Opposition Brief — Ameritas Investment Corp. v. Slinkard

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IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1996

AMERITAS INVESTMENT CORP., a Nebraska

Corporation f/k/a BLN INVESTMENT CORP.,

Petitioner,

Vv.

STEVEN M. SLINKARD, An Individual,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE STATE OF OKLAHOMA SUPREME COURT

BRIEF IN OPPOSITION

Joseph C. Long,

Counsel for Respondent

1111 Wylie Road, #17

Norman, OK 73069

(405) 364-5471

July 12, 1996

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1996

AMERITAS INVESTMENT CORP., a Nebraska

Corporation f/kia BLN INVESTMENT CORP.,

Petitioner,

Vv.

STEVEN M. SLINKARD, An Individual,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE STATE OF OKLAHOMA SUPREME COURT

BRIEF IN OPPOSITION

Joseph C. Long,

Counsel for Respondent

1111 Wylie Road, #17

Norman, OK 73069

(405) 364-5471

July 12, 1996

TABLE OF CONTENTS

ce LE ES A aa ee 1

. Jurisdiction Under Rule 10(b)

REEDS er ee ip fs a 2

A. Jurisdiction in Connection with

the Second Question Presented

B. Jurisdiction In Connection with

the First Question Presented

ll. Other Factors Which Mitigate

Against the Grant of Certiorari ........ 21

IS Cie Be eo yh ues So . - 23

CS ols lek Sos kk eRe ook eeeE A-1

EAE Sones Cpiaegeakat Bert Ona Cra eraarenas A-3

pee aes hs eee

TABLE OF AUTHORITIES

CASES

Allied-Bruce Terminix Companies, Inc. v. Dobson,

—_..:; U.S. __, 115 S.Ct. 834,

130 L.Ed.2d 753 (1005) ............. 6, 8, 10, 14

Auster v. Chicago Bd. Options Exch. Inc.,

716 F. Supp. 121, 125 (S.D.N.Y. 1989),

affd, 898 F.2d 882 (2d Cir.),

cert. denied, 498 U.S. 850(1990)...........__. 4

Bakk v. Principal Fin. Sec., inc.,

892 F. Supp. 1206 (D. Minn. 1995) .........__. 20

Davis v. Prudential Sec. Inc.,

59 F.3d 1186 (11th Cir. 1995)....... ..._.. 4, 16

Dean Witter Reynolds Inc. v. Byrd,

470 U.S. 213, 219-220, 105 S.Ct. 1238,

a POR lee en re 9

Dean Witter Reynolds, Inc. v. Trimble,

166 Misc.2d 40, 631 N.Y.S.2d 215

Pe Pe a I eg 17

Elmore v. Chicago & Iilinois Midland Ry. Co.,

782 F.2d 94, 96 (7th Cir. 1986)................ 4

Fahnestock & Co. v. Waltman,

935 F.2d 512 (2d Cir. 1991),

cert. denied, 112 S.Ct. 1241 (1992) ............ 7

Federal Deposit Ins. Comp. v. Air Florida Sys., Inc.,

822 F.2d 833, 842 n.9 (9th cir. 1987) ........... 4

First Options v. Kaplan,

une US, 1158 SCL 1020,

131 L.Ed.2d 985 (1995) ............. 6, 14, 18-19

Gamity v. Lyle Stuart, Inc.,

386 N.Y.S.2d 831,

Sue W.E.20 TOR (1G7TE) 2. ew cee 7, 18, 21

Glennon v. Dean Witter Reynolds,

Sa Fae TE Ge, FON eke Ss. 3

Honda Motor Co. Ltd. v. Oberg,

ee ee = 996 Zant,

pr BR BR re en ne ee 3,5

In re Arbitration Between Prudential

Sec. Inc. and Pesce,

642 N.Y.S.2d 466 (N.Y. Sup. Ct.,

ONO Weer GS PD gon ek ice uc ne vewan 17

In re Estate of Sandefur v. Greenway,

898 S.W.2d 667 (Mo. App. 1995) ............. 17

In re Lester Schwab Katz & Dwyer v. Yukevich,

641 N.Y.S.2d 505 (N.Y. Sup. Ct.,

New York County, 1996)................. 17-18

Kelley v. Michaels,

39 F.2d 1050 (10th Cir. 1905) ................. 4

Kintzelle v. J.B. & Sons, Inc.,

658 So.2d 130 (Fla. App. 1995) .............. 17

Lee v. Chica,

983 F.2d 883, 889 (8th Cir. 1993) ............ 2,5

Mastrobuono v. Shearson Lehman Hutton, Inc.,

a A ol a a

1217, 131 L.Ed.2d 76,__—s (1995) .... 6-8, 14-18, 20

Moses H. Cone Mem. Hosp. v. Mercury Constr. Comp.,

460 U.S. 1, 24-25, 103 S.Ct. 927,

en I a oy ek es g

New England Energy, Inc. v. Keystone Shipping Co.,

ee Ee ee 6

3t> Se ih ba as i

Se eRe RN OP FNS EE Re

sewer Te

peas

= =

—t 9

Dee RSLS

ak pel Ss ye ah

ig

ei

Laie

Pacific Mut. Life ins. Co. y. Hasiip,

499 U.S.1, 17, 20-21,

111 S.Ct. 1032, 1042-1043,

1044-1045, 113 L.Ed.2q 14 (1991)

