Prologue — Piper Jaffray & Co. v. Shea

FlLeEod

; No. 05 86 JUL 13 20ja

In ee gepeacaie iis fie CLERK

Supreme Court of the Anited States

*

PIPER JAFFRAY & CO., and

ROBERT ENGLISH, et al.,

Petitioners,

Vv.

JOHN P. DALY and AUDREY M. DALY,

JOHN D. SHEA and BRENDA SHEA,—.

THE ESTATE OF ALICE A. FRANEY, ROBERTA J.

EMETT and KATHLEEN E. MERRETT, VICKI

BERRYMAN and JAMES LEARY,

Respondents.

+

On Petition For Writ Of Certiorari

To The Montana Supreme Court

=

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PETITION FOR WRIT OF CERTIORRI

a

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Counsel:

STANLEY T. KALECZYC

BROWNING, KALECZYC, BERRY &

HOVEN, P.C.

139 N. Last Chance Gulch

P.O. Box 1697

Helena, Montana 59624

(406) 443-6820

Counsel of Record o

JOHN S. LUTZ

FAIRFIELD AND Woops, P.C.

1700 Lincoln, Suite 2400

Denver, Colorado 80203

(303) 830-2400

Counsel for Piper Jaffray & Co.,

and Robert English

wo

~——

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED FOR REVIEW

Whether the Montana Supreme Court’s judicially

imposed requirement that pre-dispute arbitration

clauses commonly contained within securities indus-

try customer agreements must be explained to the

customer before the agreement is even executed vio-

lates the Federal Arbitration Act?

Whether the Montana Supreme Court’s invalidation of

pre-dispute arbitration clauses commonly contained

within securities industry customer agreements and

generally enforceable in other jurisdictions impermis-

sibly interferes with the relationship between broker-

dealers and their customers in interstate commerce in

violation of the Commerce Clause?

ii

PARTIES

Petitioner Piper Jaffray & Co. (“Piper Jaffray”),

Defendant below, is a registered broker-dealer conducting

business in all 50 states, including Montana. At all times

material to this case, Piper Jaffray conducted business at,

among other locations, its Branch Office in Butte, Mcn-

tana.

Petitioner, Robert English, Defendant below, was at

all times material the Piper Jaffray Branch Office Man-

ager in the Butte Branch.’

Defendant Thomas J. O’Neill was at all times mate-

rial the Piper Jaffray Account Executive for each of the

Respondents.” 3

The plaintiffs below, Respondents here, in these six

actions were, at all times material to the case, clients of

Piper Jaffray. Each of the plaintiffs had signed one or more

customer account agreements with Piper Jaffray contain-

ing a pre-dispute arbitration clause, typical of the clauses

used throughout the securities industry nationwide. Each

of the plaintiffs was at all times material a citizen of

Montana and maintained an account with Piper Jaffray’s

Butte office.

* Mr. English was not named as a Defendant in Daly v. US.

Barcorp Piper Jaffray Inc., et al.

* Mr. O'Neill is not represented with respect to this Petition.

RULE 29.1 LISTING

Piper Jaffray & Co. was formerly U.S. Bancorp Piper

Jaffray Inc., a wholly owned subsidiary of U.S. Bancorp.

During the pendency of this litigation, the name and

ownership of U.S. Bancorp Piper Jaffray Inc. changed in

connection with the spin-off by U.S. Bancorp of its capital

markets business on December 31, 2003. To effect the

spin-off, U.S. Bancorp contributed its capital markets

business, including U.S. Bancorp Piper Jaffray Inc., to a

newly formed subsidiary, Piper Jaffray Companies, and

subsequently distributed all of the shares of Piper Jaffray

Companies to the shareholders of U.S. Bancorp. In connec-

tion with the spin-off, U.S. Bancorp Piper Jaffray Inc.

changed its name to Piper Jaffray & Co. and became a

wholly owned subsidiary of Piper Jaffray Companies, and

Piper Jaffray Companies became a publicly traded com-

pany whose shares are traded on the New York Stock

Exchange under the symbol “PJC”.

iv

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ........... es

PARTIES.......... ETRE AC ce Oe ee eS ii

MINE COLLOPAING oe iii

TABLE OF AUTHORITIES. .........cscsescsscssecsssecsseesssees vi

CITATIONS TO OFFICIAL AND UNOFFICIAL

BE I ieadeasexesncgreianckadnasbiselneacbsthdansaunaakeacass albus

REASONS FOR GRANTING THE WRIT..................

