Paul Revere Variable Annuity Insurance v. Zang

          United States Court of Appeals
                    For the First Circuit


No. 00-1363
No. 00-1364

 THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY, ET AL.,

                   Petitioners, Appellees,

                              v.

              ARTHUR F. ZANG AND HAROLD P. BECK,

                   Respondents, Appellants.


         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

       [Hon. Nathaniel M. Gorton, U.S. District Judge]



                            Before

                    Lynch, Circuit Judge,
                Bownes, Senior Circuit Judge,
                  and Lipez, Circuit Judge.



     Glen DeValerio, with whom Michael G. Lange, Alicia Duff,
Berman, DeValerio & Pease LLP, Francis A. Ford, James R.
Hubbard, and Ricci, Hubbard, Leopold, Frankel & Farmer, PC were
on brief, for appellants.

     Patrick W. Shea, with whom Adam S. Bozek, Paul, Hastings,
Janofsky & Walker LLP, Joseph M. Hamilton, and Mirick,
O'Connell, DeMallie & Lougee were on brief, for appellees.
May 3, 2001
            LYNCH, Circuit Judge.            Litigation decisions made by

parties    have    consequences.        This    case   involves      strategic

decisions made by parties in an attempt to obtain a benefit from

a particular ruling; when the court issued a contrary order,

those parties attempted to reverse course and get the district

court to reach a different result under Rule 60(b), Fed. R. Civ.

P.   The    district     court   was   unsympathetic,        and   this    appeal

followed.    Arthur F. Zang, Jr., and Harold P. Beck joined a

number of other employees in filing state employment actions

against six interrelated companies, including The Paul Revere

Variable Annuity Insurance Company ("Variable").                     Variable,

alone among the six companies, is a member of the National

Association of Securities Dealers ("NASD").                    Based on that

membership the companies sought to compel arbitration against

seventeen of the former employees by virtue of those employees'

registration      with   NASD.     Fifteen      of   the     seventeen     former

employees    then    voluntarily       dismissed     their    claims      against

Variable and continued their claims against the remaining five

companies; Zang and Beck remained steadfast and contested the

motions to compel arbitration.

            The district court dismissed the motions to compel

arbitration as to the fifteen employees who no longer had claims

against Variable and, after further argument, entered an order


                                       -3-
compelling Zang and Beck to submit their claims against the six

companies to arbitration, finding that they both had entered

into enforceable arbitration agreements.        Faced with this court

order, Zang and Beck reversed course and decided to dismiss

their claims against Variable.           After doing so, they sought

relief from the district court's order under Rule 60(b), arguing

that the remaining five companies lacked standing on their own

to compel arbitration.     The district court declined to grant

relief from its order, and Zang and Beck now appeal both that

denial and the initial order.       We affirm both orders.

                                I.

          In March 1997, Provident Companies, Inc. acquired The

Paul   Revere   Corporation.   As    a   result,   Provident   combined

effective control of its own wholly owned subsidiary, Provident

Life & Accident Insurance Company, with control of The Paul

Revere Variable Annuity Insurance Company and The Paul Revere

Protective Life Insurance Company, two wholly owned subsidiaries

of The Paul Revere Life Insurance Company, which, in turn, was

a wholly owned subsidiary of The Paul Revere Corporation.            In

October 1997, a number of general managers for the Paul Revere

family of companies, alleging that the termination of their

employment was imminent with the completion of the acquisition,

filed separate but substantially similar breach of contract


                                -4-
actions in a Massachusetts trial court against all six of these

corporate entities.

            As a condition of their employment, seventeen of the

general managers, including Zang and Beck, had registered with

NASD and allegedly thereby promised to abide by NASD's rules and

regulations as they were from time to time amended.                 At the time

that the employment actions were filed, the NASD Code mandated

arbitration of certain disputes if requested by a NASD member or

a person associated with a member.

            Based    on    Variable's     membership     in    NASD,    the    six

companies sought to compel arbitration of the dispute as to

those   seventeen         managers.      First,     in    January      1998    the

petitioners filed a motion to compel arbitration in the state

court, invoking the NASD Code, and asked the court to stay its

hand or dismiss the case pending arbitration.                  Fifteen of the

managers    then     voluntarily       dismissed    their     actions    against

Variable     (ultimately)       with    prejudice,       removing      the    only

petitioner from their cases who was a NASD member; Zang and Beck

retained their claims against Variable.

