age Discrimination in Employment Amendments of 1986,

Pub. L. 99-592 (October 31, 1986)), or 1990 (Older Workers

1 Securities professionals are required to register with the self-

regulatory organization(s) with which their firms do business. Applica-

tion is accomplished by completing a Form U-4. 2 N.Y.S.E. Guide

(CCH) 4 2345 (Rule 345).

6

Benefit Protection Act, Pub. L. 101-433 (October 17, .990)).”

Where Congress has not expressed such an intention, the

courts have enforced pre-dispute arbitration of statutory

rights involving, inter alia, the Racketeer Influenced and Cor-

rupt Organizations Act (‘“‘RICO”’), 18 U.S.C. § 1961 ef seq.,

the Sherman Act, the Securities Act of 1933, 15 U.S.C. § 77a

et seq., and the Securities Exchange Act of 1934, 15 U.S.C.

§ 78a et seq.’

2 Recent proposed legislation has more commonly encouraged the use

of ar bitration—including binding arbitration. See e.g., Administrative

Dispute Resolution Act (H.R. 2497 and S. 971), recently passed by

both houses of Congress, which speaks at length of the benefits of

alternative dispute resolution, and, in Section 585, expressly permits

pre-dispute agreements to arbitrate. 136 Cong. Rec. H12967-71 (Octo-

ber 26, 1990). See also, proposed Ensuring Access through Medical

Liability Reform Act (S. 2934), which provides for binding arbitration

— malpractice claims. 136 Cong. Rec. $11101-086 (July 30

).

3 See, e.g. Rodriguez (Securities Act of 1933); McMahon (RICO,

Securities Exchange Act of 1934); Jeske v. Brooks, 875 F.2d 71 (4th

Cir. 1989), cert. denied, 111 S.Ct. 43 (1990) (Securities Act of 1933,

Securities Exchange Act of 1934, RICO); Nesslage v. York Securities,

Inc., 823 F.2d 231 (8th Cir. 1987) (Securities Exchange Act of 1934,

RICO ); Jacono, M.D., Inc. v. Drexel Burnham Lambert, Inc., 715 F.

Supp. 18 (D.R.I. 1989) (enforced agreement to arbitrate a Securities

Exchange Act of 1934 claim retroactively under an arbitration clause

executed before this Court decided McMahon); Sacks v. Dean Witter

Reynolds, 627 F. Supp. 377 (C.D. Cal. 1985) (Securities Exchange Act

of 1934, RICO). Courts are now (since Mitsubishi) uniformly enforc-

ing agreements to arbitrate antitrust claims, as well. See Kowalski v.

Chicago Tribune Co., 854 F.2d 168, 173 (7th Cir. 1988); Cindy’s Can-

dle Company, Inc. v. WNS, Inc., 714 F. Supp. 973, 979 (N.D. Il.

1989); Gremco Latinoamerica, Inc. v. Seiko Time Corp. , 671 F. Supp.

972, 979 (S.D.N.Y. 1987). The courts are divided only with regard to

ERISA. Compare Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds,

Inc., 847 F.2d 475 (8th Cir. 1988) (enforcing arbitration of ERISA

claim) with Barrowclough v. Kidder, Peabody & Co., Inc., 752 F.2d

923, 939 (3d Cir. 1985) and Bird v. Shearson Lehman/American

Express, Inc., 871 F.2d 292 (2d Cir.), vacated and remanded, 110 S.

Ct. 225 (1989) (remanded for reconsideration in light of Rodriguez)

(finding compulsory arbitration incompatible with statutory scheme).

>

Petitioner argues that the ADEA is silent regarding arbitra-

tion only because Wilko, 346 U.S. 427 (1953), overruled by

Rodriguez, was still in effect and precluded arbitration of

statutory claims in 1967 when the ADEA was adopted. This

argument is unpersuasive because Wilko was also in effect in

1970 when RICO was adopted. That did not preclude this

Court from enforcing an arbitration agreement in McMahon

that involved RICO claims.

