Williams v. Imhoff

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 14 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

BRIAN WILLIAMS; BRUCE
BRAUER,

Plaintiffs-Appellees,

v. No. 98-1448

WALTER F. IMHOFF; GARY J.
WILSON; RICHARD T. HUEBNER;
GEORGE A. JOHNSON, Trustees and
Committee Members of the Hanifen,
Imhoff, Inc. Profit Sharing Plan and
Trust,

Defendants-Appellants.
_______________________________
JEFFREY WALL; PAMELA
HIGGINS, PAMELA McCUSKEY,

Plaintiffs-Appellees,

v. No. 98-1449

WALTER F. IMHOFF; GARY J.
WILSON; RICHARD T. HUEBNER,

Defendants-Appellants.
_______________________________
STEVEN E. LEATHERMAN,

Plaintiff-Appellee,

v. No. 98-1450

WALTER F. IMHOFF; GARY J.
WILSON; RICHARD T. HUEBNER,

Defendants-Appellants.
_______________________________
RUSSELL JANSKY,

Plaintiff-Appellee,

v. No. 98-1454

GARY J. WILSON; WALTER F.
IMHOFF; RICHARD T. HUEBNER,

Defendants-Appellants.
_______________________________

GENE R. ANDRIST,

Plaintiff-Appellee,

v. No. 98-1456

GARY J. WILSON; WALTER F.
IMHOFF; RICHARD T. HUEBNER,

Defendants-Appellants.

APPEALS FROM UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. Nos. 98-M-511, 98-M-659,
98-M-1396, 98-M-593, 98-M-955)

2
Daniel S. Hoffman (Barbara Z. Blumenthal and Tobin D. Kern with him on the
brief), of McKenna & Cuneo, L.L.P., Denver, Colorado, for the appellants.

John F. Walsh (Gary J. Ceriani, Charles W. Bess, and Margaret E. Peper, of Davis
& Ceriani, P.C.; Robert F. Hill and Karen A. Tomb, of Hill & Robbins, P.C.; and
Gary C. Davenport and Krista L. Tushar, of McGloin Davenport Severson &
Snow P.C., on the brief), Denver, Colorado, for the appellees.

Before BRISCOE and PORFILIO, Circuit Judges, and ROGERS, Senior
District Judge. 1

BRISCOE, Circuit Judge.

Defendants Walter F. Imhoff, Gary J. Wilson, Richard T. Huebner, and

George A. Johnson appeal from the district court’s partial denial of their motion

to compel arbitration and stay proceedings. At issue is the arbitrability of claims

asserted under the Employee Retirement Income Security Act of 1974 (ERISA),

29 U.S.C. §§ 1001-1461, by plaintiffs, former securities exchange employees who

were terminated from their employment by defendants and who allegedly did not

receive proper valuation for stock held in their former employer’s profit sharing

plan. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, and reverse and

remand with directions to stay the proceedings and compel arbitration.

1
The Honorable Richard D. Rogers, Senior United States District Judge
for the District of Kansas, sitting by designation.

3
I.

Plaintiffs Brian Williams, Bruce Brauer, Jeffrey Wall, Pamela Higgins,

Pamela McCuskey, Steven Leatherman, Russell Jansky, and Gene Andrist are all

former employees of Hanifen, Imhoff, Inc. (HII), a corporation engaged in the

securities business and a member of the National Association of Securities

Dealers, Inc. (NASD). Prior to beginning their employment with HII, each

plaintiff signed a Uniform Application for Securities Industry Registration or

Transfer (“Form U-4”), which provided in pertinent part:

I agree to arbitrate any dispute, claim or controversy that may arise
between me and my firm, or a customer, or any other person, that is
required to be arbitrated under the rules, constitutions, or by-laws of
the [NASD] as may be amended from time to time and that any
arbitration award rendered against me may be entered as a judgement
in any court of competent jurisdiction.

App. at 100 (item 5).

