Professional Documents
Culture Documents
____________________
*Chief Judge
designation.
CYR,
CYR,
a
of
the
District
Circuit Judge.
Circuit Judge.
_____________
of
New
Hampshire,
sitting
defendant-appellee
brokerage firm,
accounts
Gruntal
of Section
1934, 15 U.S.C.
erred in
ruling that
arbitral
award, we vacate
proceedings.
Co.
for fraudulently
in violation
Exchange Act of
&
("Gruntal"),
mismanaging Wolf's
10(b) of
78j(b).
securities
investment
the Securities
and
precluded by
an earlier
and remand
for further
I
I
BACKGROUND
BACKGROUND
__________
Viewed in the
see Velez-Gomez
___ ___________
(1st
Cir. 1993),
following
facts.
the
summary
In March
judgment
1988, Wolf
at its branch
appellant Wolf,
8 F.3d
record
873, 874-75
discloses
opened cash
the
and margin
office in Portland,
Maine.
"[a]ny
controversy
foregoing, arbitration
_________ ___________
asserting violation(s)
_________ ____________
Agreement
that "th[e]
16
between
of Federal
__ _______
(emphasis added).
not
___
be
__
Notwithstanding
_______________
mandated
________
on
__
claims
______
securities/commodities laws."
______________________ ____
Paragraph 17
further provided
enforcement would be
2
and
arbitration. . . .
shall
_____
[Gruntal]
governed by
New York
Wolf's
accounts,
causing a
law."
Id.
___
17.
agent fraudulently
loss
approximating
$1
million.
In December
against
Gruntal
District
claims, as
1991,
in the
of Maine.
well as
The
Wolf initiated
United
States District
complaint
the present
asserted
under the
Court
seven
action
for the
state-law
Securities and
240 (1993).1
to forego arbitration
Since
no party had
pursuant
to
section
78(j)(b),
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of
interstate commerce, or of the mails, or of any national securities exchange,
(a) to employ
defraud,
any
device,
scheme,
or
artifice
to
(c) to engage in any act, practice, or course of business which operates or would operate as a fraud or
deceit upon any person,
in connection with the purchase
ty.
17 C.F.R.
240 (1993).
The Rule 10b-5 claim alleged that Gruntal's fraudulent
scheme was comprised of three basic components: (1) Gruntal
misrepresented that its investments would comport with Wolf's
low-risk investment objectives; (2) Gruntal fraudulently extended
the one-month term of Wolf's margin account, without Wolf's
knowledge or consent, in order to promote Gruntal's interests
(i.e., by using Wolf's credit to manipulate the price of stock
____
(Secor/Novametrix) in waging its own "trading war"); and (3)
Gruntal repeatedly concealed the unauthorized margin account
activity by using Wolf's investment and "safekeeping" assets
(e.g., treasury bills) as collateral for his burgeoning margin
____
account indebtedness to Gruntal.
4
$200,000 arbitral
demand for
award against
summary judgment
Gruntal.
Gruntal
the district
court,
thereafter
moved for
contending
in
he
___ _______
ta.
__
The district court
Wolf v.
____
Gruntal & Co., No. 91-426-P-H, 1994 U.S. Dist. LEXIS 7627 (D. Me.
_____________
May 24,
1994).
of fact"
(i.e., the
____
Gruntal).
Id.
___
924
1161, 1166
F.2d
(1991)).
As
arbitration
elected to
quently,
state-law
at *4 (citing Kale
____
(1st Cir.),
"Gruntal [had]
of the
envisioned no
ongoing
[Rule
account mismanagement
cert. denied,
_____ ______
clear that
claim,"
"jurisdictional obstacle"
claims precluded
112 S.
Ct. 69
it would
accept
the
district
in the
final arbitral
the Rule
10b-5
court's
claim to arbitration.
he reasonably relied on
retention of "exclusive"
award
claim because
(i.e., sole
____
court
event Wolf
reasoned, the
by
made
10b-5]
had
Conse-
on the
Wolf
Id. at
___
84 (1982)).
the district
and indefeasible)
jurisdiction over
the Rule
10b-5 claim
in
a consequence,
Wolf's characterization,2
court erred
and, as
ruling that
the
we hold
Although
that the
federal securities
district
claim
was
II
II
DISCUSSION
DISCUSSION
__________
A.