            Faced with the employees' objections to their motions,

in   July   1998    the    companies    went   to   federal    district       court

seeking orders staying the state court actions and compelling

arbitration by all seventeen former employees, invoking the


                                        -5-
Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and

resting jurisdiction on diversity, see 28 U.S.C. § 1332(a).                   In

September 1999, the district court denied the petition to compel

arbitration as to those fifteen managers who had dismissed

Variable on the ground that the remaining petitioners, absent

Variable     as   a   defendant,       lacked      standing     under   NASD's

arbitration protocol.       See Paul Revere Variable Annuity Ins. Co.

v. Thomas, 66 F. Supp. 2d 217, 223-28 (D. Mass. 1999).                      This

court upheld that denial.          See Paul Revere Variable Annuity Ins.

Co. v. Kirschhofer, 226 F.3d 15, 18-26 (1st Cir. 2000).

             Unlike   the    other     fifteen      managers,     instead     of

dismissing Variable, Zang and Beck opted to retain their claims

against Variable and contest the motion to compel arbitration on

the merits.       They did so, presumably, because their largest

dollar value claims were against Variable.                Specifically, Zang

and Beck (1) contested the existence of a binding agreement to

arbitrate, (2) contended that they lacked sufficient notice of

the   amendments      to    NASD     regulations      requiring     mandatory

arbitration to compel them to arbitrate their employment claims,

and (3) argued that, in any case, their claims fell outside the

scope of the NASD arbitration provision, both because they did

not   sell   securities     and    because   the   NASD   Code   provided     an

exception from arbitration for insurance business.                 In October


                                      -6-
1999, after issuing its orders dismissing the petitions against

the other managers, the district court held a status conference

to determine the issues in dispute with regard to Zang and Beck.

The court ordered further briefing and denied further discovery.

On January 7, 2000, the court granted the petitions against Zang

and Beck and ordered the parties to arbitrate.               Zang and Beck

filed a timely appeal.

           On March 13, 2000, Zang and Beck dismissed their claims

against Variable with prejudice in the state court actions.

They then moved the district court to amend its prior orders

under   Fed.   R.   Civ.   P.   60(b),    arguing   that   since   they   had

dismissed the claims against Variable, none of the remaining

parties had standing under the NASD arbitration protocol to

compel arbitration.        On September 26, 2000, the district court

summarily denied Zang and Beck's Rule 60(b) motions for relief

from final judgment.        Again Zang and Beck filed an appeal, and

this court consolidated the two appeals.

                                    II.

           First, Zang and Beck seek relief from the final order

of the district court compelling arbitration under Rule 60(b),

Fed. R. Civ. P., in light of their subsequent dismissal with

prejudice of their claims against Variable.            Rule 60(b) affords

district courts the equitable power to relieve a party from the


                                    -7-
force of a final order or judgment under certain conditions

where necessary to serve the ends of justice. 1        Zang and Beck

argue that now that Variable is no longer a party to the ordered

arbitration,   the   remaining   parties   lack   standing   to   compel

arbitration under the NASD arbitration protocol.2 Therefore they

assert on appeal that Rule 60(b) relief is warranted both under

clause (5), because prospective application of the arbitration

order is, they say, "no longer equitable," and under clause (6),


    1    Fed. R. Civ. P. 60(b) provides in relevant part:
    On motion and upon such terms as are just, the court may
    relieve a party or his legal representative from a final
    judgment, order, or proceeding for the following reasons:
    * * *
    (5) the judgement has been satisfied, released, or
    discharged, or a prior judgment upon which it is based has
    been reversed or otherwise vacated, or it is no longer
    equitable that the judgment should have prospective
    application; or
    (6) any other reason justifying relief from the operation
    of the judgment. . . .
    2     While respondents argue standing and suggest in passing
that Article III standing is lacking, we note that standing in
the jurisdictional sense is not at issue.           Not only is
jurisdictional standing assessed in terms of the circumstances
at the time the action is filed, see Lujan v. Defenders of
Wildlife, 504 U.S. 555, 569-70 n.4 (1992) ("The existence of
federal jurisdiction ordinarily depends on the facts as they
exist when the complaint is filed.") (quoting Newman-Green, Inc.
v. Alfonzo-Larrain, 490 U.S. 826, 830 (1989)) (emphasis
omitted), but in any case the district court clearly still had
jurisdiction at the time it entered the order and, in fact,
there remains a live controversy here among diverse parties even
after the subsequent dismissal of Variable.         Instead, the
question properly conceived is what entities have a right under
the NASD arbitration protocols to compel arbitration, and
whether that "standing" persists upon the dismissal of Variable.