At all times relevant to this case, HII had in place an employee stock-

ownership program (ESOP) and a Profit Sharing Plan and Trust (the Hanifen

Plan) that provided pension benefits. During their respective periods of

employment with HII, plaintiffs were allegedly encouraged to, and in fact did,

accumulate significant amounts of company stock through both the ESOP and the

Hanifen Plan. Plaintiffs assert the Hanifen Plan was a “qualified trust” that

enjoyed favorable tax treatment under the Internal Revenue Code. Plaintiffs

further allege the Hanifen Plan constituted an “employee benefit plan” for

4
purposes of ERISA. See 29 U.S.C. § 1003(a). Finally, plaintiffs allege that

defendants Imhoff and Wilson, who served as trustees of the Hanifen Plan, and

defendant Johnson, who served as a committee member of the Hanifen Plan, were,

for purposes of ERISA, fiduciaries with respect to the Hanifen Plan and its

participants.

In 1994, HII was reorganized and Hanifen Imhoff Holdings, Inc. (Holdings)

was created. Plaintiffs, who had previously worked in one of several HII

divisions, became employees of one of three Holdings’ subsidiaries.

Notwithstanding the reorganization, plaintiffs apparently continued to purchase

stock (now Holdings stock) through the ESOP program and the Hanifen Plan

(which, after the reorganization, was open to all employees of Holdings and its

subsidiaries).

Article IV of Holdings’ articles of incorporation restricted ownership of

company stock to “persons actively engaged in the business of the Corporation or

any of its subsidiaries,” and required any holder of company stock to sell his or

her shares back to Holdings in the event that he or she ceased to work for

Holdings or its subsidiaries. App. at 15. In a confidential private placement

memorandum issued on September 15, 1994, Holdings indicated it would, in the

event an officer or employee was terminated, purchase any company stock held by

that officer or employee “at Adjusted Net Book Value.” Id. at 15. The

5
memorandum further indicated that “Adjusted Net Book Value has historically

reflected the fair market value of the shares of Hanifen common stock (i.e., the

price at which a third-party purchaser might value the shares if the shares could

be sold without restriction).” Id. at 16. Holdings’ articles of incorporation also

provided that the sale and disposition of stock by and through the Hanifen Plan

would “be governed by the provisions of the Plan.” Id. at 16. Under the

provisions of the Hanifen Plan, stock value was to “be determined at [its] fair

market value, as determined in good faith by the Committee and the Trustee.” Id.

In the fall of 1995, defendant Huebner, who was a director and shareholder

of Holdings, allegedly directed plaintiff Leatherman to contact Fiserv Clearing,

Inc. (Fiserv), a large publicly-owned financial services firm, to inquire if it was

interested in acquiring Holdings. During the period of negotiations with Fiserv,

the defendants, all of whom were directors, officers, and/or shareholders of

Holdings, placed a moratorium on the buying and selling of Holdings stock.

Plaintiffs assert that in early 1996, Fiserv made an offer of approximately

$69 per share for the outstanding stock of Holdings and its subsidiaries, which

was “equal to approximately three and a half times the ‘Adjusted Net Book

Value’ of Holdings’ stock.” Id. at 18. Defendants “rejected the acquisition offer

based upon an alleged problem with the terms and conditions of the offer.” Id.

According to plaintiffs, defendants then “embarked on a conspiracy to force a

6
significant percentage of minority shareholders, who were also employed by

Holdings, out of Holdings by terminating their employment.” Id. More

specifically, plaintiffs contend they were terminated and forced to sell their shares

of Holdings stock back to Holdings at “Adjusted Net Book Value,” which “was

substantially lower than the fair market value as evidenced by Fiserv’s [1996]

offer.” Id. On December 31, 1997, after completing the force-out of minority

shareholders, defendants allegedly agreed to sell Holdings to Fiserv. The

purchase price paid by Fiserv was substantially similar to its initial 1996 offer,

and represented “a per-share value approximately three and a half times the price

paid per share” by plaintiffs for their stock. Id. at 19.

