United States Court of Appeals,
Eleventh Circuit.
No. 97-4801.
DEAN WITTER REYNOLDS, INC., Plaintiff-Appellant,
v.
Wayne FLEURY, Betty Fleury, Defendants-Appellees.
April 13, 1998.
Appeal from the United States District Court for the Southern District of Florida. (No. 95-8580-CV-
DLG), Donald L. Graham, Judge.
Before COX and HULL, Circuit Judges, and FAY, Senior Circuit Judge.
COX, Circuit Judge:
Dean Witter Reynolds, Inc. appeals the district court's grant of Wayne and Betty Fleury's
motion to compel arbitration under the Federal Arbitration Act (9 U.S.C. § 1) of their claims against
Dean Witter. We vacate the district court's order and remand with instructions to dismiss Dean
Witter's complaint and compel arbitration before the NASD.
I. BACKGROUND
Wayne and Betty Fleury opened a securities account at Dean Witter in 1982. Upon opening
the accounts, the Fleurys signed a "Customer Agreement" containing this arbitration clause:
Any controversy between you [Dean Witter] and the undersigned [the Fleurys]
arising out of or relating to this contract or the breach thereof, shall be settled by arbitration,
in accordance with the rules, then obtaining, of either the Arbitration Committee of the
Chamber of Commerce of the State of New York, or the American Arbitration Association,
or the Board of Arbitration of the New York Stock Exchange, as the undersigned may elect.
(R.1-15, Exhibit G at ¶ 16). The Fleurys also signed an "Account Agreement" containing nearly
identical language.
The Fleurys purchased three limited partnerships in their Dean Witter account between 1982
and 1985. Unfortunately, the Fleurys became dissatisfied with these investments, and in December
1994 commenced an arbitration proceeding against Dean Witter before the National Association of
Securities Dealers (NASD). The Fleurys alleged that Dean Witter was guilty of wrongdoing in
connection with the purchase of the partnerships and in the ongoing management of the Fleurys'
account. The NASD was not one of the arbitration fora specified either in the Customer Agreement
or in the Account Agreement, but Dean Witter did not contest the choice of forum. Instead, Dean
Witter and the Fleurys signed a "Uniform Submission Agreement" pursuant to the NASD Code of
Arbitration Procedure (the "NASD Code") submitting the Fleurys' claims to arbitration before the
NASD. The Submission Agreement provided in pertinent part:
The undersigned parties hereby submit the present matter in controversy, as set forth
in the attached statement of claim, answers, cross claims and all related counterclaims and/or
third-party claims which may be asserted, to arbitration in accordance with the Constitution,
By-Laws, Rules, Regulations, and/or Code of Arbitration Procedure of the sponsoring
organization.
(R.1-15, Exhibit A at ¶ 1). In April 1995 Dean Witter filed an answer to the Fleurys' claims with
the NASD, alleging, among other things, that the claims were barred by § 15 of the NASD Code,
which requires that a claimant file a claim within six years of the occurrence giving rise to the
claim.1 On July 15, 1995, the NASD Director of Arbitration ruled that the six-year period
1
The NASD Code was renumbered in 1996, and Section 15 was renumbered Section 10304.
For purposes of consistency, we will refer to the section at issue as Section 15. It states:
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 Rule 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.
2
immediately preceding the filing of the claim had begun on January 31, 1989. The Director
therefore ruled that the Fleurys' claims regarding the purchase of the limited partnerships were
time-barred, as the Fleurys purchased the limited partnerships before the 1989 cutoff date. However,
the Fleurys had also alleged wrongdoing occurring after January 31, 1989; the Director ruled that
their claims as to those allegations could proceed to arbitration.
In August 1995, a month after the Director's ruling, a panel of this court decided Merrill
Lynch, Pierce, Fenner & Smith v. Cohen, 62 F.3d 381 (11th Cir.1995). In Cohen, a broker-dealer
confronted with an arbitration claim by a client sought to enjoin the arbitration on the ground that
the client's claims were barred by § 15 of the NASD Code. The district court decided in favor of the
client, and entered an order compelling arbitration. We reversed, ruling that the question of § 15
eligibility was in that case for the court, not the arbitrator, to decide.
Approximately six weeks after Cohen was issued, Dean Witter filed an action in the Southern
District of Florida. Dean Witter contended that all of the Fleurys' claims were ineligible for
arbitration under § 15, and that under Cohen the arbitrator should not have made the § 15 eligibility
determination. Dean Witter requested that the district court conduct an eligibility hearing under
Cohen, issue a declaratory judgment on the § 15 issues, and permanently enjoin the Fleurys from
arbitrating their claims before the NASD if the court found the claims ineligible under § 15. The
Fleurys responded by filing a motion for summary judgment. They characterized Dean Witter's §
15 argument as a refusal to recognize the NASD's jurisdiction over their claims, and contended that
NATIONAL ASSOC. OF SEC. DEALERS, CODE OF ARBITRATION PROCEDURE § 10304
(visited April 2, 1998)