DEERING et al v. GRAHAM et al

Filing 15

OPINION FILED. Signed by Magistrate Judge Joel Schneider on 1/30/15. (js)

[Doc. No. 9]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
MARY DEERING, JANE AND JOHN
DOE PLAINTIFFS 1-5,
Civ. No. 14-3435 (NLH/JS)
Plaintiffs,
v.
DONALD ELLWOOD GRAHAM, ET AL.,
Defendants.
OPINION
This Opinion addresses whether a client who signs a brokerage
agreement containing an arbitration clause should be compelled to
arbitrate all of her claims against her broker and the brokerage
firm

he

represents.

Defendants

Donald

Ellwood

Graham,

Graham

Financial Services, LLC, Executive Wealth Advisors, LLC, and J.P
Turner

&

Company

(collectively,

“defendants”)

seek

to

compel

arbitration and stay plaintiff’s lawsuit pending the results of
plaintiff’s arbitration hearing. Plaintiff Mary Deering, a former
client of defendants, opposes defendants’ motion [Doc. No. 11].
Defendants have also filed a reply [Doc. No. 12]. The Court
recently

held

defendants’

oral

“Motion

argument.
to

Stay

For

Action

the
and

following
Compel

reasons,

Plaintiff

to

Arbitrate Claims” [Doc. No. 9] is GRANTED in part and DENIED in

part.

Plaintiff’s

financial

mismanagement

claims

against

all

defendants, including those involving tax-relates issues, will be
sent to arbitration. Conversely, plaintiff’s NJLAD claim, asserted
against all defendants, and sexual battery and assault claims,
asserted against Graham individually, fall outside the scope of
her arbitration agreement and will be litigated in this Court.
However, this civil action will be stayed pending the completion
of the arbitration hearing.
BACKGROUND
J.P. Turner & Company (“J.P. Turner”) is a brokerage and
investment banking firm which operates through independent branch
offices, including Executive Wealth Advisors. Cert. of Donald
Ellwood

Graham

(“Graham

Cert.”)

¶¶

1-2.

In

2007,

plaintiff

contacted Donald Ellwood Graham (“Graham”) to obtain financial
advice and services. Compl. ¶ 44. Thereafter, plaintiff opened a
J.P. Turner brokerage account and completed an initial account
application on December 7, 2007. Graham Cert. ¶ 3, Exs. 1-2. The
new account application and Customer Agreement were signed by
Graham, as a J.P. Turner Representative, and Nicholas Saunders
(“Saunders”), as the Office Manager for the J.P. Turner branch
operated by Executive Wealth Advisors. Id.

2

In December 2011, “as a result of a change in clearing agents”
plaintiff executed an updated J.P. Turner new account form and
Customer Agreement. Defs.’ Br. at 3. At the same time, plaintiff
also executed a Transfer on Death Account and a Margin Agreement.
Graham Cert. ¶ 5, Exs. 4-5. About six months later, in June 2012,
plaintiff executed an updated J.P. Turner account application.
Defs.’ Br. at 3.1
The six brokerage agreements plaintiff signed all contained
arbitration

clauses.

The

parties

agree

that

the

arbitration

provisions are substantially similar in form and substance. For

1

To aid in reference, the following chart summarizes the six agreements
plaintiff signed by date, form, and signatory.
Date of Agreement

12/03/07

Description of Form
Containing Arbitration
Provision
Account Application

12/31/07

Brokerage Account
Application

12/20/11

New Account Form

12/20/11

Transfer on Death
Account Agreement
Margin Agreement
Account Application

12/20/11
06/28/12

3

Signatories

Deering and Graham (as a
J.P. Turner Account
Executive)
Deering, Saunders (as an
Office Manager) and
Graham (as a “Registered
Rep”)
Deering, Saunders (as
the Principal of J.P.
Turner) and Graham (as a
“Representative”)
Deering
Deering
Deering, Saunders (as
the J.P. Turner
Principal) and Graham
(as a J.P. Turner
Representative)

the sake of consistency the Court will focus its analysis on the
language of the June 2012 arbitration provision. This arbitration
clause states:
Arbitration
This is a pre-dispute arbitration clause. Under this
clause, which becomes binding on all parties when
you sign below, you and JPT agree as follows:
A. All parties to this agreement are giving up the
right to sue each other 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.
* * *
All controversies that may arise between you, us and
the clearing firm (including but not limited to,
controversies concerning any account, order, or
transaction, or the continuation, performance,
interpretation, or breach of this or any other
agreement between you and us, whether entered into
or arising before, on, or after the date this
Agreement is effective) shall be determined by
arbitration in accordance with the rules then
prevailing of FINRA, and/or any other securities
self-regulatory organization or securities exchange
of which the entity against whom the claim is made
is a member, as you may designate.
Graham Cert., Ex. 6.
Plaintiff’s

