Moses H. Cone requires a federal court to tread carefully when it is asked to abdicate the responsibility to adjudicate claims that are properly before it. After reviewing the factors that must be considered in such situations, as enunciated in Colorado River and in Moses H. Cone, it is apparent that no exceptional circumstances exist here warranting the dismissal of this federal suit due to the presence of concurrent state proceedings in the Court of Common Pleas of Montgomery County. As such, Merrill Lynch's motion to dismiss, which has been treated as a motion for summary judgment, will be denied.
B. Roodveldt's Motion for Injunctive Relief
Roodveldt seeks to enjoin Merrill Lynch from "enforcing . . . any order or decree of any court which is related in any way to her conduct as a former employee of defendant, Merrill Lynch." Such injunctive relief would include the order issued by the Court of Common Pleas of Montgomery County, or any other court. Further, Roodveldt seeks an order directing the parties to submit their dispute to arbitration, in accordance with the terms of the Trainee Agreement.
I begin by examining the validity under the Arbitration Act of Roodveldt's cause of action. The Arbitration Act is the statutory enunciation of strong federal policy favoring arbitration as a means of dispute resolution. See Moses H. Cone, 460 U.S. 1, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). Nevertheless, when faced with a claim brought under the Arbitration Act, a court must determine whether the dispute between the parties falls within the Act's prerequisites.
The first inquiry is whether the Trainee Agreement is a contract "evidencing a transaction involving commerce." 9 U.S.C. § 2. Interstate commerce is a necessary basis for application of the Arbitration Act, and a contract or agreement not predicated upon interstate commerce must be governed by state arbitration law. Pawgan v. Silverstein, 265 F. Supp. 898, 901 (S.D.N.Y. 1967). Federal courts have consistently held that the contract between a New York Stock Exchange brokerage firm and its employee is a contract involving interstate commerce governed by the Arbitration Act. See Shearson Hayden Stone, Inc. v. Liang, 493 F. Supp. 104, 106 (N.D. Ill. 1980) (citations omitted), aff'd, 653 F.2d 310 (7th Cir. 1981). I agree, and find that Roodveldt's Trainee Agreement is an agreement involving interstate commerce, and falls within the scope of the Arbitration Act.
Sections 3 and 4 of the Arbitration Act, the provisions upon which Roodveldt relies in this case, require that a court, before considering a claim for relief under the Act, find that a written agreement to arbitrate was made between the parties.
Again, Roodveldt easily meets this prerequisite. Paragraph 5 of the Trainee Agreement represents an unequivocal written agreement to arbitrate disputes, at the request of either party. Finally, Section 4 of the Act provides that specific performance of an arbitration agreement may be ordered without a jury trial, where the "making of the agreement or the failure to comply therewith is not in issue." 9 U.S.C. § 4. Here, it is apparent that Merrill Lynch has not complied with the Trainee Agreement's arbitration clause. For the foregoing reasons, Roodveldt may proceed with this action under the Arbitration Act.
I now turn to the merits of Roodveldt's case. At first, I note that Roodveldt pursues specific performance of the Trainee Agreement's arbitration clause as well as equitable relief against the state court suit which is now on appeal to the Superior Court of Pennsylvania. Roodveldt's motion for injunctive relief, then, brings into question the propriety of this court issuing an order that will have the effect of restraining otherwise valid Pennsylvania state court proceedings. Roodveldt's action must therefore overcome the strictures of the anti-injunction statute, 28 U.S.C. § 2283.
The anti-injunction statute states that "[a] court of the United States may not grant an injunction to stay proceedings in a state court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." Id.