In 1998, plaintiffs filed five separate, but substantially similar actions

against defendants (plaintiffs Leatherman, Jansky, and Andrist filed actions on

their own behalf; plaintiffs Williams and Brauer filed suit together, as did

plaintiffs Wall, Higgins, and McCuskey). Plaintiffs’ first claim for relief was for

“Breach of Fiduciary Duty” against all defendants in their capacities as officers,

directors, and controlling shareholders of Holdings. Id. at 20. In support of this

claim, plaintiffs alleged that defendants violated their fiduciary duties to plaintiffs

and the other minority shareholders by rejecting Fiserv’s initial acquisition offer

and subsequently forcing out the plaintiffs and other minority shareholders. In

their second claim for relief, plaintiffs asserted that all defendants, in their

7
capacities as officers, directors, and controlling shareholders of Holdings,

engaged in a civil conspiracy “to force certain minority shareholders . . . to sell

their . . . stock, in order to deprive [them] . . . of the increase in value in their . . .

stock in order to reap that benefit for themselves.” Id. at 21. In their third claim

for relief, plaintiffs contended that defendants Imhoff, Wilson, and Johnson (but

not Huebner), in their capacities as trustees and committee members of the

Hanifen Plan, breached their fiduciary duties under ERISA in determining the

price at which the Hanifen Plan would repurchase plaintiffs’ shares of Holdings

stock. More specifically, plaintiffs asserted these three defendants were required,

but failed, “to price the shares . . . at fair market value.” Id. at 24. Plaintiffs

further alleged that these three defendants violated ERISA’s prohibition against

fiduciaries dealing with plan assets in their own interests “by engaging in a

scheme to terminate employees so as to acquire the shares of these minority

shareholders and by rejecting the Fiserv acquisition offer in April 1996.” Id. at

24-25. As a result of these alleged ERISA violations, plaintiffs asserted they

were “entitled to obtain the difference between the amount they were paid for

their Hanifen Plan shares at termination, and the shares’ fair market value.” Id. at

26. In addition, plaintiffs contended they were “entitled to any profits made by

the Defendant Hanifen Plan fiduciaries through their misuse of Hanifen Plan

assets.” Id.

8
Defendants, citing the arbitration provisions in the Form U-4s signed by

plaintiffs, moved the district court to stay the proceedings and compel arbitration.

Id. at 128. The district court granted defendants’ motion with respect to the first

and second claims for relief, but denied the motion with respect to plaintiffs’

ERISA claims. Id. at 332-38. Defendants subsequently filed timely notices of

appeal in each case, and, for purposes of appeal, the cases have been

consolidated.

II.

Standard of review

We review de novo a district court’s grant or denial of a motion to compel

arbitration. Gibson v. Wal-Mart Stores Inc., 181 F.3d 1163, 1166 (10th Cir.

1999); Armijo v. Prudential Ins. Co. of America, 72 F.3d 793, 796 (10th Cir.

1995).

The Form U-4s and the NASD Rules

As previously noted, the Form U-4s signed by plaintiffs provided:

App. at 100 (item 5).

9
Among the NASD “rules, constitutions, or by-laws” incorporated by the

Form U-4s was the NASD Code of Arbitration Procedure, two rules of which are

relevant to this dispute. Rule 10101 “defines the general universe of issues that

may be arbitrated,” Armijo, 72 F.3d at 798 2, and provides, in pertinent part, for

the arbitration of:

any dispute, claim, or controversy arising out of or in connection
with the business of any member of the Association, or arising out of
the employment or termination of employment of associated
person(s) with any member, with the exception of disputes involving
the insurance business of any member which is also an insurance
company:
(a) between or among members;
(b) between or among members and associated persons;
(c) between or among members or associated persons and
public customers, or others.

App. at 287. Rule 10201 mandates arbitration for the following subset of the

universe of disputes outlined in Rule 10101:

Any dispute, claim, or controversy eligible for submission under
[Rule 10101] between or among members and/or associated persons,
and/or certain others, arising in connection with the business of such
member(s) or in connection with the activities of such associated
person(s), or arising out of the employment or termination of
employment of such associated person(s) with such member, . . . at
the instance of:
(1) a member against another member;
(2) a member against a person associated with a member or a
person associated with a member against a member; and
(3) a person associated with a member against a person
associated with a member.