Painewebber, Inc. v. Elahi,

1996 U.S.App. LEXIS 15949

(16R S, SU DS es le a. 7, 19-20

Painewebber, Inc. v. Bybyk,

81 F.3d 1193 (2d Cir. 1996)

Painewebber, Inc. v. Landay,

903 F. Supp. 193 (D. Mass. 1995)

Park Partners, L.P. v. Connolly,

839 F.2d 837 (1st Cir. CS Sebeivr es Se ee 2

Perry v. Thomas,

482 U.S. 483, 107 S.Ct. 2520 (1987)

Prudential-Bache Sec., inc. v. Tanner.

72 F.3d 234 (1st Cir. 1995)

Raytheon Co. v. Automated Business Systems, Inc.,

882 F.2d 6 (1st Cir. en SRT Dip ee 4

Scherk v. Alberto-Culver Co.,

417 U.S. 506, 511,

94 S.Ct. 2449, 2453 (1974)

ne A 6a elke Teles 9

Shearson Lehman Bros., Inc. v.

Neurosurgical Associates,

896 F. Supp. 844 (S.D. Ind. _ =e 17

Shu-Tao Lin v. McDonnell Douglas Corp.,

742 F.2d 45, 49 n.5 (2d Cir. We a oo re a ots 2

Smith Bamey Inc. v. Michalsky,

53 F.3d 807 (7th Cir. MR Seacrest ou 16

Societe Generale de Surveilance v. Raytheon,

643 F.2d 863, 867 (1st Cir. WE wae 2

iv

Southland Corp. v. Keating,

465 U.S. 1, 10,

104 S.Ct. 852, 858 (1984) ...............

Todd Shipyards Corp. v. Cunard Line, Ltd..

943 F.2d 1056 (9th Cir. 1990).............

Van Gemert v. Boeing Co.,

553 F.2d 812, 813 (2d Cir. 1977) .........

Volt information Services, Inc. v.

Board of Trustees of Leland

Stanford Junior University,

489 U.S. 468, 109 S. Ct. 1253.

ain a eM ong a ae

STATUTES, CODES and OTHER AUTHORITIES

Federal Arbitration Act

| SL ee eee

S| SR RR eae eee cea

NASD Code of Arbitration Procedure

ft Rte ts came een

Oklahoma Securities Act

Okla. Stat. tit. 71, § 408(a)(2)(A) ...........

Oklahoma Uniform Arbitration Act. § 10

Oija. Stat. tt. 15,§ 601 ......:..........

The Respondent Stephen M. Slinkard

respectfully requests that this Court deny the petition

for writ of certiorari seeking review of the Oklahoma

Supreme Court's opinion in this case.

REASONS WHY THE PETITION

SHOULD BE DENIED

Ameritas should never have filed its petition for

certiorari as this case presents none of the traditional

grounds for the granting of such writ by this Court.

This is a typical man bites dog case illustrating the

abuse of the arbitration process by many of the larger

brokerage houses. Having demanded disputes with its

customers be solved by arbitration through a contract

of adhesion and enforcing that right by motion to

compel, Ameritas, not liking the results obtained in

that arbitration, is seeking to overturn those results by

an appeal on the merits. Realizing the arbitration

process does not afford it the normal appellate review,

Ameritas has attempted to clothe its displeasure with

the substantive results of the arbitration in lofty claims

of arbitrator abuse of authority, improper pre-emption,

and deprivation of due process in an attempt to

manufacture jurisdiction for this Court to hear its

claims. This attempt fails miserably.

Rule 10 of this Court’s Rules outline the three

general considerations this Court examines in granting

or denying certiorari. Since this Case arose through

the Oklahoma state court system, general

consideration (a) of Rule 10 is Clearly inapplicable.

l. Jurisdiction Under Rule 10(b) and (c).

Ameritas, on page 1 of its Petition, claims

jurisdiction under Rules 10(b) and (c). However, a fair

reading of the body of its petition fails to reveal any

Pasis for jurisdiction under Rule 10(b). There are no

recent decisions of the United States Courts of

Appeals that are in conflict with the decision by the

Oklahoma Court of Appeals in this case. The Table

of Authorities in Ameritas’ Petition reveals seven

decisions of the Courts of Appeals, it relies upon. Of

those, four, Park Partners, L.P. y. Connolly, 839 F.2d

837 (1st Cir. 1988); Shu-Tao Lin y McDonnell

Douglas Com., 742 F.2d 45, 49 n.5 (2d Cir. 1984):

Societe Generale de Surveilance y. Raytheon, 643

F.2d 863, 867 (1st Cir. 1981); and Van Gemert y.

Boeing Co., 553 F.2d 812, 813 (2d Cir. 1977), are

imbedded citations found in quotations from other

Cases.

