Cheryl Coudert v. Paine Webber Jackson & Curtis

OAKES, WEIS,* Before PRATT and Cir Judges. cuit OAKES, Judge: This case involves the question whether a exchange stock rule requiring arbitration of disputes a registered representa- tive brokerage and her firm applies to her claims of tortious part conduct on the occurring broker after the termination of employment. The United States District Court, F.Supp. for the District of Connecticut, Robert C. Zampano, Judge, held applied that the rule and arbitrаtion law, was required, as a matter of thereby dismissing Cheryl Coudert’s stat- ing three against claims the defendant— defamation, privacy by placing invasion of light, in a false and intentional infliction of emotional alleged- distress—for ly resigned false statements made after she from the firm. We reverse.

According plaintiff’s complaint, to the she Paine employed Webber Jackson & (Paine Webber) Curtis as an account execu- tive for yеars, during eleven which she es- tablished a good reputation clientele and as Fairfield, an investment advisor in the Con- necticut, July area. But in after ad- her vising manager office that she was un- happy given with the lack support office, and, representatives receiving in her * Circuit, Appeals sitting by designation. Of the United States Court of for the Third assurances, to the investment commu- sought

no satisfaction or she communications cоl- Bache, nity, including professional Coudert’s Halsey, and received an offer from (cid:127) clients, have been leagues and is said to Stuart, Shields, presi- vice Inc. to become a “outrageous” and to have Darien, Connecticut, “extreme” and dent office. On at its to cause and in fact did cause been intended August Monday, she went emotional distress. her severe resign Paine Fairfield office to Webber’s manager that the office had discovered complaint Paine response In to the Web- things from her desk dur- removed certain stay pend- to the action ber filed a motion preceding weekend. He asked her 345, 347 and 481 ing arbitration under Rules change upon if she intended to firms and Exchange (NYSE), the New York Stock of her in which she stat- response, affirmative letter copy exchange as well as a of the effective resignation ed that her was to be The approving employment. Coudert “No, going he I am to immediately, replied, of ex- incorporates the rules letter Friday” you preceding] terminate as of and, [the perhaps, consti- change by reference 21, 1981). plaintiff’s The com- (August Principally, employment tutes an contract. plaint goes allege on to that the office Rule 347 argues Paine Webber that NYSE manager later told her former co-wоrkers It states to Coudert’s claims. applicable re- that she had been fired and had not that: Paine signed, told brokers at Webber’s registered a Any controversy between thing, suggested the same Stamford office member or mem- representative any Paine that

to her clients who called Webber organization arising out of em- ber it,” “he intimated that she had to do employment termination of ployment or under cir- had left Paine Webber clouded by and registered representative of such alleged cumstances. Coudert further organiza- member or member with such despite by presi- by assurances a senior vice tion shall be settled arbitration.... permanent dent of Paine that her Webber registered a Plainly controversy accurately record would reflect her volun- organization representative and a member never- tary resignation, manager office The district court held exists here. theless filed or caused to be filed termina- on a series of though even this suit is based Ex- tion forms with the Securities and by committed Paine Webber allegedly acts Commission, change York New Stock resignation, subsequent to Coudert’s Exchange exchanges, and other the Nation- “out of the controversy nevertheless arose al Association of Dealers and var- Securities employment” оr terminatioh departments ious state securities that false- the view that of Coudert. The court took cause.1 The ly stated that she was fired for factual issues concern underlying alleged fact that are to be these statements professional competence and and malicious and to have been made false from Paine reasons for her disassociation gave truth disregard with reckless Webber, falling under and treated this as The clause, rise to her defamation action. state- v. citing O’Neel Na the arbitration Dealers, in a ments are also said to have her placed tional Association of Securities Inc., (9th Cir.1982); false her customers and her Muh light before 667 F.2d professional colleagues by falsely portray- Loeb & 540 F.2d Newburger, v. (9th Cir.1976); Hayden, as an invest- Isaacson v. ing her as unfit to continue 972-73 Inc., (S.D.N.Y. adviser, F.Supp. giving ment rise to the second Stonе 1970). same making cause of action. And 13) disput- complaint joint (¶ appendix in the and “not are two “U-5”