                                 -8-
because the lack of standing of the remaining parties provides

a "reason justifying relief from the operation of the judgment."

            This effort faces two formidable hurdles.        First, Rule

60(b) relief is "extraordinary relief" reserved for "exceptional

circumstances,"    given   the     countervailing     interest    in    the

finality of such orders.         See United States v. One Urban Lot,

882 F.2d 582, 585 (1st Cir. 1989) (internal quotation marks

omitted).     Moreover, the district court's decision to deny

relief under Rule 60(b) is, in turn, reviewed on appeal for

abuse of discretion.    See Ahmed v. Rosenblatt, 118 F.3d 886, 891

(1st Cir. 1997) ("We will find an abuse of discretion [under

Rule 60(b)] only when we are left with a definite and firm

conviction that the lower court committed a clear error of

judgment . . . ."), cert. denied 522 U.S. 1148 (1998).           Zang and

Beck fail to clear these considerable hurdles.

Rule 60(b)(6)

            The first five subsections of Rule 60(b) allow a court

to relieve a party from a final judgment on several specified

grounds, such as mistake or excusable neglect, newly discovered

evidence, or fraud.      See Fed. R. Civ. P. 60(b)(1)-(5).             Rule

60(b)(6)    provides   federal    district   courts   with   a   residual

reservoir of equitable power to grant discretionary relief from

a final judgment for "any other reason justifying relief . . .


                                   -9-
."     See Fed. R. Civ. P. 60(b)(6).            This residual catchall

provision   allows   a   court   to   relieve   a   party   from   a   final

judgment where such relief is appropriate to accomplish justice,

but the reasons for that relief are not encompassed by the other

provisions of the rule.     Zang and Beck argue that the fact that

the only petitioner with standing under the NASD Code to compel

arbitration (Variable) is no longer party to the case justifies

relief from the arbitration order issued by the district court.

This is not necessarily so, and the district court did not abuse

its discretion in denying such relief.

            District courts should grant Rule 60(b)(6) motions

"only where exceptional circumstances justifying extraordinary

relief exist."    Ahmed, 118 F.3d at 891, citing Valley Citizens

for a Safe Environment v. Aldridge, 969 F.2d 1315, 1317 (1st

Cir.    1992).   District    courts      have   "broad    discretion"     to

determine whether such circumstances exist.              Valley Citizens,

969 F.2d at 1317.    The bar for such relief is set high because,

as the Supreme Court noted in Ackermann v. United States, 340

U.S. 193, 198 (1950), "[t]here must be an end to litigation

someday . . .," and therefore district courts must weigh the

reasons advanced for reopening the judgment against the desire

to achieve finality in litigation.         E.g. Lussier v. Dugger, 904

F.2d 661, 667 (11th Cir. 1990);          see also 11 Wright et al.,


                                  -10-
Federal Practice and Procedure § 2857, at 256-57 (West 1995).

           The reasons for relief advanced by Zang and Beck are

not so compelling as to require the district court to grant

their Rule 60(b) motion.             The decision to persevere in their

claims against Variable upon the filing of the petitions to

compel arbitration in federal court was a "free, calculated, and

deliberate" choice.              Ackermann, 340 U.S. at 198.              The only

relevant     change    in    circumstance        since     the    entry    of   the

arbitration order is Zang and Beck's also "free, calculated, and

deliberate" choice to dismiss Variable from their state court

actions.     Ordinarily, the discretionary power granted by Rule

60(b)(6) is not for the purpose of relieving a party from such

"free, calculated, and deliberate" choices made as part of a

strategy of litigation.           E.g. id. ("free, calculated, deliberate

choices are not to be relieved from");                   see also id. at 200

(stating   that     "by     no    stretch   of   the     imagination      can   the

voluntary,     deliberate,          free,     untrammeled        choice   by    the

petitioner    not     to    appeal"     compare     with    the     "exceptional

circumstances" found in other cases); 11 Wright et al., supra §

2864, at 359.       The law presumes that parties will make choices

to protect their legal interests, even though those choices may

at times involve a calculated risk.                    Where a party makes a

considered choice, though it may involve some calculated risk,


                                       -11-
he "cannot be relieved of such a choice because hindsight seems

to indicate to him" that, as it turns out, his decision was

"probably wrong."    Ackermann, 340 U.S. at 198.

