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KALIDEN v. SHEARSON LEHMAN HUTTON

August 14, 1991

WILLIAM G. KALIDEN, JR., PLAINTIFF,
v.
SHEARSON LEHMAN HUTTON, INC., DEFENDANT.



The opinion of the court was delivered by: Lee, District Judge.

MEMORANDUM OPINION

Presently before this Court is a Motion by defendant, Shearson Lehman Hutton, Inc., (Shearson), to Compel Arbitration*fn1 of the claims of plaintiff, William G. Kaliden, Jr., (Kaliden).

This case arises out of Kaliden's claim that Shearson terminated his employment because of his age and non-job-related hearing impairment in violation of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (ADEA), and the Pennsylvania Human Relations Act, 43 P.S. § 951 et seq., (PHRA).

On November 15, 1984, Kaliden was hired by Shearson as Vice President and Regional Sales Director for its mid-Atlantic Region. At the time of his hire, Kaliden completed an application for employment in which he agreed:

  that any controversy arising out of or in connection
  with my compensation, employment or termination of
  employment shall be submitted to arbitration before
  the National Association of Securities Dealers, Inc.,
  the New York Stock Exchange, Inc., or the American
  Stock Exchange, Inc., and be resolved in accordance
  with the rules in effect of such entities.

On January 16, 1985, in order to retain his existing securities registration while employed by Shearson, Kaliden executed a Uniform Application for Securities Industry Registration or Transfer, commonly known as Form U-4. On January 16, 1987, Kaliden became a registered general securities representative of the New York Stock Exchange (NYSE), after having successfully obtained his Series 7 licensure, and, completing an additional Form U-4. Under the terms of each application, Kaliden agreed:

  to arbitrate any dispute, claim or controversy that
  may arise between me and my firm . . . that is
  required to be arbitrated under the rules,
  constitution or by-laws of the organizations with
  which I register . . .

The NYSE Constitution provides that any controversy between a member corporation, such as Shearson, and any other person, arising out of the business of a member, shall be arbitrated. NYSE Constitution, Art. XI, § 1, 2, NYSE Guide (CCH) ¶ 1501. Rule 347 of the NYSE also 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 described elsewhere in these
  rules.

Shearson terminated Kaliden's employment on November 10, 1987, claiming that such termination was part of a corporate-wide staff and cost reduction efforts. On September 15, 1989, Kaliden commenced the present action, claiming that his termination was based upon his age and non-job-related hearing impairment.

Shearson moved for leave to amend its answer on June 19, 1990, to add the affirmative defense that Kaliden's claims were barred because of his agreement to submit claims arising out of his employment with Shearson to arbitration. This Court granted Shearson's motion and the additional defense was incorporated. Despite demands made by Shearson that Kaliden submit all of his claims in the lawsuit to arbitration, Kaliden refused to place his claims before an arbitration tribunal.

Shearson now moves this Court to Compel arbitration of the aforesaid claims. Because of the strong federal policy favoring arbitration, and the holding in Gilmer v. interstate/Johnson Lane Corporation, 500 US. ___, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), such motion shall be granted.

The Federal Arbitration Act (Act), 9 U.S.C. § 1 et seq., was intended to "revers[e] centuries of judicial hostility to arbitrate agreements" by "plac[ing] arbitration agreements upon the same footing as other contracts." Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-511, 94 S.Ct. 2449, 2453, 41 L.Ed.2d 270 (1974). The Act provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract." 9 U.S.C. § 2. The express mandate of the Act also provides that a court must stay its proceedings if it is satisfied that an issue before it is subject to valid written arbitration agreement, 9 U.S.C. § 3; and it authorizes a federal district court to direct the parties to proceed to arbitration in those instances where it is clear that an agreement to arbitrate has been made and there has been a "failure, neglect or refusal" to comply with the agreement. 9 U.S.C. § 4.

The United States Supreme Court has made clear that the Act establishes a federal policy favoring arbitration and requiring that such provisions be rigorously enforced. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987) (quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 29, 103 S.Ct. 927, 943, 74 L.Ed.2d 765 (1983) and Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 1242, 84 L.Ed.2d 158 (1985)). In Shearson/American Express, the Supreme Court held further that the duty to enforce arbitration agreements is not diminished when a party bound by the agreement raises a claim founded on statutory rights. This expanded the Act to require that certain claims brought under Section 10(b) of the Securities Exchange Act and under RICO be subject to arbitration. The Supreme Court has also held enforceable ...


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