SEER et A MME cieniinhid saxdndnnceasapaed dcpacabhdnmtanaaliouiuiannee

I. The Montana Supreme Court’s unique

judicially imposed requirement that pre-

dispute arbitration clauses commonly con-

tained in securities industry customer agree-

ments must be explained to the customer

before the agreement is even executed, which

requirement is not applied to any other con-

tract provisions in Montana, violates the

Federal Arbitration Act and frustrates the

national policy of favoring arbitration as a

means of dispute resolution..................ccceeeeees

II. The Montana Supreme Court’s wholesale

invalidation of pre-dispute arbitration

clauses common in the securities industry is

out of step with the majority of state courts

which routinely enforce arbitration clauses

contained within customer agreements in the

RTT SOD ass isscccccaccegeen cess cnercareavdanes

10

TABLE OF CONTENTS - Continued

Page

III. The Montana Supreme Court’s wholesale

invalidation of pre-dispute arbitration provi-

sions common in the securities industry

impermissibly interferes with the relation-

ship between broker-dealers and their cus-

tomers in interstate commerce and thus

violates the Commerce Clause........................

FEIN tric cociinonidncndetnincosisern cnitenconnassccinantubenventn

vi

TABLE OF AUTHORITIES

Page

CASES

Agra, Gill & Duffus, Inc. v. Benson, 920 F.2d 1173

I ee caaitcchsth cteisiecalheksineicutnbiaabniatadatedliadciinliaatss setessis 18

Alexander v. Calton & Associates, Inc., 110 P.3d 509

CORE. Baas, OO, Bi isictscneisstichcsbite strate casintnsthicntbarcedecsnts 23

Allied-Bruce Terminix Cos. v. Dobson. 513 U.S. 265

ER RIEL ES 5 LS OO ES Se aR EO 8,12

American Ins. Co. v. Cazort, 871 S.W.2d 575 (Ark.

OUD sscisknstnpsacnininshdiiianainiaiaieitaiinigtilibiaiaehrichalidbabeninitabaisiaaetiaid 21

Bennett v. Shearson Lehman-American Exp., Inc.,

423 N.W.2d 911 (Mich. App. Ct. 1987) ...............ccecceeeees 23

Vickie Berryman v. U.S. Bancorp Piper Jaffray Inc.,

) . § 6 Re - Bene heaRe Rie ye

Blount v. Smith Barney Shearson, Inc., 695 So. 2d

SN: Cis: Sas MN A cee bisacicssiciet lintncniesenihclnsaistacchetnnacdon 22

Camps Newfound/Owatonna, Inc. v. Town of Harri-

son, Maine, et al., 520 U.S. 564 (1997)....................0..00 25

Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943

Rs Be ckinsicedbiedasashsited cineca cutaslde adil denies cak cee 24

Capital Options Investments, Inc. v. Goldberg

Brothers Commodities, Inc., No. 88 C 2073, 1990

WL 180583 (N.D. Ill. Nov. 5, 1990) ....................cceeeee sees 17

Carlsten v. Oscar Gruss & Son, Inc., 853 A.2d 1191

8 RRS EEO ARER EY epee BITS NO NEON Se DHS eRe 24

Casarotto v. Lombardi (Casarotto I), 886 P.2d 931

Sic Das ccstecntbosicinkcs sheet igh lu bana wicininbccacs vitae cen 7, 8,9

Casarotto v. Lombardi (Casarotto IIT, 901 P.2d 596

I TN i 8

vii

TABLE OF AUTHORITIES -— Continued

Page

Cauble v. Mabon Nugent & Co., 594 F. Supp. 985

CORBI Ey SP) wadiicdiichsdacienh sincsasutcdantiolacaatidksnncasodiobaaioediens 18

Chor v. Piper, Jaffray & Hopwood, Inc., 862 P.2d 26

CE Tiss sSicosaarctatusee taisuciigiamahansaininion 11, 14, 21

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

CO Ce Si inaiinicssitis ek einca caine 21

Commonwealth Equity Services, Inc. v. Messick,

831 A.2d 1144 (Md. Ct. Spec. App. 2003)..................00. 22

Comvest, L.L.C. v. Corporate Securities Group, Inc.,

507 S.E.2d 21 (Ga. Ct. App. 1998).................sscsesceeceeeees 22

John P. Daly and Audrey M. Daly v. U.S. Bancorp

Piper Jaffray Inc., et al., 2005 MT 62N, 110 P.3d

SIDE sais. cik shiv nesicid aitcnnakgh sitacansaiciciaerds ccmadipadieatnca emails 1, 2, 7