          Zang and Beck are correct that the facts of Ackermann

are different -- that case involved a decision not to pursue an

appeal.   But still, the policy embodied in Ackermann applies

with equal force in this case.      Zang and Beck persisted in their

claim against Variable, cognizant of the risk that this would

lead to mandatory arbitration.            Indeed, by the time of the

October 1999 status conference, the September dismissals of the

petitions against the other fifteen managers made clear that it

was reasonably likely that this consequence could be avoided by

dismissing Variable.        Nonetheless Zang and Beck continued to

litigate against the petitions to compel arbitration rather than

dismissing   Variable,   gambling    that    they   could       defeat   those

petitions on the merits.      Only upon the district court's order

compelling   arbitration     did   Zang     and   Beck    opt    to    dismiss

Variable, hoping thereby to evade the arbitration order.

          Zang and Beck chose to retain their claim against

Variable, fully aware that this choice increased the likelihood

that they would be compelled to arbitrate their claims.                    Now

that this likelihood has been borne out, they cannot reverse the

consequences   of   their   decision      after   the    fact   by    suddenly


                                   -12-
changing course and then asking the district court to correct

for   their    earlier     improvident    choice.      Rather,   the   rule

contemplates that a party will take the legal steps necessary to

protect his own interests, and instead acts to relieve a party

from extraordinary predicaments where, because of exceptional

circumstances, the party would have been unable to do so.               The

district court did not abuse its discretion in denying relief on

the grounds here.

Rule 60(b)(5)

             On appeal, Zang and Beck also argue that their Rule

60(b) motion falls within the fifth clause of the rule, which

allows   a    court   to    relieve   parties       from   judgments   with

prospective effect where, inter alia, "it is no longer equitable

that the judgment should have prospective application."            Fed. R.

Civ. P. 60(b)(5).     Petitioners contend that Zang and Beck failed

to argue adequately before the district court that their case

fell within the scope of this provision, and that therefore the

argument is waived.        Zang and Beck respond that they did raise

the argument, and in any event they say that motions under Rule

60(b) need not specifically reference a particular subsection.

             We need not reach the waiver question because it is

clear that Zang and Beck do not qualify for relief under Rule

60(b)(5). As an initial matter, Zang and Beck's claims fall far


                                   -13-
outside the cases with which the provision is particularly

concerned,      such    as   institutional        reform    litigation,       where,

because    the    decree     involves       the    long-term     supervision      of

changing conduct or conditions, its prospective requirements may

be rendered inappropriate by unforeseen changes in circumstance

subsequent to the entry of the order.                      See, e.g.,     Rufo v.

Inmates    of    Suffolk     County   Jail,       502   U.S.    367,    379   (1992)

(suggesting a flexible standard is required for decrees that

involve "the supervision of changing conduct or conditions" and

thus of necessity are "provisional and tentative").

           Even if we were to indulge in respondents' favor the

argument that the arbitration order falls within the scope of

Rule   60(b)(5),       qualifying     for    relief     under    this    provision

requires    a    clear     showing    of    inequity.          Historically,     the

standard for relief from a binding decree was quite high.                       E.g.

United States v. Swift & Co., 286 U.S. 106, 119 (1932) ("No

doubt the defendants will be better off if the injunction is

relaxed, but they are not suffering hardship so extreme and

unexpected as to justify us in saying that they are the victims

of oppression.         Nothing less than a clear showing of a grievous

wrong evoked by new and unforeseen conditions should lead us to

change what was decreed . . . ."); see also 11 Wright et al.,

supra, § 2863, at 340-41.             It is true the Supreme Court has


                                       -14-
acknowledged that greater flexibility is required in considering

requests to modify institutional reform consent decrees.                 See

Rufo   v.   Inmates   of   Suffolk    County   Jail,   502   U.S.   at   383.

