Lorbietzki v. Merrill Lynch, Pierce, Fenner, & Smith Incorporated, No. 2:2010cv01585 - Document 14 (D. Nev. 2011)
Court Description: ORDER Granting 9 Defendants' Motion to Compel Arbitration. IT IS FURTHER ORDERED that 11 Defendants' Motion to Dismiss or Stay the Proceeding is DENIED as to dismissal and GRANTED as to a stay of the proceeding. Signed by Chief Judge Roger L. Hunt on 3/8/11. (Copies have been distributed pursuant to the NEF - EDS)
Download PDF
<![CDATA[
Lorbietzki v. Merrill Lynch, Pierce, Fenner, & Smith Incorporated Doc. 14 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 DISTRICT OF NEVADA 9 *** 10 11 12 13 14 15 16 NATHAN J. LORBIETZKI, ) ) Plaintiff, ) ) vs. ) ) MERRILL LYNCH, PIERCE, FENNER & ) SMITH INCORPORATED; DOES 1-10; and ) ROE CORPORATIONS and ENTITIES 1-10, ) ) Defendants. ) _______________________________________) 2:10-cv-01585-RLH-PAL Case No.: 2:11-cv-01585-RLH-PAL ORDER (Motion to Compel Arbitration–#9; Motion to Dismiss or Stay the Proceedings–#11) 17 18 Before the Court is Defendant Merrill Lynch, Pierce, Fenner & Smith 19 Incorporated’s (“Merrill Lynch”) Motion to Compel Arbitration (#9) and Motion to Dismiss or 20 Stay the Proceeding (#11), filed concurrently on October 27, 2010. The Court has also 21 considered Plaintiff Nathan Lorbietzki’s Opposition (#12), filed November 12, 2010, and Merrill 22 Lynch’s Reply (#13), filed November 22, 2010. 23 24 BACKGROUND This dispute arises from Nathan Lorbietzki’s allegations that his former employer, 25 Merrill Lynch, terminated his employment without cause and, therefore, breached the parties’ 26 employment agreement. Lorbietzki alleges the following facts. (Dkt. #1, Pet. for Removal Ex. A, AO 72 (Rev. 8/82) 1 Dockets.Justia.com 1 Compl.) Lorbietzki began working for Merrill Lynch as a registered financial advisor in August 2 2009. On August 4, 2009, the parties executed an employment agreement and Lorbietzki 3 completed a Uniform Application for Securities Industry Registration or Transfer (“Form U-4”), 4 which contains an arbitration clause. (Dkt. #9-1, Mot. Ex. A at 13 ¶ 5.) In March 2010, Merrill 5 Lynch terminated Lorbietzki’s employment amidst contentious circumstances. 6 On June 4, 2010, Lorbietzki filed suit against Merrill Lynch in the Eighth Judicial 7 District Court of the State of Nevada alleging: (1) breach of contract, (2) breach of the covenant of 8 good faith and fair dealing, (3) declaratory relief, (4) promissory estoppel/reliance, (5) fraud & 9 misrepresentation, (6) defamation/slander, (7) intentional infliction of emotional distress, and (8) 10 unjust enrichment. Merrill Lynch removed the case to this Court on the basis of diversity 11 jurisdiction and now asks the Court to compel Lorbietzki to arbitration pursuant to the arbitration 12 clause contained in Form U-4. Merrill Lynch also asks the Court to dismiss or stay this 13 proceeding. For the reasons discussed below, the Court grants Merrill Lynch’s motion to compel, 14 denies the motion to dismiss, and grants the motion to stay. 15 16 DISCUSSION The Federal Arbitration Act (“FAA”), 9 U.S.C. § 2 et. seq., generally applies to 17 individual employment contracts, agreements to arbitrate, and arbitration clauses such as the one at 18 issue in this dispute. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 109 (2001); see also 19 Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 476 (9th Cir. 1991). However, the 20 arbitrability of a particular issue turns on principles of contract interpretation because a party 21 cannot be required to arbitrate any dispute which he has not agreed to arbitrate. Three Valleys 22 Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1142 (9th Cir. 1991) (citing AT&T Tech., 23 Inc. v. Commc’ns Workers, 475 U.S. 643, 648 (1986)). “Indeed, as a matter of federal arbitration 24 law, a court may not compel arbitration until it is ‘satisfied that the making of the agreement for 25 arbitration or the failure to comply therewith is not in issue’.” Jackson v. Rent-A-Center West, Inc., 26 581 F.3d 912, 916 (9th Cir. 2009) (quoting 9 U.S.C. § 4). Nevertheless, the FAA “establishes a AO 72 (Rev. 8/82) 2 1 national policy favoring arbitration when the parties contract for that mode of dispute resolution,” 2 Preston v. Ferrer, 552 U.S. 346, 349 (2008), “notwithstanding any state substantive or procedural 3 policies to the contrary.” Moses H. Cone Mem’l Hosp v. Mercury Const. Co., 460 U.S. 1, 24 4 (1983). The preference for arbitration is so strong that the U.S. Supreme Court has directed 5 district courts to liberally construe any contractual language pertaining to arbitration and resolve 6 “any doubts concerning the scope of arbitrable issues ... in favor of arbitration.” Id. at 24–25. The 7 FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that 8 district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration 9 agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). 