American Express v. Makarewisc

122 F.3d 936

• Court: Court of Appeals for the Eleventh Circuit
• Decided: September 9, 1997
• Docket: 96-3074
• Status: Published

Opinion

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 96-3074

D. C. Docket No. 95-1718-CIV-T-23A

AMERICAN EXPRESS FINANCIAL ADVISORS, INC. f.k.a. IDS FINANCIAL SERVICES, INC., and IDS LIFE INSURANCE COMPANY,

Plaintiffs-Appellants,

versus

DENNIS MAKAREWICZ, and TRAVIS TUCILLO,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Georgia

(September 9, 1997)

Before TJOFLAT and BARKETT, Circuit Judges, and HOWARD*, Senior District Judge. ___________________________ *Honorable Alex T. Howard, Jr., Senior U.S. District Judge for the Southern District of Alabama, sitting by designation. TJOFLAT, Circuit Judge:

American Express Financial Advisors, Inc. ("American

Express"), and IDS Financial Services, Inc. ("IDS") appeal the

district court's denial of injunctive relief and its

administrative closure of their lawsuit pending industry

arbitration. We hold that we lack jurisdiction over the appeal

from the district court's decision to compel arbitration as to

the damages claims. Regarding the district court's denial of

injunctive relief, however, we find that we have jurisdiction,

and we reverse.

I.

Appellants American Express and IDS provide financial

services and insurance to individual and organizational clients

nationwide. Appellees Dennis Makarewicz and Travis Tuccillo

worked as financial advisors for appellants until September 14,

1995, when they ended their relationships with American Express

and IDS and started their own financial consulting business.

According to the appellants' original complaint, filed October

16, 1995, Makarewicz and Tuccillo took approximately 200 of

appellants' clients with them when they left, departures which

allegedly resulted in the withdrawal of approximately $20 million

in investments managed by the appellants. In luring away these

customers, appellees allegedly violated contractual agreements

that they had signed as an original condition of employment by

2 appellants.1

1 Section IV(1) of the agreements signed by Makarewicz and Tuccillo stated, in part, the following:

(a) You must not . . . :

(1) Encourage or induce anyone to terminate an agreement with [American Express or IDS] without [American Express'] consent;

(2) Encourage or induce any Client to stop carrying out any action related to a Product or Service it acquired from or through [American Express] . . . ;

(3) Promote or make unwarranted claims against [American Express or IDS];

(4) Encourage or induce any Client to sell, surrender or redeem any Product or Service distributed or offered by [American Express or IDS] without [American Express'] consent.

(b) All of the above provisions apply while the Agreement is in effect and after it ends.

(c) All Records and Materials are the property of [American Express or IDS]. All rights to Records and Materials that you prepare or create in connection with the performance of this Agreement are hereby assigned to [American Express]. You agree that you will not reproduce or allow the reproduction of the Records and Materials in any manner whatsoever, except pursuant to written policy or consent of [American Express].

(d) . . . . Such Records and Materials are open to inspection by [American Express] at any time during your normal business hours. You must return them and all copies of them to [American Express] at any time on request. When this agreement ends, all of these items remain [American Express] property. You must return all of them, together with any licenses you have or control, without demand or compensation.

(e) While this agreement is in effect and after it ends, you agree that you will not reveal the contents of any [American Express] property or allow them to be revealed, except in connection with carrying out your duties under the Agreement. You will not reveal the names and addresses of [American Express] Clients or any other information about them, including financial

3 On October 16, 1995, appellants brought this diversity suit

against Makarewicz and Tuccillo in the United States District

Court for the Middle District of Florida. They sued for breach

of contract, misappropriation of trade secrets, breach of

fiduciary duty, conversion, and intentional interference with

prospective business relationships. Appellants sought both

injunctive relief and compensatory and punitive damages. With

regard to damages, however, the complaint admitted that

"[p]ortions of this dispute may be arbitrable pursuant to the

[National Association of Securities Dealers' ("NASD")] Code of

Arbitration Procedure." Nevertheless, appellants sought both

preliminary injunctive relief to preserve the status quo pending

arbitration and permanent injunctive relief for whatever claims

were not arbitrable.

information. You also will not reveal any of this information about potential Clients, to whom a presentation has been made by an [American Express] Planner, who might reasonably be expected to do business with [American Express or IDS]. You will not allow any of this information about Clients or potential Clients to be revealed.

