IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 00-20917
__________________________
PAINEWEBBER INCORPORATED,
Petitioner-Appellee,
versus
THE CHASE MANHATTAN PRIVATE BANK (SWITZERLAND),
Respondent-Appellant.
___________________________________________________
Appeal from the United States District Court
For the Southern District of Texas
___________________________________________________
July 31, 2001
Before SMITH, DUHÉ, and WIENER, Circuit Judges.
WIENER, Circuit Judge:
Respondent-Appellant The Chase Manhattan Private Bank
(Switzerland) (“Chase-Switzerland”) appeals the district court’s
order to arbitrate third-party claims brought against it by
PaineWebber Incorporated (“PaineWebber”), contending that the
district court lacked personal jurisdiction over it. We agree, and
vacate the district court’s order.
I.
FACTS AND PROCEEDINGS
This dispute had its genesis in 1994 when PaineWebber, a
financial services firm specializing in private wealth management,
approached Chase-Switzerland, a Swiss bank, to secure its services
for PaineWebber customers. After protracted negotiations, the
parties entered into an agreement in June 1994 whereby PaineWebber
would refer its customers who wished to house their assets in a
Swiss bank to Chase-Switzerland (the “Referral Agreement”). Under
the Referral Agreement, a PaineWebber customer would open a
custodial account at Chase-Switzerland, which would in turn open an
omnibus brokerage account at PaineWebber. PaineWebber would then
execute transactions for the customer in the omnibus account. Most
importantly for the instant case, the Referral Agreement provides:
Any dispute between [Chase-Switzerland] and
PaineWebber which cannot be resolved by good
faith negotiations shall be submitted to the
appropriate arbitrator or court in the United
States.
Not long after negotiating the Referral Agreement, PaineWebber
referred the Lerma family of Mexico to Chase-Switzerland. A
company controlled by the Lermas1 opened an account with Chase-
Switzerland, and Enrique Ernesto Perusquia (“Perusquia”), then a
PaineWebber vice president, was designated by the Lermas as the
“Independent Asset Manager” of their account. Chase-Switzerland
opened an omnibus account at PaineWebber pursuant to the Referral
1
For simplicity, we will refer to the Lerma family and their
company as “the Lermas.”
2
Agreement and executed a PaineWebber trading authorization form.
The account-opening documents gave PaineWebber no authority to
trade options in the omnibus account. Nevertheless, approximately
nine months after Chase-Switzerland opened the omnibus account, at
least one such transaction was executed in the account.
PaineWebber belatedly sought Chase-Switzerland’s retroactive
approval by requesting its signature on a one-page form contract
entitled “Client Option Agreement and Qualification Form” (the
“Option Agreement”). In fine print on the form, the Option
Agreement contained the following boilerplate arbitration clause:
I agree and by carrying an account for me you
agree, that any and all controversies which
may arise between you and me concerning any
account, transaction, dispute or the
construction, performance, or breach of this
or any other agreement whether entered into
prior, on or subsequent to the date shall be
determined by arbitration. Any arbitration
under this agreement shall be held under and
pursuant to and be governed by the New York
Exchange, Inc., or the National Association of
Securities Dealers, Inc. I may also select
any other national securities exchange’s
arbitration forum upon which PaineWebber is
legally required to arbitrate the controversy
with me, including, where applicable, the
Municipal Securities Rule Making Board. Such
arbitration shall be governed by the rules of
the organization convening the panel. I may
elect in the first instance the arbitration
forum.
Over the course of one month, Chase-Switzerland signed three such
Option Agreements, each containing the identical arbitration
3
clause.2 Chase-Switzerland sent a signed Option Agreement dated
March 16, 1995 to PaineWebber with a transmittal cover letter
stating that “this document is only valid on a temporary basis.”
Chase-Switzerland’s letter also informed PaineWebber that if it
“would like to just trade options on this account or others, we
will need to modify the legal doc [sic] which is the Referral
Agreement[.]” Chase-Switzerland signed another Option Agreement on
March 28, 1995, again with a notation that the Option Agreement
would be “valid until April 30, [19]95 only.”
