Petition for Writ of Certiorari — Ronwin v. Smith Barney, Harris Upham & Co.

93-25%

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1993

EDWARD RONWIN,

Petitioner,

vs.

SMITH BARNEY, HARRIS UPHAM & CO.,

INC., and JOHN SPAUSTAT,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED SZATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Edward Ronwin

P.O. Box 88746

Sioux Falls, SD 57105

(507) 673-2581

Petitioner pro se and

Attorney at Law (Iowa)

QUESTION FOR REVIEW

Were this Court's decisions in Rodriquez

de Quijas v. Shearson/American Express,Inc.,

490 U.S. 477, 109 S.Ct. 1917 (1989) and

Shearson/American Express,Inc. v. McMahon,

482 U.S. 220, 107 S.Ct. 2332 (1987), reh.

den. 483 U.S. 1056, warrants to securities

brokers to deny customer statutory rights

to choose a judicial forum and to confine

customers to arbitration only of customer/

broker disputes?

ii

TABLE OF CONTENTS

Question for Review

Table of Contents

Table of Authorities

Opinions Below

Jurisdiction

Statutory Provisions Involved

Statement of the Case

Reasons for the Writ

Importance of the Case

Conclusion

Appendix

TABLE OF AUTHORITIES

Cases

Boyd v. Grand Trunk Western R.Co.,

338 UeSe 263, 70 S.C. 26,

94 L.Ed. 55 (1949)

Ernst & Ernst v. Hochfelder,

425 U.S. 185, 96 $.Ct. 1375,

47 L.Ed.2d 668 (1976),

reh. den. 425 U.S. 986

Harrison v. Springdale Water &

Sewer Com., 780 F.2d 1422

(8th Cir. 1986)

12,13

La

‘2

iii

TABLE OF AUTHORITIES —- CONT'D.

Page

Kennett v. Chambers, 55 U.S. 38, 13

14 L.Ed 316 (1852)

Rodriquez de Quijas v. Shearson/ i,4,6,9,

American Express, Inc., 490 11,12,16

Ronwin v. Smith Barney, Harris

Upham & Co, 807 F.Supp. 87 ea

(D. Neb. 1992) y

Shearson/American Express, Inc.

Ve McMahon, 482 UeSe 220, 107 oo

2332 (1987), reh. den. 483 (4,6

U.S. 1056 boli Se

14,16

Simmons v. Dickhaut, 804 F.2d 182 13

(lst Cir. 1986)

United Housing Foundation, Inc.

Wilko v. Swan, 346 U.S. 427, 4,14

74 S.Ct. 182 (1953) ;

United States Constitution

First Amendment 13

Fifth Amendment | 13

Fourteenth Amendment 13

United States Code

9 U.-S.-Ce, Sec. l, et seq. 9

iv

TABLE OF AUTHORITIES-CONT'D.

Page

LS U.8.€.;

Sec. 77a 7

Sec. 77n 7

Sec. 77v 2:;4,5,114713

Sec. 78a 7

Sec. 78aa 3,4,5,2ai27ih0

Sec. 78cc 7,14

28 DeBeGee

Sec. 1254(1) 2

Sec. 1291 10

Sec. 1294 10

Sec. 1331 >

Sec. 1332 5

Sec. 1337 >

Sec. 1367 5

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1993

EDWARD RONWIN, Petitioner,

VS.

SMITH BARNEY, HARRIS UPHAM & CO.,

INC., and JOHN SPAUSTAT, Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

OPINIONS BELOW

On June 24, 1993, the U.S. Court of Ap-

peals for the Eighth Circuit entered an

unpublished Opinion, and a separate Judgment

affirming the district court's Opinion:

See Appendix, A-1l, A-2. On or about June

30, 1993, Petitioner, ("RONWIN") filed a

timely Petition for Rehearing and the

court of appeals entered a denial of same

on July 21, 1993, A-3.