twelve-count

complaint

contains

two

general

claims. One, plaintiff alleges defendants breached their financial
services contracts. See Compl. at 27-40. The Court refers to this
claim as plaintiff’s financial mismanagement claim which includes
4

tax-related issues. For example, plaintiff claims that defendants
fraudulently

induced

her

to

enter

into

various

securities

contracts, failed to monitor her investments and subjected her to
tax penalties. Compl. at 27, 34. Two, plaintiff alleges Graham
engaged in an improper sexual relationship and sexually abused
her. Compl. ¶¶ 5-51. The Court refers to this as plaintiff’s sexrelated claim. Without getting into the details regarding the
sordid allegations in the complaint, plaintiff generally alleges,
inter alia, that Graham forced her into a nonconsensual sexual
relationship and subjected her to severe and pervasive sexual
harassment. Compl. at 19-24. Plaintiff asserts claims against all
defendants which include violations of the New Jersey Law Against
Discrimination, the Securities Act of 1933 and the Exchange Act of
1934, breach of contract, breach of the implied covenants of good
faith and fair dealing, duress, assault and sexual battery. See
generally Compl.2

2

Plaintiff’s complaint pleads twelve causes of action: violations of the
New Jersey Law Against Discrimination (NJLAD), violations of the Securities Act
of 1933 and the Exchange Act of 1934, breach of contract, negligent entrustment,
“breach of fiduciary duty and respondeat superior in violation of the implied
promise
of
fair
and
honest
dealing
of
brokers”,
fraudulent
concealment/misrepresentation, breach of implied covenant of good faith and
fair dealing, negligence, duress, negligent hiring, assault, and sexual battery.
All of plaintiff’s claims are made against all defendants with the following
exceptions: (1) the duress claim is not alleged against Graham Financial
Services, LLC; (2) the negligent hiring claim is only alleged against Executive
Wealth Advisors and J.P Turner; and (3) the assault and sexual battery claim is
only alleged against Graham.

5

One of the defendants is Graham Financial Services, LLC, a
financial services firm owned by Donald Graham. Plaintiff alleges
that when Graham rendered her tax advice he was acting in his
capacity as her tax advisor and not as her broker, thus implicating
Graham

Financial

Financial

Services.

Services

containing

is

arbitration

not

Pl.’s
a

Opp

party

clauses,

at

to

11.

any

defendants

of

Although
the

Graham

agreements

(including

Graham

Financial Services) argue they may compel plaintiff to arbitrate
her

claims.

Financial

Defendants

Services

are

argue

that

the

“intertwined”

claims
with

against

plaintiff’s

Graham
other

claims. Defs.’ Reply at 12. Further, defendants generally assert
that all of the conduct alleged in plaintiff’s complaint was
committed “through and in the course of Mr. Graham’s role as her
professional financial advisor” and is therefore subject to the
arbitration agreements contained within the contracts plaintiff
signed. Defs.’ Br. at 4. Conversely, it is plaintiff’s position
that her tax-related claims are only directed to Graham in his
capacity as a tax preparer for Graham Financial Services and that
her tax-related claims are not subject to any of the arbitration
provisions. Pl.’s Opp. at 12. Further, plaintiff argues that her
NJLAD, assault, and sexual battery claims do not fall within the
scope of her arbitration provisions. Pl.’s Opp. at 7. Plaintiff
6

also argues she should not be compelled to arbitrate any of her
claims because she signed the documents at issue under duress.
Pl.’s Br at 2-9.
DISCUSSION
1. Standard of Review
The Third Circuit recently clarified the standard of review
a court should apply in deciding a motion to compel arbitration.
See Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d
764 (3d Cir. 2013). Where it is apparent on the face of the
complaint and the documents relied upon in the complaint that the
claims contained within the complaint are subject to arbitration,
the case is considered under a motion to dismiss standard pursuant
to Fed. R. Civ. P. 12(b)(6). Id. at 744. The motion to dismiss
standard is, however, inappropriate where “either the motion to
compel arbitration does not have as its predicate a complaint with
the requisite clarity to establish on its face that the parties
agreed to arbitrate or the opposing party has come forth with
reliable evidence that is more than a naked assertion ... that it
did not intend to be bound by the arbitration agreement, even
though on the face of the pleadings it appears that it did.” Id.
(quotation and citation omitted). Under these circumstances, the
court must apply the summary judgment standard. Here, because
7

plaintiff has come forward with some reliable evidence challenging
the agreement to arbitrate (see discussion, infra), the summary
judgment standard applies.
A

court

may

grant

summary

judgment

if

the

pleadings,

depositions, answers to interrogatories and admissions show that
there is no genuine issue as to any material fact, and if the court
determines that the moving party is entitled to judgment as a
matter of law. See Fed. R. Civ. P. 56(a). When determining the
existence of a genuine issue of material fact in the context of
arbitration,

