JONATHAN D AHLBRAND V KENNETH A KEELEY
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STATE OF MICHIGAN
COURT OF APPEALS
JONATHAN D. AHLBRAND, CRAIG A.
JANUTOL, and EAST WEST CAPITAL
CORPORATION,
UNPUBLISHED
January 9, 1998
Plaintiffs-Appellants,
v
KENNETH A. KEELEY, Trustee of the KENNETH
A. KEELEY TRUST,
No. 197775
Bay Circuit Court
LC No. 96-003628
Defendant-Appellee.
Before: Gage, P.J., and Murphy and Reilly, JJ.
MEMORANDUM.
This is a declaratory judgment action in which the trial court was asked to determine whether
defendant is precluded from arbitrating his dispute with plaintiffs, arising from the purchase of
$1,000,000 in notes from the now bankrupt Towers Financial Corporation, by §12(d)(2) of the
Uniform Code of Arbitration of the National Association of Securities Dealers [NASD] where
defendant is a member of a putative class action, but has filed a “Declaration of Non-Participation in the
Putative Class” with the NASD and the federal district court in which the putative class action is
awaiting a decision on certification pursuant to Fed R Civ P 23. The trial court determined that
defendant was not precluded from pursuing arbitration. We agree. This case is being decided without
oral argument pursuant to MCR 7.214(E).
Section 12(d) of the Uniform Code of Arbitration provides:
(1) A claim submitted as a class action shall not be eligible for arbitration under this
Code at the Association.
(2) Any claim filed by a member or members of a putative or certified class action is
also ineligible for arbitration at the Association if the claim is encompassed by a putative
or certified class action filed in federal or state court, or is ordered by a court to an
arbitral forum not sponsored by a self-regulatory organization for class wide arbitration.
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However, such claims shall be eligible for arbitration in accordance with Section 12(a)
or pursuant to the parties’ contractual agreement, if any, if a claimant demonstrates that
it has elected not to participate in the putative or certified class action or, if applicable,
has complied with any conditions for withdrawing from the class prescribed by the
court.
At issue is the meaning and application of the phrase “if a claimant demonstrates that it has
elected not to participate in the putative . . . class action . . . .” Section 12(d) is silent with regard to
how investor-customers are to demonstrate that they have elected not to participate in the putative class
action suit. Plaintiffs argue that this precondition to arbitration can only be satisfied upon proof of
affirmative judicial action taken to exclude the investor-customer from the putative class or to allow the
investor-customer to withdraw from putative class.
We reject plaintiffs’ argument in light of In re Piper Funds, Inc, 71 F3d 298 (CA 8, 1995). In
re Piper Funds stands for the proposition that formal court action releasing a party from its membership
as a class plaintiff is not required before that party may pursue arbitration under §12(d)(2) and the
FAA. Id., 302-304.
In the instant case, defendant submitted to the NASD and the federal district court a sworn
Declaration of Non-Participation in Putative Class in which defendant indicated his intent to opt out of
the class action and to secure judicial action removing it from the putative class once the court of
jurisdiction established the conditions for opting out of the putative class. Although not as definitely
worded as the declaration in In re Piper Funds, the declaration filed by defendant demonstrates a clear
intent to choose arbitration over participation in the class action. In light of In re Piper Funds,
defendant’s Declaration of Non-Participation in Putative Class was sufficient to trigger defendant’s
contractual right to immediate submission of his claims to arbitration under §12(d)(2). Defendant was
not required to wait until the court with jurisdiction over the putative class action established procedures
to opt out or took affirmative action to remove defendant from the putative class.
Affirmed.
/s/ Hilda R. Gage
/s/ William B. Murphy
/s/ Maureen Pulte Reilly
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