A.
Standards Of Review
Standards Of Review
___________________
We review a
the
grant of summary
order to
judgment de novo,
__ ____
to interrogatories,
and admissions
on file,
under
court, in
depositions, answers
together with
the
as a matter of law."
__ _ ______ __ ___
Jirau-Bernal
____________
entitled to judgment
________ __ ________
v. Agrait, 37
______
F.3d 1, 3
As the
____________________
law,3 it
review.
____________________
_____ ______________
federal court in assessing the preclusive effect of a state-law
based arbitral award which has not been confirmed in a judicial
_________
proceeding.
Had Wolf's arbitral award been confirmed by a New
York court, the resulting judgment presumably would be entitled
________
to the same preclusive effect in federal court as it would be
accorded by a New York court. See 28 U.S.C.
1738 ("full faith
___
and credit"); see also, e.g., Oliveras v. Miranda Lopo, 800 F.2d
___ ____ ____
________
____________
3, 6 (1st Cir. 1986) (citing Migra v. Warren City Sch. Dist. Bd.
_____
__________________________
of Educ., 465 U.S. 75, 81 (1984)); Restatement (Second) of
________
_________________________
Judgments
84(1), 86.
As section 1738's "full faith and
_________
credit" provision does not apply to unconfirmed arbitral awards,
___
however, see McDonald v. City of West Branch, 466 U.S. 284, 287___ ________
___________________
88 (1984) (for res judicata purposes, unless an arbitral award
___ ________
has received judicial confirmation, it is not the product of a
"judicial proceeding" as defined in 28 U.S.C.
1738), it afforded no support for the district court's ruling that Wolf's unconfirmed arbitral award was entitled to preclusive effect.
Cf.
___
Wolf, 1994 U.S. Dist. LEXIS 7627, at *4 (citing Pujol, 829 F.2d
____
_____
1201, 1204 (1st Cir. 1987) (where final arbitral award had been
confirmed by state court)).
_________
Moreover, since it is now settled law that the contracting
parties may accede (or object) to an arbitral submission of
federal securities claims based on Rule 10b-5, see Shearson/Am.
___ ____________
Express, Inc. v. McMahon, 482 U.S. 220, 227-38 (1987) (Rule 10b-5
_____________
_______
claims not presumptively nonarbitrable), we can discern no sound
reason for not according comparable legal effect to the reasonable expectations of the contracting parties as embodied in the
choice-of-law clause in their Agreement. See Volt Info. Scienc___ __________________
es, Inc. v. Board of Trustees of Leland Stanford Junior Univ.,
________
___________________________________________________
489 U.S. 468, 478 (1989) (arbitration law "simply requires courts
to enforce privately negotiated agreements to arbitrate, like
____
other contracts, in accordance with their terms") (emphasis
_____ _________
added); McCarthy v. Azure, 22 F.3d 351, 356 (1st Cir. 1994)
________
_____
B.
B.
Res Judicata
Res Judicata
____________
Res
___
judicata
________
over
claim).
is
not implicated
if
the
forum which
award) lacked
precluded claim
(viz., the
___
1993); Handy v.
_____
Westbury Teachers Ass'n, 480 N.Y.S.2d 728, 731 (App. Div. 1984);
________________________
see also Nottingham Partners v.
___ ____ ___________________
(1st
____
__________
____
collateral
estoppel
preclusion)
(issue
normally bars
preclusion),
res
___
(i) relitigation
of
(adopting
claims
and
e.g., Hodes
____ _____
26(1)(c) (1982),4
v. Axelrod,
_______
"pragmatic"
could have
515 N.E.2d
transaction
been raised
test
in prior
prior proceeding.
612, 616
(N.Y. 1987)
for determining
which
proceeding); see
___
also
____
____________________
Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981).
____________________________
______
C.
C.