10 I. 11 Motion to Compel Arbitration In addressing a motion to compel arbitration, a district court is required to answer 12 two questions: “(1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the 13 agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., 207 F.3d 14 1126, 1130 (9th Cir. 2000). “If the response is affirmative on both counts, then the [FAA] requires 15 the court to enforce the arbitration agreement in accordance with its terms.” Id. The Court will 16 address these questions in turn. 17 A. 18 Merrill Lynch seeks to compel arbitration pursuant to the FAA and the arbitration Valid Agreement to Arbitrate 19 clause in Form U-4, which registered Lorbietzki with the Financial Industry Regulatory Authority 20 (“FINRA”) as a financial advisor for Merrill Lynch. Form U-4 provides in relevant part: 21 23 I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm ... that is required to be arbitrated under the rules, constitutions, or by-laws of [FINRA] ... as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction. 24 (Dkt. #9, Mot. Ex. A, Form U-4, Section 15A ¶ 5.) (emphasis in original). FINRA Rule 13200(a) 25 supports the Form U-4 arbitration clause by stating, “[e]xcept as otherwise provided in the Code 26 [of Arbitration Procedure for Industry Disputes], a dispute must be arbitrated ... if the dispute 22 AO 72 (Rev. 8/82) 3 1 arises out of the business activities of a member or an associated person and is between or among: 2 Members; Members and Associated Persons; or Associated Persons.” FINRA Rule 13200(a); see 3 also id. 13100(f) (defining “Code”). 4 Merrill Lynch argues that the arbitration clause in Lorbietzki’s Form U-4 requires 5 him to arbitrate his claims. Lorbietzki does not dispute the existence of the arbitration clause in 6 his Form U-4. Instead, he argues that his employment agreement, which was executed on the 7 same day as the Form U-4, does not require arbitration and contains a merger clause. (Dkt. #12-1, 8 Opp’n Ex. 1.) Although both assertions are true, these facts do not negate the existence of a valid 9 agreement to arbitrate in Form U-4. Nothing in the employment agreement prevents the parties 10 from arbitrating their disputes. The employment agreement covers Lorbietzki’s compensation in 11 great detail but is silent as to the method of resolving disputes. Because of the unique regulatory 12 requirements in the investment industry, the Court can easily infer that Form U-4 ordinarily 13 provides for dispute resolution rather than an employment agreement doing so. See Crockett & 14 Myers, Ltd. v. Napier, Fitzgerald & Kirby, LLP, 440 F. Supp. 2d 1184, 1191 (D. Nev. 2006) 15 (permitting evidence of a separate agreement when the existing written agreement is silent on a 16 particular term). 17 The Court is satisfied that the parties entered into a valid agreement to arbitrate. 18 Attached to Lorbietzki’s Form U-4 was an additional disclosure statement informing him of the 19 parties’ arbitration agreement: 20 21 22 23 Before signing the Form U-4, you should understand the following: You are agreeing to arbitrate any dispute, claim or controversy that may arise between you and your firm, or a customer, or any other person that is required to be arbitrated under the rules of the self-regulatory organizations with which you are registering. This means you are giving up the right to sue a member, customer or another associated person in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed. 24 (Dkt. #9, Mot. Ex. A, Form U-4, Attachment A (emphasis added).) This additional statement 25 further warned him about the arbitration agreement. The language is clear, easy to read, and very 26 conspicuous since it was presented in a separate attachment to Form U-4. Lorbietzki signed this AO 72 (Rev. 8/82) 4 1 statement along with Form U-4. Therefore, the Court answers the first question affirmatively and 2 moves on to the second part of the test: whether the agreement encompasses the dispute at issue. 