On Octeber 29, 1992: ths V.2, Die*rtct

Court for the District of Nebraska

entered a Judgment, A-16, and a separate

Order and Memorandum, ("DIST CT OPINION"),

A-3, et seg... DIST CT OPINION has been

published at 807 F.Supp. 87 (D.Neb. 1992).

JURISDICTION

This Petition for Writ of Certiorari is

being filed within 90 days after the

court of appeal's denial of RONWIN's

Petition for Rehearing entered July 21, 1993.

The rehearing was requested on the court

of appeal's Opinion, A-l and Judgment, A-2,

both entered on June 24, 1993. This Court's

jurisdiction is invoked under 28 U.S.C.,

Sec. 1254(1).

STATUTORY PROVISIONS INVOLVED

United States Code, Title 15, Sec. 77v(a)

The district courts of the United States,

IBEST AVAIL

--e-Shall have jurisdiction of offenses

and violations under this subchapter, and

concurrent with State and Territorial

courts, of all suits in equity and

actions at law brought to enforce any

liability or duty created by this subchapter.

United States Code,Title 15, Sec. 78aa

The district courts of the United States

--e-Shall have exclusive jurisdiction of

violations of this chapter...and of all ss

Suits in equity and actions at law brought

to enforce any liability or duty created

by this subchapter...

STATEMENT OF THE CASE

On January 15, 1992, RONWIN executed a

customer agreement with SMITH BARNEY,

HARRIS UPHAM & CO., INC., ("SB," which

will include as the use implies SB's Omaha

office manager, JOHN SPAUSTAT,

("SPAUSTAT")), for a cash only securities

account. Prior to entering the agreement,

RONWIN objected to the pre-dispute

4

arbitration clause and SB's representative

agreed to delete same. That is an essential

distinction between this case and the facts

in Rodriquez de Quijas v. Shearson/American

Express, Inc., 490 U.S. 477, 109 S.Ct. 1917

(1989), and in Shearson/American Express,

Inc. ve McMahon, 482 U.S. 220, 107 S.Ct.

2332 (1987), where the customers signed

agreements containing predispute arbitration

clauses and, after a dispute erupted,

urged that arbitration clauses were

prohibited by the 15 U.S.C., Secs. 77v

and 78aa, and this Court's decision in

Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182

(1953); See, Rodriquez, 107 S.Ct. @ 1918-19,

and McMahon, 482 U.S. @ 222-226, 107 S.Ct.

@ 2335-2337.

Later that day, Jan. 15, 1992, SPAUSTAT

reversed SB's position and, after further

interaction between SB and RONWIN, SB

refused service to RONWIN and unilaterally

closed the account.

|

On May 6, 1992, RONWIN filed a

four-Count Complaint: Count I [unenforce-

able] contract of adhesion; Count II,

violation of Securities Acts; Count III,

breach of contract and Count IV, breach

of fiduciary duty. The jurisdictional bases

pled were: 15 U.S.C, Secs. 77v, 78aa;: 28

U.S.C., Secs. 1331, 1332, 1337 ana LaG7 «

SB met the Complaint with a motion to

dismiss and to strike and RONWIN filed a

motion for partial Summary judgment. October

29, 1992, the district court entered Judgment

and the separate DIST cT OPINION, A-3 et

seg-, dismissing all Counts.

The district court's reasons for said

dismissal is of import to this Petition.

As to Count II, DIST CT OPINION contended

that, A=-9 to A-10; 807 F.Supp. @ 89:

The essence of Ronwin's contention

is that these Acts, at Sec. 22 of

the Securities Act of 1933 (15

U.S.C., Sec. 77v) and at Sec. 27 of

the Securities Exchange Act of 1934

(15 U.S.C., Sec 78aa), vest exclusive

jurisdiction for violations of the

6

respective Acts in the district

courts of the United States; the pre-

dispute arbitration clause, Ronwin

argues, constitute a waiver of

compliance with those respective

provisions...

and, the district court added (correctly)

that McMahon rejected that argument,

hake.