1. Included in the defendant,” part forms, of the file was not sent Paine Web- ed termination notices to the presumably court. Since it is Ex- before the district ber to the New York Stock allegations must look change in the that we mentioned in the text. and others as case, 8/28/81, event, first, any posture X in the in in this dated contains an correct, makеs, second, appellee is irrel- “discharged.” point however dated box marked 10/12/81, contains an X in the box marked evant. first, says “voluntary.” Appellee that the while tion. v. National DISCUSSION O’Neel Association Se Dealers, Inc., 806-07; curities F.2d at We start with some propositions Newburger, Muh Loeb & 540 F.2d at so that are basic as to amount truisms in to Moreover, they survive a claim state They of the law. are termination, wrongful so that mentioned this to demon opinion only they wrongful strate have not been overlooked. a claim of be termination must First, agreements are favored See, Krasner, e.g., Drayer had. the law and are to be construed. ‍​‌‌‌​​‌​​‌​‌‌​​‌​‌​‌‌​‌‌​‌‌‌​​‌‌​‌‌‌​‌‌​‌‌​‌‌‌​‌‍broadly (2d Cir.) An order arbitrate should not be denied it can be unless said that the arbitration is not susceptible clause reasonable hand, of a party On the other cannot interpretation covering the asserted dis required any be submit to arbitration short, pute. doubts should resolved in be disputes which he has not agreed to submit. coverage. favor of United of Steelworkers Steelworkers, 582, 363 80 U.S. at v. Navigation, America Warrior & Gulf 363 Rule S.Ct. at 1352. NYSE 347 was “pri 574, 582-83, 1352-53, 1347, 80 4 U.S. S.Ct. to cover marily designed” disputes regard (1960). Second, 1409 L.Ed.2d the securities ing rep and duties rights registered the of industry is to some because unique extent exchange resentatives and members as em self-regulation by exchanges registеred is ployers employees. Ayres Merrill upon 78f, based statute. 15 78s. U.S.C. §§ Pierce, Smith, Inc., Fenner & Lynch, 538 Compare Silver v. New York Stock Ex 532, (3d Cir.), denied, F.2d 535 cert. 429 U.S. 341, 1246, 373 change, 349-57, U.S. S.Ct. 83 1010, 542, (1976). 50 97 S.Ct. L.Ed.2d 619 1252-1257, 10 (1963) (exchange L.Ed.2d 389 Rule 347 to apply Thus NYSE does not self-regulation designed to curb securities a require dispute arbitration of out arising abuses), Pierce, with Merrill Fenner Lynch, of the sale of broker’s own common Smith, Ware, 117, 135-36, & Inc. v. 414 U.S. employee. stock Similarly, to the Id. fol 383, 393-394, (1973) 94 38 348 S.Ct. L.Ed.2d voluntary lowing employ termination of (state law not preempted 347(b) when Rule registered ment an issue whether the repre does promote self-policing not of profit sharing sentative forfeited benefits by securities abuses As we exchanges). profit sharing plan, under the broker’s turn Co., held in Coenen v. R.W. & Pressprich wage statute giving on a California 1209, (2d denied, Cir.), 453 F.2d 1211 cert. action, not right earners was held S.Ct. Pierce, Lynch, Merrill Fenner & arbitrable. (1972), since the constitution аnd rules of Ware, Smith, 134-136, Inc. v. U.S. at exchange a contract stock constitute it is general S.Ct. at 393-394. And law exchange with between members that there no to duty this circuit is each other and with the the arbi exchange, arising after the ter grievance arbitrate provisions tration included rules in those agreement mination of the constituting “contractual an validity,” have parties, expired agreement if the in even agreement binding to arbitrate at least on clause. Ma Korody cluded an arbitration attorning parties. Compare Laupheim Philipp rine v. Minerals & Corp. Chemicals (2d er v. McDonnell & 500 F.2d (2d Corp., Cir.1962) (per 300 F.2d Cir.1974) (distinguishing Coenen where dis curiam). grievances on only Thus based employer pute employer’s with a result of arising “during the term of the conditions fraud). Here there is no but that question agreement arbitrate” are to arbitrable after Coudert, in applying exchange to the to the term has endеd. Procter & Gamble registered become a was fa representative, Ivory Union of Port Independent Procter with miliar the rules requiring Manufacturing & Gamble and assented to them. The are clear cases Cir.1962) in (2d (emphasis original), to disputes relating employment, that as 1872, 10 provisions employ ‍​‌‌‌​​‌​​‌​‌‌​​‌​‌​‌‌​‌‌​‌‌‌​​‌‌​‌‌‌​‌‌​‌‌​‌‌‌​‌‍ the arbitration survive resigna- ment termination even way present perform- state of the record we under the arbitration clause in thе Guthrie,