3 B. 4 Merrill Lynch argues that Lorbietzki’s claims are subject to arbitration because the Dispute Subject to Arbitration 5 parties are covered by FINRA Rules and the dispute arises out of business activity. The Court will 6 address each assertion. 7 1. Associated Person 8 Under FINRA rules, “members” and “associated persons” must arbitrate disputes. 9 FINRA Rule 13200(a). “Member” is defined as “any broker or dealer admitted to membership in 10 FINRA .” Id. 13100(o). An “associated person” is defined as “[a] natural person who is registered 11 or has applied for registration under the Rules of FINRA.” Id. 13100(a) & (r). In addition, “a 12 person formerly associated with a member is a person associated with a member.” Id. 13100(r). 13 The Court finds that these parties are covered by FINRA rules: Lorbietzki is an 14 associated person and Merrill Lynch is a member. Although Lorbietzki asserts that he was no 15 longer an associated person connected to the securities business when he suffered damages, 16 FINRA rules clearly contradict such arguments and still consider former employees to be 17 associated persons. Thus, the parties are subject to FINRA’s arbitration rules. 18 19 2. Arises Out of Business Activity Arbitration of a dispute between associated persons is required under Rule 13200 20 only “if the dispute arises out of [their] business activities.” FINRA Rule 13200(a). FINRA’s 21 Rules do not define this phrase, however, the plain meaning of the language is quite clear. 22 Disputes which involve claims that are “utterly unrelated to the securities industry” should not fall 23 under this rule; instead, a court “must require arbitration of disputes only if they arise out of the 24 business activities of an individual as an associated person of a FINRA member. Valentine 25 Capital Asset Mgmt, Inc. v. Agahi, 94 Cal. Rptr. 3d 526, 534 (Cal. Ct. App. 2009) (emphasis in 26 original). “With this interpretation, FINRA and the registered representatives under its jurisdiction AO 72 (Rev. 8/82) 5 1 are assured that arbitration will pertain to matters with some nexus to the activity actually 2 regulated by FINRA.” Id. Thus, the Court must examine the nature of this dispute to see if it falls 3 within the class of disputes wherein the issues are reasonably related to FINRA regulated 4 activities. 5 Lorbietzki asserts that his claims do not arise out of business activities and are, 6 therefore, outside of the scope of FINRA rules. Merrill Lynch maintains that this dispute does, in 7 fact, arise out of business activities because his claims involve his hiring, employment, and 8 termination. In the Court’s view, these allegations clearly fall within the scope of the parties’ 9 “business activities” because they directly implicate some of the most fundamental aspects of 10 Lorbietzki’s business relationship with Merrill Lynch. As a result, the Court finds that each of his 11 causes of action fall within the scope of the arbitration agreement in Form U-4. Because the Court 12 answers the second question affirmatively, Lorbietzki’s claims must be arbitrated. Accordingly, 13 the Court grants Merrill Lynch’s motion to compel arbitration. 14 II. Motion to Dismiss or Stay the Proceedings 15 Under the FAA, a district court should stay any matter in which the parties have 16 agreed to arbitrate pursuant to a written agreement. See 9 U.S.C. § 3. The Court therefore denies 17 Merrill Lynch’s motion to dismiss the case and grants the motion to stay the proceedings. 18 CONCLUSION 19 Accordingly, and for good cause appearing, 20 IT IS HEREBY ORDERED that Defendants’ Motion to Compel Arbitration (#9) is 21 GRANTED. 22 IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss or Stay the 23 Proceeding (#11) is DENIED as to dismissal and GRANTED as to a stay of the proceeding. y p g 24 Dated: March 8, 2011. 25 ____________________________________ ____________________________________ __ ____ _ __ ROGER L. HUNT ROGER L HUNT E Chief United States District Judge United f U ted 26 AO 72 (Rev. 8/82) 6
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
