The opinion of the court was delivered by: MAURICE B. COHILL, JR.
Before the Court is defendant Prudential-Bache Securities, Inc.'s ("Prudential") Motion for an Injunction Against the Arbitration of Certain Claims (Doc. 8), which requires that we determine whether any of plaintiffs' remaining claims are eligible for arbitration. Defendant Charles Vollmer joins in this motion.
The Complaint filed by plaintiffs Anne and Howard Manasse alleges breach of fiduciary duties, negligence, fraud, and breach of contract arising from allegedly improper investments, made on their behalf by defendant Charles Vollmer. Mr. Vollmer made these investments first while employed by defendant Prudential Securities, Inc. ("Prudential"), and then as an employee of E.F. Hutton & Co. ("Hutton"), a predecessor of defendant Shearson Lehman Brothers, Inc. ("Shearson"). The motion before us concerns only those purchases made by Mr. Vollmer while he was at Prudential. The earliest of these purchases was made on August 9, 1982. Mr. Vollmer left Prudential for Hutton on May 8, 1984.
This action was filed in the Court of Common Pleas of Erie County, Pennsylvania, on December 18, 1991, and was removed to this Court on January 16, 1992. Defendants then filed a motion to compel arbitration, and to strike any references to claims arising from certain limited partnerships known as the VMS Limited Partnerships ("VMS claims").
We granted the motion and stayed the action pending arbitration. Order dated May 27, 1992., PP b, c.
Plaintiffs filed a Statement of Claim with the National Association of Securities Dealers, Inc. ("NASD"), to which defendant Shearson answered. Defendant Prudential, joined by Vollmer, filed the motion presently before us. Portions of this motion were previously disposed of in Manasse v. Prudential-Bache Securities, 840 F. Supp. 42 (W.D. Pa. 1993). In that opinion, we determined that the VMS claims were not to be submitted to arbitration, and we ordered plaintiffs Anne and Howard Manasse to amend their Statement of Claim to exclude any and all references to such claims. Id. at 43. We also enjoined the arbitration of plaintiffs' remaining claims, until such time as we determined which of those claims were arbitrable.
A. Arbitrability of Claims
In the Third Circuit, the court, not the arbitrator, must determine the scope of an arbitration agreement. PaineWebber v. Hofmann, 984 F.2d 1372, 1374 (3d Cir. 1993). In resolving the issue of arbitrability, "a court is not to rule on the potential merits of the underlying claims." Id. at 1377 (quoting AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986)). It is well settled that there is a strong presumption of arbitrability. Hofmann, 984 F.2d at 1377; see also PaineWebber Inc. v. Hartmann, 921 F.2d 507, 513 (3d Cir. 1990). However, "if the court determines that...the matter at issue clearly falls outside of the substantive scope of the agreement, it is obliged to enjoin arbitration." Hofmann, 984 F.2d at 1372, (quoting Hartmann, 921 F.2d at 511).
The parties to this action agree that the arbitrability of the claims at issue is controlled by the NASD Code of Arbitration Procedure ("NASD Code" or "the Code").
Section 15 of the NASD Code provides that:
No dispute, claim, or controversy shall be eligible for submission to arbitration under this Code where six (6) years have elapsed from the occurrence or event giving rise to the act or dispute, claim, or controversy. This section shall not extend applicable statutes of limitations, nor shall it apply to any case which is directed to arbitration by a court of competent jurisdiction.
In addition, § 18(b) of the Code provides, in pertinent part, that:
The six (6) year time limitation upon submission to arbitration shall not apply when the parties have submitted the dispute, claim, or controversy to a court of competent jurisdiction. The six (6) year time limitation shall not run for such period as the court shall retain jurisdiction upon the matter submitted.
Code of Arb. Pro. § 18(b).
The Court of Appeals for the Third Circuit recently interpreted § 15 of the NASD Code in PaineWebber v. Hofmann, 984 F.2d 1372 (3d Cir. 1993).
"Section 15 can reasonably be read in only one way -- as a substantive limit on the claims that the parties have contracted to submit to arbitration." Hofmann, 984 F.2d at 1379, citing Edward D. Jones & Co. v. Sorrells, 957 F.2d 509 (7th Cir. 1992). Section 15 therefore defines which claims shall be eligible for submission to arbitration. Id. This provision of the NASD Code functions as "an eligibility requirement and not a statute of limitations and thus cannot be tolled." Id. at 1379, (quoting Sorrells, 957 F.2d at 513).
Where, as here, plaintiffs submit multiple claims for arbitration, the court must assess, on a claim-by-claim basis, which claims may proceed to arbitration. Hofmann, 984 F.2d at 1377. Hofmann requires that the district court (1) identify each specific independent claim; (2) determine the date of the relevant occurrence or event; and (3) apply the language of § ...