must look to the to determine er’s services contract in Fuller v. (2d Cir.1977). dispute whether this 565 F.2d 259 pertains either to em ployment termination, or or whether it sim hold, then, stay We motion to ply alleges arising tortious conduct after must be denied and dismissal complaint plainly alleges termination. The complaint reversed. voluntarily resigned Coudert had be Judgment reversed. fore false statements were co-workers, customers, made to and various WEIS, Judge, dissenting. securities exchanges organizations, question here is whether the contro- it is a short road from here to the conclu versy between the and her former plaintiff sion that controversy this is not controlled employer “arising employ- is one out of the by an arbitration clause that governs only ment or and is employment,” termination of employment or termination. Paine Webber therefore arbitrable. The distriсt court would have us hold that as a matter lawof Therefore, agree. found that it was and I I claims of” the out ter “aris[e] dissent. plaintiff. mination of whether specific One matter Certainly .they concern such termination in stating the defendant was correct the limited sense that each of the three employees other grounds for relief stated Coudert in her “fired.” contends the statement was She complaint rests on statemеnts suggesting This “resigned.” false because she disa- that she was discharged for cause rather greement over the circumstances of the than resigned. that she the plaintiff’s departure applies as well to But this is not what Rule 347 NYSE required notifications that the defendant addresses either under the case law we have exchanges submitted to various securities language, above cited or under its precise governmental agencies. plaintiff’s “arising out of termination.” She is not alleges also that the defendant claiming that wrongfully she was terminat- some of her clients that her “de- informed Krasner, as Drayer ed the did in parture from Paine Webber is unfortu- supra. is not seeking employment She ben- nate,” and intimated that the termination accruing efits because of her employment, was for cause. which are resignation. arbitrable even after Although these communiсations took E.g., Co., Muh v. Newburger, supra; Loeb & termination, plaintiff’s place after O’Neel v. National Association of Security “underlying found that district court Dealers, Inc., Rather, supra. profes- the plaintiff’s factual issues concern pertain itself does not to employment or for her competence sional and the reasons employment; termination of the tortious from Paine Webber. Obvi- disassociation acts аre all claimed to have occurred after ously the evidence will involve to a substan- such termination. The claim here made is during which arose degree tial matters principle similar in to that Dutch Old which reflect employment course of her Farms, Dairy Inc. v. Milk Drivers & Em- employer-employee relation- directly on ployees Local Union No. 359 F.2d 598 ship. ...” (2d Cir.1966), that an where court held employer precluded was not the аrbitra- that majority position takes the tion bargaining agree- clause of a collective the em- did not “arise out of” controversy ment a asserting against from claims union because the chal- ployment relationship for tort damages based on unlawful after the communications occurred lenged secondary activity of the union. It is also ceased. The employment had court, however, similar a that to the slander claim made reasoned district promoter predicated concert aris- from and is against performer controversy a “flows termination, and its ing upon” out of statements to the audience at the required. concert therefore arbitration that were held not to be arbitrable sure, The meaning “arising out of” is not To be none of these factors would extent, always justify directing self-evident. To a court in contractual large arbi- parties tration where the had not agreed to proper interpretation depends the specif- on procedure. that See Steelworkers Thus, presented. ic situation consid- policy of America v. Warrior Navigation & Gulf erations often “arising determine whether at 80 S.Ct. at 1352. If a given out of” should be a strict or liberal fairly susceptible contract is of differing interpretation. however, meanings, it clear concedes, As the majority adоpt courts are to interpretation agreements are favored in the law and are requires arbitration. to be broadly construed. The Steelworkers The policy favoring arbitration is not di trilogy,1 teaches that all doubts should be agreement minished because this comes un resolved in favor of coverage. The Su regulations der the of the New York Stock preme Court repeated that admonition in Exchange. That muсh is obvious from this Moses H. Hospital Cone Memorial v. Mercu opinion court’s in Coenen v. R. W. Pressprich ry Construction Corp., -U.S.-,-, (2d Cir.1972). & 453 F.2d 1209 There 103 S.Ct. acknowledged we the drafters of an healthy and advocated “a regard for the Exchange arbitration clause “intended it to federal policy favoring arbitration.” This very designed be broad” and it keep policy is further reflected the United disputes between out members of the courts Act, States Arbitration 1-14 U.S.C. §§ possible. as much as See also O’Neel v. (1976), which declares that a agree written Dealers, National Association of Securities ment for in a “contract evidenc Inc., (9th Cir.1982); F.2d 804 Muh v. involving transaction commerce .. . Co., Inc., Newburger, Loeb & 540 F.2d 970 valid, irrevocable, shall be and enforceable.” (9th Cir.1976). Id. 2.§ Krasner, In Drayer v. The ever-mounting caseload in the courts (2d Cir.), 98 S.Ct. has ‍​‌‌‌​​‌​​‌​‌‌​​‌​‌​‌‌​‌‌​‌‌‌​​‌‌​‌‌‌​‌‌​‌‌​‌‌‌​‌‍lead to increasing discussion of alterna- (1978), Judge Friendly resolutiоn, tive means of dispute particular- Exchange 347(b) discussed Rule at some ly arbitration. The Pound of Conference and length, incongruity found no in the 1976 advocated an expanded use of arbitra- disputes arbitration of of members organized tion2 and the bar joined has in Exchange employees. the and their There the call through the work of various com- exceptions have been some in clearly mittees.3 bar, The defined situаtions. case at how- Report 1. United Steelworkers of America v. American See of the Pound Confer conference. Manufacturing 564, 1343, Force, Follow-Up 363 U.S. 80 S.Ct. ence Task 74 F.R.D. 159 (1960); Steelworkers of (1976); Erickson, The Pound Conference Rec Navigation America v. Warrior & Gulf 363 Blueprint ommendations: A for the Justice 574, 1347, (1960); 80 4 S.Ct. L.Ed.2d 1409 System Twenty-first Century, in the 76 F.R.D. Enterprise United Steelworkers of America v. Bell, (1978); The Pound Conference Fol 277 Corp., 1358, 593, Wheel & Car 363 U.S. 80 S.Ct. low-Up: Resрonse A from the United States (1960). 4 1424 L.Ed.2d Justice, Department of (1978). 76 F.R.D. 320 2. The Pound Conference focused on the effec The American Bar Association committees judicial system. tiveness of the American The include the ABA Action Committee to Reduce major addresses delivered at the conference are Delay, Special and the Committee Court Costs See, e.g., reprinted (1976). at 70 F.R.D. 83 Disputes, Spe- on Resolution of Minor and the Burger, Agenda for 2000 A.D.—A Need for Dis- cial Alternative Means of Committee on Systematic Anticipation, 70 F.R.D. 83 pute Resolution. emphasis alternative, Special placed was on non-judicial dispute See of means resolution. active in The Chief Justice has also been Dispute Processing, Sanders, Varieties of 70 calling enlargement for an of alternative means (1976). Encouragement F.R.D. 111 See, e.g., Burger, new Isn’t dispute of. of resоlution. delivery justice, mechanisms for the of includ Way? (March There a Better 274 68 A.B.A.J. arbitration, ing emerged an increased use of as 1983). principle one of the recommendations