A. Jurisdiction in Connection with

the Second Question Presented

Lee v. Chica, 983 F.2d 883, 889 (8th Cir. 1993),

while not noted in their Table of Authorities as such,

Bie in

is @ quote from the concurring and dissenting opinion

of Judge Beam. This is the only Court of Appeals

decision dealing with the second question presented

that the lack of meaningful court review of the

arbitrators’ award of punitive damages results in a

denial of due process to Ameritas.

Mr. Slinkard would point out that the decision of

the Oklahoma courts in refusing to reverse the award

of punitive damages on this basis is consistent with all

of the decisions of the United States Courts of

Appeals that his research has found. Most recently,

in Glennon v. Dean Witter Reynolds, 83 F.3d 132 (6th

Cir. 1996), the Sixth Circuit specifically rejected

Ameritas’ position that the FAA did not provide an

adequate standard of review under this Court’s

decision in Honda Motor Co. Ltd. v. Oberg, __ US.

—_.: 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994). The

court first assumed that due process protections

attach in the case of review of arbitration awards. It

then considered:

“[Wjhether the FAA affords meaningful

review to defendant's claim that no

evidence supports the arbitration panel's

punitive damage award. We conclude that

the manifest disregard of the law standard

permits vacatur of those punitive damage

awards that are supported by no evidence.

Since that standard of review would allow

vacatur of those awards, it is necessarily

3

meaningful review of claims that no

evidence supports an arbitration panel’s

Punitive damage award."

83 F.3d at 138.

The issue assumed by the Sixth Circuit was

Specifically addressed by the Eleventh Circuit in Davis

v. Prudential Sec., inc., 53 F.3d 1186 (11th Cir. 1995).

It held that both the award of Punitive damages by the

arbitrators and the confirmation of such award by the

federal district court did not constitute state action so

as to trigger due process protection. The court cited

Federal Deposit Ins. Corp. v. Air Florida Sys., Inc.,

822 F.2d 833, 842 n.9 (9th cir. 1987): Elmore v.

Chicago & Illinois Midland Ry. Co., 782 F.2d 94, 96

(7th Cir. 1986); and Auster v. Chicago Bd. Options

Exch. Inc., 716 F. Supp. 121, 125 (S.D.N.Y. 1989),

affd, 898 F.2d 882 (2d Cir.), cert. denied, 498 U.S.

850 (1990), in support of its position. See also

Raytheon Co. v. Automated Business Systems, Inc.,

882 F.2d 6 (1st Cir. 1989); Todd Shipyards Corp. v.

Cunard Line, Ltd., 943 F.2d 1056 (9th Cir. 1990); and

Lee v. Chica, 983 F.2d 883 (8th Cir. 1993).

The Tenth Circuit recently held in Kelley v.

Michaels, 59 F.2d 1050 (10th Cir. 1995), that an

award of punitive damages by arbitrators in the

amount of slightly less than twice the actual damages

Wisi acne bcs

did not violate due process under the three-tiered

approach of this Court in Pacific Mut. Life ins. Co. v

Haslip, 499 U.S.1, 17, 20-21, 111 S.Ct. 1032, 1042-

1043, 1044-1045, 113 L.bu.2d 1 (1991). In the

present case, the award was roughly two and one half

times the actual damage award.

Therefore, the decision in the present case not

to reverse the arbitrators’ award of punitive damages

based upon due process grounds is clearly not in

conflict with the decisions of the Courts of Appeals.

Instead, the decision is clearly consistent with the

existing precedent from these Courts. Therefore,

Ameritas has not established jurisdiction under Rule

10(b) for the second of its "questions" presented.

These same decisions indicate that the Courts of

Appeal find no inconsistency between the award of

Punitive damages by arbitrators and this Court's

decisions in Honda Motor Co. Ltd. v. Oberg, __ US.

—_, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994) or

Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111

S.Ct. 1032, 113 L.Ed.2d 1 (1991). Ameritas has

offered no support for such position other than the

pinion of Judge Beam in Lee v. Chica, 983 F.2d 883,

889 (8th Cir. 1993). Based upon this absence of

authority, Mr. Slinkard submits that Ameritas has not

shown jurisdiction on this issue under Rule 10(c)

either. The decision in this case is consistent with the

teachings of this Court.

B. Jurisdiction In Connection with the

First Question Presented.

Ameritas’ first question presented, dealing with

the pre-emption of Oklahoma state law by the FAA,

does not fair any better under Rules 10(b) and (c). As

far as Rule 10(b) is concerned, only two decisions of

the Courts of Appeal are cited as being in conflict with

the decisions in the present case. These cases are

from the First Circuit in New England Energy, Inc. v.

Keystone Shipping Co., 855 F.2d 1 (1st Cir. 1988),

and the Second Circuit in Fahnestock & Co. y

Waltman, 935 F.2d 512 (2d Cir. 1991), cert. denied.

112 S.Ct. 1241 (1992).

Both cases pre-date what Mr. Slinkard believes

are the controlling 1995 decisions of this Court in

Allizd-Bruce Terrm:1ix Companies, Inc. v. Dobson, ___

U.S. ___, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995):

Mastrobuono v. Shearson Lehman Hutton, Inc., ____

U.S.___, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995); and

First Options v. Kaplan, aa. ¥-9-___, 1915 S.Ct. 1920.