“[t]he

party

opposing

arbitration

is

given

the

benefit of all reasonable doubts and inferences that may arise.”
Kaneff v. Delaware Title Loans, Inc., 587 F.3d 616, 620 (3d Cir.
2009) (internal quotation and citation omitted).
2. The Federal and New Jersey Arbitration Acts
The parties’ arbitration agreement is governed by the Federal
Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., and the New Jersey
Uniform Arbitration Act of 2003 (“NJUAA”), N.J.S.A. 2A:23B–1, et
seq. Washington v. CentraState Healthcare Sys., Inc., C.A. No. 106279, 2011 WL 1402765, at *4 (D.N.J. Apr. 13, 2011). Section 2 of
the FAA provides: “A written provision in ... a contract evidencing
a

transaction

involving

commerce

to

settle

by

arbitration

a

controversy thereafter arising out of such contract ... shall be
8

valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.” 9
U.S.C. § 2. Under Section 3 of the FAA, a party may apply to a
federal court for a stay of the trial of an action “upon any issue
referable to arbitration under an agreement in writing for such
arbitration.” 9 U.S.C. § 3. “The NJUAA has a substantive provision
nearly identical to the FAA's § 2, see N.J.S.A. 2A:23B–6(a), and
a

mechanism

for

staying

court

proceedings

and

compelling

arbitration similar to the FAA's §§ 3 and 4, see N.J.S.A. 2A:23B–
7.” Washington, 2011 WL 1402765, at *4.
Courts apply a two-step test in determining whether a cause
of action is supplanted by an existing arbitration agreement.
Aetrex Worldwide, Inc. v. Sourcing for You Ltd., 555 Fed. Appx.
153, 154 (3d Cir. 2014). Courts first determine whether a valid
agreement to arbitrate exists. If a valid agreement exists, a court
should

then

determine

dispute at issue.

whether

the

agreement

encompasses

the

Id. If an agreement to arbitrate exists and the

dispute is encompassed by the agreement, the decision to enforce
arbitration is mandatory. Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 218 (1985); Great Western Mortg. Corp. v. Peacock, 110
F.3d 222, 228 (3d Cir. 1997). In this case plaintiff contests both
requisites to a finding of arbitrability. Plaintiff also contests
9

that a valid agreement exists, and that the present dispute falls
within the scope of the agreement.
“When determining both the existence and the scope of an
arbitration

agreement,

there

is

a

presumption

in

favor

of

arbitrability.” Animal Sci. Products, Inc. v. China Minmetals
Corp., C.A. No. 05-4376 (KM), 2014 WL 3695329, at *46 n.26 (D.N.J.
July 24, 2014) (citing Trippe Mfg. Co. v. Niles Audio Corp., 401
F.3d 529, 532 (3d Cir. 2005)). This presumption is not absolute,
however, and should be discharged “only where a validly formed and
enforceable arbitration agreement is ambiguous about whether it
covers the dispute at hand; and . . . where the presumption is not
rebutted.” Granite Rock Co. v. International Broth. of Teamsters,
130 S. Ct. 2847, 2858 (2010) (quotation and citation omitted). In
other words, because arbitration is a matter of contract, a party
cannot be required to arbitrate disputes “which [s/]he has not
agreed so to submit.” BG Grp., PLC v. Republic of Argentina, 134
S. Ct. 1198, 1206 (2014) (quoting Steelworkers v. Warrior & Gulf
Nav. Co., 363 U.S. 574, 582 (1960)). In the absence of “clea[r]
and unmistakabl[e]” evidence, “it is the court’s duty to interpret
the agreement and to determine whether the parties intended to
arbitrate grievances concerning a particular matter.” Granite Rock
Co., 130 S. Ct. at 2858 (quotation and citation omitted).
10

If a valid and enforceable arbitration agreement is broad in
its scope, “[a]n order to arbitrate . . . should not be denied
unless it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the
asserted dispute.” Century Indem. Co. v. Certain Underwriters at
Lloyd’s, London, 584 F.3d 513, 556 (3d Cir. 2009) (quotation and
citation omitted); see also Robinson v. PNC Bank, C.A. No. 1307818

(SRC),

2014

WL

1716248,

at

*2

(D.N.J.