2
Armijo involved a previous, but substantially similar, NASD rule.

10
App. at 289. Exempted from mandatory arbitration are “claim[s] alleging

employment discrimination, including a sexual harassment claim, in violation of a

statute.” Rule 10201(b) (1999).

Inapplicability of Wright’s “clear and unmistakable” standard

The district court, relying on Wright v. Universal Maritime Serv. Corp.,

119 S. Ct. 391 (1998), concluded plaintiffs’ ERISA claims were not subject to

mandatory arbitration because the claims were “statutory in origin,” and “the

Form U-4 and the NASD rules d[id] not explicitly require [their] arbitration.”

App. at 337. Although plaintiffs urge us to adopt this same rationale, we decline

to do so.

In Wright, the Supreme Court held, in the context of construing a general

arbitration clause contained in a collective bargaining agreement (CBA), that any

union-negotiated waiver of employees’ statutory rights to a judicial forum must be

“clear and unmistakable.” 119 S. Ct. at 396. In doing so, the Court was careful

to differentiate CBAs from agreements entered into by individual employees. The

Court noted that CBAs involve “a union’s waiver of the rights of represented

employees,” whereas individual agreements involve “an individual’s waiver of his

own rights.” Id. at 397. Precisely because CBAs give rise to a “tension between

collective representation and individual statutory rights,” Gilmer v.

11
Interstate/Johnson Lane Corp., 500 U.S. 20, 35 (1991), the Court believed it was

necessary for any union waiver of individual statutory rights in a CBA to “be

particularly clear.” Wright, 119 S. Ct. at 396. Although the Court did not discuss

in detail the standard applicable to agreements entered into by individual

employees, it left little doubt that the “clear and unmistakable” standard was

inapplicable to such agreements. Id. at 397 (noting that “the ‘clear and

unmistakable’ standard was not applicable” in Gilmer, which involved an

individual’s waiver of his own statutory rights). Further, the Court indicated that

a “broad arbitration clause” in an individual agreement could “embrace federal

statutory claims,” while the identical clause in a CBA would be construed in a

more narrow fashion. Id.

Because the Form U-4s at issue here are individual agreements signed by

plaintiffs, we reject the notion that they are subject to Wright’s “clear and

unmistakable” standard. To the contrary, we conclude they, like the substantially

similar agreement signed by the plaintiff in Gilmer, are governed by the Federal

Arbitration Act (FAA), 9 U.S.C. § 1 et seq. See Gilmer, 500 U.S. at 25; Armijo,

72 F.3d at 797. Under the FAA, a “court must stay proceedings if satisfied that

the parties have agreed in writing to arbitrate an issue or issues underlying the

district court proceeding.” McMahan Sec. Co. v. Forum Capital Markets, 35 F.3d

82, 85 (2d Cir. 1994) (citing 9 U.S.C. § 3). “‘[Q]uestions of arbitrability must be

12
addressed with a healthy regard for the federal policy favoring arbitration,’ and

thus, ‘any doubts concerning the scope of arbitrable issues should be resolved in

favor of arbitration.’” Armijo, 72 F.3d at 797 (quoting Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).

Whether plaintiffs’ ERISA claims fall within the scope of the arbitration clauses

We engage in a two-part inquiry to determine whether plaintiffs’ ERISA

claims fall within the scope of the arbitration clauses contained in the Form

U-4s. Mitsubishi Motors, 473 U.S. at 628. Our first task “is to determine

whether the parties agreed to arbitrate” the ERISA claims at issue. Id. at 626.

“[A]s with any other contract, the parties’ intentions control, but those intentions

are generously construed as to issues of arbitrability.” 3 Id. If we determine the

agreement covers the ERISA claims, our second inquiry is “whether legal

constraints external to the parties’ agreement foreclose[] the arbitration of those

claims.” Id. at 628.

