As previously discussed, all claims against the defendant Broadcort are dismissed. Therefore, since all of the plaintiffs' claims for brokers fraud against defendant Broadcort are dismissed, I need only address the sufficiency of the pleadings with regard to the Laverell defendants.
Under the Federal Rule of Civil Procedure 8, the complaint need only set forth a short and plain statement of claims sufficient to give defendants fair notice of the nature of the claims and the grounds upon which the claims are based. Bogosian v. Gulf Oil, 561 F.2d 434, 446 (3d Cir. 1977). However, it has been held that Rule 9(b) by its very languages creates an exception to Rule 8 when a party is pleading fraud. Arpet, Ltd. v. Homans, 390 F. Supp. 908, 912 (W.D. Pa. 1975).
More recently, the Third Circuit in Christidis v. First Pa. Mortgage Trust, 717 F.2d 96, 100 (3d Cir. 1983) (quoting S. C. Wright & A. Miller, Federal Practices and Procedures, § 1298 at 407 (1969), held in regards to Rule 9(b), that "focusing exclusively on the particular language is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules." The particular mandate, in other words, should not be viewed as a formal checklist of specific points one must allege to survive a motion to dismiss, but rather in terms of rule 9(b), the purpose should be: ". . . to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurios charges of immoral and fraudulent behavior." Seville Indus. Mach. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984), cert denied, 469 U.S. 1211, 84 L. Ed. 2d 327, 105 S. Ct. 1179 (1985). Rule 9(b) "should not be used to create an insurmountable obstacle to the bringing of Section 10(b) actions and it must be read in conjunction with the general principle of notice pleading adopted by the Federal Rules." Summers v. Lukash, 562 F. Supp. 737, 739 (E.D. Pa. 1983); Thomas v. Tramiel, 105 F.R.D. 568 (E.D. Pa. 1985); Cottman Transmission Systems, Inc. v. Dubinsky, 95 F.R.D. 351, 352 (E.D. Pa. 1982).
Plaintiffs' complaint goes far beyond informing defendants of their "precise misconduct" and "safeguarding defendants against spurios charges." For example, plaintiffs aver: (1) the details of the guarantees and promises made by Mark Siemon which induced plaintiffs to trade options (see, plaintiffs' complaint pp. 15-21); (2) the misrepresentation and outright lies made by Siemon which induced plaintiffs to retain their accounts and make additional investments (see, plaintiffs' complaint pp. 25-32); and (3) Siemon's trading in plaintiffs' accounts contrary to express instructions (see, plaintiffs' complaint pp. 33-34).
With regard to the Laverell defendants, plaintiffs' complaint is replete with allegations supporting the duty each defendant owed to the plaintiffs, the misrepresentations and material omissions attributed to each, the actual knowledge and recklessness of each, and the reliance of plaintiffs on the representations of these defendants as professional broker dealers. For example, plaintiffs allege that no inquiry was made by these defendants despite an affirmative duty imposed by the NASD rules.
The defendants' claim that plaintiffs must plead specific misrepresentations with respect to each particular recipient is without merit. In Alfaro v. E.F. Hutton & Co., 606 F. Supp. 1100, 1108 (E.D. of Pa. 1985), the court held that "less specificity is required when the complaint presents the claim of a class and individual identification of the circumstances of the fraud as to each class member would require voluminous pleadings." Similarly, in Capalbo v. Paine Webber, Inc., 672 F. Supp. 1048, 1050 (N.D. Ill. 1987), the court held that Rule 9(6) does not require plaintiffs to identify which particular misrepresentations were made to each plaintiff. The Capalbo court also held that the purpose of Rule 9(6) is to ensure that defendants receive fair notice of the particular circumstances underlying plaintiffs' fraud claims.
MOTION TO COMPEL ARBITRATION
The Laverell defendants request, in the alternative, a denial of their respective motions to dismiss, that all plaintiffs' claims, both federal and pendent state claims, be compelled to arbitration. Plaintiffs have raised multiple issues in which they assert that their claims should not be compelled to arbitration. Plaintiffs assert that the agreement between plaintiffs and the Laverell defendants, the standard option agreement, is not binding and if the court should determine to the contrary, that the agreement does not include the individual Laverell defendants and thus their claims should be litigated.