Apr.

30,

2014)

(accord). If the arbitration agreement is itself narrowly crafted,
it should not be presumed that the parties agreed to arbitrate any
and all disputes. Id.
Importantly, where a complaint contains both arbitrable and
non-arbitrable claims, the court must compel arbitration of the
arbitrable claims. KPMG LLP v. Cocchi, 132 S. Ct. 23, 26 (2011)
(citation omitted). This is required even where the bifurcated
action may result in “the possibly inefficient maintenance of
separate proceedings in different forums.” Id.; see also Waskevich
v. Herold Law, P.A., 431 N.J. Super. 293, 300 (App. Div. 2013)
(citation omitted) (“federal law ‘requires piecemeal resolution
when necessary to give effect to an arbitration agreement.’”).
Thus, the Court must determine which of plaintiff’s claims are
arbitrable and which are not, and then refer the arbitrable claims
11

to arbitration. See Waskevich, 431 N.J. Super. at 300 (bifurcating
NJLAD claim from arbitrable claims).
3. Whether a Valid Agreement Exists and Plaintiff’s Defense
of Duress
The Court first considers whether a valid agreement exists,
i.e.,

the

viability

of

plaintiff’s

duress

defense.

Plaintiff

argues the arbitration agreement entered into on June 28, 2012
“was the result of undue influence [and] coercion exerted by
defendant Donald Graham.” Pl.’s Br. 3-4. Thus, plaintiff argues,
she did not enter into the agreement “knowingly and voluntarily.”
Pl.’s Br. at 4. In support of her argument plaintiff cites to
conversations and sexual relations which occurred between her and
Graham. See, e.g., Cert. of Mary Deering (“Deering Cert.”) ¶ 10.
Plaintiff also alleges that Graham rushed her into signing the
June 28, 2012 contract, containing around “10 papers”, and that
Graham did not explain or point out the arbitration provision.
Deering Cert. ¶ 11.3 Plaintiff alleges that after she signed the
papers at Graham’s direction he exposed himself to her. Id. ¶ 13.

3 At oral argument plaintiff argued the arbitration clause should be set
aside because defendants, and more specifically Graham, did not specifically
point out or explain the arbitration provision before the documents at issue
were signed. This argument runs counter to well-established black letter law.
Signatories to a contract are bound by the written terms regardless if those
terms were pointed out or explained. “It will not do for a man [or woman] to
enter into a contract, and, when called upon to respond to its obligations, to
say that [s/]he did not read it when [s/]he signed it, or did not know what it
contained. If this were permitted, contracts would not be worth the paper on

12

In response, defendants argue that plaintiff cannot avoid
arbitration by claiming undue influence, coercion or duress with
respect to a single clause rather than a stand-alone agreement to
arbitrate. Defs.’ Reply at 3 (citing Nicholson v. CPC Int'l, Inc.,
C.A. No. 88-45, 1988 WL 35382, at *2 (D.N.J. Apr. 18, 1988), aff'd,
877 F.2d 221 (3d Cir. 1989) (the Supreme Court draws a “distinction
between fraud in the inducement of an agreement to arbitrate and
fraud in the inducement of a contract which contains a promise to
arbitrate. While the former is for a federal court to determine,
the latter is for an arbitrator.”) (citation omitted)). In other
words, because plaintiff is claiming that she signed an integrated
contract containing an arbitration clause under duress, rather
than just a stand-alone agreement to arbitrate, the duress defense
must be decided by an arbitrator and not this Court.4 Therefore,
plaintiff’s argument that she signed the June 2012 agreement under
duress does not warrant the denial of defendants’ motion. To be
sure, however, although this Court will not address the duress
defense, the issue should be decided by an arbitrator.

which they are written.” Upton v. Tribilcock, 91 U.S. 45, 50 (1875); see also
Morales v. Sun Constructors, Inc., 541 F.3d 218, 221 (3d Cir. 2008) (accord).
4

While the Court is not ruling on the issue, it does not go unnoticed
that plaintiff’s duress argument is undercut by the fact that she signed five
other agreements containing an arbitration clause. Plaintiff is not claiming
she signed these five agreements under duress, including the agreement signed
on December 3, 2007, which was before the alleged harassment started.

