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Shearson Hayden Stone, Inc v. Protzko
Citations: 296 N.W.2d 224; 98 Mich. App. 245; 1980 Mich. App. LEXIS 2740Docket: Docket 43902
Court: Michigan Court of Appeals; June 16, 1980; Michigan; State Appellate Court
Defendant Protzko appeals a circuit court order affirming an arbitration award in favor of plaintiff Shearson Hayden Stone, Inc. regarding a dispute over commodity futures trading. Protzko began employment with Shearson on July 1, 1975, signed a customer's agreement on July 3, 1975, which contained a clause mandating arbitration for any disputes related to the agreement. In late July 1975, a dispute over margin requirements led to the liquidation of Protzko's accounts and termination of his employment. On August 8, 1975, Shearson demanded arbitration, to which Protzko did not respond. In April 1977, Protzko filed a "reparations" complaint with the Commodity Futures Trading Commission (CFTC) seeking damages against Shearson for improper conduct. Shearson subsequently filed a complaint in Oakland County Circuit Court to compel arbitration, leading to a circuit judge’s order for arbitration on June 15, 1977. Despite Protzko's claims that arbitration was prohibited by federal law, the arbitration proceeded, resulting in an award of $17,036.76 plus costs for Shearson. The circuit court affirmed the arbitration award on November 15, 1978. However, under the Commodity Exchange Act, the CFTC has rule-making authority, and its regulation 180.3(b) requires that any arbitration agreement with a customer must be separately endorsed and contain specific cautionary language in bold. The arbitration agreement between Shearson and Protzko was found not to comply with these requirements. The court referenced the Ames v. Merrill Lynch case, which established that regulation 180.3 applies retroactively to all arbitration agreements. Consequently, the arbitration award was set aside and vacated, with costs awarded to the defendant.