Nonetheless this court has since required a considerable showing

to modify decrees in private contractual disputes that lack

substantial bearing on the public interest.            See Alexis Lichine

& Cie v. Sasha A. Lichine Estate Selections, Ltd., 45 F.3d 582,

586-87 (1st Cir. 1995) (describing the continuum of cases in

which Rule 60(b)(5) is invoked).        In considering the equities of

such a modification, a court should look to such factors as the

circumstances leading to the decree, the level of hardship on

the "burdened" party, and the extent to which the change in

circumstances falls outside of those contemplated at the time

the decree was issued.       The order here resolved a contractual

dispute between private parties with tenuous and tangential

bearing at best on the public interest; the hardship of mandated

arbitration is limited; and the change of circumstances lay

fully within the control of (and, indeed, was caused by) the

parties requesting relief.       Such facts fail to demonstrate the

type of inequity to warrant Rule 60(b)(5) relief.

            Zang and Beck argue that a change in facts justifying

relief from the prospective effect of a final order under Rule

60(b)(5) need not be "unforeseen and unforeseeable."                     This


                                     -15-
assertion is correct.     See Rufo v. Inmates of Suffolk County

Jail, 502 U.S. at 385.    From this assertion Zang and Beck reason

by implication that Rule 60(b)(5) relief is appropriate here,

where the circumstances at issue were within their control both

before and after the issuance of the district court's order.

But there is considerable distance between facts that were

completely   unforeseen   when   an     order   was   issued   and   those

circumstances that were in both the control and contemplation of

the parties, both before and at the time of the judgment; the

line was not extended so far in Rufo.           Cf. id. ("Litigants are

not required to anticipate every exigency that could conceivably

arise during the life of a consent decree.         Ordinarily, however,

modification should not be granted where a party relies upon

events that actually were anticipated at the time it entered

into a decree.").   Rather, the policy underlying Ackermann --

that parties must live with the consequences of freely made,

calculated decisions reached for strategic reasons in the course

of litigation --    applies with equal force in the context of

Rule 60(b)(5).   See, e.g., Valentine Sugars, Inc. v. Sudan, 34

F.3d 320, 322 (5th Cir. 1994) (holding that Rule 60(b)(5) relief

is not appropriate where the party not only foresaw the changed

conditions but created them).

         On these circumstances, Zang and Beck are not entitled


                                 -16-
to   relief   from     the    district     court's       order   under   either

subsection (5) or (6) of Rule 60(b).             They are not free to test

the waters, fully litigating the merits of the arbitration

petition in the district court, and then, displeased with the

outcome, to escape the consequences of this choice by shifting

to a different course after the fact.              The orders are binding,

and the circumstances are not so exceptional or unforeseen as to

compel the district court to relieve the parties from their

force.   Any "injustice" wrought by these orders, if it exists at

all, is not so extreme -- Zang and Beck retain a right to pursue

their    claims   on    the    merits     in     the   pending    arbitration

proceedings and receive compensation if they prevail, even if

this is not their preferred forum or format.                 Finding no abuse

of discretion, we affirm the district court's denial of the Rule

60(b) motion.

                                    III.

           Zang   and   Beck    also     raise    four    challenges     to   the

district court's initial determination granting the petition and

ordering arbitration.         First, Beck contends that petitioners

failed to present sufficient evidence of the existence of any

agreement to arbitrate.         Next, Zang and Beck argue that there

was no knowing and voluntary agreement to mandatory arbitration.

Zang and Beck also contend that they were denied discovery about


                                    -17-
material issues of fact in dispute regarding the continued

standing of Variable to compel arbitration.                      Finally, Zang and

Beck contend that even if the NASD arbitration provisions bound

them     to    arbitrate       some     disputes,       the    insurance      business

exception in the NASD Code exempted these particular disputes

from mandatory arbitration.                    We review the district court's

grant of the motion to compel arbitration de novo.                          See Bank v.

Int'l Bus. Machines, Inc., 99 F.3d 46, 48 (1st Cir. 1996).

The Existence of an Agreement to Arbitrate

               First, Beck claims that the petitioners failed to prove

the existence of any signed agreement on his part in which he

agreed    to    arbitration.            NASD    records    indicate     that       Beck's

registration       was       filed    and    approved     on   November      21,    1968.