13

4. Scope of the Arbitration Clause
Having determined that a valid arbitration provision exists,
and that an arbitrator and not this Court will decide the duress
defense, the Court turns to whether the arbitration provision
encompasses the claims at issue and what parties are bound to
arbitrate. Plaintiff argues the broad scope of the arbitration
provision renders the provision unenforceable, and even if the
provision

is

enforceable,

the

allegations

contained

in

the

complaint fall outside its scope. Pl.’s Br. at 5.5 In conjunction
with these arguments plaintiff also asserts that defendants Donald
Graham, in his capacity as president of Graham Financial Services,
and Graham Financial Services, were not parties to the contracts
she signed and therefore they may not compel arbitration.6
The Court first considers which parties are bound to arbitrate
and

then

considers

what

claims

are

subject

to

arbitration.

Plaintiff argues that the agreements do not bind Donald Graham, in
his capacity as President of Graham Financial Services, and Graham
Financial Services, because they “were not privy to the Arbitration

5

The Court notes that plaintiff has not cited a single case to support
her argument.
6

Defendants do not directly address whether Graham could have proffered
tax advice in his capacity as a broker but insist that plaintiff’s single
specific claim against Graham and Graham Financial Services is “intertwined”
with plaintiff’s other claims. Defs.’ Reply at 12.

14

Agreement” and do not have “any direct link” to J.P Turner or
Executive Wealth Advisors. Pl’s Opp. at 12. In support of this
position plaintiff points out that some of her allegations concern
Graham in his capacity as plaintiff’s tax preparer rather than as
her broker. Thus, plaintiff argues, the agreements she signed with
J.P. Turner and Executive Wealth Advisors cannot bind Donald
Graham, in his capacity as President of Graham Financial Services,
and Graham Financial Services.
Even though Graham Financial Services is not a party to
plaintiff’s arbitration agreements, it may still compel plaintiff
to arbitrate her claims. The Third Circuit has identified two
avenues

which

permit

courts

to

bind

nonsignatories

to

an

arbitration clause.
First, courts have held non-signatories to an
arbitration clause when the non-signatory knowingly
exploits the agreement containing the arbitration
clause despite having never signed the agreement.
Second, courts have bound a signatory to arbitrate
with
a
non-signatory
at
the
nonsignatory's
insistence because of the close relationship
between the entities involved, as well as the
relationship of the alleged wrongs to the
nonsignatory's obligations and duties in the
contract ... and [the fact that] the claims were
intimately founded in and intertwined with the
underlying contract obligations.

E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir. 2001) (internal
15

citations and quotations omitted). The first category of cases
involves nonsignatories who at one time embraced the contract but
during litigation attempt to repudiate the arbitration terms. Id.
at

200.

The

first

theory

is

inapplicable

because

here

nonsignatories (Graham and Graham Financial Services) are seeking
to compel a signatory (plaintiff) to arbitrate, not the reverse.
See Precision Funding Grp., LLC v. Nat'l Fid. Mortgage, C.A. No.
12-5054 (RMB/JS), 2013 WL 2404151, at *4 (D.N.J. May 31, 2013)
(citing Hautz Constr. v. H & M Dep't Store, C.A. No. 12–3478 (FLW),
2012 WL 5880370, at *14 n.8 (D.N.J. Nov. 20, 2012) (stating that
cases relying on the “direct benefit” theory of estoppel apply
only to non-signatories trying to avoid arbitration)). In the
second category of cases, “courts have bound a signatory to
arbitrate with a non-signatory ‘at the non-signatory's insistence
because of the close relationship between the entities involved,
as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and [the
fact that] the claims were intimately founded in and intertwined
with the underlying contract obligations.’” Id. at *4 (citing
DuPont, 269 F.3d at 299).
In Precision Funding this Court recognized two situations in
which a nonsignatory may compel arbitration under this second
16

category: (1) where the issues to be litigated are “inextricably
intertwined” with the arbitration agreement such that the claims
asserted against the signatory and the non-signatory are identical
and (2) where there is a requisite nexus of the claim to the
contract together with an integral relationship between the nonsignatory and the other contracting party. Id. at *5. In Precision
Funding, the plaintiff sued a business competitor for hiring its
former employees who were subject to a non-compete agreement which
contained an arbitration provision. Plaintiff also sued its former
employees,
claims

and,

were

pursuant

sent

to

to

the

arbitration

arbitration.

The

provision,

business

those

competitor

defendant, a nonsignatory to the non-compete agreement, sought to
enforce the arbitration provision against plaintiff in its action.
After

surveying

arbitration
connection

applicable

because
between

it
the

found

case
that

signatories

law,

the

there
and

was

Court
an

compelled

inextricable

nonsignatories

to

the

arbitration provision. The Court found that the essence of the
claims against the nonsignatories were essentially the same as
those against the signatories and that the causes of actions were
nearly identical. Id. at *7.
This case is analogous to Precision Funding because there is
an

inextricable

connection

between
17

plaintiff’s

financial

mismanagement claims and the signatories and nonsignatories to her
agreements.