(f) You agree that the identity of Clients and potential Clients is confidential information. For one year after this Agreement ends, you agree not to use any such information in connection with any business in competition with [American Express or IDS].

(g) For one year after this Agreement ends, you agree that you will not . . . directly or indirectly offer for sale, sell or seek an application for any Product or Service issued or provided by any company to or from a Client you contacted, dealt with or learned about while you represented [American Express or IDS] or because of that representation.

(emphasis added).

4 On October 17, appellees initiated NASD arbitration.2 On

October 18, appellants moved for a temporary restraining order

("TRO") pursuant to Fed. R. Civ. P. 65. On October 19, the

appellees moved for a hearing on this motion, and on October 27,

they moved for "an order pursuant to the Federal Arbitration Act

staying this action and compelling arbitration."3 The district

court granted the appellees' motion for a hearing on the issue of

preliminary injunctive relief. At the November 1, 1995 hearing,

the district court listened to the arguments of both sides, but

it did not rule on either the appellant's motion for a

preliminary injunction or the appellees' motion to compel

arbitration.

Months passed. On April 8, 1996, appellants moved for a

declaration that no elements of the dispute were subject to NASD

arbitration; they argued that the appellees had misrepresented

their standing to initiate NASD arbitration. The district court

did not respond. On June 30, 1996, the district court finally

issued a terse order in which it concluded that "all of the

2 Appellees have never answered the appellants' complaint. Instead, they have adopted the position, in response to various motions filed by the appellants, that all of the claims the appellants have asserted -- both legal and equitable - - are subject to mandatory NASD arbitration. 3 Appellees were apparently referring to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (1994) ("FAA"). Both parties apparently accept that this act applies to the present case, and we find no reason to disagree. See generally Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S. Ct. 1248, 1254, 103 L. Ed. 2d 488 (1989) ("It is undisputed that this contract falls within the coverage of the FAA, since it involves interstate commerce . . . .").

5 claims raised in this action are encompassed by the standard NASD

arbitration agreements executed by the parties." The court

reached this conclusion "[f]or the reasons discussed by the

defendants (1) in their October 27, 1995, memorandum, (2) at the

November 1, 1995, oral argument, (3) in their May 1, 1996,

memorandum opposing the plaintiffs' motion for a ruling of non-

arbitrability, and (4) in their other filings." The district

court therefore granted appellees' motion to compel arbitration

as to all claims and denied appellants' motion for injunctive

relief. The court administratively closed the case and removed

it from its docket. American Express and IDS took this appeal.

II.

As an initial matter, we must address our jurisdiction over

the present appeal. The FAA currently governs the appealability

of orders disposing of requests to compel arbitration. See 9

U.S.C. § 16 (1994). Section 16(b) of the act provides as

follows: "Except as otherwise provided in section 1292(b) of

title 28, an appeal may not be taken from an interlocutory order

. . . granting a stay of any action under section 3 of this title

. . . ." 9 U.S.C. § 16(b) (1994). The district court in this

case granted a stay under section 3 of the FAA.4 The district

4 Section 3 states the following:

If any suit or proceeding be brought in any of the courts of the Unites States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon

6 court did not certify this decision for interlocutory appeal

pursuant to 28 U.S.C. § 1292(b). Therefore, we have no

jurisdiction over the district court's decision to stay the

present action pending arbitration.5 We cannot, at present,

resolve the merits of the defendants' claims for relief.

We do have jurisdiction, however, to review the district

court's denial of appellants' request for preliminary and

permanent injunctions. The district court explicitly denied

appellants' motions for injunctive relief. As stated in 28

U.S.C. § 1292 (1994), the courts of appeals have jurisdiction

over "[i]nterlocutory orders of the district courts . . .

refusing or dissolving injunctions." § 1292(a)(1). Therefore,

we may review this aspect of the district court's order.

III.

being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . . .

9 U.S.C. § 3 (1994). Although the district court did not cite any authority for its order to stay the present action, section 3 clearly provided such authority. 5 Section 16(a)(3) provides the courts of appeals with jurisdiction over "a final decision with respect to an arbitration that is subject to this title." 9 U.S.C. § 16(a)(3) (1994). Appellants might argue that the district court's decision to submit appellants' claims to arbitration was a final decision. We have held, however, that "orders granting or denying requests to compel arbitration are not final decisions if entered in the course of ongoing actions for legal or equitable relief on the underlying claims." Thomson McKinnon Sec., Inc. v. Salter, 873 F.2d 1397, 1399 (11th Cir. 1989) (per curiam). Hence, we have no jurisdiction over this order.