Most courts that have addressed the issue have found

ADEA claims to be arbitrable. In Pierce v. Shearson Lehman

Hutton, Inc., 52 Fair Empl. Prac. Cas. (BNA) 1882, 1884

(April 26, 1990), the Court concluded that ‘‘the arbitrator

has sufficient power to structure a remedy to eliminate age

discrimination.’’ Moreover, that Court noted that arbitration

decisions are reviewable by the courts, and therefore any fear

that courts will be removed from the enforcement ‘of ADEA

claims is unjustified. Jd. at 1884.

In Pihl v. Thomson McKinnon Securities, Inc., 48 Fair

Empl. Prac. Cas. (BNA) 922 (May 24, 1988), the claimant

had signed a Form U-4. As in Pierce, the Court could find

no legislative intent ‘‘to exclude ADEA claims from the dic-

tates of the Arbitration Act.’’ Jd. at 924.

The plaintiff in Garfield v. Thomson McKinnon Securities,

Inc., 731 F.Supp. 841 (N.D. Ill. 1988), had also signed a

Form U-4. The Court in that action read the legislative his-

tory of the ADEA to favor ‘informal methods of dispute

resolution’ because the Act requires that claims be submitted

to the EEOC initially, in an effort to resolve the dispute by

conciliation, conference and persuasion. 731 F.Supp. at 843-

44 (citing 29 U.S.C. § 626(d)).

SIA submits that the reasoning of the Court belo. and of

other courts that have found ADEA claims arbitrable is com-

pelling and more consistent with the recent arbitration deci-

sions of this Court than the sole authority cited by Petitioner

that denied arbitration of an ADEA claim. In Nicholson v.

CPC International, 877 F.2d 221 (3d Cir. 1989), the Third

Circuit relied on decisions of this Court that predated Mitsu-

bishi and involved other statutes, giving only lip service to

the more recent decisions favoring arbitration. The dissenting

judge concluded that the 1978 amendment to the ADEA,

which added a tolling provision to the statute of limitations,

was passed ‘‘to ensure that claimants achieved resolution of

their claims despite delays and not, as the majority suggests,

because informal mechanisms were perceived as inherently

inferior to judicial resolution.”’ 877 F.2d at 236 (Becker, J.

dissenting).

The decisions of this Court relied on by the Nicholson

court and the Petitioner are clearly distinguishable. A/exander

v. Gardner-Denver Co., 415 U.S. 36 (1974), which pre-dated

Mitsubishi, involved a collective bargaining agreement con-

taining an arbitration provision. This Court refused to

enforce the arbitration agreement because the individual

claimant had no control over ‘“‘the manner and extent to

which [his] individual grievance [was] presented.”’ Jd. at 58,

n.19. Moreover, the union might not have made the same

strategic choices as would the claimant, perhaps because their

interests differed or even conflicted. Jd. Similarly McDonald

v. West Branch, 466 U.S. 284 (1984), and Barrentine vy.

Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981),

involved collective bargaining agreements and pre-dated Mit-

subishi*.

Gardner-Denver also expressed a mistrust for arbitral pro-

cedures notably absent from this Court’s recent decisions.

Compare 415 U.S. at 57 with Rodriguez, 109 S.Ct. at 1920

and McMahon, 482 U.S. at 232-34.

4 The decisions in McDonald, Gardner-Denver, and Barrentine sug-

gested that Congress had not intended that arbitration be an exclusive

procedural remedy under 42 U.S.C. § 1983, Title VII, or Fair Labor

Standards Act, respectively. However, Congressional intent is not

addressed in depth by the opinions of this Court or of the courts

below. It was not until Mitsubishi that this Court clearly articulated

the requirement that the opponent of arbitration bears the burden of

demonstrating that Congress did not intend that the specific statutory

right be arbitrated. 473 U.S. at 624-28.

9

In Atchison, Topeka & Santa Fe Railway Co. v. Buell, 480

U.S. 557 (1987), this Court was presented with two federal

statutes—the Federal Employers’ Liability Act (‘‘FELA’’)

and the Railway Labor Act (‘‘RLA’’)—which appeared to be

in conflict regarding the appropriate forum for resolution of

certain employment disputes. The Court upheld the claim-

ant’s right to bring a FELA action for damages, concluding

that the RLA is not intended to be exclusive. In Buell, once

again, there was no individual contract requiring “rbitration.