Chase-Switzerland did not grant PaineWebber general authority
to trade options in the omnibus account until May 2, 1995 (the “May
1995 Authorization”). In the May 1995 Authorization, the parties
drew a line through the phrase in the form agreement providing that
options transactions would be conducted in accordance with
PaineWebber’s standard terms and conditions, and typed in its place
2
The parties dispute the authenticity of the first Option
Agreement, dated March 3, 1995. Chase-Switzerland points out that
unlike the other two Option Agreements, the March 3 Option
Agreement does not contain basic information such as the account
title, the PaineWebber branch maintaining the account, the account
number, or the PaineWebber broker. PaineWebber counters that
Chase-Switzerland simultaneously faxed both the March 28 Option
Agreement, which Chase-Switzerland does not question, and the March
3 Option Agreement, which it does question, to PaineWebber on June
1, 1995. PaineWebber offers us no explanation for why it would
have asked Chase-Switzerland to sign two more Option Agreements if
the March 3 agreement had been sufficiently broad in scope and
duration. Nevertheless, as Chase-Switzerland does not expressly
deny that it executed the March 3, 1995 Option Agreement, and as
our decision does not rely either on its authenticity or the lack
thereof, we will assume for the purpose of deciding this appeal
that Chase-Switzerland did execute the March 3 Option Agreement.
4
a provision directing that such transactions be conducted according
to the Referral Agreement.
In December 1998, the Lermas instituted arbitration to resolve
a claim against PaineWebber, Perusquia, and Lehman Brothers
(Perusquia’s former employer) before the National Association of
Securities Dealers (the “NASD”). The Lermas alleged that
Perusquia, acting first as the employee of Lehman Brothers and then
as the employee of PaineWebber, defrauded them of more than 80
million dollars. The Lermas’ claim advanced multiple theories of
liability including fraud, conversion, forgery, theft, breach of
fiduciary duty, churning, self-dealing, violation of state and
federal securities laws, and breach of contract. PaineWebber and
the Lermas agreed to stay the NASD arbitration for 16 months while
they attempted to sort out the complex relationships and
transactions at issue.
In May 2000, PaineWebber answered the Lermas’ claim, filed a
cross-claim against Lehman Brothers, and asserted third-party
claims against Chase-Switzerland and UBS AG, another Swiss Bank.
PaineWebber’s claims against Chase-Switzerland arose out of
Perusquia’s purchase for the Lermas of more than 21 million dollars
worth of shares in Northern Orion Exploration (“Northern Orion”),
a gold mining company. PaineWebber contends, inter alia, that
Perusquia acted outside the scope of his employment in transacting
the Northern Orion purchases for the Lermas, and that PaineWebber
relied on Chase-Switzerland’s representations in permitting
5
Perusquia to execute the transactions. Chase-Switzerland, in turn,
informed PaineWebber in writing on two occasions that it did not
believe that the third-party claims were arbitrable, but if they
nevertheless proved to be arbitrable, Chase-Switzerland would elect
to arbitrate in New York City before the New York Stock Exchange
(the “NYSE”).
In June 2000, a rapid series of steps was instituted by
PaineWebber and the Lermas. First, PaineWebber and the Lermas
agreed to place the NASD arbitration on inactive status; almost
immediately thereafter, the Lermas initiated an arbitration before
the NYSE against PaineWebber, Perusquia, and Lehman Brothers based
on the same allegations and theories of liability advanced before
the NASD; and, in its equally immediate response filed June 22,
2000, PaineWebber denied all liability and asserted third-party
claims against Chase-Switzerland seeking contribution for any
liability resulting from the Lermas’s allegations that the Northern
Orion purchases were unauthorized and unsuitable. In the final
step of the series, PaineWebber requested the NYSE to set the
arbitration hearing in Houston, Texas. A mere six days later, the
NYSE granted PaineWebber’s request (not objected to by the Lermas)
to hold the arbitration in Houston.
Chase-Switzerland promptly filed a petition in New York state
court seeking to stay arbitration of the third-party claims.
Chase-Switzerland asserted that it had not agreed to arbitrate
these claims; alternatively, that if such claims were arbitrable,
6
they should be arbitrated in New York City.