131 L.Ed.2d 985 (1995). To the extent that the courts

of appeals cases conflict with the later decisions by

this Court, the decisions of the courts of appeals are

no longer good law. For example, in light of this

Court's holding in Mastrobuono, the statement in

Fahnestock that there is no conflict bes«ween the FAA

and the Garrity v. Lyle Stuart, Inc., 386 Y.S.2d 831,

353 N.E.2d 793 (1976), case is no lonier accurate.

Further, Mr. Slinkard believes that these Opinions may

no longer represent the views of these Circuits in light

of the more recent developments by this Court. For

more recent views, see Painewebber Inc. v. Elahi.

1996 U.S.App. LEXIS 15949 (1st Cir. July 3, 1996):

Prudential-Bache Sec., Inc. v. Tanner, 72 F.3d 234

(1st Cir. 1995), and PaineWebber, Inc. v. Bybyk, 81

F.3d 1193 (2d Cir. 1996).

However, both cases appear to be cited largely

for the proposition that the Federal Arbitration Act

("FAA"), 9 U.S.C. § 1, et. seq., does not pre-empt all

State law. This is consistent with the statement in the

"Questions Presented For Review" section that the

first issue for review is the pre-emption of "the entirety

of Oklahoirss state law... by the Federal Arbitration

Act." Ameritas attempts to re-enforce this position by

Stating on p.11 of its Petition: "A major underpinning

of Mr. Slinkard’s argument has been that all

Oklahoma laws are pre-empted by the FAA simply

because this case involved interstate commerce."

If, indeed, this was Mr. Slinkard’s position, there

would not only be a conflict between these two Courts

i

of Appeals decisions, but also a major conflict with the

decision of this Court in Volt Information Services, Inc.

Vv. Board of Trustees of Leland Stanford Junior

University, 489 U.S. 468, 109 S.Ct. 1253,___s— L.Ed.2d

——. (1989), and Mastrobuono v. Shearson Lehman

Hutton, Inc., ___ U.S. ; , 115 S.Ct. 1212,

1217, 131 L.Ed.2d 76, —. (1995). Ameritas would.

therefore, clearly have established jurisdiction under

both Rules 10(b) and (c).

However, such is not the case. Ameritas has

Simply created a straw man which it then proceeds to

knock down in an attempt to create jurisdiction. Mr.

Slinkard has never maintained that the FAA displaces

the entire body of state substantive or arbitrative law.

His position, which is both simple and logical, is based

entirely upon the already established teachings of this

Court.

The beginning point is the application of the

FAA. As acknowledged by Ameritas in the quoted

language, this is a contract involving interstate

commerce. Allied-Bruce Terminix Companies, Inc. v.

Dobson, _ U.S. __, 115 S.Ct. 834, 130 L.Ed.2d

753 (1995). As such, it Clearly comes within the terms

of 9 U.S.C. § 2 and is controlled by the FAA.

This Court, in a series of cases, has made

several important observations about the FAA and its

Ne alibi inal Nid SCARS DY, ate ache s

VASA HI BOW Comb sa

interplay with the state law and the state courts. It

first identified the purpose of the FAA “to overrule the

judiciary’s longstanding refusal to enforce agreements

to arbitrate," Dean Witter Reynolds Inc. v. Byrd, 470

U.S. 213, 219-220, 105 S.Ct. 1238, 1241-1242 (1985),

“and place such agreements ‘upon the same footing

as other contracts," Scherk v. Alberto-Culver Co., 417

U.S. 506, 511, 94 S.Ct. 2449, 2453 (1974), quoted

with approval in Volt Information Sciences, Inc. v.

Board of Trustees of the Leland Stanford Junior

University, 489 U.S. at 474, 109 S.Ct. at 1253. This

purpose led it to conclude in Moses H. Cone Mem.

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25,

103 S.Ct. 927, 941-942 (1983), that Section 2 of the

FAA "create[s] a body of federal substantive law of

arbitrability, applicable to any arbitration agreement

within coverage of the Act." [Emphasis added.]

Finally, Southiand Comp. v. Keating, 465 U.S. 1,

10, 104 S.Ct. 852, 858 (1984), held that the FAA pre-

empts state laws which "require a judicial forum for

the resolution of claims which the contracting parties

agreed to resolve by arbitration." Again, quoted with

approval in Volt Information Sciences, Inc. v. Board of

Trustees of the Leland Stanford Junior University, 489

U.S. at 478, 109 S. Ct. at 1255. This holding makes

Clear that as to arbitrability of issues, the contract of

the parties is controlling over any state statute or

constitutional provision which is to the contrary.

The Court renewed its earlier positions in 1995

in Allied-Bruce, supra, Saying:

[T}his Court [has] decided that Congress

would not have wanted state and federal

courts to reach different outcomes about

the validity of arbitration in similar cases.

