Robert L. Zink v. Merrill Lynch Pierce Fenner & Smith, Inc. Peter A. Childs
Docket: 92-5175
Court: Court of Appeals for the Tenth Circuit; December 17, 1993; Federal Appellate Court
Robert L. Zink appealed the district court's approval of an arbitration panel's decision favoring defendants Merrill Lynch Pierce Fenner, Smith, Inc. and Peter A. Childs regarding his state claims. Zink argued that the district court incorrectly determined that his claims fell under an arbitration agreement made in a 1982 account agreement, which included a clause mandating arbitration for disputes arising from the agreement. He also contended that the court misapplied the Federal Arbitration Act principles and improperly dismissed his claim under Section 17(a) of the Securities Act of 1933 based on collateral estoppel.
Zink had previously purchased bonds through Merrill Lynch, and after filing suit in December 1983, the district court granted partial summary judgment in March 1987, affirming that most of Zink's claims were subject to arbitration. Initially, the court stayed proceedings on Zink's federal securities claims due to uncertainty about their arbitrability. This uncertainty was resolved, leading to a referral of these claims to arbitration in November 1987. An arbitration panel ultimately ruled in favor of the defendants in November 1991.
Zink sought to vacate the panel's findings, referencing a prior decision (Coffey v. Dean Witter Reynolds, Inc.) which stated that the Supreme Court's ruling on the arbitrability of Section 10(b) claims should not be applied retroactively. Zink argued this precedent indicated that his federal securities claims were not subject to arbitration. The Tenth Circuit Court of Appeals affirmed the district court's rulings.
The district court endorsed the general rule from Coffey regarding the arbitrability of the plaintiff's federal securities claims but denied the plaintiff's request for a hearing on these claims. The court ruled that the plaintiff is collaterally estopped from pursuing his federal securities claims since the arbitration panel had already resolved the same issues related to his state claims. On July 30, 1992, the district court affirmed the arbitration panel's decision concerning the state claims and entered a final judgment.
Regarding the arbitration clause in the plaintiff's 1982 agreement with Merrill Lynch, the court determined that it encompasses the dispute related to the WPPSS and SWBT bond purchases, rejecting the plaintiff's argument to the contrary. The arbitration agreement's language, stating that any controversy arising from the plaintiff's business or the agreement shall be submitted to arbitration, was interpreted as broadly covering the dispute, even if the events leading to it occurred before the agreement was executed. The court emphasized that arbitration agreements should be favorably interpreted, with ambiguities resolved in favor of coverage.
Additionally, the plaintiff contended that his claims were not arbitrable under the Federal Arbitration Act (FAA). The court reviewed this interpretation de novo, clarifying that the FAA validates arbitration provisions in contracts involving commerce, making them enforceable unless there are legal grounds for revocation.
The plaintiff argues that the transaction in question does not involve commerce, but this claim is rejected. The bond transactions and the account agreement are clearly classified as involving commerce under the Federal Arbitration Act (FAA). Relevant case law, including Mayaja, Inc. v. Bodkin, establishes that agreements related to securities and commodities futures inherently involve interstate commerce, regardless of the actual activity under the agreement. The Supreme Court's ruling in Prima Paint Corp. v. Flood further clarifies that the scope of interstate commerce includes not only physical shipments but also contracts associated with it.
Additionally, the plaintiff contends that the dispute arose from actions taken before the account agreement was executed, suggesting it falls outside the FAA's coverage. This is also dismissed; the FAA aims to treat arbitration agreements similarly to other contracts, as noted in Shearson/American Express, Inc. v. McMahon. The FAA's language is interpreted broadly, allowing for arbitration of disputes not directly arising from the contract containing the arbitration clause, provided other FAA requirements are met.
The court emphasizes that section 2 of the FAA mandates that written arbitration agreements regarding controversies from contracts involving commerce are valid. Consequently, because the FAA applies, the plaintiff's argument for the application of New York arbitration principles based on state law relevance is rejected. Federal law governs the arbitrability of agreements under the FAA, which must be interpreted in light of the federal policy favoring arbitration. This principle also applies to other state claims related to the arbitration agreement.
Plaintiff asserts that the district court incorrectly ruled him collaterally estopped from pursuing his claim under Section 17(a) of the Securities Act of 1933. However, this court does not evaluate that claim, as it has determined there is no private right of action under Section 17(a), referencing Bath v. Bushkin Gaims Gaines, Jonas, 913 F.2d 817 (10th Cir. 1990). Although the reasoning for denying the plaintiff's request for a hearing differs from that of the district court, a reviewing court can affirm a lower court's decision based on any grounds supported by the record. Consequently, the panel affirms the district court’s judgment regarding the arbitration rulings related to the plaintiff's state claims and the denial of the hearing on his Section 17(a) claim. The panel unanimously decided that oral argument would not contribute significantly to the appeal's resolution. The plaintiff previously attempted to appeal a March 1987 order, which was dismissed for not being a final order under 28 U.S.C. Section 1291. Additionally, the case references the Supreme Court's ruling in Shearson/American Express, Inc. v. McMahon regarding the arbitrability of Section 10(b) claims. The court acknowledges an argument from the plaintiff regarding the defendants' failure to cross-appeal but deems it unnecessary to address, maintaining its authority to uphold the district court’s decision based on the established absence of a private right of action under Section 17(a).