Based upon the quoted contention, the

district court dismissed Count II, A-1l;

807 F.Supp. @ 90.

The district court's contention was not

only incorrect, but utterly contrary to

RONWIN's stated position as found in

[RONWIN's] Brief in Support of [RONWIN's]

Response to Defendants’ Motions to

Dismiss and to Strike, p. 9:

Thus, the element central to both

McMahon and Rodriquez reduced to a

question of whether the arbitration

clause accepted by the customers in

each case could be enforced to require

the customer-claimants to arbitrate

the disputes each had with the broker/

dealer, (the same firm in both cases),

and which arose in each case subse-

quent to the execution of the respec-

tive customer agreements or whether

the right to a judicial forum provided

EEE Ee

7

an 13 GU.8.6., See. Pia, et seq.,

and 15 U.S.C., Sec. 78a, et seq.,

excluded arbitral forums pursuant to

the provisions of 15 U.S.C., Sec.

77n and 15 u.S.c., Sec. 78cc,

respectively. That question is not

an_issue, central or otherwise, in

this action. (emphasis added).

Not only did RONWIN Clearly inform the

district court that the posture on Count

II which said court ascribed to RONWIN

was inaccurate, but the district court's

contention, upon which it dismissed Count

II, is nowhere to be found in the record

below.

An analogous situation occurred as to

Count I. DIST CT OPINION alleged and

dismissed Count I on the following grounds,

A-8; 807 F.Supp. @ 89:

_Ronwin has made no allegation of un-

conscionability separate from the

general assertion that the

predispute arbitration clause is a

contract of adhesion, and the apparent,

albeit erroneous, presumption that

all such clauses are inherently

unconscionable. Count I of the

complaint must accordingly be dismis-

sed for failure to state a claim.

8

The district court's allegation is at

odds with the record below. Under Count I,

RONWIN pled, Para. XVII, pp. 5-6:

The actions of the Defendants in de-

manding as a condition for the pro-

vision of their Federal and State

regulated services...[{that] RONWIN

and any other prospective customer

unconditionally accept said pre-dis-

pute arbitration clause, and thereby

denying RONWIN...the free choice of

whether or not to agree to said pre-

dispute arbitration clause, whether

for a cash or a margin account, and

denying to RONWIN...the right to seek

redress of grievances...in the

Courts of the United States and/or

in the Courts of the several

states, constitute a contract of

adhesion and/or an impermissible

demand for same, and said action by

SB is against public policy,

unenforceable and an unconscionable

business tactic.

Contrary to the district court's conten-

tion, RONWIN certainly did not plead that

all broker/customer agreements containing

predispute arbitration clauses are "contracts

of adhesion" and, consequently, “inherently

unconscionable"; rather, RONWIN pled that

the reason the predispute arbitration

clause in SB's customer agreement becomes

|

a "contract of adhesion" and an "unconscion-

able business tactic" is that, as RONWIN

had pled, SB refuses service to RONWIN

unless RONWIN "unconditionally accepts

said predispute arbitration clause."

There was no pleading by RONWIN, apparent

or otherwise, of an "albeit erroneous,

presumption that all such (predispute ar-

bitration] clauses are inherently unconsci-

Oonable."

In (RONWIN's] Brief in Support of

[RONWIN's] Response to ([SB's] Motions to

Dismiss and to Strike, pP.- 7, RONWIN told

the district court:

--TO emphasize the point: The complaint

does not challenge the provisions

of the Federal Arbitration Act, 9

U-+S.C., Sec. 1, et seq.; and agrees

that an arbitral forum can re lace

a statutoril rovided judicial forum

i ln the oe TEER ET. area, as in other ——__

fields, but, the Complaint insists

in line with Rodriquez that the

agreement to arbitrate must be an

unfettered choice of the customer

and not required as a non=negotiable

demand by the broker/dealers...

(emphasis supplied).