Buell is also not controlling here because the Arbitration

Act, by its terms, is not applicable to ‘‘railroad employees.’’

9 U.S.C. § 1. Thus, the Buell decision required no deferral to

the mandate of the Arbitration Act and, like the decisions in

McDonald, Gardner-Denver and Barrentine, contains no dis-

cussion of the Act’s policies. Here, where the policies of the

Arbitration Act are fully involved, the Mitsubishi line of

cases is far more applicable.

The Arbitration Act and its policies contro] the agreement

to arbitrate in this action and require that it be enforced.

POINT Ili

ARBITRATION IS NOT IN CONFLICT WITH THE

POLICIES UNDERLYING THE ADEA

Finding no comfort in the express legislative intent of Con-

gress respecting the ADEA, Petitioner vaguely argues that

arbitration is in conflict with the policies underlying the

ADEA. Petitioner’s arguments in this regard consist primar-

ily of assertions that arbitration, and, in particular, NYSE

arbitration, is an inadequate forumi for the determination of

important rights, in this case, ADEA claims. At least since

Mitsubishi, however, this Court has rejected similar attacks

by others in connection with what they viewed to be **impor-

tant rights.’’ The courts have left suspicion of arbitration

behind and recognized the confidence that Congress has

placed in the arbitration process through the Arbitration Act.

In light of this current authority, Petitioner’s complaints can

10

Only be viewed as an attack on the wisdom of the Arbitration

Act itself. This is neither the appropriate forum nor the time

for such attacks.

A. Petitioner’s Criticisms of Arbitration Have Been Rejected

by the Courts.

In his Brief on the Merits, Petitioner expresses several

unfounded suspicions in an effort to disparage arbitration

generally. But this Court has repeatedly emphasized the bene-

fits of arbitration, even when a Statutory claim is involved.

By agreeing to arbitrate a statutory claim, a party does

not forego the substantive rights afforded by the statute;

it Only submits to their resolution in an arbitral, rather

than a judicial forum. It trades the procedures and

opportunity for review of the courtroom for the simplic-

ity, informality, and expedition of arbitration... .

Having made the bargain to arbitrate, the party should

be held to it unless Congress itself has evinced an inten-

tion to preclude a waiver of judicial remedies for the

Statutory rights at issue.

Mitsubishi, 473 U.S. at 628.

When the Arbitration Act was adopted, the House of Rep-

resentatives recognized that it was a reaction to the ‘‘agita-

tion against the costliness and delays of litigation.’’ See Dean

Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 220 (1985)

(quoting H.R. Rep. No. 96, 68th Cong., Ist Sess., 1-2

(1924)). In McMahon, this Court concluded that ‘‘the stream-

lined procedures of arbitration do not entail any consequen-

tial restriction on substantive rights.”” 482 U.S. at 232 (citing

Mitsubishi, 473 U.S. at 628). It is also accepted that ‘arbitral

tribunals are readily capable of handling the factual and legal

complexities of antitrust claims.’’ McMahon, 482 U.S. at 232

(citing Mitsubishi, 473 U.S. at 633-34). Moreover, this Court

has stated that while judicial scrutiny of arbitration awards is

limited by necessity, ‘‘such review is sufficient to ensure that

1]

arbitrators comply with the requirements of the statute.’’

McMahon, 482 U.S. at 232.°

Petitioner’s specific attacks on NYSE arbitration similarly

proceed as if the propriety of securities arbitration had never

been addressed by the courts. Many of this Court’s decisions

upholding the enforceability of arbitration agreements, how-

ever, involved securities arbitration. See, e.g., Rodriguez,

McMahon, Perry, Byrd. Indeed, the arbitration procedures

of the NYSE have often been praised by the federal courts

specifically in connection with employment disputes. See,

Pearce v. E.F. Hutton Group, Inc., 828 F.2d 826, 829 (D.C.