August 2, 2000 was a busy day for PaineWebber. On that day,
PaineWebber (1) as defendant, removed Chase-Switzerland’s state-
court suit to the Southern District of New York, (2) filed a motion
in that court to transfer Chase-Switzerland’s suit to the Southern
District of Texas, and (3) as plaintiff, filed the instant action
in the Southern District of Texas where it was assigned to the
Honorable Lynn N. Hughes. Chase-Switzerland objected to the
transfer of its New York suit on the ground, inter alia, that the
Southern District of Texas lacked jurisdiction over Chase-
Switzerland. Likewise, Chase-Switzerland moved to dismiss the suit
that PaineWebber filed in Texas as the plaintiff (the case here on
appeal) for lack of personal jurisdiction, or, in the alternative,
to transfer this case to the Southern District of New York.
Instead, Judge Hughes ordered Chase-Switzerland to arbitrate
the third-party claims after concluding that Chase-Switzerland “is
within this court’s jurisdiction because it agreed to arbitrate in
the United States, it elected arbitration through the exchange, and
the exchange sent the arbitration to Houston, where PaineWebber has
begun to add [Chase-Switzerland] as a third party defendant.”
Judge Hughes did not specify which of the numerous agreements
between the parties was the basis for his ruling that Chase-
Switzerland “elected arbitration through the exchange.”
On the very same day that Judge Hughes signed the order to
compel arbitration in Houston, the district court in New York, over
7
the objection of Chase-Switzerland, granted PaineWebber’s motion to
transfer Chase-Switzerland’s New York suit to the Houston division
of the Southern District of Texas, where it was assigned to the
Honorable Melinda Harmon. After its suit was transferred to the
Southern District of Texas, Chase-Switzerland filed a motion to
retransfer the case to New York. PaineWebber opposed the motion
and also filed a motion for summary judgment, arguing that the
judgment rendered by Judge Hughes works as a res judicata bar to
Chase-Switzerland’s suit (even though it had been filed in New York
before PaineWebber’s suit was filed in Judge Hughes’s court).
Chase-Switzerland responded by filing a cross-motion for a stay of
all proceedings in Judge Harmon’s court pending this appeal from
Judge Hughes’s ruling, or in the alternative, requesting that she
decide Chase-Switzerland’s transfer motion first. To date, all the
motions before Judge Harmon are pending.
After Judge Hughes entered the arbitration order in the
instant case, Chase-Switzerland timely filed a notice of appeal and
sought a stay pending appeal. Judge Hughes denied the stay, after
which Chase-Switzerland sought a stay from this court. We too
denied the stay, and this appeal followed.
II.
ANALYSIS
A. Standard of Review
We review the district court’s jurisdictional determinations
8
de novo.3 We also review the district court's grant of a motion to
compel arbitration de novo.4
B. Personal Jurisdiction
As an initial matter, we note that our analysis is complicated
by the interrelatedness of the jurisdictional and substantive
issues in this case. PaineWebber asks us to affirm the district
court’s ruling that Chase-Switzerland impliedly consented to the
district court’s jurisdiction by entering into an agreement to
arbitrate before the NYSE. We obviously cannot do so, however,
without initially ascertaining that Chase-Switzerland agreed to
arbitrate these claims in the first place.5 On appeal, PaineWebber
urges us to consider two additional bases for the Houston-based
court’s jurisdiction over Chase-Switzerland that do not depend on
the existence of a valid arbitration agreement between the parties.
We will begin, therefore, by discussing these alternative grounds
for jurisdiction.
1. Submission to Jurisdiction by Conduct as a Plaintiff
PaineWebber contends that Chase-Switzerland has submitted to
the jurisdiction of the Southern District of Texas by its conduct
as a plaintiff in the suit currently pending before Judge Harmon.
3
Mink v. AAAA Development LLC, 190 F.3d 333, 335 (5th Cir.
1999).
4
Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139
F.3d 1061, 1065 (5th Cir. 1998).
5
It is undisputed that Chase-Switzerland has no other “minimum
contacts” with Texas sufficient to satisfy due process.
9
PaineWebber relies on the well-established rule that parties who
choose to litigate actively on the merits thereby surrender any
jurisdictional objections.6 But that rule has no application to
the facts of this case.