David v. Merrill Lynch, Pierce, Fenner and Smith,

Inc., 440 N.W.2d 269 (N.D. 1989).................cscceseseeeeerees 23

Dean Witter Reynolds, Inc. v. Shear, 796 P.2d 296

(Gin. RD isis i sisinciisicicincthisnc cides concent 23

Dickler v. Shearson Lehman Hutton, Inc., 596 A.2d

BD Chem. Boannpee: CO. RE a isiccsiciishssise is asc ibid ca cctgnceeseanen 24

Doctor’s Associates, Inc. v. Casarotto, 515 U.S. 1129

CR TIIUED socisssiciacincsoaninrnescapcceuniisiiubenianedaassaea auntie taste catia 8

Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681

CSGIOD i siinsccvissiltinscicitoittsiacicibibaihitesatiaiehitlcteada aaiaibitiataatias 8, 12,15

Dowd v. First Omaha Securities Corp., 495 N.W.2d |

De CU: BO a scviiv arse sresscirpsnts cvectcas tenia eens 23

Roberta J. Emett and Kathleen E. Merrett v. U.S.

Bancorp Piper Jaffray Inc., et al., 2005 MT 94N,

REN ET

TABLE OF AUTHORITIES — Continued

Page

Eychner v. Van Vleet, 870 P.2d 486 (Colo. Ct. App.

SUI clipcistenn starsat enthcengigasenesadsapantinaistedimaticesensintiniotasell 21

Fairview Cemetery Assoc. v. Eckberg, 385 N.W.2d

PIII UII nto 2s iniestchiian saath beilehedeechiemneienibaaniehanasimeten 21

Featherstone v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 822 N.E.2d 841 (Ohio Ct. App. 2004)........ 23

Financial Network Investment Corp. v. Becker, 741

IN BDa SBT C.F. Bem. CR BRC) cccccceccsccccscccccssesseseseese 23

Finkle and Ross v. A.G. Becker Paribas, Inc., 622

SD, Be es Ee BIO sen cccaicccnsscccntsiccncquccasoacseen 20

First Options of Chicago, Inc. v. Kaplan, 514 U.S.

re Atel vichadecitedliceiiebbdessbibinannoapbishetinninnneilinteiegnadiatiaaenitnds 10

Estate of Alice Franey v. U.S. Bancorp Piper Jaffray

Inc., et al., 2005 MT 73N, 110 P.3d 1057................. 1, 2,7

Garmo v. Dean, Witter, Reynolds, Inc., 681 P.2d 253

CoA, cNEIUID srcivnedecneuiginstiigaticcasitthatsenabiadenentapuanpenseiehaniutan 24

H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525

PID chisttcciudcdecnectctitndendoncbtceaseeananctinditnaianemnetniantindiainiinets 26

In re Kaplan, 143 F.3d 807 (3rd Cir. 1998) ................00000+ 18

Investment Management & Research, Inc. v. Hamil-

me gf bg Tey Ree 22

Iwen v. U.S. West Direct, 1999 MT 63, 977 P.2d 989.......... 4

Jansen v. Salomon Smith Barney, Inc., 776 A.2d

816 (N.J. Super. Ct. App. Div. 2001) .............ccccceceeeessees 23

Keystone, Inc. v. Triad Systems Corp., 1998 MT 326,

Ee GREE Wei chececsesitnnccchstiunigiisdecandatatiiastsihneibaloaaanniandiaaal 9

Kingston v. Ameritrade, Inc., 2000 MT 269, 12 P.3d

BRIS ES EES reek ree ee ener RE ee ae meee 8 PAE OR ¥

TABLE OF AUTHORITIES - Continued

Page

Kloss v. Edward D. Jones, 2002 MT 129, 54 P.3d 1,

cert. denied, 538 U.S. 956 (2003)..............ccccscssesseceeeseners 9

James Leary v. U.S. Bancorp Piper Jaffray Inc.,

cy el} leg RL roe 1, 2,7

Loche v. Dean Witter Reynolds, Inc., 526 N.E.2d

RIO CR. BRR: GR... Ba ivesncccsnnesescessnensonssnavvecsensciautics 23

Macaulay v. Norlander, 15 Cal.Rptr.2d 204 (Cal.

