Stewart et al v. Laidlaw and Company (UK) et al

Filing 15

ORDER granting 7 Motion to Compel Arbitration and Stay Proceedings. Signed by Judge Marcia G. Cooke on 1/31/2012. (tm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-22846-Civ-COOKE/TURNOFF
DONNA JEAN STEWART, et al.,
Plaintiffs
vs.
LAIDLAW AND COMPANY (UK)
LTD, INC., et al.,
Defendants.
_________________________________/
ORDER GRANTING DEFENDANT’S MOTION TO
COMPEL ARBITRATION AND STAY PROCEEDINGS
THIS MATTER is before me on Defendants Laidlaw and Company (UK) Ltd. Inc. and
Anthony Calabro’s Motion to Compel Arbitration and Stay Proceedings. (ECF No. 7). I have
reviewed the arguments, the record, and the relevant legal authorities. For the reasons explained in
this Order, the Defendant’s Motion is granted.
I. BACKGROUND
Plaintiffs, who are groups of investors, bring this action for violation of the Securities Act of
1933 and the Exchange Act of 1934 against Defendants, Laidlaw and Company (UK) Ltd, Inc.
(“Laidlaw”) and Anthony Calabro. On February 22, 2008, Plaintiffs purchased certain reverse
convertible securities through Laidlaw, a brokerage company. Between April 8, 2008, and July 2,
2009, the Plaintiffs executed six agreements in connection with the opening of their securities
brokerage accounts with Laidlaw. The agreements each contain an arbitration provision, which
states, in relevant part:
ALL CLAIMS, DISPUTES AND OTHER MATTERS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE SUBMITTED TO THE
ARBITRATION BOARD OF THE NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.1 . . . THIS EXPRESS AGREEMENT TO
SUBMIT TO BE BOUND BY ARBITRATION INCLUDES, BUT IS NOT
LIMITED TO, DISPUTES ARISING UNDER THE SECURITIES ACT OF
1933, THE EXCHANGE ACT OF 1934 . . ..
Plaintiffs allege that Defendants violated the Securities Act of 1933 an the Exchange Act of
1934 by making material misrepresentations to them that the securities they purchased and
maintained through Laidlaw would pay out three years’ worth of interest on or around February 22,
2011. According to Plaintiffs, Defendants made the first misrepresentation in February 2008, and
the last misrepresentation in January 2011. Defendants seek to stay this case and compel arbitration
pursuant to parties’ agreement to arbitrate.
III. LEGAL STANDARDS
Pursuant to Section 3 of the Federal Arbitration Act (“FAA”), a district court shall stay a
pending suit “upon being satisfied that the issue involved in such suit or proceeding is referable to
arbitration” under a valid arbitration agreement. 9 U.S.C. § 3. When a district court is asked to
compel arbitration, it must: (1) determine whether the parties agreed to arbitrate the dispute by
applying the federal substantive law of arbitrability; and (2) consider whether legal constraints
external to the parties’ agreement foreclose arbitration of claims. Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626–628 (1985). However, “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.” United Steelworkers of Am. v. Warrior & Golf Navigation Co., 363 U.S. 574, 582
(1960). “[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983).
III. ANALYSIS
Defendants seek to enforce the arbitration clause contained in the executed brokerage
1

The National Association of Securities Dealers, Inc. (NASD) was succeeded by the Financial Industry
Regulatory Authority (FINRA).

2

account agreements. Plaintiffs argue that the clauses do not apply to the present dispute because
Plaintiffs purchased the securities at issue before they executed the brokerage account agreements.
“An arbitration agreement may be applied retroactively to transactions which occurred prior
to execution of the arbitration agreement.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. King,
804 F. Supp. 1512, 1514 (M.D. Fla. 1992); see also Drews Distrib. Inc. v. Silicon Gaming, Inc., 245
F.3d 347, 350 (4th Cir. 2001) (“But the reach of an arbitration clause is not restricted to those
causes of action brought under the contract containing the clause, unless the parties draft a clause so
restricted in scope.”).
In determining whether to compel arbitration, a court should consider the intent of the
parties. See Thomas v. Carnival Corp., 573 F.3d 1113, 1119 (11th Cir. 2009). To determine the
parties’ intent, a court must look to the language of the arbitration clause. See id.
The plain language of the arbitration provision indicates that the parties must submit the
present dispute to arbitration. The arbitration provision governs “all claims, disputes and other
matters arising out of or relating to this agreement,” including disputes arising under the Securities
Act of 1933 and the Exchange Act of 1934. The provision appears in the parties’ brokerage account
agreements. These brokerage accounts held the securities at issue at least until February 2011, well
after Plaintiffs executed the arbitration agreements. According to Plaintiffs’ Complaint, Defendants
allegedly made the actionable material misrepresentations about the securities up until January
2011, during the course of the parties’ broker-client relationship. The Plaintiff’s cause of action
therefore relates to the brokerage account agreements.2
Finally, Plaintiffs request limited discovery into the circumstances surrounding the
2

Further, I note that Plaintiffs allege ongoing misconduct, which continued for over two years after they
executed the brokerage account agreements. Other courts have held that arbitration agreements may be
enforced where there are allegations of ongoing misconduct. See Arrigo v. Blue Fish Commodities, Inc., 408
F. App’x 480, 481-82 (2d Cir. 2011); Marcus v. Masucci, 118 F. Supp. 2d 453, 457 (S.D.N.Y. 2000).

3

arbitration agreements, to determine if fraud occurred. The party opposing a motion to compel
arbitration is responsible for coming forward by way of affidavit or allegation of fact to show cause
why the court should not compel arbitration. See Aronson v. Dean Witter Reynolds, Inc., 675
F.Supp. 1324, 1325 (S.D. Fla. 1987). The party opposing arbitration should identify those portions
of “the pleadings, depositions, answers to interrogatories, and ... affidavits which support its
contention.” Id. at 1325 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Plaintiffs have
made no allegation of fraud in their Complaint, and have failed to produce any factual basis for the
Court to conclude that further discovery of this issue is necessary. See id. (“[I]t is axiomatic that
[plaintiff] is not entitled to additional discovery of ‘issues’ he is entirely unable to establish even as
a threshold matter.”). Because Plaintiffs are unable to establish fraud as a threshold issue, their
request for limited discovery is denied.
IV. CONCLUSION
It is ORDERED and ADJUDGED that Defendants Laidlaw and Company (UK) Ltd., Inc.
and Anthony Calabro’s Motion to Compel Arbitration is GRANTED. The parties shall arbitrate
Plaintiff’s claims under the Securities Act of 1933 and the Exchange Act of 1934 in accordance
with the terms of the arbitration agreement.
This case is STAYED pending completion of arbitration proceedings. This Court retains
jurisdiction to enforce the arbitral award, if appropriate. The Clerk is directed to administratively
CLOSE this case. All pending motions, if any, are DENIED as moot.
DONE and ORDERED in chambers at Miami, Florida, this 31st day of January 2012.

4

Copies furnished to:
William C. Turnoff, U.S. Magistrate Judge
Counsel of record

5