To reiterate, Chase-Switzerland commenced its suit in state
court in New York, and —— after PaineWebber removed to federal
court there —— opposed transfer to Texas on the ground that the
Southern District of Texas lacked jurisdiction. Following transfer
to the Southern District of Texas after its objection to transfer
was overruled, Chase-Switzerland specially appeared for the limited
purpose of asking Judge Harmon to retransfer the case to New York,
pointing out that it had opposed transfer from New York on the
ground that “the Southern District of Texas has no personal
jurisdiction over Chase-Switzerland.” When Paine-Webber filed a
motion in Judge Harmon’s court for summary judgment on grounds of
res judicata after Judge Hughes had entered the order to arbitrate,
Chase-Switzerland did not respond on the merits, but filed a cross-
motion for a stay of the summary-judgment motion and all
proceedings in Judge Harmon’s court pending this appeal. When
viewed in the light of these facts, PaineWebber’s contention that
Chase-Switzerland has submitted to the jurisdiction of the Southern
District of Texas by “actively litigating” the merits of the
arbitrability issue before Judge Harmon is not merely misleading
6
See General Contracting & Trading Co., LLC v. Interpole,
Inc., 940 F.2d 20, 23 (1st Cir. 1991).
10
but is flatly contradicted by the record in that case.7
It is no wonder, then, that the cases cited by PaineWebber are
inapposite. This is not a case in which the party seeking to avoid
the court’s jurisdiction has chosen to commence the action or a
related action in the very forum in which it is contesting personal
jurisdiction;8 neither is this a case in which the party contesting
jurisdiction has asserted counterclaims for affirmative relief;9
and this is not a case in which a party has litigated extensively
on the merits before making any jurisdictional objections.10 In
7
PaineWebber intimates that Chase-Switzerland’s decision not
to move for dismissal of its action immediately upon transfer is
another indication of its submission to the jurisdiction of the
Southern District of Texas. What PaineWebber conveniently fails to
mention, however, is that Chase-Switzerland’s suit was transferred
from New York to Judge Harmon’s court after Judge Hughes ruled that
“[t]his court has jurisdiction over [Chase-Switzerland].” Thus, it
is hardly surprising that Chase-Switzerland would not seek
dismissal of its action for lack of personal jurisdiction in light
of Judge Hughes’s contrary ruling. “By submitting to the
jurisdiction of the court for the limited purpose of challenging
jurisdiction, the defendant agrees to abide by that court's
determination on the issue of jurisdiction: That decision will be
res judicata on that issue in any further proceedings.” Insurance
Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456
U.S. 694, 706 (1982). In any event, a motion for transfer is fully
consistent with an objection to personal jurisdiction, as a court
may transfer a case even though it lacks personal jurisdiction.
See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962).
8
See Interpole, 940 F.2d at 21.
9
See Bel-Ray Co., Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435,
443 (3d Cir. 1999).
10
See Grupke v. Linda Lori Sportswear, Inc., 174 F.R.D. 15
(E.D.N.Y. 1997) (party contesting jurisdiction had litigated in the
transferee court for three years and amended its complaint
following transfer to add new defendants).
11
short, neither the law nor the facts justify the exercise of
jurisdiction over Chase-Switzerland on the basis of its conduct in
its suit before Judge Harmon.
2. Submission to Jurisdiction by Conduct as a Defendant
PaineWebber also contends that Chase-Switzerland has submitted
to the jurisdiction of the Southern District of Texas by its
conduct in the instant case. More specifically, PaineWebber argues
that Chase-Switzerland has waived any objection to personal
jurisdiction by seeking the “affirmative relief” of a stay pending
appeal and an injunction to prevent PaineWebber from proceeding
with arbitration of the third-party claims during the pendency of
this appeal.
Paine-Webber is right that a party may waive any
jurisdictional objections if its conduct does “not reflect a
continuing objection to the power of the court to act over the
defendant’s person.”11 PaineWebber is also right that when “a party
seeks affirmative relief from a court, it normally submits itself
to the jurisdiction of the court with respect to the adjudication
of claims arising from the same subject matter.”12 But PaineWebber
is dead wrong in suggesting that Chase-Switzerland, by making a
motion based on the defense of personal jurisdiction, has thereby
submitted to the court’s jurisdiction.