10

As to Counts III and IV, the district

court found that diversity jurisdiction

existed, A-13; but dismissed both Counts,

A-13. Count III was dismissed on the

grounds that SB allegedly could breach

its contract at will, A-13,A-14; 807

F.Supp. @ 90, and Count IV was dismissed

because the other Counts had been dismissed,

as failing to state a claim, A-14,A-15;

807 F.Supp. @ 90-91.

It is pertinent that SB's forcing of

predispute arbitration clauses on

customers was found by the district court

to be an industry-wide practice, A-7; 807

F.Supp. @ 89.

A timely notice of appeal was filed on

November 30, 1992. Jurisdiction in the

court of appeals was based on 28 U.S.C.,

Secs. 1291 and 1294. The Court of Appeals

for the Eighth Circuit entered both a

brief Opinion, A-l, and a separate Judgment,

A=-2, on June 24, 1993. The brief Opinion

ee

1l

merely states the court of appeal's approval

of the entire district court opinion. On

or about June 30, 1993, RONWIN filed a

timely Petition for Rehearing. On July

21, 1993, the court of appeals denied the

petition without comment, A-3.

REASONS FOR THE WRIT

In justification of this Court's expansion

of the terms of 28 U.S.C., Secs. 77v and

78aa, to allow arbitral forums, this

Court wrote in Rodriquez, 490 U.S. @

482-483, 109 S.Ct. @ 1921:

--to advance the objective of allowing

buyers of securities a broader right

to select the forum for resolving

disputes, whether it be judicial or

otherwise...

Placing the right to select the forum,

judicial or arbitral, in the customer's

lap is consistent with this Court's

repeated recognition that the Securities

Acts of 1933 and 1934 were enacted for

the benefit of, and protection of,

customers, as noted in Rodriquez, 490 U.S.

12

@ 484, 109 S.Ct. @ 1921:

This avenue of relief is in harmony

with the Securities Acts' concern to

protect buyers of securities by re-

moving 'the disadvantages under which

buyers labor' in their dealings with

sellers [citing] Wilko, 346 U.S. @

435, 74 S.Ct. @ 187...

Accord: Ernst & Ernst v. Hochfelder, 425

U.S. 185, 194-195, 96 S.Ct. 1375, 1381-1382,

986; United Housing Foundation, Inc. v.

Forman, 421 U.S. 837, 849, 95 S.Ct. 2051,

2059, 44 L.Ed.2d 621 (1975), reh. den.

423 U.S. 884.

SB's practice of forcing customers or

prospective customers to accept a predis-

pute arbitration clause in its customer

agreements, which is an industry-wide

practice:

1. Denied RONWIN's "right to select

the forum...whether it be judicial or

{[arbitral]," recognized under Rodriquez.

A “right to select the forum...is a substan-

tial right," Boyd v. Grand Trunk Western

aaeaaaaaessiiaiaiaiei caine iad

is

R. Co., 338 U.S. 263, 266, 70 S.Ct. 26,

28, 94 L.Ed. 55 (1949); which right ultim-

ately springs from fundamental constitu-

tional rights under the First, Fifth and

Fourteenth Amendments, Harrison Ve

Springdale Water & Sewer Com., 780 F.2d

1422, 1427-1428 (8th cir. 1986); Simmons

ve Dickhaut, 804 F.2d 182, 183 (Se¢ Circ.

1986); and,

y Unilaterally- voids the

above-quoted terms, 2-3 above, of 28

U.S.C., Secs. 77v and 78aa, which allow

the choice of judicial forums; and,

3. Violates the public policy of

the United States, Kennett v. Chambers,

95 U.S. 38, 51, 14 L.Ed. 316 (1852); and,

4. Makes SB's predispute arbitration

clauses, unenforceable contracts of adhesion.

The district court's opinion, approved

by the court of appeals, runs diametrically

contrary to this Court's decisions as

cited and quoted above.

14

A second reason for granting the Writ

of Certiorari is that this Court held in

2339-2340:

Section 29a, ' 2 ea

78cc(a)] is concerned, not with

whether brokers 'maneuver([ed

customers] into' an agreement, but

with whether the agreement 'weaken[s]

their ability to recover under the

[Exchange] Act. [Wilko v. Swan],

346 U.S., at 432, 74 $.Ct., at 185.

The former is grounds for revoking

the contract under ordinary principles

of contract law; the latter is

grounds for voiding the agreement

under Section 29a. (2nd, 3rd and

4th brackets are in the original).