To determine whether the parties agreed to arbitrate the ERISA claims

asserted by plaintiffs, we must return to the provisions of NASD Rules 10101 and

10201. In order to satisfy both Rules 10101 and 10201, and thus be subject to

3
“By agreeing to arbitrate a statutory claim, a party does not forgo the
substantive rights afforded by the statute; it only submits to their resolution in an
arbitral, rather than a judicial, forum.” Mitsubishi Motors , 473 U.S. at 628.

13
mandatory arbitration, plaintiffs’ ERISA claims must be “between” persons

specifically listed in Rule 10101, First Liberty Inv. Group v. Nicholsberg, 145

F.3d 647, 651 (3d Cir. 1998), and must “aris[e] in connection with the business”

of members, “in connection with the activities of such associated person(s),” or

“out of the employment or termination of employment of such associated

person(s) with such member.” Id.

We have little trouble concluding that plaintiffs’ ERISA claims are between

“associated persons.” NASD By-Law Art. I(q) defines the term “associated

person of a member” as: “every sole proprietor, partner, officer, director, or

branch manager of any member, or any natural person occupying a similar status

or performing similar functions, or any natural person engaged in the investment

banking or securities business who is directly or indirectly controlling or

controlled by such member.” Both the plaintiffs, who were employees of

Holdings and involved to one degree or another in the sales of securities, and the

defendants, who were directors and/or officers of Holdings, satisfy this definition.

See Armijo, 72 F.3d at 799 (concluding that plaintiffs, who were employed as

securities salesmen, “engage[d] in the securities business under the control” of

their employer, and thus were “associated persons” under the NASD Code).

Indeed, in their pleadings filed with the district court, plaintiffs admitted that they

and defendants were “associated persons” for purposes of the NASD Code. App.

14
at 165. Although plaintiffs argue on appeal that, for purposes of the ERISA

claims, the defendants are being sued solely in their capacity as ERISA

fiduciaries, that does not alter the fact that defendants are, in fact, officers and/or

directors of an NASD member institution and, for purposes of the NASD Code,

“associated persons.” Although plaintiffs have attempted to argue that the

provisions of Rule 10101 do not cover disputes between associated persons, the

language of the rule, in particular subparagraph (c), clearly appears to govern

such disputes. 4 See Armijo, 72 F.3d at 798-99 (construing the phrase “others,” as

used in the NASD Rules, to include “associated persons”).

The more difficult question is whether the ERISA claims arise “in

connection with the business” of members, “in connection with the activities of

such associated person(s),” or “out of the employment or termination of

employment of such associated person(s) with such member.” Defendants’

primary contention is that plaintiffs’ claims arise “out of the employment or

termination of employment of such associated person(s) with such member.”

According to defendants, “Plaintiffs’ claims would not exist but for their

employment relationship” with HII/Holdings. Aplt’s Opening Brief, at 28. In a

4
Even if defendants are not “associated persons,” they clearly fall within
the category of “others” in subparagraph (c) of Rule 10101. In other words, the
dispute would then be between “associated person” (i.e., the plaintiffs) and
“others” (i.e., defendants in their role as ERISA fiduciaries).

15
secondary argument, defendants also contend that plaintiffs’ claims arise “in

connection with the business” of HII/Holdings. 5 In contrast, plaintiffs argue that

their ERISA claims do not fall within any of these provisions because they arise

solely out of defendants’ breaches of their duties as fiduciaries to the Hanifen

Plan participants.

To resolve the parties’ arguments, we find it necessary to first interpret the

phrase “arising out of,” as it is used in NASD Rules 10101 and 10201. To date,

we have broadly interpreted the provisions of the NASD Arbitration Code. For

example, prior to 1993, the NASD Code did not expressly require arbitration of

claims arising out of the employment or termination of employment of an

associated person. Although some federal courts held that employment

discrimination claims were not encompassed by the pre-1993 version of the

NASD Code, see, e.g., Prudential Ins. Co. of America v. Lai, 42 F.3d 1299, 1305

(9th Cir. 1994), we held otherwise. In Armijo, we held that such claims were

encompassed by the NASD Code’s reference to claims “in connection with [the]

activities of such associated person(s).” 72 F.3d at 799.