An agreement to arbitrate is nothing more nor less than a contract. George Campbell Painting Corporation v. Brotherhood of Painters & Allied Trades, District Council, 480 F. Supp. 120 (E.D. Pa. 1979). This court must compel arbitration of those claims which are expressly covered by an arbitration agreement regardless of whether or not federal claims in the same action are to be litigated. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985). However, there is no duty upon a party to submit a dispute to arbitration unless there is an agreement between the parties so requiring. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S. Ct. 1347, 1353, 4 L. Ed. 2d 1409 (1960). Before there can be arbitration of federal securities claims there must first be an express, unequivocal contract between the parties to arbitrate their claims. Par-Knit Mills, Inc. v. Stockbridge Fabrics, 636 F.2d 51, 54 (3d Cir. 1980).
With regard to the Laverell defendants, the only document produced to show an agreement to arbitrate is the Standard Option Agreement which does not include the names of the Laverell firm, Judson Laverell, Rodger Reynolds, or Mark Siemon. In fact, the Standard Option Agreement produced by the Laverell defendants appears to be a Broadcort form document.
In 1987, this court was faced with a similar agreement purporting to compel arbitration of the plaintiff customer's claims in Adams v. Laidlaw, 1987 U.S. Dist. LEXIS 6035, C.A. No. 87-0165, 1987 West Law 13388 (E.D. Pa. July 6, 1987). In Adams, plaintiff customers sued their introducing broker who then proffered the clearing broker's "Margin Agreement" as evidence of an arbitration agreement in his motion to compel arbitration. The Honorable Clifford Scott Green held that the agreement to arbitrate was between plaintiffs and the clearing broker, not between plaintiffs and the introducing broker, stating:
"It is clear that plaintiffs' agreement to arbitrate was between plaintiffs and Pershing, the clearing broker, and not Laidlaw, the securities broker dealer. The reference in the Margin Agreement to "us" refers only to the parties to the Agreement -- plaintiffs and Pershing. Laidlaw is not mentioned in the Margin Agreement. Laidlaw contends that the Margin Agreement was intended to benefit Laidlaw; however, the Margin Agreement states without ambiguity that it limits the liability of Pershing and does not mention or confer any benefits upon Laidlaw."
Westlaw slip op. at 3.
Other courts have likewise held that purported agreements to arbitrate, which fail to name or refer to the introducing broker or registered account representative, as in the instant case, may not be enforced by the non-contracting, broker dealer parties. Lester v. Basner, 676 F. Supp. 481, 484-85 (S.D.N.Y. 1987); Kyung Sup Ahn v. Rooney, Pace Inc., 624 F. Supp. 368, 370 (S.D.N.Y. 1985).
In sum, plaintiffs are not bound to arbitrate their claims against the Laverell defendants based on federal or state law. If the Laverell defendants desired to have their customers sign agreements to arbitrate any controversies against them, they should have had their customers sign an agreement which lists the Laverell firm's name and clearly identifies the parties to the agreement. The only party listed in the document which the Laverell defendants have produced is Broadcort.
Therefore, this court finds that all plaintiffs' claims against the Laverell defendants are not compelled to arbitration. An appropriate order follows.
AND NOW, this 17th day of January, 1989, upon consideration of Defendants' Motions to Dismiss Plaintiffs' Complaint Pursuant to Fed. R. Civ. P. 12(b) (6) and 9, Defendants' alternative Motion to Compel Plaintiffs' Claims to Arbitration, and plaintiffs' responses thereto, IT IS HEREBY ORDERED that:
(1) the Laverell firm, Judson D. Laverell, and Roger A. Reynolds' motion to dismiss plaintiffs' complaint is DENIED.
(2) Defendant Broadcort's motion to dismiss plaintiffs' complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b) (6) is GRANTED; however, plaintiffs will be given leave to replead with more specificity the facts concerning Broadcort's role as a fiduciary.
(3) All defendants' motions to dismiss plaintiffs' complaint for failure to plead fraud with particularity pursuant to Fed. R. Civ. P. 9 are DENIED.
(4) the Laverell firm, Judson D. Laverell, and Roger A. Reynolds' motion to compel arbitration is DENIED.