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LEWIS v. MERRILL LYNCH

April 21, 1977

Thomas C. LEWIS
v.
MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., et al.



The opinion of the court was delivered by: HANNUM

 HANNUM, District Judge.

 Presently before the Court is defendants' motion to stay proceedings pending arbitration pursuant to 9 U.S.C. § 3 *fn1" in this action under the Employees Retirement Income Security Act of 1974 (ERISA). The issue for determination is whether a prospective agreement to arbitrate disputes arising out of termination of employment compels a former employee to submit his ERISA claims to arbitration rather than adjudication in the federal courts.

 From February 1955 until March 1975, the plaintiff Thomas C. Lewis was employed by defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch), serving in the capacity of account representative during most of his tenure. On December 1, 1957, Lewis became a participant in the Merrill Lynch Pension Plan and so remained until he resigned in May of 1975 to join the Philadelphia office of Kidder, Peabody & Co., a competing securities firm. In April of 1975, prior to his leaving Merrill Lynch, Lewis was informed that his pension rights were 100% vested based on his age and number of years as a plan participant. However, the Merrill Lynch Pension Plan provides that:

 
A Participant who enters employment or engages directly or indirectly in any business deemed by the Committee to be competitive with the business of any Employer or any Subsidiary shall forfeit all rights to any benefits due or to become due from the Trust Fund, other than those attributable to Voluntary Contributions.

 Accordingly, in October of 1975 after Lewis had joined a competitor, he was informed that his pension rights were forfeited. In September 1976, Lewis instituted this suit against Merrill Lynch, the Merrill Lynch Pension Plan and individual plan administrators claiming violations of ERISA in connection with the forfeiture of his pension rights.

 Defendants seek a stay of proceedings in this Court pending arbitration on the basis of what they construe to be an agreement to arbitrate stemming from forms signed by plaintiff in 1955. In order to become a registered representative, Lewis was required to file with the New York Stock Exchange (NYSE), of which Merrill Lynch is a member, a signed copy of form RE-1 which states in paragraph 31:

 
. . . in consideration of the New York Stock Exchange's approving my application, I submit myself to the jurisdiction of such Exchange, and I agree as follows:
 
. . .
 
(g) I am familiar with the rules and regulations of the New York Stock Exchange pertaining to the employment of so-called registered employees, and I agree to abide by the existing rules and all amendments thereto.

 One such amendment to the NYSE rules, originally passed in 1958, is Rule 347 which provides:

 
Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization shall be settled by arbitration, at the instance of any such party, in accordance with the arbitration procedure prescribed elsewhere in these rules.

 It is defendants' contention that form RE-1 and the subsequently instituted Rule 347, construed together, constitute Lewis' agreement to arbitrate the present dispute over forfeiture of his pension rights. Lewis resists arbitration, preferring instead to have his rights determined in the federal courts. He contends first, that there was no agreement to arbitrate and second, that a prospective agreement to arbitrate disputes arising out of termination of employment is void as to ERISA claims.

 We express no opinion here on whether the constructive agreement to arbitrate urged by defendants is binding in these circumstances, but assume the existence of an arbitration agreement arguendo in order to address the paramount issue of whether an agreement to arbitrate executed before the fact is valid to force ...


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