11
See Alger v. Hayes, 452 F.2d 841, 844 (8th Cir. 1972).
12
See Bel-Ray, 181 F.3d at 443.
12
Chase-Switzerland timely and properly asserted its
jurisdictional objection by making a threshold motion to dismiss
for lack of personal jurisdiction. It has asserted no
counterclaims and engaged in no third-party practice. It premised
its motion for a stay and an injunction pending appeal on the
argument that “an improper exercise of personal jurisdiction over
Chase-Switzerland constitutes irreparable injury as a matter of law
[as a violation of due process].” Try as we might, we cannot see
how such actions manifest anything but a “continuing objection” to
the district court’s exercise of personal jurisdiction over Chase-
Switzerland.
Not surprisingly, PaineWebber does not cite, and we have not
found, a single case holding that a motion for a stay pending
appeal waives an objection to personal jurisdiction. Neither have
we found even one case that supports PaineWebber’s contention that
a defendant submits to the jurisdiction of a court by seeking to
enjoin further legal proceedings on the ground that to require
participation in such proceedings in the absence of personal
jurisdiction would violate due process. Indeed, merely to state
this argument is to refute it.
Inasmuch as, in this circuit, the filing of a counterclaim,
cross-claim, or third-party claim does not, without more, waive an
objection to personal jurisdiction,13 we cannot fathom how a motion
13
See Bayou Steel Corp. v. M/V Amstelvoorn, 809 F.2d 1147, 1149
(5th Cir. 1987).
13
premised on a jurisdictional objection could simultaneously operate
as a waiver of that very objection. Accordingly, we reject out of
hand PaineWebber’s argument that Chase-Switzerland, by its conduct
in either lawsuit, has submitted to the district court’s exercise
of personal jurisdiction.
3. Implied Consent to Jurisdiction
The sole remaining ground urged by PaineWebber for the
district court’s exercise of personal jurisdiction over Chase-
Switzerland is implied consent. Because the requirement of
personal jurisdiction is a waivable right, “there are a variety of
legal arrangements by which a litigant may give express or implied
consent to the personal jurisdiction of the court.”14 An agreement
to arbitrate is one such “legal arrangement” by which a litigant
may impliedly consent to personal jurisdiction.15
The Second Circuit, for example, has long held that a party
who expressly agrees to arbitrate in one state has impliedly
consented to the jurisdiction of the courts in that state, on the
theory that only that state’s courts have jurisdiction to compel
arbitration in that state.16 Extending this reasoning, one line of
14
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985)
(internal quotation marks and citations omitted).
15
See Insurance Corp. of Ireland, 456 U.S. at 704 (noting that
“lower federal courts have found such consent implicit in
agreements to arbitrate”).
16
See Victory Transport Inc. v. Comisaria General de
Abastecimientos y Transportes, 336 F.2d 354, 363 (2nd Cir. 1964).
14
New York cases holds that arbitration clauses that identify an
organization before which arbitration may be held, without
expressly designating the specific geographic location for the
arbitration, may be deemed to imply the parties’ consent to the
jurisdiction of courts in the state where the arbitral organization
is based.17 Under the logic of these cases, parties who agree to
arbitrate before the NYSE or the NASD have impliedly consented to
the jurisdiction of courts in New York, where those organizations
are based.18
The district court extended this reasoning even further by
ruling that Chase-Switzerland “is within this court’s jurisdiction
because it agreed to arbitrate in the United States, it elected
arbitration through the exchange, and the exchange sent the
arbitration to Houston, where PaineWebber has begun to add [Chase-
Switzerland] as a third party defendant.” Chase-Switzerland
insists, however, that as it never agreed to arbitrate
PaineWebber’s third-party claims in the first place, its consent to
17
See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc., v.
Lecopulos, 553 F.2d 842 (2d Cir. 1977); Dain Bosworth, Inc. v.