However, the NASD has not located an actual registration form

signed    by    Beck     in    1968.        Nevertheless,      the    district      court

concluded that Beck had signed the relevant forms, relying on

secondary       evidence.            Petitioners    filed      with    the    court    an

affidavit       from     a    NASD     official     containing        the    following

assertions: (1) that NASD records show that Beck's registration

was both filed and approved on November 21, 1968; (2) that when

Beck registered in November 1968, NASD required registrants to

sign a registration application as part of its regular business

practice; and (3) that despite reasonable efforts, NASD had


                                            -18-
failed to locate Beck's application forms.                 The parties do not

dispute that the relevant registration form at the time was Form

A-300, and petitioners also introduced a copy of Form A-300.

Beck       states     only   that    he    does    not   recall   signing      the

application, and does not contend that the form was lost in bad

faith or contest that he was in fact registered.

                On this record, the district court concluded that Beck

had signed and submitted Form A-300, in which he agreed to be

bound      by   any   NASD   rules    as    they   existed   at   the   time    he

registered and "as they may from time to time be adopted,

changed, or amended."3 As a result, the district court concluded

that Beck had agreed to be bound by the NASD rules in effect

when he filed suit in October 1997, which at the time required

arbitration of employment disputes.

                On appeal, Beck argues that the district court erred

in finding this evidence sufficient to conclude that he had

actually signed Form A-300.               Beck says that the absence of any

testimony regarding personal knowledge that Beck had signed the

form, the failure to provide any explanation for the absence of

the form from the NASD's files, the fact that the NASD affidavit



       3  Petitioners did produce the form Zang signed when he
registered in 1974, Form B-301, in which he likewise agreed to
be bound by all NASD regulations as they existed and are
"adopted, changed, or amended."

                                          -19-
contains the admittedly false statement that Beck's application

contained an express arbitration provision, and the fact that

the   one    partial        registration     document   NASD    did   produce

regarding Beck -- the face page of an amended registration form,

Form U-4, from 1996 -- did not contain Beck's signature but

instead that of another Variable employee, all militate against

the district court's conclusion.

             The district court's reliance on secondary evidence is

appropriate.          See, e.g., Bituminous Cas. Corp. v. Vacuum Tanks,

Inc., 975 F.2d 1130, 1132 (5th Cir. 1992); Fed. R. Evid. 1004,

advisory committee's note ("if failure to produce the original

is satisfactorily explained, secondary evidence is admissible").

In particular, testimony regarding a regular business practice

can be sufficient to establish the existence and content of

missing business documents.          See, e.g., Simas v. First Citizen's

Fed. Credit Union, 170 F.3d 37, 52 (1st Cir. 1999) (relying on

testimony        to     establish    the   existence    of     missing   loan

application); Fireman's Fund Ins. Co. v. Glass, No. 94 Civ. 7375

(WK), 1997 WL 289858, at *3 (S.D.N.Y. May 30, 1997) (relying on

evidence of custom and practice to use standard engagement

letter      to   establish     the   existence   and    terms    of   missing

engagement letters).          The fact that the affidavit erroneously

stated that the application Beck signed contained an express


                                      -20-
arbitration clause is not directly contradictory, as there is no

dispute that if Beck signed an application, it was Form A-300,

and the contents of that form are not in question.   Similarly,

the fact that the single page found of the incomplete 1996

amended registration form did not contain Beck's signature is

not persuasive in challenging NASD's business practices, as the

one page found was the first page of a three page application

form, and not the one on which NASD would have required an

actual signature.

         It is undisputed that Beck was in fact registered with

NASD in 1968, and given the convincing evidence that he would

not have been registered without a signed Form A-300 in light of

NASD's business practices, the district court was not in error

to conclude that he had in fact signed and submitted the form.

Voluntary and Knowing Agreement to Mandatory Arbitration

         Zang and Beck also contend that even if they at one

time agreed to be bound by NASD rules as they were "adopted,

changed, or amended," this agreement is not sufficient to compel

them to submit to mandatory arbitration where the documents they

signed are silent as to arbitration.   Agreements to arbitrate,

they say, must be knowing and voluntary, and the forms they

(allegedly) signed did not contain any mandatory arbitration

provisions, much less one regarding employment disputes.