5
In Armijo , this court held that employment discrimination claims filed by
former securities salesmen arose “in connection with activities of such associated
person(s)” for purposes of NASD Rule 10101 (which, at the time, was referred to
as Section 1 of the NASD Code). 72 F.3d at 799. However, defendants do not
appear to be asserting that plaintiffs’ ERISA claims arose “in connection with the
activities of such associated person(s).”

16
Although the phrase “arising out of” is not defined in Rules 10101 or 10201

(or elsewhere in the NASD Code), we believe it must be broadly construed to

mean “originating from,” “growing out of,” or “flowing from.” In reaching this

conclusion, we glean support from cases interpreting the identical phrase as used

in contracts of insurance. See, e.g., Federal Ins. Co. v. Tri-State Ins. Co., 157

F.3d 800, 804 (10th Cir. 1998) (stating “the phrase ‘arising out of’ should be

given a broad reading such as ‘originating from’ or ‘growing out of’ or ‘flowing

from’ or ‘done in connection with’--that is, it requires some causal connection to

the injuries suffered, but does not require proximate cause in the legal sense”);

Merchants Ins. Co. of New Hampshire, Inc. v. United States Fidelity and Guar.

Co., 143 F.3d 5, 9 (1st Cir. 1998) (concluding the phrase “arising out of,” as used

in the insurance contract, was synonymous with “originate” or “come into

being”); Acceptance Ins. Co. v. Syufy Enterprises, 81 Cal. Rptr. 2d 557, 561 (Ct.

App. 1999) (concluding the phrase “arising out of,” as used in the insurance

contract, “broadly links a factual situation with the event creating liability, and

connotes only a minimal causal connection or incidental relationship”); see also

12 Couch on Insurance 2d § 45:61 (rev. ed. 1981) (noting the phrase “arising out

of” generally means originating from, growing out of, or flowing from).

Although these cases are obviously not on point, we find them useful because

they adopt a broad construction of the phrase “arising out of,” similar to the broad

17
construction we must give to arbitration agreements subject to the FAA.

In deciding whether plaintiffs’ ERISA claims “originate from,” “grow out

of,” or “flow from” their employment or termination of employment, we find

useful an older district court case, Ayres v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 353 F. Supp. 1084 (E.D. Pa. 1973), which involved facts that are

sufficiently similar to the case at hand to warrant close review. Plaintiff Percy

Ayres worked as an account executive for defendant Merrill Lynch from 1940

until his voluntary retirement in October 1970. Upon his retirement, Ayres was

required to sell the substantial number of shares of company stock he had

accumulated during his career. Approximately nine months after Ayres’

retirement, Merrill Lynch removed the restrictions on stock ownership that had

previously required Ayres to dispose of his stock. Merrill Lynch made a public

offering of its stock, which more than tripled the price per share in comparison to

the price at which Ayres had sold his stock. Ayres filed suit against Merrill

Lynch under the federal securities laws, claiming that Merrill Lynch made its

decision to become a publicly-owned company in the summer of 1970, but

wrongfully concealed this information from him until the summer of 1971. Ayres

alleged that if Merrill Lynch had not breached its fiduciary duties toward him, he

would not have retired in October 1970 but instead would have continued to work

and hold his stock until after the public stock offering.

18
Merrill Lynch moved the district court to stay the proceedings and compel

arbitration. Merrill Lynch noted that, during the course of his employment, Ayres

had submitted an application to become a registered representative with the New

York Stock Exchange (NYSE) and had agreed to be bound by NYSE rules,

including Rule 347(b), which compelled arbitration of “[a]ny controversy between

a registered representative and any member organization arising out of the

employment or termination of such registered representative by and with such

member or member organization.” 353 F.Supp. at 1086 n.2. The district court,

relying on the language of Rule 347(b), concluded that Ayres’ claims were subject

to arbitration. The court noted that “Ayres was initially permitted to purchase the

shares of Merrill Lynch only because he was one of its employees.” Id. at 1087.