Clearly, RONWIN had a common law claim

Since the basis for the breach of the

RONWIN/SB cash account agreement was

RONWIN's refusal to be "maneuvered into"

such an agreement if it contained a

predispute arbitration clause, along with

RONWIN's insistence on the right’ to

choose a judicial forum rather than an

arbitral forum if a dispute arose; See

quotation from Complaint at 8, above. As

15

the district court found that diversity

jurisdiction existed under Count III,

there were no grounds to dismiss said

Count, regardless of the merits, if any,

of the district court's dismissal of the

other Counts.

Importance of this Case

This action runs beyond RONWIN's own

dispute with SB. Not only are large

numbers of SB's_ securities customers

equaily and illegally denied

constitutional and Statutory rights recog-

nized by this Court, but, as an industry-

wide practice, millions of Americans are

being forced to surrender their right to

choose judicial forums rather than arbitral

forums, contrary to constitutional right,

Statutory right and the decisions of this

Court; and as bad, SB's action, and that

of its fellow brokers, illegally voids

statutes of Congress.

16

CONCLUSION

For the foregoing reasons, this Court

is urged to grant the Writ sought so that

this Court can make clear that it did not

replace judicial forums with arbitral

forums when it promulgated the Rodriquez

and McMahon decisions, but merely enlarged

the free choice of buyers cof securities,

1.@., the customers and prospective

customers of securities brokerage establish-

ments, to choose arbitral or judicial forums

for customer/broker dispute resolution.

Respectfully submitted

Edward Ronwin

P.O. Box 88746

Sioux Falls, SD 57105

(507) 673-2581

Petitioner pro se and

Attorney at Law (Iowa)

Dated: August 17, 1993

(Appendix follows)

ESTER PERRET oe ”

a a ee be ee i ee > Bas

A-1l

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Appeal from the United States

District Court for the

District of Nebraska

(CAPTION)

[ UNPUBLISHED]

+e © + + * &

Submitted: June 18, 1993

Filed: June 24, 1993

Before McMILLIAN, FAGG, and HANSEN,

Circuit Judges.

PER CURIAM.

Edward Ronwin appeals the district court's

order dismissing Ronwin's action for failure

to state a claim on which relief can be

granted. See Ronwin v. Smith Barney, Harris

Upham & Co., 807 F.Supp. 87, 88 (D.Neb.

1992). We have nothing to add to the

district court's well-reasoned opinion.

Accordingly, we affirm on the basis of

the district court's opinion. See 8th

Cir. R. 47B.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 92=-3788NEO

*

(CAPTION) ,Appeal from the United States

,District Court for the District

,of Nebraska

*

JUDGMENT

This appeal from the United States

District Court was submitted on the record

of the district court and briefs of the

parties.

After consideration, it is hereby ordered

and adjudged that the judgment of the

district court in this cause is affirmed

in accordance with the opinion of this

Court.

June 24, 1993

A true copy.

ATTEST:

/s/ Michael E. Gans

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

MANDATE ISSUED 7/28/93

es

UNITED STATES COURT OF APPEALS

POR THE EIGHTH CIRCUIT

No. 92-3788NEO

*

(CAPTION) *Appeal from the United States

*District Court for the District

*of Nebraska

*

The petition for rehearing by the panel

is denied.

July 21, 1993

Order Entered at the Direction of the Courts:

/s/ Michael E. Gans

Clerk, U.S. Court of Appeals, Eighth Circuit

PT BENET FLIER PSE TEETER RELIED EE 8

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

EDWARD RONWIN, d/b/a

Plaintiff, 8:CV92-00232

vs.

)

)

)

)

SMITH BARNEY, HARRIS eats and

UPHAM & Cee INC., )

and JOHN SPAUSTAT,

)

)

Defendants.

