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Seus v. John Nuveen & Co.

June 08, 1998


On Appeal From the United States District Court For the Eastern District of Pennsylvania

Before: BECKER,*fn* and Stapleton, Circuit Judges, and FEIKENS,*fn** District Judge

The opinion of the court was delivered by: Stapleton, Circuit Judge:

(D.C. Civil Action No. 96-cv-05971)

Argued January 20, 1998

Opinion Filed June 8, 1998


Sheila Warnock Seus sued John Nuveen & Company, Inc., her former employer, under Title VII and the ADEA. Because Seus, at the commencement of her employment, had signed a Uniform Application for Securities Industry Registration that contained arbitration and compliance clauses, the district court granted the employer's motion to compel arbitration of her claims pursuant to the Federal Arbitration Act. The court also denied Seus's motion for leave to take depositions of the National Association of Securities Dealers ("NASD"). We will affirm.


In 1982, Sheila Seus joined the Nuveen brokeragefirm. As a member firm of the NASD, Nuveen is required to register with the NASD all employees who deal directly with the public in the purchase and sale of over-the-counter securities. To comply with this requirement, employees complete a Uniform Application for Securities Industry Registration, commonly referred to as a Form U-4. Approximately four months after she was hired, Seus was required to sign a Form U-4. The Form contained the following arbitration clause:

I agree 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 [NASD].

App. at 5 (Form U-4, ¶ 5). The Form also contained a "compliance clause," under which Seus agreed to:

abide by, comply with, and adhere to all the provisions, conditions and covenants of the . . . by-laws and rules and regulations of the [NASD] as they are and may be adopted, changed or amended from time to time . . .

App. at 5 (Form U-4, ¶ 2).

At the time Seus executed the Form U-4, the NASD Code of Arbitration Procedure required arbitration of:

any dispute, claim or controversy arising out of or in connection with the business of any member of the [NASD], with the exception of disputes involving the insurance business of any member which is also an insurance company: (1) between or among members; (2) between or among members and public customers, or others; and (3) between or among members [and] registered clearing agencies . . . .

NASD Manual - Code of Arbitration Procedure § 1 (reprint ed. May 1982). Although the NASD Code in effect in 1982 did not explicitly state that employment disputes were subject to arbitration, the Code was amended in 1993 to do so. The current Code expressly provides for arbitration of "any dispute, claim, or controversy . . . arising out of the employment or termination of employment of associated person(s) with any member." NASD Manual- Code of Arbitration Procedure Rule 10101 (formerly § 1) (1997).

In 1996, Seus filed suit against Nuveen in the district court, alleging multiple claims of discrimination under Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. §§ 2000e et seq., and the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C.§§ 621 et seq. Based on Seus's execution of her Form U-4, Nuveenfiled a motion to dismiss and compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3-4. Seus, in turn, filed a motion for leave to take the deposition of the NASD pursuant to Fed. R. Civ. P. 30(b)(6) to obtain information regarding the rules, procedures, and results obtained in other employment disputes arbitrated under NASD rules.

The district court granted Nuveen's motion and dismissed Seus's complaint without prejudice, directing her to arbitrate her claims. The court concluded that the Form U-4 executed by Seus constituted a valid contractual agreement to arbitrate enforceable under the FAA, and that the arbitration agreement covered the claims asserted in this case.

The district court also denied Seus's motion to depose the NASD. It noted that the Supreme Court in Gilmer recognized the adequacy of the New York Stock Exchange's arbitration procedures, which the district court found to be "functionally equivalent" to those of the NASD. D. Ct. Op. at 15. The district court also concluded that the NASD Code of Arbitration Procedure, which details discovery procedures and subpoena powers, etc., provides information sufficient to evaluate the fairness of the arbitration process.

In accordance with our usual practice in arbitration cases, we will address, in turn, whether there is a binding agreement to arbitrate between the parties and, if so, whether this dispute is within the scope of that agreement. See PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990). We will then determine whether the district court abused its discretion in denying Seus's motion for discovery from the NASD. See Marroquin-Manriquez v. INS, 699 F.2d 129, 134 (3d Cir. 1983).


A. The FAA

The FAA, 9 U.S.C. § 1 et seq., was enacted in 1925. Its purpose was to make agreements to arbitrate enforceable to the same extent as other contracts. Section 2 of the Act provides, in relevant part:

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation of any contract.

"Commerce," as defined in the Act, includes "commerce among the several States." 9 U.S.C. § 1. "[C]ontracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" are excluded from the scope of the Act, however. Id. The Form U-4 has been held by the Supreme Court to be a "contract evidencing a transaction in commerce" and not to be "a contract of employment" within the meaning of the FAA. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 n.2 (1991). This court and others have also held that the "contract of employment" exception is limited to the contracts of employees who, like seamen and railroad workers, are engaged directly in the channels of interstate commerce. See Great Western Mortgage Corp. v. Peacock, 110 F.3d 222, 226-27 & nn.20-21 (3d Cir. 1997) (stating Third Circuit rule and collecting cases from other jurisdictions).

If a party to a binding arbitration agreement is sued in a federal court on a claim that the plaintiff has agreed to arbitrate, it is entitled under the FAA to a stay of the court proceeding pending arbitration, Section 3, and to an order compelling arbitration, Section 4. If all the claims involved in an action are arbitrable, a court may dismiss the action instead of staying it. See Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); Dancu v. Coopers

& Lybrand, 778 F. Supp. 832, 835 (E.D. Pa. 1991), aff'd, 972 F.2d 1330 (3d Cir. 1992).

Thus, the FAA on its face authorizes the enforcement action taken by the district court. It follows that we must affirm unless we conclude that legislation passed subsequent to the FAA reflects a congressional intent that agreements like the Form U-4 contract be excluded from it scope, that this Form U-4 contract is unenforceable under the provisions of the FAA, or that this dispute is not within the scope of the arbitration provision of that contract.

B. The ADEA, OWBPA, Title VII And The Civil Rights Act of 1991:

The Implied Repealer Challenge To The Validity Of The Agreement

Seus contends that Congress, in legislation subsequent to the FAA, has carved out an exception to its provisions for predispute agreements to arbitrate claims under the ADEA (i.e., agreements to arbitrate ADEA claims that have not arisen at the time the agreement is reached). The EEOC, which has filed an amicus brief in support of Seus's position, contends that a similar exception has been created by Congress for predispute agreements to arbitrate claims under Title VII ...

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