84 1975), resigned who had account executives ever, question preemp does not raise the law, prof to recover brokerage as in firm sued employee state relations from a tion Smith, Pierce, Inc. and Fenner & became vested Lynсh, sharing Merrill units which it 383, Ware, 117, 94 38 414 U.S. S.Ct. employment. payable upon severance ‍​‌‌‌​​‌​​‌​‌‌​​‌​‌​‌‌​‌‌​‌‌‌​​‌‌​‌‌‌​‌‌​‌‌​‌‌‌​‌‍situation (1973), or the L.Ed.2d controversy be that the The court directed Pierce, Lynch, v. Merrill Fenner & Ayres Ex to New York Stock pursuant arbitrated Inc., Cir.), Smith, (3d F.2d 532 case, the de 347(b). In that change Rule 429 U.S. S.Ct. the sever withholding fendant’s conduct (1976), dispute the cen where day the last after ance benefits occurred and employee’s tered on the investments Indeed, the benefits did not employment. not his status. Nevertheless, until severance. become due difficulty in had no appeals the court of simple here is a defamation dispute arose out of dispute that the concluding poses no unusual issues. case employment.” “termination that the matter should plaintiff’s contention it is a tort case not be arbitrated because given to construction generous The same extended validity requires has nо no agree- subject matter of arbitration injury personal discussion. Hundreds of tempo- their as well to apply ments should every day under the claims are arbitrated Brothers, Inc. v. ral limitations. In Nolde of standard provisions uninsured motorist Confectionary Work- Bakery and Local also 16 policies. automobile insurance See Union, ers Contracts, Williston on Jaeger, W. § held Supreme Court L.Ed.2d (“Claims of torts (1976) arising at 13 out to arbitrate pаrties required were to arbitra- may and nuisances be submitted but the contract that arose under dispute tion.”) place after matters that took centered on complains about plaintiff The conduct the bargaining a collective expiration of of her precipitated by the termination that noth- The Court observed agreement. the vari- The notifications to employment. ex- “expressly clause in the arbitration exchanges governmental ous stock which dispute operation cludes from its part proc- were of the termination agencies contract, which is but arises under ess, explanations and the termi- after its on events occur based expected were concomitants to customers some con- the absence of nation. ... parties’ relationship. That severance of indication, strong reasоns there are trary found the contents of com- not intend parties did conclude does not isolate munications to be offensive to be terminated duties their arbitration process. them from the termination Id. at the contract.” automatically with John Similarly, in at 1073. 97 S.Ct. removed from Nor is 543, 84 Livingston, Wiley & Sons fact arbitration rule scope of the the Court 11 L.Ed.2d after the that the communications occurred arising of claims arbitrability upheld the the dеfend day last of work for expired had agreement Pierce, underlying after Lynch, v. Merrill ant. Stokes Smith, (6th by its terms.5 523 F.2d 433 Cir. Fenner & disputes position. cases construed Among plaintiffs Those to ar- claims submitted 4. agree- scope Drayer to be outside the was one that the bitration in v. Krasner “falsely represented employer ments. to NYSE had [plaintiff] present Moreover, had been terminated here and others that factor additional an 405(1),” emplоyed presently and the plaintiff of NYSE Rule for violation is damages recovery sought for loss of Stock Ex- “included New York another member 350. to continue change. clientele.” 572 F.2d at has chosen The by the to be bound thus continues the field and respect rule, her to least with Farms, at Milk Drivers & Dutch Inc. v. 5. Old arguably plaintiff has employer. Dairy Employees F.2d No. Local Union object about right Guthrie, to arbitration her 1966), waived (2d and Fuller v. Cir. work- ceased my after she Cir.1977), contrary which occurred (2d events F.2d 259 are not