Arbitral Awards
Arbitral Awards
_______________
Final
829 F.2d 1201, 1206-07 (1st Cir. 1987); infra note 6 and accompa_____
nying text.
with respect
to prior
arbitral awards
res
___
as is
Judgments
_________
cannot be presumed,
tribunal
acquired competent
We explain.
authority over
that an arbitral
the putative
Unlike
"pre-
federal courts
a litigant, with
appropriate judicial
constitutional, statutory,
Source, Inc.
____________
v. Burrows,
_______
or common
law
581 N.Y.S.2d 9,
invoke the
on extrinsic
authority, see
___
10 (App.
Cine_____
Div. 1992),
the parties.
___ _______
judicata effect
________
of arbitral
(noting, as
awards, that
basis for
limiting res
___
"the authority of
an
the
Restatement
contracted
to
arbitration,
submitting
26(1)(c).
submit
either
______
First,
all
___
party
where
disputes
may
compel
present analogue
the
or
of
parties
controversies
arbitration
simply
have
to
by
7503(c) (1993);
"demand").
Second, even
arbitration
arbitrate
("uncovered
"submission."
any
claims"), simply by
Id.
___
a written agreement
of arbitral
or all
either includes no
otherwise
in writing
nonarbitrable claims
entering into a
joint arbitral
any exercise
absent a "meeting
____________________
7501 (putative
agreements to
&
unenforceable
_____________
"arbitration
violation(s)
of
shall
Federal
not be
mandated
on
securities/commodities
claims asserting
laws,"
places
category.
Cf.
___
Church v. Gruntal & Co., 698 F. Supp. 465, 468-69 (S.D.N.Y. 1988)
______
_____________
(holding
that identical
_________
expressly
contract language
As the district
provided
that
excluded
Rule 10b-5
all non-federal
___________
securities
claim.
N.Y.S.2d
807, aff'd,
_____
344
'compulsory' counterclaim,
not
passed upon
action;
by the
obviously the
action."); Cine-Source,
___________
context
N.E.2d at
arising from
arbitrators is
[arbitral] award
581 N.Y.S.2d
("Where, however,
the same
transaction,]
the subject of
is
at 10
not a
[a
a later
bar to
(rejecting, in
that
the
"res judicata
decided in
asserted .
________
. . ."); Lopez
_____
to [claims] which
were actually
have been
____ ____
526
N.Y.S.2d 156,
158
(App. Div.
1988)
("[T]he doctrines
of
that
action .
. . .");
judicata effect
________
to "limited"
William J.
__________
even
was charged with the burden of proving, see Rembrandt, 344 N.E.2d
___ _________
at
384 (claim
and issue
482 N.E.2d
Clark
_____
v.
preclusion); see
___
63, 67
Scoville, 91
________
(N.Y. 1985)
N.E.
also Kaufman
____ _______
800,
v. Eli
___
(same, collateral
802
(N.Y. 1910)
v. University of Ill.
__________________
966 F.2d 1318, 1321 (9th Cir. 1992), at a bare minimum, cf. supra
_______ ___ _____
note 6,
Rule 10b-5
claim at
__
state-law claims.
_________ ______
demanded arbitration
________ ___________
on the
__ ___
____________________
6Indeed, as indicated in the accompanying text, the circumstances in these New York cases suggest a far narrower application of res judicata principles in the context of arbitral
___ ________
district
court
arbitration in
withheld
________
that
Gruntal
March 1993
from
arbitration
would
have been
the
express
amenable
to
was mutually
________
terms
of
the
2d at
10, absent
forum
diction)
claim.
a bilateral, written
_________ _______
submission, an
arbitral
litigation of
claim in
federal district
court.
Stearns'
[contractual]
the prior
with Clark
agreement
[arbitration]
. the
jurisdiction over
terms of
Of
brought them
course,
had
____________________
sive effect vis-a-vis the Rule 10b-5 claim, it could have endeavored to persuade Wolf to join an arbitral submission.
v. Trager,
______
482 N.Y.S.2d
See Ticker
___ ______
one is
(1934)).
III
III
CONCLUSION
CONCLUSION
__________
Although Wolf incorrectly
jurisdiction over
arbitral
Consequently,
the
submission
Rule
10b-5
encompassing
claim
the
37 F.3d at 3, and
retained
absent
Rule
an
10b-5
judgment as a
the district
preclu-
____________________
15