                             -21-
          Zang and Beck rely heavily on this court's opinion in

Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170

F.3d 1 (1st Cir. 1999), to argue that the agreements that they

signed cannot serve to compel arbitration in the absence of

proof of more direct awareness of and consent to the arbitration

requirement.      However, Rosenberg is different from this case in

two   respects.      First,   Rosenberg    was    concerned         only    with

compelling arbitration in the context of federal employment

discrimination     claims   and   relied   in    part    on    congressional

history   expressing     particular      concerns       on    the   issue     of

arbitration arising out of the strong public policy against such

discrimination.      Id. at 17-21.    By contrast, this case involves

a straightforward contract dispute that does not raise the

public policy concerns addressed by statutory bars to employment

discrimination.      Moreover, the defendant in Rosenberg, Merrill

Lynch, had agreed expressly to familiarize its employees with

the governing regulations, and had not notified the plaintiff of

the mandatory arbitration provision.         Id. at 19.        Here Variable

made no such promise,4 and therefore Rosenberg is inapposite on


      4   While Zang and Beck argue that NASD Rule 3010 reflects
a commitment by Variable to notify them of changes in the NASD
Code, this is simply not the case. Rather, Rule 3010 requires
Variable to supervise its employees to ensure that they do not
violate securities laws, regulations, or NASD rules, and in this
context, to keep employees abreast of such regulations to ensure
compliance. Rule 3010 does not reach the adoption of mandatory

                                  -22-
this point as well.   Other courts have compelled arbitration on

similar agreements to abide by rules as modified in the future.

See, e.g., R.J. O'Brien & Assoc. v. Pipkin, 64 F.3d 257 (7th

Cir. 1995); Geldermann v. CFTC, 836 F.2d 310 (7th Cir. 1987).

Zang and Beck are professionals who agreed to abide by the rules

and regulations of a professional organization to which they

belonged; in the absence of any commitment by the petitioners to

inform them of rule changes, they cannot plead ignorance of

rules with which they have agreed to comply to escape their

effect.

The Denial of Discovery

          Zang and Beck also challenge the district court's

denial of discovery regarding whether petitioners had cancelled

their NASD registrations through Variable before the accrual of

their employment claims.   Petitioners argue that the discovery

request was untimely and therefore waived; Zang and Beck respond

that they had a right to test the legal sufficiency of the

petition before pursuing factual disputes.

          We need not resolve the question.   The only "disputed"

factual issue raised by Zang and Beck on appeal is the alleged

transfer of Zang and Beck's registration with NASD from Variable



arbitration for employment disputes, which falls beyond the area
of securities regulation with which Rule 3010 is concerned.

                              -23-
to Washington Square Securities, Inc.      The district court denied

discovery on this question.        The essence of Zang and Beck's

theory is that if they were registered through Washington Square

and not through Variable, then Variable lacked standing to

compel arbitration.     However, NASD records before the district

court establish that Zang and Beck were still registered with

NASD through Variable at the time of the termination of their

employment.     Thus    any    question    regarding     their   alleged

(additional)   registration      through       Washington    Square     is

immaterial.

The Insurance Business Exception

         Zang and Beck's final argument is that their employment

claims against the petitioners fall outside the scope of the

NASD arbitration provisions because the NASD Code excepts from

arbitration "disputes involving the insurance business of any

member which is also an insurance company."          NASD Code § 1.    The

overwhelming   weight   of    authority   on   the   issue   holds    that

employment with an insurance company alone is not enough to

trigger the exception unless the pending claim is entangled with

the company's insurance business to a substantial degree, and we

hold that is the correct rule.      See, e.g., Armijo v. Prudential

Ins. Co. of America, 72 F.3d 793, 800 (10th Cir. 1995) (claims

of employment discrimination against insurance company did not


                                 -24-
involve insurance business of defendant); Cular v. Metropolitan

Life Ins. Co., 961 F. Supp. 550, 558 (S.D.N.Y. 1997) (breach of

contract and tort claims              in the case were "garden-variety"

employment      disputes    not   covered     by   the     insurance   business

exception).      Since this dispute simply involves the obligations

of   the   companies       to   the   managers     under    their    employment

contracts and does not substantially implicate the conduct of

insurance business, the exception is inapposite.

                                       IV.

           We    affirm     the   district    court's       orders   compelling

arbitration and denying the Rule 60(b) motion for relief from

that order.

           So ordered.




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