The arbitration clause in this case is scope.

broad in It is intended to cover

disputes that are related to termination of

employment. The controversy at hand is of type accompanies which often such an

event. I hedge see no need to appli-

cation of arbitration to this case. Under

any but the most restrictive interpretation, should be arbitrated. liber-

al standard which the court apply should

here compels that result.

I would affirm the order of the district

court.

In re AIR CRASH DISASTER AT WAR-

SAW, POLAND, ON MARCH (Lot

MDL Polskie Linie Lotnicze Airlines), Corporation.

Polish

Angela ROBLES, Margaret Ojeda, Y. Hen- ryka Smiegel, Pimental, Emily Jose George Tompkins, Jr., N. Condon & For- Bland, Raymond Wesson, E. Patricia syth, New York City (Lawrence Mentz, Chavis, Radison,

Ann Susan Janice John Jr., Barry, Axelrod, Desmond T. Peter A. Lindsay, Aрpellees, counsel), appellant ‍​‌‌‌​​‌​​‌​‌‌​​‌​‌​‌‌​‌‌​‌‌‌​​‌‌​‌‌‌​‌‌​‌‌​‌‌‌​‌‍for Polskie Linie Lot- nicze. AIRLINES, Appellant. Moller, Marc LOT Kreindler, S. POLISH Kreindler & (Michael New City York D. Young, of coun- No. Docket 82-7616. sel), appellees for Ojeda. Robles and United States Appeals, Court of Granito, Jr., Frank H. Spieser Krause, & Second Circuit. P.C., Pino, New York City Jr., V. (Rudolph counsel), appellees Smiegel, Pimental, Argued Jan. 1983. Bland, Wesson, Chavis, Radison, and Lind- Decided April say. OAKES,

Before KEARSE SLOVIT ER,* Judges.

OAKES, Judge: The Warsaw Convention1 limits the lia- bility of air carriers for injury or death * Exchange, for one member Appeals but was theOf United States Court of for the working Circuit, sitting by another. designation. Third

1. 49 Stat. 3000. TS No. 876. 137 L.N.T.S. 11

Case Details

Case Name: Cheryl Coudert v. Paine Webber Jackson & Curtis

Court Name: Court of Appeals for the Second Circuit

Date Published: Apr 8, 1983

Citation: 705 F.2d 78

Docket Number: 754, Docket 82-7657

Court Abbreviation: 2d Cir.