The

nexus

and

intricate

connections

between

the

defendants is obvious. As to plaintiff’s claims, she only alleges
one claim (consisting of a single paragraph contained within Count
Four in a 54-page complaint) specifically against Graham Financial
Services and Graham, as its president.7 See Compl. at 29-34 ¶ 20.
This

tax-related

claim

is

inextricably

intertwined

with

plaintiff’s financial mismanagement claims. Additionally, Count
Four, a claim pursuant to the Securities Act of 1933 and the
Exchange Act of 1934, is alleged against all defendants. Indeed,
plaintiff refers to all defendants, rather than separating them
out,

throughout

her

complaint.

This

demonstrates

plaintiff’s

acknowledgment of the interconnectedness of the defendants and her
claims. See Guidotti v. Legal Helpers Debt Resolution, LLC, C.A.
No. 11-1219 (JBS/KMW), 2012 WL 3262435, at *7 (D.N.J. Aug. 7, 2012)
(permitting

nonsignatory

defendant

to

compel

plaintiff

to

arbitration and finding persuasive that plaintiff sought relief
from signatory and nonsignatory defendants “under exactly the same
counts.”). Further, plaintiff’s claims against the defendants stem

7

The single paragraph states: “20. Defendants Graham and Graham Financial
prepared and filed plaintiff[‘s] tax returns, despite the lack of any real tax
planning by defendants Graham and Graham Financial for plaintiff. Defendants
Graham and Graham Financial exposed plaintiff to numerous IRS penalties.” Compl.
at 34.

18

from similar alleged conduct. For these reasons, the Court finds
the

claims

Services

against

and

Graham,

Graham

as

president

Financial

of

Services

Graham
are

Financial

inextricably

intertwined with the other financial claims asserted against the
signatories (J.P Turner and Executive Wealth Advisors). Thus, the
Court finds Graham and Graham Financial Services have standing to
compel plaintiff to arbitrate the claims asserted against them.
See Precision Funding, 2013 WL 2404151 at *7.
Next, the Court considers whether all of plaintiff’s claims,
which include allegations of financial mismanagement, assault, and
sexual battery, are subject to arbitration, i.e. whether the
agreement encompasses these claims. See Trippe Mfg. Co., 401 F.3d
at 532. In order to make this finding, it is necessary to examine
the intended scope of the arbitration agreement.
When deciding whether parties agreed to arbitrate a certain
matter, courts must apply state law contract principles governing
the formation of contracts. First Options, 514 U.S. at 944. Under
New Jersey law, “[i]n determining whether a particular dispute is
encompassed by an arbitration provision, as in construing any other
contractual provision, a court's ‘goal is to discover the intention
of

the

parties[,]’

which

requires

consideration

of

the

‘contractual terms, the surrounding circumstances, and the purpose
19

of the contract.’” Washington, 2011 WL 1402765, at *5 (citing
Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J. Super. 138 (N.J.
Super. Ct. App. Div. 2008)). The “‘proper starting point is the
plain meaning of the Arbitration Agreement.... Other interpretive
principles need be employed only if the Agreement's plain meaning
cannot

be

determined.’”

Id.

(quoting

Steigerwalt

v.

Terminix

Intern. Co., LP, 246 Fed. Appx. 798, 801 (3d Cir. 2007)).
In this case, the arbitration provision states that it applies
to “all controversies” which “arise” between the signatories.
“Courts have generally read the terms ‘arising out of’ or ‘relating
to’ a contract as indicative of an ‘extremely broad’ agreement to
arbitrate any dispute relating in any way to the contract.”
Guidotti v. Legal Helpers Debt Resolution, L.L.C., 866 F. Supp. 2d
315, 331-32 (D.N.J. 2011) vacated and remanded on other grounds,
716 F.3d 764 (3d Cir. 2013) (citation omitted). “A dispute or claim
‘relates to’ the contract whenever the dispute requires ‘reference
to the underlying contract.’” Id. (citation omitted). The Court
finds

that

plaintiff’s

contract

and

financial

mismanagement

claims, such as breach of contract and breach of the implied
covenants

of

good

faith

and

fair

dealing,

are

subject

to

arbitration because they are covered by the plain meaning of the

20

arbitration provision.8 Conversely, plaintiff’s NJLAD, assault,
and sexual battery claims are not covered when one examines the
contract terms, the surrounding circumstances, and the purpose of
the contract. Washington, 2011 WL 1402765, at *5. The arbitration
provision at issue qualifies the term “all controversies” with the
parenthetical
concerning