The Court [has] concluded that the Federal

Arbitration Act pre-empts state law; and it

[has] held that state courts cannot apply

State statutes that invalidate arbitration

agreements.

115 S.Ct. at 838.

Based upon these holdings, Mr. Slinkard

maintains that the FAA pre-empts any state law

provision which prevents the parties from submitting

any issue they desire to arbitration. in the present

case, this means that any Oklahoma substantive law

Or arbitration provision preventing the parties from

arbitrating issues such as Punitive damages,

attorneys’ fees, or pre- or post-judgment interest

would be pre-empted by the FAA. State law pre-

emption is limited to those state Statutory or common

law provisions which directly interfere with the parties

night to arbitrate any issue. This is a much narrower

position than that claimed by Ameritas in its first

"Question Presented" as to the total pre-emption. Mr.

Slinkard’s position is neither inconsistent with the cited

decisions of the Courts of Appeals or this Court.

Mr. Slinkard recognizes one important caveat to

the above position created by Volt Information

Services, Inc. v. Board of Trustees of Leland Stanford

Junior University, 489 U.S. 468, 109 S. Ct. _ ae

L.Ed.2d ___ (1989). The Court in Volt held that the

parties may, by agreement, replace the FAA as the

controlling body of case law. Thus, in Volt, the parties

elected to be controlled by California law rather than

the FAA.

Ameritas incorrectly urges that Volt is controlling

in the present case. In fact, Volt has no application to

the present case for one important reason that

Ameritas conveniently forgets. It only applies where

the parties have agreed to waive application of the

FAA. There is no such waiver in the present case.

To the contrary, the agreement between the

parties as evidenced by the arbitration agreement

itself, the NASD Submission Agreement, Mr.

Slinkard’s statement of claim submitted to the

arbitrators, and the conduct of the parties during

the arbitration all indicate that it was the intent of

the parties to have the issues of punitive

damages, attorneys’ fees, and pre- or post

judgment interest determined by the arbitrators.

Paragraph 13 of Ameritas’ customer agreement

is a broad form arbitration agreement requiring the

arbitration of “any controversy between us arising out

of your business or this agreement...." See Petitioner's

Brief, Appendix 14A, where the Oklahoma Court of

Appeals quotes Paragraph 13 in full. Further, Ameritas

signed the Uniform Submission Agreement which

provides in Paragraphs 1 and 3:

1. The undersigned parties hereby

submit the present matter in

controversy, as set forth in the attached

statement of claim, answers, cross

claims and related counterclaims and/or

third party claims which may be

asserted, to arbitration in accordance

with the Constitution, By-laws, Rules,

Regulations and/or Code of Arbitration

Procedure of the sponsoring organization.

eee

3. *** The undersigned parties further

agree and understand that the arbitration

will be conducted in accordance with the

Constitution, By-laws, Rules, Regulations

and/or NASD Code of Arbitration

Procedure of the sponsoring organization.

The signed Uniform Submission Agreement is

reproduced in the Appendix at p. App |-1.

The final paragraph of Mr. Slinkard’s First

Amended Claim, p.15, states:

"As a result of all of the allegations set

forth in the paragraphs, McQueen, and

12

Ameritas are liable to Slinkard in actual

} damages as set forth at 71 OS. §

408(a)(2)(A), which is the return of all

money invested with McQueen, equal to

the sum of $42,700, together with interest

: at ten percent (10%) per year from the

. date of payment, together with costs and a

reasonable attorneys fee. Although all

securities purchased by Slinkard from

: McQueen are worthless, Slinkard hereby

; tender any such securities to McQueen

and Ameritas. Slinkard further requests

exemplary damages as specifically set

forth herein in an amount in excess of

$100,000, plus costs, attorney fees and

such other and further relief that the

Arbitrator deems fair and equitable.”

[Emphasis added.]

Finally, during the course of the arbitration itself

both Mr. Slinkard and Ameritas requested the

arbitrators to award them attorneys’ fees under 71

Okla. Stat. § 408(a)(2)(A).

These various documents and actions make

clear that it was within the contemplation of the parties

that the arbitrators had the power to, and were

expected to, address the issues of punitive damages,

attorneys’ fees, and interest. Under the FAA, such

agreement is sufficient authority for the arbitrators to

consider the matters, and any state Statutory or

common law provisions to the contrary are pre-

empted.

13

|

The_correctness of Mr. Slinkard’s position is

borne out by this Crurt’s decisions in Mastrobuono V.

Shearson Lehman Hutton, Inc., Se Ceo. See

S.Ct. 1212, 131 L.Ed.2d 76 (1995): and First Options

v. Kaplan, __ U.S. __, 115 S.Ct. 1920, 131 L.Ed.2q

985 (1995).

Mastrobuono makes clear that the parties

agreement, not state law, determines the scope of the

arbitration or arbitrability. It said:

[Wje think our decisions in Allied-Bruce,

Southland, and Perry v. Thomas, 482 U.S.

483, 107 S.Ct. 2520 (1987), make clear

that if contracting parties agree to include

claims for punitive damages within the

issues to arbitrated, the FAA ensures that

their agreement will be enforced according

to its terms even if a rule of state law

would otherwise exclude such claims from

arbitration. Thus, the case before comes

down to what the contract has to Say about

the arbitrability of petitioners’ claim for

punitive damages.