Cir. 1987) (‘‘The arbitrators who serve on the Exchange

Arbitration panels are experienced, competent individuals

who are fully capable of examining, evaluating and deciding

the types of claims being asserted by [the plaintiff].’’) (quot-

ing affidavit of Edward Morris, Arbitration Director of the

NYSE.); Pierce, 52 Fair Empl. Prac. Cas. (BNA) at 1884 (a

case brought under the ADEA) (‘‘The [NYSE] commercial

arbitration procedures are substantially similar to those in a

judicial forum and the arbitrator has sufficient power to

structure a remedy to eliminate age discrimination’’); Pih/, 48

Fair Empl. Prac. Cas. at 926 (a case brought under the

ADEA) (‘‘The NYSE’s arbitration procedure . . . offers an

efficient and just means for resolution of ADEA claims’’).

Thus, the Petitioner’s suspicions regarding the arbitration

procedures of the securities self-regulatory organizations have

already been considered—and dismissed—by the courts.

B. Petitioner’s Criticisms of NYSE Arbitration are Factually

Unfounded.

The securities industry is one of the most heavily regulated

in the world. Indeed, the courts’ confidence in the arbitration

procedures of the self-regulatory organizations rests in part

on the knowledge that the SEC has oversight authority. In

S$ In their brief to this Court, the customers in McMahon raised the

same criticisms as Petitioner. Brief for Respondent at 24-28. In decid-

ing to enforce the arbitration agreement, this Court considered these

criticisms and dismissed them.

12

McMahon, this Court noted that ‘‘[n]o proposed rule change

may take effect unless the SEC finds the proposed rule is

consistent with the requirements of the Exchange Act, 15

U.S.C. § 78s(b)(2) . . . . and the Conzmission has the power

to ‘abrogate, add to, and delete from, any [self-regulatory

organization] rule if it finds such changes necessary or appro-

priate to further the objectives of the Act, 15 U.S.C.

§ 78s(c).”’ 482 U.S. at 233. SEC review is intended inter alia,

“‘to insure the fair administration of self-regulatory organiza-

tion’’. 15 U.S.C. § 78s(c).

Among the rules of the self-regulatory organizations filed

with the SEC are provisions for arbitration of intra-industry

disputes. Such provisions have existed and been regularly uti-

lized since the 19th century, and the NYSE has required arbi-

tration of employment disputes between broker-dealers and

their registered representatives since 1958. 2 N.Y.S.E. Guide

(CCH) 4 2347 (Rule 347); Form U-4. For over thirty years,

and many years before that on a voluntary basis, arbitration

has been the accepted and effective means of resolving

employment disputes in the industry.°

NYSE arbitration of disputes between broker-dealers and

registered representatives is subject to substantially the same

rules as disputes between customers and broker-dealers. As

discussed above, those procedures have been found fair by

this and many other courts.’ In addition, they have been

reviewed and approved by the SEC, which specifically noted

their applicability to intra-industry disputes. SEC Order

Approving Rule Changes to the Arbitration Process, Securi-

6 See generally, Serota, The Unjustified Furor Over Securities Arbi-

tration, 16 Pepperdine L. Rev. 5105 (May 1989); Goldman, Samuel P.,

A Handbook of Stock Exchange Laws (Matthew Bender & Company

1915), pp. 6, 127.

7 Acceptance of Petitioner’s argument would thus suggest that the

same securities arbitration procedures are inadequate for registered

employees of brokerage firms but adequate for customers. Such a find-

ing would be without factual or legal support and would be inconsis-

tent with the premises of the Court’s recent customer arbitration

decisions.

13

ties Exchange Act Release No. 34-26805 (CCH) (May 10,

1989).

Contrary to Petitioner’s assertions, the panel designated to

hear disputes like that involved in this litigation would cur-

rently consist of a majority of arbitrators from outside the

securities industry.* Moreover, any industry arbitrator would

be chosen from a panel that includes, among others, present

and retired registered representatives and other non-

managerial employees. 2 N.Y.S.E. Guide (CCH) 4 2607(a)(3)

(Rule 607(a)(3)).