“including

any

account,

but

not

order,

limited
or

to,

controversies

transaction,

or

the

continuation, performance, interpretation, or breach of this or
any other agreement between you and us[.]” Graham Cert., Ex. 6.
The Court finds that the arbitration provision is not susceptible
of

an

interpretation

which

includes

claims

such

as

sex

discrimination, assault and sexual battery. Medtronic AVE, Inc. v.
Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir. 2001)
(“An order to arbitrate should not be denied unless it may be said
with

positive

susceptible

of

assurance
an

that

the

interpretation

arbitration
that

covers

clause
the

is

not

asserted

dispute.”) (citation omitted); see also Brayman Const. Corp. v.
Home Ins. Co., 319 F.3d 622, 626 (3d Cir. 2003) (stating that
allegations are arbitrable only if they “touch matters” covered by
the contract) (citation omitted). The Court agrees with plaintiff

8 While it is plaintiff’s position that all of the agreements are invalid
because they were signed under duress, plaintiff does not forcefully dispute
that her financial services claims fall within the scope of the arbitration
provisions.

21

that the term “all claims” within the arbitration agreement is
most plainly read to mean all “financial claims.” Pl.’s Opp. at 7.
To be sure, plaintiff would not have had contact with Graham but
for her financial services contracts. However, the resolution of
plaintiff’s claims of a sexual nature do not require reference to
her contracts. Although there is a modicum of overlap between
plaintiff’s financial and sexual claims, the claims are separate.
While

resolution

of

plaintiff’s

financial

claims

requires

reference to her contracts, this is not true of her other claims.
As a result, the Court finds with “positive assurance” that
plaintiff’s NJLAD, assault, and sexual battery claims are not
covered by the arbitration clauses.
The parties have not provided, and the Court is unable to
find, a case analyzing whether NJLAD, assault, and sexual battery
claims can be read to be covered by an arbitration provision
contained within a brokerage agreement. Nonetheless, cases in the
employment context are sufficiently analogous to provide guidance
here.
The same conclusion that NJLAD claims are not arbitrable was
reached in Washington v. CentraState Healthcare Sys., Inc., C.A.
No. 10-6279, 2011 WL 1402765 (D.N.J. Apr. 13, 2011). In that case,
the court considered whether an arbitration provision within an
22

employment agreement which covered “any dispute . . . arising out
of or related to this Agreement” could reasonably be read to
include an NJLAD claim. The court found that it could not and that
any alternative reading would “stretch the meaning of ‘arising out
of or relating to’ too far.” Washington, 2011 WL 1402765 at *5.
Additionally, the court cited to New Jersey Supreme Court precedent
which holds that courts will not assume employees intend to waive
their

statutory

rights

unless

the

agreement

so

provides

in

unambiguous terms. Id. at *6 (citing Garfinkel v. Morristown
Obstetrics & Gynecology Assoc., 168 N.J. 124 (2001)). Here, because
plaintiff’s arbitration provision cannot be reasonably read to
encompass NJLAD claims, and the provision does not unambiguously
require arbitration of plaintiff’s statutory claims, plaintiff’s
NJLAD claim is not subject to arbitration.
As to the other two claims at issue, courts are divided as to
whether claims akin to sexual battery and assault are independent
of an employment relationship and subject to arbitration. Compare
Jones v. Halliburton Co., 583 F.3d 228, 236 (5th Cir. 2009)
(employee’s claims of assault and battery were not “related to”
her employment and thus not arbitrable under the FAA) with Forbes
v. A.G. Edwards & Sons, Inc., C.A. No. 08–552, 2009 WL 424146, at
*8 (S.D.N.Y. Feb. 18, 2009) (employee’s sexual assault claim was
23

“related to” the plaintiff’s employment when committed by another
company employee at a work conference). With this context in mind,
the Court finds that plaintiff’s claims of sexual battery and
assault are further removed from the purview of a financial
agreement than is plaintiff’s NJLAD claim. The reference to “all
claims”

within

the

subject

arbitration

provision

cannot

be

reasonably interpreted to include plaintiff’s claims of assault
and

sexual

battery.