However, before considering Roodveldt's motion for injunctive relief against the state court proceeding, I must initially analyze whether specific performance of the arbitration agreement is warranted. In a similar context, the Eleventh Circuit recently had occasion to consider the relationship between the Arbitration Act and the anti-injunction statute. Ultracashmere House, Ltd. v. Meyer, 664 F.2d 1176 (11th Cir. 1981). In Ultracashmere, the federal court plaintiff had sought a stay of a state court proceeding, and an arbitration order pursuant to the Arbitration Act. Judge Kravitch, writing for the court, concluded that where a plaintiff seeks an arbitration order in addition to a stay of a state court action, the district court must first adjudicate the propriety of issuing the arbitration order before determining whether injunctive relief is appropriate. "The latter is but an adjunct of, and can be issued only to effectuate, the former, regardless of the order in which they are sought." Id. at 1183 n.13 (citations omitted).
Section 4 of the Arbitration Act provides that once a court finds that a controversy is subject to a written agreement to arbitrate, "the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4 (emphasis added). In this case there is such a provision, embodied in paragraph 5 of the Trainee Agreement. When presented with a written arbitration agreement, and a motion for an arbitration order under Section 4 of the Arbitration Act, a federal court must initially evaluate whether the arbitration clause arguably covers the dispute at hand. McAllister Bros. v. A & S Transportation Co., 621 F.2d 519, 522 (2d Cir. 1980); Aberthaw Construction Co. v. Centre County Hospital, 366 F. Supp. 513, 515 (M.D. Pa. 1973), aff'd, 503 F.2d 1398 (3d Cir. 1973). In determining whether the dispute between Roodveldt and Merrill Lynch is arbitrable under the Trainee Agreement, I am guided by the principle that "the Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. . . ." Moses H. Cone, 460 U.S. 1, 74 L. Ed. 2d 765, 785, 103 S. Ct. 927; see Becker Autoradio U.S.A. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 43-45 (3d Cir. 1978).
The arbitration provision contained in the Trainee Agreement is straightforward and unambiguous. It states that " any controversy between [Roodveldt] and Merrill Lynch arising out of [her] employment, or the termination of [her] employment . . . for any reason whatsoever shall be settled by arbitration at the request of either party." (Emphasis added). This broad language, coupled with a strong federal policy in favor of arbitration as an informal means of dispute resolution, leads me to conclude that the dispute between Roodveldt and Merrill Lynch falls within the scope of the parties' written arbitration agreement.
Furthermore, Judge Subers' latest opinion in this matter, entitled Adjudication, explicitly comprehends arbitration as the proper means of resolving the controversy arising out of Roodveldt's departure from Merrill Lynch.
Merrill Lynch Pierce Fenner & Smith v. Stephany Roodveldt, No. 83-09272, slip op. at 5, (Ct.C.P., Montgomery County July 7, 1983). Judge Subers granted Merrill Lynch injunctive relief, finding such relief "the only means available to Merrill Lynch to maintain the status quo pending an opportunity to arbitrate the dispute upon the merits." Id. However, Judge Subers neither ordered the parties to arbitrate their dispute, nor explicitly denied Roodveldt's petition for a stay pending arbitration. I am now faced with the explicit mandate of the Arbitration Act, Section 4, to order arbitration where I find the parties have executed a written arbitration agreement that covers their dispute. An arbitration order issued here will not interfere with or restrain the state court proceedings. Judge Subers' injunction against Roodveldt, and the accompanying escrow account, will remain in effect pending the arbitration.