The remaining arbitration procedures are generally identi-

cal to those in customer arbitration, and are designed to

assure impartiality and fairness.’ Arbitrators are required to

8 Panels composed entirely of industry members are utilized only

where the controversy is ‘“‘between parties who are members, allied

members, member firms or member corporations.’’ 2 N.Y.S.E. Guide

(CCH) 4 2632 (Rule 632). Neither the record on appeal nor the mem-

bership lists in the current N.Y.S.E. Guide (CCH) (Volume 1) reflect

that Petitioner falls in any of the categories requiring an all industry

panel. Controversies involving ‘‘non-members”’ are heard by panels of

three to five arbitrators appointed in the same manner as for customer

claims. 2 N.Y.S.E. Guide (CCH) 44 2632 (Rule 632) and 2607 (Rule

607).

9 Petitioner suggests that a significant difference is that the recently

adopted NYSE Rule 637, requiring expanded disclosure respecting

arbitration, is not applicable to Petitioner. Of course, this Court's

recent decisions upholding securities customer arbitration were made

even without such disclosure rule.

Moreover, Petitioner is being less than candid in his assertions that

he was unaware of the significance of the arbitration provision in the

Form U-4 and in the NYSE Rules. According to the Form U-4 (JA 15),

petitioner became a registered representative in 1959. It is incompre-

hensible that after at least 22 years of employment in the securities

industry he was jgnorant of self-regulatory organization arbitration

procedures at the time he completed the Form U-4.

Indeed, registered representatives are required to study industry

rules (including arbitration provisions) and pass examinations respect-

ing them before becoming registered. Securities Exchange Act of 1934

14

disclose any business affiliation with any parties before them,

and may be disqualified for cause for even the appearance of

a conflict of interest. See, e.g., 2 N.Y.S.E. Guide (CCH)

{ 2610 (Rule 610). There are trial-type procedures, including

the right to be represented by counsel, to cross-examine wit-

nesses and to create a transcript. In addition, the increasingly

broad discovery provisions allow parties to subpoena wit-

nesses and documents and to compel the presence of an

employee of a member firm, without resort to subpoenas.

See, e.g., 2 N.Y.S.E. Guide (CCH) 44 2614-15, 2619-20, 2623

(Rules 614-15, 619-20, 623). These and other procedural! safe-

guards are a result of joint efforts of the SEC and the indus-

try itself, which has a long history of active self-regulation.

See SEC Release No. 34-26805 (May 10, 1989).'°

The actual experience with the operation of the NYSE arbi-

tration rules has clearly demonstrated their fairness. The fol-

lowing Statistics, which include both customer disputes and

intra-industry disputes, were collected by the Securities Indus-

try Conference on Arbitration (‘‘SICA’’), Report #6 (August

1989). They demonstrate that the overall arbitration process

at the NYSE is efficient and frequently results in awards in

favor of customers.

§ 1S(b); NYSE Rule 345.13, 345.15(1) and (2). The U-4 itself, on the

last page in item 2, contains a certification that the applicant has read,

understands and agrees to abide by the rules of the relevant self-

regulatory organizations.

Of course, in Item $, any applicant, including Petitioner, specifically

agrees “‘to arbitrate any dispute . . . that may arise between me and

my firm.”’

10 ~=—- Petitioner’s further argument that because arbitrations are non-

public, the leverage of potential adverse publicity is lost, is particularly

meritless. First, many awards are now public. Second, Petitioner can-

not point to any express or implied legislative intent encouraging the

use of publicity for leverage.

15

NEW YORK STOCK EXCHANGE, INC.

Total Cases Public

Total Concluded Small Small Customers Awards

Cases Including Claims Claims Cases in Favor

Year Received Settlement Received Concluded Decided of Public

1980 367 327 131 110 221 119

1981 477 433 117 134 214 111

1982 558 473 109 113 214 118

1983 713 532 136 122 276 137

1984 1,008 796 176 183 259 113

1985 1,095 962 198 190 424 221

1986 965 1,004 181] 205 432 210

1987 1,050 1,000 225 204 378 200

1988 1,623 1,196 263 235 440 228

While the results of NYSE arbitration of employment dis-

putes between firms and registered representatives were, until

1989, not gemerally published, statistics are available for at

least one prior period. They confirm that arbitration of

employment claims is just as feasible, fair and efficient as is

arbitration of customer disputes’’:

Cases Cases

Total in which in which

Cases Registered Registered

Involving Represen- Represen- Cases Cases in

Registered tative tative in which which Firm

Represen- Cases was Received Firm was Received

Year tatives Settled Claimant an Award Claimant Award

1986 341 183 79 58 79 59

Arbitration of employment disputes by another self-

regulatory organization, the National Association of Securi-

11 Masucci and Morris, ‘‘Arbitration at the National Association of

Securities Dealers and the New York Stock Exchange,’’ Securities

Arbitration 1989 (Practicing Law Institute).