Thus,

these

claims

are

not

subject

to

arbitration.
In support of their assertion that “all claims” includes the
NJLAD, assault, and sexual battery claims, defendants cite to
Steigerwalt v. Terminix Int'l Co., LP, 246 Fed. Appx. 798 (3d Cir.
2007). In Steigerwalt, an employee claimed his employer committed
an intentional tort by directing him to handle toxic chemicals
without protective gear. Id. This case is distinguishable for at
least two reasons. First, the arbitration provision in Steigerwalt
explicitly stated that it applied to torts, thus the agreement
could be reasonably read to apply to torts. Here, the arbitration
provision at issue does not include the same explicit language.
Second, in Steigerwalt the referenced intentional tort did not
involve claims of sexual battery and assault. Steigerwalt did not
address allegations remotely similar to the instant case.
24

Further, the Court is not convinced by defendants’ argument
that plaintiff’s complaint concedes that all of her claims arise
out

of

and/or

relate

to

the

issues

surrounding

the

alleged

securities law violations. Defs.’ Br. at 9 n.4 (citing Compl. ¶ 12
(“All other state claims . . . may be permitted to be brought into
Federal Court, under 19 U.S.C. § 1367, as said claims arise out of
and/or relate to the issues surrounding the . . . Securities Law
violations.”)). The general references in plaintiff’s complaint do
not

amount

plaintiff’s

to

what

state

law

defendants
claims

suggest

are

–

subject

a
to

concession
the

that

arbitration

provision. Rather, plaintiff’s statement was made for purposes of
alleging

supplemental

jurisdiction.

Defendants

further

cite

plaintiff’s averment that, “[d]efendant Graham, in his capacity as
plaintiff’s financial broker and tax preparer . . . [coerced
plaintiff to submit] to defendant Graham’s sexual proclivities.”
Compl. ¶ 37. Again, this language does not lead the Court to
conclude that plaintiff conceded that the all of her claims are
subject to arbitration. In fact the opposite is true. Plaintiff is
contesting arbitration. The Court agrees with plaintiff that,
“depending on when and in what capacity Mr. Graham was in, at the
time of the alleged incident, is crucial in determining whether or
not

such

action

should

fall

under
25

the

alleged

arbitration

agreement.” Pl.’s Br. at 11. Therefore, in sum, plaintiff’s NJLAD
claim against all defendants and plaintiff’s assault and sexual
battery claims against Graham are not subject to arbitration.
Plaintiff’s remaining claims, which generally concern financial
mismanagement and tax-related issues, are subject to arbitration.
5. Bifurcation and Stay
Having determined that some of plaintiff’s claims are subject
to arbitration and some are not, the Court must decide whether
plaintiff’s non-arbitrable claims should be stayed pending the
results of her arbitration. FAA, 9 U.S.C. § 3 (authorizing court
to stay proceedings pending arbitration where any issue in suit is
referred to arbitration). “If the court orders arbitration, the
court on just terms shall stay any judicial proceeding that
involves a claim subject to the arbitration. If a claim subject to
the arbitration is severable, the court may limit the stay to that
claim.” N.J.S.A. 2A:23B–7(g); see also Edmondson v. Lilliston
Ford, Inc., --- Fed. Appx. ---, 2014 WL 6657065, at *2 (3d Cir.
Nov. 25, 2014) (“[T]he plain language of § 3 affords a district
court no discretion to dismiss a case where one of the parties
applies for a stay pending arbitration.”) (citing Lloyd v. Hovensa,
LLC, 369 F.3d 263, 269 (3d Cir. 2004)). Here, because the Court
has found some claims arbitrable it will stay plaintiff’s sexual
26

battery, assault and NJLAD claims. See N.J.S.A. 2A:23B–7(g). After
plaintiff’s financial mismanagement and tax-related claims are
arbitrated, the stay will be lifted so that plaintiff will be
permitted to litigate her non-arbitrable claims. Those claims will
be administratively terminated without prejudice to plaintiff’s
right

to

activate

the

litigation

after

the

arbitration

is

complete.9
CONCLUSION
In conclusion, the Court finds the following claims are not
subject to arbitration: (1) the NJLAD claim against all defendants;
(2) the sexual battery claim against Graham individually; and (3)
the

assault

claim

against

Graham

individually.

The

remaining

claims, asserted against all defendants, which generally concern
alleged financial and tax mismanagement, are arbitrable. The Court
will stay this civil action while the arbitrable claims are
arbitrated. An Order consistent with this Opinion follows.

s/ Joel Schneider
JOEL SCHNEIDER
United States Magistrate Judge
Dated: January 30, 2015

9 If the arbitrator rules that plaintiff’s contracts were signed under
duress and are therefore invalid, plaintiff may move to litigate all of her
claims in the re-opened case.

27