Fedora, No. 92 Civ. 7813 (JSM), 1993 WL 33642 (S.D.N.Y. Feb. 3,
1993); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Noonan, No. 92
Civ. 3770 (SWK), 1992 WL 196741 (S.D.N.Y. Aug. 3, 1992).
18
We note that another line of New York cases has expressly
rejected this reasoning and held that such clauses do not consent
to personal jurisdiction at all. See, e.g., Koob v. IDS Financial
Services, Inc., 213 A.D.2d 26, 629 N.Y.S.2d 426 (1st Dept. 1995);
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. McLeod, 208 A.D.2d
81, 622 N.Y.S.2d 954 (1st Dept. 1995); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Barnum, 162 Misc.2d 245, 616 N.Y.S.2d 857
(N.Y. Sup. Ct. 1994).
15
jurisdiction cannot thereby be implied.
Arbitration is “a matter of contract and a party cannot be
required to submit to arbitration any dispute which he has not
agreed so to submit.”19 In determining whether the parties have
agreed to arbitrate the dispute in question, we must consider “(1)
whether a valid agreement to arbitrate between the parties exists;
and (2) whether the dispute in question falls within the scope of
that arbitration agreement.”20 In doing so, we must bear in mind
the strong federal policy favoring arbitration and resolve any
ambiguity as to the availability of arbitration in favor of
arbitration.21 Here, PaineWebber contends that Chase-Switzerland
agreed in four separate agreements —— the Referral Agreement and
the three Option Agreements —— to arbitrate all disputes with
PaineWebber, including the third-party claims.
As to the Referral Agreement, we cannot agree with PaineWebber
that the dispute resolution clause in that contract —— stating that
“any dispute between [Chase-Switzerland] and PaineWebber which
cannot be resolved by good faith negotiations shall be submitted to
the appropriate arbitrator or court in the United States” ——
constitutes an agreement to arbitrate, even when read in light of
19
United Steelworkers of America v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 582 (1960).
20
Pennzoil, 139 F.3d at 1065.
21
See Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 676 (5th Cir.
1999).
16
the strong federal policy favoring arbitration. The Referral
Agreement merely provides that the parties will attempt to
negotiate any disputes in good faith and, absent a resolution,
shall conduct dispute resolution proceedings in the United States.
Importantly, the Referral Agreement does not state that any
dispute shall be submitted “either” to arbitration or the courts,
as PaineWebber insists. Rather, it states that disputes between
PaineWebber and Chase-Switzerland shall be submitted “to the
appropriate arbitrator or court in the United States.” How then,
we ask rhetorically, can this provision be deemed a binding
agreement to arbitrate any and all disputes (which precludes by its
very terms any court resolution) when it identifies “court” and
“arbitration” as equals in that very provision? Significantly,
there is no mention of a specific geographic location for
arbitration, no selection of an arbitral forum such as the NYSE or
the NASD, and no language requiring arbitration. The dispute
resolution clause in the Referral Agreement, then, simply leaves
too many critical elements unaddressed to support PaineWebber’s
contention that the Referral Agreement, standing alone, amounts to
a binding arbitration agreement between the parties.
The weakness of PaineWebber’s argument becomes even clearer
when we compare the dispute resolution clause in the Referral
Agreement to the arbitration clauses in the Option Agreements:
I agree and by carrying an account for me you agree, that
any and all controversies which may arise between you and
me concerning any account, transaction, dispute or the
17
construction, performance, or breach of this or any other
agreement whether entered into prior, on or subsequent to
the date shall be determined by arbitration. Any
arbitration under this agreement shall be held under and
pursuant to and be governed by the New York Exchange,
Inc., or the National Association of Securities Dealers,
Inc.