115 S.Ct. at 1215.

The Court also held in Mastrobuono that the

parties showed the necessary intent to arbitrate

Punitive damages. In reaching this conclusion, the

Court relied upon two things. First, it considered the

language of the arbitration ciause itself and Said:

[T]his clause strongly implies that an

arbitral award of punitive damages is

14

appropriate. It explicitly authorizes

arbitration in accordance with [National

Association of Securities Dealers, Inc.)

rules; the panel of arbitrators in fact

proceeded under that set of rules. The

NASD Code of Arbitration Procedures

indicates that arbitrators may award

"damages and other relief." NASD Code of

Arbitration Procedure 3741(e) (1993).

While not a clear authorization of punitive

damages, this provision appears broad

enough at least to contemplate such a

remedy. Moreover...a manual provided to

NASD arbitrators contains this provision:

B. Punitive Damages

The issue of punitive damages may

arise with great frequency in

arbitrations. Parties to arbitration are

informed that arbitrators can consider

punitive damages as a remedy.

Thus, the text of the arbitration clause itself

Surely does not support--indeed contradicts

--the conclusion that the parties agreed to

foreclose claims for punitive damages. 115

S.Ct. at 1218.

Second, the Court applied the common law rule of

contract construction that any ambiguity in the

agreement should be construed against the interest of

the party who drafted it. /d. at 1219.

These facts are all present in case at bar. The

arbitration agreement is the same. It was an NASD

arbitration, and the arbitrators and the parties had the

15

same NASD manuals. Finally, Ameritas, not Mr.

Slinkard, drafted the arbitration agreement and sought

to arbitrate the claims.

The Mastrobuono analysis applies equally to

attorneys’ fees and prejudgment interest. As will be

seen below, Mr. Slinkard does not believe the

Oklahoma Uniform Arbitration Act § 10, 15 Okla. Stat.

(1991) § 810, or Oklahoma Securities Act §

408(a)(2)(A), 71 Okla. Stat. (1991) § 408(a)(2)(A),

prohibit the arbitrators from awarding either attorneys’

fees or pre- or post-judgment interest. In the present

case, the Oklahoma Court of Appeals specifically held

that post-judgment attorneys’ fees had to be awarded

by the arbitrators and neither party appealed this

holding. However, to the extent that these provisions

could be interpreted to prevent such awards, then

under the rationale of Mastrobuono, they are pre-

empted by the FAA.

As did the Oklahoma Court of Appeals in the

present case, virtually every state and federal court to

consider the issue has followed Mastrobuono and

confirmed the arbitrators’ award of both punitive

damages and attorneys’ fees. See e.g. Davis y.

Prudential Sec. Inc., 59 F.3d 1186 (11th Cir. 1995)

(punitive damages); Smith Bamey Inc. v. Michalsky,

93 F.3d 807 (7th Cir. 1995) (punitive damages);

16

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2

:

4

;

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Painewebber v. Landay, 903 F. Supp. 193 (D. Mass.

1995) (punitive damages); Shearson Lehman Bros.

Inc. v. Neurosurgical Associates, 896 F. Supp. 844

(S.0. Ind. 1995) (both punitive damages and

attorneys’ fees); /n re Estate of Sandefur v.

Greenway, 898 S.W.2d 667 (Mo. App. 1995) (punitive

damages); Kintzelle v. J.B. & Sons, Inc., 658 So.2d

130 (Fla. App. 1995) (punitive damages).

Against this impressive list, Ameritas can cite

only one case, the decision from a New York trial

court, in Dean Witter Reynolds, Inc. v. Trimble, 166

Misc.2d 40, 631 N.Y.S.2d 215 (N.Y.Sup. Ct., 1995),

refusing to follow this Court’s decision in Mastrobuono

holding that the FAA does not pre-empt New York law

in the case of punitive damages. However, two more

recent New York decisions, /n re Arbitration Between

Prudential Sec. Inc. and Pesce, 642 N.Y.S.2d 466

(N.Y. Sup. Ct., New York County, 1996), and /n re

Lester Schwab Katz & Dwyer v. Yukevich, 641

N.Y.S.2d 505 (N.Y. Sup. Ct, New York County,

1996), have followed Mastrobuono and held that

arbitrators can award both attorneys’ fees and punitive

damages under the FAA in spite of the prohibitions of

New York law. The court in /n re Arbitration Between

Prudential Sec. Inc. and Pesce, supra, simply stated:

"This court is bound to apply Mastrobuono and the

17

issue of punitive damages is left to the arbitrators to

decide.” Id. at 468.

The Yukevich case is directly in point because

the parties had signed no conflict-of-law clause. The

court stated:

Mastrobuono, is instructive with regard to

the facts presented in this case—where the

agreement contains no choice of law

provision and mandates that all

controversies be submitted to arbitration.

In a situation such as this, the Supreme

Court held that:

. ., there would be nothing in the

contract that would possibly constitute

evidence of an intent to exclude

punitive damages claims.