THIS MATTER is before the Court on the

Defendants' motion to dismiss and to

strike (Filing No. 13). For the reasons

A-4

set out below, this action will be dismissed,

pursuant to Rule 12(b)(6) of the Federal

Rules of Civil Procedure, for failure to

state a claim.

The plaintiff in this acticn, Edward

Ronwin, doing business as Index

Investments, alleges (Filing No. 1) that

he had sought to open a securities account

with defendant Smith Barney, Harris Upham

& Co., Inc.; defendant John Spaustat is

and was, at all times relevant, resident

—_————

manager of Smith Barney's Omaha office.

Ronwin alleges that he was initially

permitted to open a cash account without

signing an agreement containing a predis-

pute arbitration agreement, but’ that

Smith Barney later determined that it

would not permit him to have an account

without such an arbitration agreement and

returned his money. Ronwin further alleges

that he was damaged by the defendants' re-

fusal to do business with him on his terms.

A-5

He seeks to recover compensatory and puni-

tive damages and attorney fees, as well

as injunctive relief.

Jurisdiction is asserted upon the bases

of the existence of a federal question

(28 U.S.C., Sec. 1331), diversity of citi-

zenship (28 U.S.C., Sec 1332), commerce

and antitrust regulations (28 U.S.Cc., Sec.

1337), upon supplemental jurisdiction pur-

Suant to 28 U.S.C., Sec. 1367, and upon

the Securities Act of 1933 (15 U.S.c.,

Sec. 77v) and the Securities Exchange Act

of 1934 (15 U.S.C., Sec. 78aa).

The standards for dismissal pursuant to

Rule 12(b)(6) are well established. In con-

sidering a motion to dismiss under F.R.Civ.P.

12(b)(6), the allegations in the complaint

must be viewed in the light most favorable

to the plaintiff. Fusco v. Xerox Corp.,

676 F.2d 332, 334 (8th Cir. 1982). "TA]

complaint should not be dismissed for fail-

ure to state a claim unless it appears be-

A-6

yond doubt that the plaintiff can prove no

set of facts in support of his claim which

would entitle him to relief." Conley v. Gibson,

355 U.S. 41, 45-46 (1957) (footnote omitted).

"Thus, as a practical matter, a dismissal

under Rule 12(b)(6) is likely to be granted

only in the unusual case in which a plain-

tiff includes some insuperable bar to relief."

Jackson Sawmill Co. v. United States, 580

F.2d 302, 306 (8th Cir. 1978), cert. denied,

439 U.S. 1070 (1979).

The Court finds this to be such a case.

In the first count of his complaint,

Ronwin asserts that the defendants' insis-

tence that he agree to the predispute arbi-

tration clause as a condition of doing

business with Smith Barney constitutes an

attempt to impose an unenforceable contract

of adhesion. He accordingly seeks to

have Smith Barney enjoined from requiring

such clauses as a prerequisite for accepting

accounts, and seeks unspecified compensatory

A-7

and punitive damages, as well as attorney

fees and costs,

This count of the plaintiff's complaint

rests upon an erroneous presumption and

must therefore be dismissed. The defendants

do not deny, and this Court finds, that the

contract in questionisa contract of adhesion.

Such contracts may be said to exist where,

as here, a standardized form of agreement,

Grafted by the party with superior bargain-

ing power, is presented to a party on a

take it or leave it basis. As the plaintiff

points out, and the defendants do not dis-

pute, insistence upon such predispute arbi-

tration clauses are an industry-wide practice.

However, the mere fact that a contract

falls under the rubric of the adhesion

doctrine does not make it unenforceable.

See, e.g. Webb v. R. Rowland & Co., 800

F.2d 803, 807 (8th Cir. 1986) ("the use

of a standard form contract between two

parties of admittedly unequal bargaining

A-8

power does not invalidate an otherwise

valid contractual provision. To be invalid,

the provision at issue must be unconscion-

able"). See also Finkle and Ross vy. A.G.