16

ties Dealers, Inc. (‘‘NASD”’), reflects similar results for the

associated persons (registered representatives)’:

Cases

Total in which

Cases Cases Assoc. Cases in

with Cases with Assoc. Person Cases with which Firm

Assoc. Settled or Person As Received Firm as Received

Year Persons Withdrawn Claimant Award Claimant Award

1986 280 177 55 39 48 39

Since May, 1989, arbitration awards within the securities

industry have been publicly available and have been pub-

lished in the Securities Arbitration Commentator Award

Reporter, a monthly periodical. The following table contains

information from NYSE arbitrations between employees and

firms, as tabulated from the publicly available information.

This data includes arbitration results released by the NYSE

from May, 1990 through October, 1990:

No. of No. of Total

Awards Awards on Amount of

Cases with in Em- Counter- Counter-

Employee ployee’s Total Amount Claims Claims

as Claimant Favor of Awards by Firm Awarded

65 47 $6,445,900 3 $41,000

No. of Total

No. of Awards on Amount of

Cases with Awards Counter- Counter-

Firm as in Firm’s Total Amount Claims by Claims

Claimant Favor of Awards Employee Awarded

89 75 $2,325,000 12 $1,107,100

These statistics clearly reflect the fairness of the NYSE

arbitration procedures. Employees received numerous and

substantial awards on their claims and counterclaims.

12 dd.

17

NASD employment arbitrations have had similar results, as

the following data, also collected from publicly available

information through October, 1990, reflects:

No. of No. of Total

Awards Awards on Amount of

Cases with in Em- Counter- Counter-

Employee ployee’s Total Amount Claims Claims

as Claimant Favor of Awards by Firm A warded

21 15 $760,400 2 $77,200

No. of Total

No. of Awards on Amount of

Cases with Awards Counter- Counter-

Firm as in Firm’s Total Amount Claims by Claims

Claimant Favor of Awards Employee Awarded

18 12 $332,300 2 $38,235,300"

While the available data is recent, it reflects that employees

have received substantial awards in arbitration proceedings,

and have won a significant percentage of their cases.

Petitioner cannot merely suggest that arbitration of ADEA

claims is inappropriate. He must point to something in the

Act’s legislative history that would corroborate his conclu-

sion. He has not done so. Moreover, the relevant authorities

and facts clearly establish the opposite conclusion—that

NYSE arbitration is fully capable of fairly deciding ADEA

claims.

13. _ Includes one award on a counterclaim in favor of an employee in the

amount of $38,233,000. Prescott Ball and Turben, Inc. v. Kanuth,

Case No. 88-1919, NASD, May 2, 1990.

18

POINT Il

THE STATUTORY EXCLUSION CONTAINED IN THE

ARBITRATION ACT DOES NOT APPLY

TO THIS DISPUTE

Respondent moved under the Arbitration Act to compel

arbitration of Petitioner’s claims. The amici curiae in support

of Petitioner argue that the arbitration agreement in this liti-

gation falls within the exclusion from the Arbitration Act for

“contracts of employment of seamen, railroad employees, or

any other class of workers engaged in foreign or interstate

commerce.’’ 9 U.S.C. § 1.

The argument of amici for Petitioner is without merit. As

an initial matter, the exclusion from the Arbitration Act they

rely on applies to arbitration provisions contained in ‘‘con-

tracts of employment.’’ In this case, the arbitration provi-

sions are contained in NYSE Rule 347 and in Form U-4.

Clearly, the Section 1 exemption does not apply to an arbi-

tration agreement contained in a rule or registration applica-

tion with a self-regulatory organization.