7 The district court apparently denied appellants' motion for

preliminary and permanent injunctions on the ground that the NASD

arbitrator should decide this issue.6 When the district court

submitted appellants' equitable claims to the arbitrator, the

court in effect held that the parties had agreed to arbitrate the

question of injunctive relief. We reverse, however, because the

plain terms of the contracts in this case contradict the district

court's conclusion.

Under the FAA, upon motion of a party, district courts must

compel arbitration of all claims subject to arbitration. See

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 - 19, 105

S. Ct. 1238, 1241 - 42, 84 L. Ed. 2d 158 (1985). On the other

hand, "the FAA does not require parties to arbitrate when they

have not agreed to do so, . . . nor does it prevent parties who

do agree to arbitrate from excluding certain claims from the

scope of their arbitration agreement." Volt Info. Sciences, Inc.

v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S.

468, 478, 109 S. Ct. 1248, 1255, 103 L. Ed. 2d 488 (citations

omitted). Because parties are free to structure their

arbitration agreements as they see fit, "they may limit by

contract the issues which they will arbitrate." Id. at 479, 109 S. Ct. at 1256. "When deciding whether the parties agreed to

6 Because of its brevity, the district court's order is unclear on this point. One of the arguments made by appellees, however, was that appellants should seek injunctive relief from the NASD arbitrator rather than the district court. The court's order incorporated this argument by reference. We find that the district court denied appellants' request for injunctive relief because the court decided that this claim should be arbitrated.

8 arbitrate a certain matter . . . , courts generally . . . should

apply ordinary state-law principles that govern the formation of

contracts." First Options of Chicago, Inc., v. Kaplan, 514 U.S. 938, ---, 115 S. Ct. 1920, 1924, 131 L. Ed. 2d 985 (1995).

Under Florida law, the terms of the contract should control

where the rights and interests of the parties are definitely and

clearly stated. Atlanta & St. A.B. Ry. Co. v. Thomas, 53 So.

510, 513 (Fla. 1910). Section IV(3)(b) of the agreements signed

by Makarewicz and Tuccillo provided as follows:

If a dispute involving this Agreement is submitted for arbitration under the Code of Arbitration Procedure of the National Association of Securities Dealers or otherwise, you agree that [American Express] is entitled to an injunction from a court of competent jurisdiction to keep you from violating these restrictions while the arbitration is pending.

This provision leaves no room for ambiguity: the parties

intended to allow "a court of competent jurisdiction" -- the

United States District Court for the Middle District of Florida -

- to provide injunctive relief. Therefore, we hold that the

district court erred in denying injunctive relief on the ground

that the parties intended the arbitrator to decide whether to

grant such relief.7

7 Appellees might argue that the district court merely submitted to the NASD arbitrator the issue of who should decide whether appellants were entitled to an injunction. Given that their agreement indicates that they intended to arbitrate certain issues, appellees might argue that the issue of who should grant injunctive relief should be committed to the arbitrator in the absence of clear evidence that such issues should be decided by the district court. The Supreme Court, however, has held otherwise: "Courts should not assume that the parties agreed to arbitrate arbitrability unless there is 'clear and unmistakabl[e]' evidence that they did so." First Options of

9 IV.

On remand, the district court should determine as soon as

possible8 whether to grant appellants' request for preliminary and permanent injunctions. In conclusion, the appeal from the

district court's order staying appellants' damages claims is

DISMISSED, but the district court's order denying appellants'

requests for temporary and permanent injunctive relief is

REVERSED.

Chicago, 514 U.S. at ---, 115 S. Ct. at 1924 (quoting AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 106 S. Ct. 1415, 1418 - 19, 89 L. Ed. 2d 648 (1986)). We find, to the contrary, that the parties in this case deliberately assigned to the district court the question whether appellants would be entitled to injunctive relief. 8 Appellants' claims for temporary and permanent injunctive relief remained pending for 8½ months. The two provisions which barred appellees from competing with appellants, sections IV(1)(f) and IV(1)(g), by their terms lasted for only one year after the date of appellees' separation. By the time appellants reached oral argument before this court, therefore, the two provisions central to their claim for injunctive relief had been mooted -- principally because of the district court's delay in ruling on their motions. Luckily for appellants, the one-year time bar did not apply to all of the provisions of their agreements with appellees. It is these remaining provisions which the district court must consider on remand.