Becker Paribas, Inc., 622 F.Supp. 1505,

1512 (S.D.N.Y. 1985) (holding that such

contracts may be considered contracts of

adhesion but are nonetheless enforceable

in the absence of a showing of

"unfairness, undue oppression or unconscion-

ability").

Ronwin has made no allegation of uncon-

scionability separate from that the (sic)

general assertion that the predispute arbi-

tration clause is a contract of adhesion,

and the apparent, albeit erroneous, presump-

tion that all such clauses are inherently

unconscionable. Count I of the complaint

must accordingly be dismissed for failure

to state a claim.

In Count II of his complaint, Ronwin al-

leges that the defendants’ insistence upon

A-9

the predispute arbitration clause was an

attempt to impose a condition that

violates Sec. 14 of the Securities Act of

1933 (15 U.S.C., Sec. 77n) and Sec. 29(a)

of the Securities Exchange Act of 1934

(15 U.S.C., Sec 78cc). Each of those

provisions forbids the imposition of "any

condition, stipulation or provision binding

any person to waive compliance with any

provision [of the respective Acts]".

Ronwin asserts that the predispute arbi-

tration clause falls within those proscrip-

tions. In this Count, Ronwin seeks compen-

satory and punitive damages, injunctive

relief, and an award of attorney fees and

costs.

The essence of Ronwin's contention is

that these Acts, at Sec. 22 of the Secur-

ities Act of 1933 {15 U.S.C., Sec. 77v)

and at Sec. 27 of the Securities Exchange

Act of 1934 (15 U.S.C., Sec. 78aa), vest

exclusive jurisdiction for violations of

the respective Acts in the district courts

A-10

of the United States; the predispute

arbitration clause, Ronwin argues, consti-

tutes a waiver of compliance with those

respective provisions.

This argument, in the context of the

Securities Exchange Act of 1934, was con-

sidered and rejected by the Supreme Court

of the United States in Shearson/American

Express, Inc. v. McMahon, .482 U.S. 220, 107

S.Ct. 2332, 96 L.~Ed.2d 185 (1987). In McMahon

the Court reasoned that

The McMahons contend that an agree-

ment to waive this jurisdictional

provision is unenforceable because

Sec. 29(a) voidg the waiver of "any

provision" of the Exchange Act. The

language of Sec. 29(a), however,

does not reach so far. What the anti-

waiver provision of Sec. 29(a) forbids

is enforcement —of agreements to

waive "compliance" with the provi-

sions of the statute. But Sec. 27

itself does not impose any duty

with which persons trading in

securities must "comply." But its

terms, Sec. 29(a) only prohibits

waiver of the substantive obliga-

tions imposed by the Exchange Act.

Because Sec. 27 does not impose any

statutory duties, its waiver does

not constitute a waiver of "compli-

ance with any provision" of the

Exchange Act under Sec. 29(a).

aera eeenenietineaane aarti

A-1l

482 U.S. at 228. The Supreme Court

expressly adapted that same reasoning to

the Securities Act of 1933 in Rodriquez de

Quijas v. Shearson/American Express, Inc.,

490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d

526 (1989). The predispute arbitration

Clause insisted upon by the defendants

simply does not contravene the respective

Acts; Count II of Ronwin's complaint must

accordingly be dismissed for failure to

state a claim.

The two remaining Counts of the plaintiff's

complaint are based upon common law

Claims of breach of contract and breach of

fiduciary duties. Having dismissed the

Counts of the plaintiff's complaint which

would have established jurisdiction on the

basis of a federal question, securities

laws or antitrust laws, or which would

have provided a basis for supplemental

jurisdiction, the Court must face the ques-

tion of whether diversity jurisdiction re-

mains pursuant to 28 U.S.C., Sec. 1332.

ill

A-12

As further explained below, the Court

finds that it does.

