Jackson & Curtis, Inc., 389 F. Supp. 678 (D. Wyo. 1975).
The following courts, however, have refused to imply a cause of action based on NASD or similar stock exchange rules: Jablon v. Dean Witter & Co., 614 F.2d 677 (9th Cir. 1980); Colonial Realty Corp. v. Bache & Co., 358 F.2d 178 (2d Cir. 1966) (Friendly, J.), cert. denied, 385 U.S. 817, 17 L. Ed. 2d 56, 87 S. Ct. 40; Hoover v. E.F. Hutton & Co.,  Fed.Sec.L.R. P 97,654 (E.D. Pa. 1980); Rankl v. Elkins, Stroud, Supplee & Co., Fed. Sec. L. Rep. (CCH) P 97,827, No. 79-3187 (E.D. Pa. June 12, 1980); Birotte v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 468 F. Supp. 1172 (D.N.J. 1979); Thompson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 401 F. Supp. 111 (W.D. Okl. 1975); Utah v. duPont Walston, Inc., [1974-1975] Fed.Sec.L.Rep. (CCH) P 94,812 (D. Utah 1974). Cf. State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 851-53 (2d Cir. 1981). See also Note, Civil Liability for Violation of NASD Rules: SEC v. First Securities Co., 121 U.Pa.L.Rev. 388 (1972).
As Judge Cahn points out in Hoover v. E.F. Hutton Co., "the Touche Ross and Transamerica cases have significantly undermined the rationale of the cases permitting a private right of action under New York Stock Exchange rules." Fed.Sec.L.R. (CCH) P 97,654 at p. 98, 486. The cases cited by plaintiffs, all but one of which were decided prior to Touche Ross, are therefore of questionable value despite their substantial number.
On the other hand, the Court of Appeals for the Ninth Circuit, in analyzing the issue in light of Touche Ross and Transamerica, concluded that there is no private right of action under the NASD rules. Jablon v. Dean Witter, supra, 614 F.2d 677. This court adopts the reasoning of the Ninth Circuit. Accordingly, summary judgment in favor of defendants Smith and Gruntal will be entered on count IV of the amended complaint.
Defendants request that the plaintiffs' pendent state law claims be severed for resolution by arbitration, and that the arbitration of these claims be stayed pending completion of federal litigation. Defendants' request will be denied.
Assuming, without deciding, that the state law claims would otherwise be subject to arbitration under the terms of the arbitration provision of plaintiffs' Customers Agreement, defendants have waived their right to demand arbitration. To date, defendants have not taken any action to secure arbitration. More importantly, defendants have manifested a clear intent to utilize the judicial process both by failing to affirmatively assert the arbitration clause, either in their answer to the amended complaint or in a timely motion to dismiss, and by taking full advantage of the discovery process.
The Third Circuit has indicated that waiver of an arbitration clause may be found where the demand for arbitration came long after the suit commenced and both parties have engaged in extensive discovery. Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d 777, 783 (3d Cir. 1975). Determination of whether a waiver has occurred is dependent on the presence or absence of prejudice. Id. Here, defendants' conduct in waiting until discovery has closed and the case is ready for trial before asserting the arbitration provision, has prejudiced the plaintiffs. Accordingly, the court finds that defendants have waived any right to arbitration.
An appropriate Order will be entered.
AND NOW, TO WIT, this 16th day of December, 1983, for the reasons stated in the foregoing Memorandum, IT IS ORDERED as follows:
1. The motion of defendants, E.W. Smith Company and Gruntal & Co., to dismiss, which the court construes as a motion for summary judgment, is denied as to count III of the amended complaint.
2. The motion of defendants, E.W. Smith Company and Gruntal & Co., to dismiss, which the court construes as a motion for summary judgment, is granted as to count IV of the amended complaint.
3. Judgment is entered in favor of defendants, E.W. Smith Company and Gruntal & Co., and against plaintiffs on count IV of the amended complaint.
4. The motion of defendants, E.W. Smith Company and Gruntal & Co., to sever counts V through VIII of the amended complaint and to stay arbitration pending the outcome of this federal litigation is denied.