NRE Ee INE AV i RR een ee 21

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985)..............cccccsceseeeeees 10

Modern Settings, Inc. v. Prudential-Bache Securi-

ties, Inc., 936 F.2d 640 (2nd Cir. 1991).................... 17, 18

Mueske v. Piper, Jaffray & Hopwood, Inc., 859 P.2d

COE GG ies sachieiitintiiig enttientitenibtniatitennnntiiiccsat 9, 10

Nelson for Soller v. Roger J. Laxge & Co., Inc., 594

Ee ae Gees SUNN, ih: NIUE sacincnchintnichenspiisteemeeeeesinnsinsd 22

Oppenheimer & Co., Inc. v. Young, 475 So. 2d 221

anh, Ald cinbschesmitininisinneestinipclisainatahasiiailysbapiocabidinmananininpniteindis 22

Park v. Merrill Lynch, 582 S.E.2d 375 (N.C. Ct.

RN, Te ia satcen kcksntnitentiatinbtiadantnnsintitinatnsaviatinjaiiypuiinngens 23

Passage v. Prudential-Bache Securities, Inc., 727

Es ee GE, Te hciranncceunpnstbsciesioncensatintabtinnasenanatiine 20

Perry v. Thomas, 482 U.S. 483 (1987).....................0005 11, 12

Pierce County, Wash. v. Guillen, 537 U.S. 129 (2003)....... 25

Pomano-Windy City Partners, Ltd. v. Bear Stearns

& Co., Inc., 794 F. Supp. 1265 (S.D.N-Y. 1992)............. 16

Prudential-Bache Securities, Inc. v. Stricklin, 890

~ & 5 tReet 17

TABLE OF AUTHORITIES — Continued

Page

Rocz v. Drexel Burnham Lambert, Inc., 743 P.2d

a ect ais pee atten ieependibin einige 22

Salomon Smith Barney, Inc. v. Cotrone, 841 A.2d

1390 (Comm. Amn. Ob. SO06).....ccscsccersccsescoccsccssosccanccscesses 22

Schlemmer v. North Central Life Co., 2001 MT 256,

pCR SES SME IS. 8 PR AREA SI DRL 9 TESE AREOR P 14

John D. Shea and Brenda Shea v. U.S. Bancorp

Piper Jaffray Inc., et al., 2005 MT 63N, 110 P.3d

NEE -sninitsgihiiniitelibsadinihdtiansachhittienshisadblaninibtiinkbacngiebiapinbse 1,2,7

Shearson/American Express, Inc. vu. McMahon, 482

I EIU T aiccnkahassansinmonsnsdanesscsunshahamaheraniaiiing 10, 11, 12

Smith Barney, Inc. v. Henry, 775 So. 2d 722 (Miss.

SD clcnisianensiniiviins ail ehiiniinanaddscansiinas iocinannicnihatnnestnmbatinie 21

Southland Corp. v. Keating, 465 U.S. 1 (1984)................. 10

State ex rel. PaineWebber, Inc. v. Voorhees, 891

S.W.2d 126 (Mo. 1995)...........sesssecsecsseenesesnensrssrseseensseenes Do

United States v. Lopez, 514 U.S. 549 (1995) ..........cccceeess 25

Vukasin v. DA. Davidson & Co., 785 P.2d 713

I FI aise ehethcscnsnincnveetieciiichnincbtnctandchpensdlinssncniiucea 11

Wiley v. Iverson, 1999 MT 214, 985 P.2d 1176................... 14

Willems v. U.S. Bancorp Piper Jaffray Inc., et al.,

gg A Be LRN eee passim

Wyoming v. Oklahoma, 502 U.S. 437 (1992)............:00000 25

Young v. Prudential Securities, Inc., 891 S.W.2d 842

Fah, a iisaceticibncsicctpibiimaninicseenstacivscividivaiavetens 23

U.S. CONSTITUTION

af BS SS Ree ee mee 2, 25

xi

TABLE OF AUTHORITIES - Continued

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STATUTES

De Mee Se Oe saascenbihiniinhonchesnidikpkanuinbardenpdguiobadsoninnghvassnanehibepis 2,12

BE Ue ei civiissntn bth seehccabsikeatostsasischacidcaneschindadmssninhabbcatt 19

se eee Cee Fite Be ions ksccncsndceninsccessaxepincannsecncsacscn 14

OTHER AUTHORITIES

FE EN TRU ihahieh se ciinisacibintssaantnnscisdcsiadibivonnssarsbasicosips 20