Moreover, courts have read the exclusory language in Sec-

tion 1 of the Arbitration Act narrowly. They have almost

universally held that in exempting ‘‘contracts of employment

of seamen, railroad employees, or any other class of workers

engaged in foreign or interstate commerce”’, Congress

intended in Section 1 of the Arbitration Act to exclude only

those workers ‘‘engaged in the movement of interstate or

foreign commerce”’, i.e. the transportation industries. Tenney

Engineering v. United Electrical Radio & Machine Workers

of America, 207 F.2d 450, 452 (3d Cir. 1953); Malison v.

Prudential-Bache Securities, Inc., 654 F. Supp. 101, 104

(W.D.N.C. 1987) (refusing to apply the Section 1 exemption

to a registered representative of a brokerage firm); Miller

Brewing v. Brewery Workers Local Union No. 9, 739 F.2d

1159, 1162 (7th Cir. 1984), cert. denied, 469 U.S. 1160 (1985)

(employees of a brewery).

ee ee ee

ee ee

19

In cases involving registered representatives and other secu-

rities professionals, courts, including this Court, have regu-

larly enforced, under the Arbitration Act, arbitration

agreements in self-regulatory organization applications and

rules.'* Perry, 482 U.S. 483 (1987); Coenen v. R.W. Pres-

sprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S.

949 (1972); Legg, Mason & Company, Inc. v. Mackall &

Coe, Inc., 351 F. Supp. 1367, 1370 (D.D.C. 1972); see also

Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698, 704 (2d

Cir. 1985), cert. denied, 475 U.S. 1067 (1986), reh’g denied,

475 U.S. 1151 (1986); Fleck v. E.F. Hutton Group, Inc., 891

F.2d 1047 (2d Cir. 1989) (enforcing the arbitration provisions

in Form U-4 and NYSE Rule 347); McGinnis v. E.F. Hutton

and Company, Inc., 812 F.2d 1011 (6th Cir. 1987), cert.

denied, 484 U.S. 824 (1987) (enforcing the arbitration provi-

sions in Form U-4 and NYSE Rule 347); Pearce; Haviland v.

Goldman, Sachs & Co., 736 F.Supp. 507 (S.D.N.Y.1990);

Henderson v. Tucker, Anthony and RL Day, 721 F.Supp. 24

(D.R.I. 1989); Monahan v. Paine Webber Group, Inc., 724

F.Supp. 224 (S.D.N.Y. 1989). While the decisions often do

not address the exclusionary language, this only suggests that

the exclusion was so evidently inapplicable that neither the

court nor the litigants raised the issue. Where the issue has

been raised, the courts have declined to apply the Section 1

exclusion, concluding that registered representatives are not

the types of ‘‘v orkers’’ envisioned by Congress. Dickstein v.

duPont, 443 F.2d 783 (ist Cir. 1971); see also Stokes v. Mer-

rill Lynch, Pierce, Fenner & Smith, Inc., 523 F.2d 433, 436

(6th Cir. 1975) (claimants ‘‘do not seriously contend that as

‘account executives’, they fall within the exception from cov-

erage in § 1”’).

Thus, while this Court has not explicitly addressed this

issue, it is well-settled in the lower courts that the Arbitration

Act applies to arbitration agreements signed by registered

14 _— Petitioner’s suggestion in his brief that arbitration is inappropriate

for the enforcement of personal—as opposed to economic—rights,

therefore lacks support in the case law.

20

representatives of securities firms. The reasoning of the lower

court decisions should be adopted here.

CONCLUSION

Petitioner knowingly signed an agreement to arbitrate all

of his disputes with his employer. He has failed to point to

any express or implied congressional intent to preclude claims

brought under the ADEA from mandatory arbitration. He

should be held to his contract.

For the reasons stated above and in Respondent’s Brief on

the merits, amicus curiae the Securities Industry Association

respectfully requests that this Court affirm the decision of the

Fourth Circuit.

Respectfully submitted,

A. Robert Pietrzak

Charna L. Gerstenhaber

Counsel of Record

BROWN & Woop

One World Trade Center

New York, New York 10048

(212) 839-5300

Of Counsel:

William J. Fitzpatrick

Gerard J. Quinn

Securities Industry Association, Inc.