Accordingly. punitive damages would

be allowed because, in the absence

of contractual intent to the contrary,

the FAA would preempt the Garrity

rule. Id. at___—, 115 S.Ct. at 1217.

641 N.Y.S.2d at 506.

In the alternative, if the above analysis does not

convince the Court that the parties have specifically

agreed to have the arbitrators consider punitive

damages, attorneys’ fees, and interest, then this

Court’s decision in First Options, supra, supplies a

presumption that such matters are to be covered. First

Options also dispels Ameritas’ idea that arbitrability

involves only the general agreement to arbitrate.

18

wees

b bonita aes aN

SPEEA sin RO AN SE RN Ss OIE ER tak Re

In First Options, the Court first held that

arbitrability is normally an issue for the courts to

determine, unless the parties have Clearly submitted

this issue to the arbitrators themselves. Again the

Parties’ contract, not state law, determines this

issue.

The Court then distinguished between

arbitrability in general and arbitrability of a

Particular issue. Arbitrability in general concerns the

question of whether the parties generally agreed to

arbitration as a _ substitute for litigation, while

arbitrability of a particular issue refers to whether the

parties agreed to arbitrate such Specific issues as

Punitive damages, attorneys’ fees and interest. The

Court held, in the case of general arbitrability, there is

@ presumption against finding an intent to arbitrate.

On the other hand, the Court held, in the case of the

scope of individual issues submitted to arbitration,

there is a presumption in favor of arbitrating. 115

S.Ct. at 1924. See also Painewebber vy Elahi, 1996

U.S. App. LEXIS 15949 (1st Cir. July 3, 1996):

Painewebber, Inc. v. Landay, 903 F. Supp. 193 (D.

Mass. 1995).

The Court's analysis in First Options makes two

points relevant to the present case. First, arbitrability

involves both a determination of arbitrability in general

19

me

¥

and whether the parties have submitted Particular

issues, such as punitive damages, attorneys’ fees,

and prejudgment interest to the arbitrators. Cf

Painewebber, Inc. v. Elahi, 1996 U.S. App. LEXIS

15949 (1st Cir. July 3, 1996): Painewebber, Inc. vy.

Landay, 903 F. Supp (D. Mass. 1995): Bakk y.

Principal Fin. Sec., Inc., 892 F. Supp. 1206 (D. Minn.

1995) (determination of arbitrability itself left to

arbitrators). Second, there is a presumption in favor of

finding arbitrability of a Particular issue. In the present

case, this means that Mr. Slinkard is entitled to a

presumption that the arbitrators could consider his

Claims for punitive damages, attorneys’ fees, and

prejudgment interest. This presumption is in addition

to the actual evidence found sufficient for such

Submission in Mastrobuono.

This analysis shows that the decision by the

Oklahoma courts in the present case is not

inconsistent with the decisions of the other state

courts, the Courts of Appeals, or this Court.

Therefore, Ameritas has not established jurisdiction

under either Rule 10(b) or (c). Further, this analysis

also indicates the absence of the second major

consideration under Rule 10 for the granting of

certiorari--that the present case present an "important

federal question” which this Court needs to review and

20

ee te ieee ee ee ee

De Nie a ani Re AS Sain

settle. The federal issues presented have already

been resolved by this Court and are being

Satisfactorily applied by the state and lower federal

courts. No further guidance from this Court is

necessary.

ll. Other Factors Which Mitigate

Against the Grant of Certiorari.

In order to give some bare credence to these

lofty legal claims, Ameritas has ignored several

pertinent points which undercut the alleged conflicts

over which it urges this Court to take jurisdiction. For

example, it claims as one of the issues presented is

the pre-emption of the Oklahoma State rule against

arbitrators granting Punitive damages. As the

Oklahoma Court of Appeals opinion in the present

case acknowledged, there is no Oklahoma rule on this

point. See Memorandum Opinion at p. 18A of

Petition’s Appendix. There simply is no Statutory or

decisional law as to whether Oklahoma would or

would not follow the New York Rule of Gamtty v. Lyle

Stuart, Inc., 386 N.Y.S.2d 831, 353 N.E.2d 793

(1976), and prohibit arbitrators from making an award

of punitive damages. Therefore, at this point, there is

only a potential conflict.

In the same vein, Ameritas ignores the plain

language of Oklahoma Uniform Arbitration Act § 10,

21

15 Okla. Stat. (1991) § 810, the language of which is

reproduced in Petitioner's Brief, Appendix, p. 25A.

This section does not prohibit the awarding of

attorneys’ fees by arbitrators. Instead, it merely

requires that the agreement to arbitrate provide for the

award of such fees. The "agreement" under this

section should include not only Paragraph 13 of the

Customer Agreement, but also the NASD Submission ©

Agreement, Mr. Slinkard’s statement of claim

submitted to the arbitrators, and the conduct of the

parties during the arbitration. As outlined in the

previous point, all of these items viewed, both

Separately and collectively, make plain that it was the

intent of the parties to have the issues of attorneys’

fees determined by the arbitrators. Therefore, even if

it were to apply, the requirements have been met for

the arbitrators to award attorneys’ fees under Section

10 of the Oklahoma Act.