Finally, I note that as a member of the federal judiciary, I am bound to act consistently with the federal policy, often reiterated by the Supreme Court, favoring the arbitral process. Moses H. Cone, 460 U.S. 1, 74 L. Ed. 2d 765, 785, 103 S. Ct. 927 (1983); see also, the Steelworkers "trilogy", United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 4 L. Ed. 2d 1403, 80 S. Ct. 1343 (1960); United Steelworkers of America v. Warrior & Gulf Co., 363 U.S. 574, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960); United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 4 L. Ed. 2d 1424, 80 S. Ct. 1358 (1960). In the instant case, Roodveldt and Merrill Lynch bargained and gave consideration for the arbitration clause contained in the Trainee Agreement. Whatever may be the merits of Roodveldt's underlying dispute with Merrill Lynch, I am compelled to give effect to that agreement, and to provide Roodveldt with the benefit of her bargain. Furthermore, the facts of this particular case persuade me that an arbitration order is warranted. On June 22, 1983, Roodveldt received notice of Merrill Lynch's state court suit against her. She sent a timely demand for arbitration to the New York Stock Exchange that same day, in accordance with the terms of the Trainee Agreement. Nevertheless, Roodveldt was bound to defend Merrill Lynch's action against her in the Court of Common Pleas of Montgomery County. Being a Pennsylvania citizen, she was unable to remove the state court proceeding to a federal forum. See 28 U.S.C. § 1441(b). Roodveldt did defend the state court proceeding. Twice, during the temporary restraining order hearing and during the preliminary injunction hearing, she moved to stay Merrill Lynch's Court of Common Pleas action pending arbitration. After those unsuccessful attempts, she filed this diversity action in federal court pursuant to the Arbitration Act.
Thus, this is not a case in which Roodveldt has been dilatory in seeking arbitration, or has failed to remove the action to federal court to pursue her rights under the Arbitration Act. Cf. Ultracashmere House, Ltd. v. Meyer, 664 F.2d 1176 (11th Cir. 1983) (district court refusal to enjoin state court proceeding pending arbitration affirmed due to plaintiff's failure to remove and delay in seeking arbitration). In sum, from the outset of this dispute, Roodveldt has manifested her desire to enforce the arbitration clause of the Trainee Agreement. For these reasons, Roodveldt's motion for injunctive relief will be granted insofar as it seeks an order directing the parties to arbitration in accordance with the terms of the Trainee Agreement.
Having determined that an arbitration order is warranted in this instance, I now evaluate Roodveldt's motion for a stay of the Pennsylvania state court proceedings.
At first, it is clear that if an injunction is to issue against the state court proceeding, I must determine whether Roodveldt's cause of action implicates one of the three stated exceptions to the anti-injunction statute.
In similar circumstances, federal courts have held that a state court proceeding may be enjoined by a federal court following the issuance of an arbitration order pursuant to the Arbitration Act. These courts view equitable relief as justified due to a federal court's authority, under the anti-injunction statute, to stay proceedings in a state court "to protect or effectuate the [federal court's] judgments." 28 U.S.C. § 2283. Blount Brothers Corp. v. M.K. Steel, Inc., 524 F. Supp. 1037, 1039 (N.D. Ala. 1981) (citations omitted). In such cases, the federal courts conclude that the arbitration order, and the consequent expeditious resolution of the underlying dispute, would be nullified unless the federal court stayed the state court proceedings. Id.
Of course, assuming that the Arbitration Act may provide an exception to the anti-injunction statute does not mandate that Roodveldt's motion for injunctive relief be granted. In the interests of comity and federalism, the three exceptions to the anti-injunction statute must be strictly construed. "'Doubts as to the propriety of a federal injunction against state court proceedings should be resolved in favor of permitting the state courts to proceed in an orderly fashion to finally determine the controversy.'" Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 630, 53 L. Ed. 2d 1009, 97 S. Ct. 2881 (1977) (plurality opinion), quoting Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 297, 26 L. Ed. 2d 234, 90 S. Ct. 1739 (1970). This is so even though the strict abstention doctrine of Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971) may not be applicable to state civil proceedings between private litigants.
See Johnson v. Kelly, 583 F.2d 1242, 1249-1250 (3d Cir. 1978). Judge Wisdom, writing for the Fifth Circuit in the case of Southern California Petroleum Corp. v. Harper, 273 F.2d 715 (5th Cir. 1960), explained the nature of the anti-injunction statute:
Section 2283 is essentially a rule of comity, and the demand . . . that a federal court interfere with state court proceedings is directed to the discretion of the federal court. This discretion should be exercised in light of the historical reluctance of federal courts to interfere with state judicial proceedings.