(emphasis added). Unlike this arbitration clause, the dispute
resolution clause in the Referral Agreement does not make
arbitration compulsory; neither does it so much as mention an
arbitral forum, much less a specific geographic location. True
enough, the Referral Agreement’s dispute resolution clause appears
under the heading “INTERPRETATION OF CONTRACT AND ARBITRATION OF
DISPUTES,” but the mere mention of the word “arbitration” in a
contract’s section heading cannot a binding arbitration agreement
make, especially when, as here, the language of the agreement
itself conspicuously lacks any of the universal indicia of an
arbitration clause.22
22
Compare, e.g., Doctor’s Associates, Inc. v. Stuart, 85 F.3d
975, 977 (2d Cir. 1996) (“‘Any controversy or claim arising out of
or relating to this contract or the breach thereof shall be settled
by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association at a hearing to be held in
Bridgeport, Connecticut, or whichever city in which the Company is
then headquartered[.]’”); Lecopulos, 553 F.2d at 844 n.1 (“‘It is
agreed that any controversy between us arising out of your business
or this agreement, shall be submitted to arbitration conducted
under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange[.]’”); Merrill Lynch,
Pierce, Fenner & Smith Inc. v. Shaddock, 822 F. Supp. 125, 127
(S.D.N.Y. 1993) (“‘It is agreed that any controversy between us
arising out of your business or this agreement shall be submitted
to arbitration conducted under the provisions of the Constitution
and Rules of the Board of Governors of the New York Stock Exchange,
Inc., or pursuant to the Code of Arbitration Procedure of the
National Association of Securities Dealers, Inc., as the
18
Even if we were willing to accept PaineWebber’s tortured
argument that (1) the Referral Agreement compels Chase-Switzerland
to arbitrate this dispute, (2) the NYSE is an “appropriate”
arbitrator, and (3) jurisdiction is therefore proper in the
Southern District of Texas because that is where the NYSE sent the
arbitration between PaineWebber and the Lermas, we would still have
to stretch this already strained logic beyond the breaking point to
conclude that Chase-Switzerland, a foreign corporation with no
other meaningful connection to Texas, impliedly consented to the
jurisdiction of the Southern District of Texas by entering into an
arbitration agreement that does not even mention an arbitral forum
much less designate a geographic location more specific than the
entire United States of America. The links of this daisy chain are
simply too weak to bind Chase-Switzerland to arbitrate this dispute
in the Southern District of Texas.
Neither can we agree with PaineWebber that Chase-Switzerland
impliedly consented to jurisdiction in the Southern District of
Texas on the basis of the arbitration clauses in the Option
Agreements. Certainly, the extremely broad language of these
clauses, if read in a vacuum, would appear to bind the parties to
arbitrate any and all disputes that may arise between them. When
read in context as they must be, however, the reach of the
arbitration clauses in the Option Agreements is simply not capable
undersigned may elect.’”).
19
of such an expansive grasp.
First, the Option Agreements were executed for short durations
and were expressly limited to (1) the purchases of options (2) at
the time executed. Perusquia’s purchases of the Northern Orion
shares, out of which PaineWebber’s third-party claims against
Chase-Switzerland arose, had nothing whatsoever to do with options
and were not transacted during the effective dates of any of the
three Option Agreements. Second, Chase-Switzerland made clear when
it signed the Option Agreements that they in no way modified or
superseded the Referral Agreement;23 similarly, when Chase-
Switzerland agreed to the May 1995 Authorization which finally
granted PaineWebber general authority to trade options in the
account, Chase-Switzerland inserted a clause specifically providing
that all such trades would be executed in accordance with the terms
of the Referral Agreement, and crossed out a clause in the form
agreement providing that PaineWebber’s standard terms and
conditions, such as the arbitration clauses in the Option
Agreements, would control.
Simply put, when read in the context of the dealings between
the parties, the number of times the documents were executed, the
purposes for their execution, and the nature of the transactions
consummated under them, the arbitration clauses in the Option
23
Likewise, PaineWebber impliedly acknowledged the short fuse
on the Option Agreements by requesting that Chase-Switzerland
execute a series of such agreements when and as new options
transactions were instituted.
20
Agreements, which are strictly limited in both duration and scope,
cannot reasonably be interpreted to require Chase-Switzerland to
arbitrate PaineWebber’s third-party claims arising out of the
Northern Orion purchases, none of which had anything to do with
options.
III.
CONCLUSION
As the district court lacked jurisdiction to enter its order
compelling Chase-Switzerland to arbitrate PaineWebber’s third-party
claims in Houston, we vacate that order and remand with
instructions to dismiss this case for lack of personal jurisdiction
over Chase-Switzerland.
VACATED and REMANDED with instructions.
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