The burden of proof on a Rule 12(b)(I)

motion is upon the party asserting juris-

diction. Estate of Blakely v. Asbestos

Corp., 766 F.Supp. 721 (E.D. Ark. 1991);

12 Wright and Miller, Federal Practice &

Procedure, Sec. 1350 (1990). Ronwin has

clearly pled diversity among the parties

(Filing No. 1 at Paras. II, III and IV),

but has pled damages only "in an amount to

be determined at trial" (Filing No. 1 at

Paras. XVIII, XXI, XXIV, and the prayer for

relief). Although the Court has serious

doubts that the plaintiff would recover

an amount in excess of Sec. 1332's $50,000

amount in controvery requirement, the Court

is also cognizant that "the claim is deemed

to have been made in good faith so long

as it is not clear to a legal certainty

that the claimant could not recover a

judgment exceeding the jurisdictional amount."

A-13

Id. at 231. Accordingly, the Court holds

that diversity jurisdiction exists.

Nonetheless, the Court further finds

that these remaining two counts should be

dismissed for failure to state a claim.

Count III is a breach of contract claim

in which Ronwin alleges that Smith Barney's

refusal to permit Ronwin to participate

in an account without a predispute arbitra-

tion agreement constituted a breach of

the agreement for a cash account.

However, it is uncontroverted that Smith

Barney returned Ronwin's funds and the

account was closed. See, e.g., Complaint

(Filing No. 1) at Para. XV. Assuming arguendo

that a contract had existed, Smith Barney

Clearly had the right to end the contract

in the manner it did.

Notice to this Supreme Court:

The following portion of the decision did

not appear on the pages supplied by the

District Clerk's office, but was taken

A-14

from the published decision at 807

F.Supp. @90:

"The general rule is that contracts having

no fixed term are terminable at will by

either party." Martin v. Equitable Life

Assurance Soc. of the United States, 553

F.2d 573, 574 (8th Cir.

End of portion missing from the copy of

the decision distributed by the District

Court Clerk's office.

1977); See also Federal Deposit Insurance

Corp. v. Northwood Projects, Inc., 95 Misc.2d

373, 407 N.Y.S.2d 424 (1978) and Muller

Enterprises v. Samuel Gerber, Advertising

Agency, Inc., 182 Neb. 261, 153 N.W.2d

920 (8th Cir. 1967) (sic). Again, the

plaintiff has failed to state a claim

upon which relief could be granted.

Ronwin's fourth and final Count is pre-

mised upon an ulleged breach of fiduciary

duty. Assuming arguendo that a fiduciary

relationship existed, Ronwin has simply

A-15

failed, for the reasons described above,

to allege any circumstances that could

conceivably constitute a breach of any fidu-

ciary duty. This Count, like the others,

must be dismissed for failure to state a

claim. Accordingly,

(1) the motion on to (sic) dismiss

(Filing No. 13) is granted;

(2) the plaintiff's motion for partial

summary judgment (Filing No. 21) 1s denied

as moot; and

(3) an Order of Dismissal consistent

with this Memorandum and Order will be

entered this date.

DATED this 29 day of October, i992.

BY THE COURT:

/3/ William G. Cambridge

WILLIAM G. CAMBRIDGE,

United States District Court Judge

A-16

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

EDWARD RONWIN, d/b/a (sic))

Plaintiff, 8:CV92-00232

vs. )

SMITH BARNEY, HARRIS proce

UPHAM & CO., INC., )

T

Defendants. ) 1992)

)

In accordance with the Order entered

this date, IT IS ORDERED that this matter

is dismissed.

DATED this 29 day of October, 1992.

BY THE COURT:

/3s/ William G. Cambridge

WILLIAM G. CAMBRIDGE,

United States District Court

Notice: The portion noted as missing from

the District Court Clerk's copy of the

Memorandum and Order, as supplied on

pages A-12 and A-13, supra, and as found

in 807 F.Supp. @90, was officially made

part of the record below by an Amendment

to Memorandum and Order filed January 20,

1993 by the District Clerk's office. Said

Amendment was signed by Judge CAMBRIDGE on

January 20, 1993.