The court further noted that “Ayres’ decision to retire when he did might have

precipitated Merrill Lynch’s exercising its re-purchase option and hence” the

dispute also “stemmed from the termination of [Ayres’] employment.” Id.

Here, we likewise conclude that plaintiffs’ ERISA claims arise out of their

employment, or termination from employment, with HII/Holdings. Plaintiffs were

entitled to purchase company stock and participate in the Hanifen Plan solely as a

result of their employment with HII/Holdings. Further, the necessity for plaintiffs

to dispose of their stock was the result of the termination of their employment

with HII/Holdings. In other words, it would have been unnecessary for plaintiffs

19
to sell their stock and for defendants to place a value on that stock if plaintiffs’

employment was not terminated. Finally, and perhaps most crucial, is the broad

nature of plaintiffs’ ERISA claims. Although plaintiffs assert on appeal that their

ERISA claims are narrowly confined to the allegation that defendants improperly

valued their stock, a review of the record on appeal demonstrates otherwise. In

particular, plaintiffs’ complaints allege, as part of their ERISA claims, that

defendants engaged in a course of self-dealing, pursuant to which they (1)

rejected Fiserv’s initial offer, (2) terminated plaintiffs’ employment in order to

repurchase their shares at a below-market-value price, and (3) finally accepted

Fiserv’s offer and profited at plaintiffs’ expense. Viewed as a whole, we believe

plaintiffs’ allegations arise out of their termination in the sense that, without

terminating plaintiffs’ employment, defendants would not have been able to carry

out their alleged scheme. Accordingly, we conclude that plaintiffs’ ERISA claims

fall within the scope of the arbitration clauses contained in the Form U-4s.

As for defendants’ argument that the ERISA claims also fall within the

scope of the phrase “in connection with the business of” HII/Holdings, we

conclude that is a much weaker, and ultimately meritless, argument. In particular,

we are not persuaded that the ERISA claims, which are based upon an alleged

scheme on the part of three defendants, have any connection to the business of

HII/Holdings, which is the selling of securities.

20
Absence of legal constraints foreclosing the arbitration of ERISA claims

Having concluded that plaintiffs agreed, by way of their Form U-4s, to

arbitrate their ERISA claims, the only remaining question is whether there are any

external legal restraints that would prevent those claims from being arbitrated. In

particular, the question is whether Congress intended to exclude ERISA claims

from arbitration. See Shearson/American Express, Inc. v. McMahon, 482 U.S.

220, 238 (1987) (holding that arbitration agreements are enforceable with respect

to statutory claims in the absence of evidence of “congressional intent to exclude .

. . [those] claims from the dictates of the Arbitration Act”). To date, four circuits

have held that Congress did not intend to prohibit arbitration of statutory ERISA

claims. See Kramer v. Smith Barney, 80 F.3d 1080, 1084 (5th Cir. 1996);

Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1119 (3d

Cir. 1993); Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116, 119-

20 (2d Cir. 1991); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, Inc., 847 F.2d

475, 478 (8th Cir. 1988); see also G. Richard Shell, ERISA and Other Federal

Employment Statutes: When is Commercial Arbitration an “Adequate Substitute”

for the Courts?, 68 Tex. L. Rev. 509, 572-73 (Feb. 1990) (“A careful review of

ERISA discloses that, if Congress intended anything with respect to enforcement

of the FAA, it intended to preserve the full application of the FAA in ERISA

cases.”). Having carefully examined the opinions, we agree with those circuits

21
and likewise conclude that Congress did not intend to prohibit arbitration of

ERISA claims.

III.

The judgment of the district court is REVERSED and the case is

REMANDED with directions to stay the proceedings and compel arbitration of

plaintiffs’ ERISA claims.