While Ameritas no doubt will claim to the

contrary that the language of these agreements did

not provide the necessary agreement, Mr. Slinkard

would point out that Ameritas made this argument in

connection with post-award attorney fees. The

argument convinced the Oklahoma Court of Appeals

which held:

22

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P ‘pepilinaiin

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. ee ee ae oe ara

"Ameritas contends the Option Agreement

required that any controversy between the

parties be submitted to the aprbitrators

Slinkard cites [Section 408 of the

Oklahoma Securities Act to support his

Claim for post-award interest and

attorneys’ fees]. We agree with Ameritas

and hold that the trial court erred entering

its July 1, 1994 order as to additional

attorney's fees and costs."

Petitioner's Appendix at Pp. 22A.

CONCLUSION

In summary, Ameritas’ Petition contains nothing

which suggest that this Court should exercise its

discretion and grant the requested Writ. Ameritas has

not established any kind of a conflict between the

decisions of the Oklahoma courts and other state

courts, the Courts of Appeal, or this Court which

would support jurisdiction under Rule 10(b) or (c). It

has not shown that the case presents "an important

federal question" on which the guidance of the Court

is required. Ameritas has ignored several major

factual issues which undercut the validity of the

questions it believes are presented. Finally, the

decision of the Oklahoma courts appears to be

accurate and correct when viewed in light of the

precedent of this Court, the lower federal courts, and

the state courts.

The Petition, Mr. Slinkard believes, was filed

largely for the purpose of further delaying payment of

the arbitration award and attempting to prevent the

State district court from considering the collateral

estoppel effect of such award on the thirteen

remaining plaintiffs with essentially identicai claims in

the original class action suit.

The Petition has no substance. Stripping away

the fancy legal claims, this case amounts to nothing

more than a thinly veiled attempt by Ameritas to

persuade a court to review the arbitrators’ decision on

the merits, something which the Federal Arbitration

Act, 9 U.S.C. § 1 et seq., specifically prohibits. Three

Oklahoma state courts have resisted the attempts of

Ameritas to undertake a merits review and this Court

should as well.

For these reasons, the petition for a writ of

certiorari should be denied. Because the Respondent,

Mr. Slinkard, believes the Petition for Writ of Certiorari

to be frivolous, he requests the Court to award him

just damages and double costs under Rules 42 and

43 of this Court.

ectfully submitted,

Norman, OK 73069

(405) 364-5471

Dit te tient BPA cra LA =

mb slabbd aos

bed Ges Ahead tam tnt tt ne

NASD Arbitration

National Association of

Securities Dealers, Inc

UNIFORM SUBMISSION AGREEMENT NASD Financial Center

33 Whitehall Street

New York, N.Y. 10004

FAX (212) 858-4389

NATIONAL ASSOCIATION OF

SECURITIES DEALERS

In the Matter of the Arbitration Between

Name of Claimant(s)

Steven M. Slinkard

92-03295

Names of Respondent(s)

Donaldson Lufkin & Jenrette Securities

Ameritas Investment Corporation

1. The undersigned parties hereby submit the

present matter in controversy, as set forth in the

attached statement of claim, answers, cross claims

and all related counterclaims and/or third party claims

which may be asserted, to arbitration in accordance

with the Constitution, By-Laws, Rules, Regulations

and/or Code of Arbitration Procedure of the

sponsoring organization.

2. The undersigned parties hereby state that they

have read the procedures and rules of the sponsoring

organization relating to arbitration.

3. The undersigned parties agree that in the event

a hearing is necessary, such hearing shall be held at

a time and place as may be designated by the

App |-1

Director of Arbitration or the arbitrator(s). The

undersigned parties further agree and understand that

the arbitration will be conducted in accordance with

the Constitution, By-Laws, Rules, Regulations and/or

NASD Code of Arbitration Procedure of the

sponsoring organization.

4. The undersigned parties further agree to abide

by and perform any award(s) pursuant to this

Submission Agreement and further agree that a

judgment and any interest due thereon may be

entered upon such award(s) and, for these purposes.

the undersigned parties hereby voluntarily consent to

submit to the jurisdiction of any court of competent

jurisdiction which may properly enter such judgment.

5. IN WITNESS WHEREOF, the parties hereto

nave signed and acknowledged the foregoing

Submission Agreement.

Party(ies) Signature

s/Rodney K. Vincent

Ameritas Investment Corporation

App |-2

Okla. Stat. tit. 71 § 408(a)(2)(A)

in the case of an offer or sale of a security

by such means, to the person buying the

security from him, who may sue either at

law or in equity to recover the

consideration paid for the security, together

with interest at ten percent (10%) per year

from the date of payment, costs, and

reasonable attorneys’ fees, less the

amount of any income received on the

security, upon the tender of the security, or

for damages if he no longer owns the

security. Damages are the amount that

would be recoverable upon a tender, less

the value of the security when the buyer

disposed of it, and interest at ten percent

(10%) per year from the date of disposition,

or