Dillard v. Security Pacific

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 1, 1996
• Docket: 95-20503
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 95-20503 Summary Calendar _____________________

CARVEL G. DILLARD,

Plaintiff-Appellant,

versus

SECURITY PACIFIC CORPORATION, MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., SECURITIES INDUSTRY ASSOCIATION, INC., SECURITY PACIFIC BROKERS, INC., FINANCIAL CLEARING AND SERVICES CORPORATION, JENKENS & GILCHRIST, A PARTNERSHIP, JENKENS & GILCHRIST, A PROFESSIONAL CORPORATION,

Defendants-Appellees.

_______________________________________________________

Appeal from the United States District Court for the Southern District of Texas (CA-H-88-2848) _______________________________________________________

April 18, 1996 Before REAVLEY, SMITH and PARKER, Circuit Judges.

PER CURIAM:*

Plaintiff-appellant Carvel Gordon Dillard challenges orders

compelling arbitration with defendants Merrill Lynch, Pierce,

Fenner & Smith, Inc. (Merrill Lynch), Security Pacific

Corporation, Security Pacific Brokers, Inc., Financial Clearing

* Pursuant to Local Rule 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in Local Rule 47.5.4. and Services Corporation (FCSC), and Jenkens and Gilchrist (J&G),

(collectively, Security Pacific). Dillard also challenges an

order granting summary judgment to Security Industry Association,

Inc. (SIA), a trade association for the securities industry.

Finally, Dillard challenges the denial of his motions for partial

summary judgment and for a preliminary injunction. We affirm.

I.

The lengthy factual and procedural history of Dillard’s

three federal lawsuits is detailed in Dillard v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 961 F.2d 1148 (5th Cir. 1992)

(Dillard II), cert. denied, 506 U.S. 1079 (1993), and Dillard v.

Security Pacific Brokers, Inc., 835 F.2d 607 (5th Cir. 1988)

(Dillard I). Dillard brought suit against the defendants in

1985, 1986, and 1988. This appeal concerns the 1988 suit.

Dillard’s causes of action against the various defendants arose

from trades in margins and options that Merrill Lynch and

Security Pacific made for Dillard in 1983 and 1984. Before

Dillard opened margin and option accounts at the two firms he

signed agreements requiring disputes to be resolved through

2 arbitration.1 The central issue in the case is whether the

arbitration clauses are enforceable.

A. Merrill Lynch

In his first amended complaint, Dillard asserted causes of

action against Merrill Lynch for malicious prosecution, abuse of

process, defamation and violations of RICO, civil rights, and

antitrust laws. Merrill Lynch filed a motion to compel

arbitration, and an alternative motion for summary judgment. The

district court granted the motion to compel arbitration, denied

as moot the motion for summary judgment, and dismissed the suit

against Merrill Lynch. We affirm these orders of the district

court.

1 Paragraph 11 of the Customer Agreement with Merrill Lynch states:

It is agreed that any controversy between us arising out of your business or this agreement shall be submitted to arbitration conducted under the provisions of the Constitution and Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc., as the undersigned may elect.

Dillard’s customer agreement and margin agreement with Security Pacific Brokers contain the following:

To the extent permitted by law, any controversy arising out of or relating to any of my account(s) with FiCS or this agreement, shall be submitted to arbitration conducted under the Constitution and Rules of the Board of Governors of the New York Stock Exchange Inc. or the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc. or the arbitration panel of any other exchange which has jurisdiction over the transaction in dispute[.]

3 Merrill Lynch and Dillard signed a contract requiring

arbitration of disputes. Dillard does not deny that the language

of the arbitration clause is broad enough to cover the claims he

has made against Merrill Lynch. In order to have his case heard

in court, the party resisting arbitration “must make at least

some showing that under prevailing law, he would be relieved of

his contractual obligation to arbitrate if his allegations proved

to be true.” Dillard II, 961 F.2d at 1154. Dillard argues

that the arbitration provision is unenforceable because it is an

unconscionable provision in an adhesion contract, and because it

is the product of an antitrust conspiracy. These arguments

failed in Dillard II, and they fail again here. Id. at 1153-55.

Adhesion contracts are not automatically unenforceable; the

party seeking to avoid one must generally show that it is

unconscionable. Id. at 1154. Dillard II rejected the argument

that arbitration clauses in the securities context are

unconscionable as a matter of law, 961 F.2d at 1154-55, and

Dillard failed to produce evidence that the agreement to

arbitrate was unfair, oppressive, or made under duress. In fact,

Dillard admitted that he never even negotiated to have the

arbitration clauses removed from either the Merrill Lynch or the

Security Pacific contracts.2

2 In a hearing and in his deposition, Dillard stated that at Merrill Lynch he inquired generally about whether the contract could be changed, but admitted that he did not attempt to negotiate for a change in the arbitration clause, by offering, for example, to pay a higher charge for trades. Dillard also admitted that he made no attempt to change the arbitration clause at Security Pacific.

4 Dillard’s argument that an antitrust conspiracy renders the

arbitration clause unenforceable is likewise without merit. Even

if such an antitrust conspiracy existed, “this finding would not

compel the invalidation of the agreement to arbitrate . . . .”

Dillard II, 961 F.2d at 1155.

Dillard argues vociferously that the arbitration clause

violates his Seventh Amendment right to jury trial. This

argument is meritless. Private actors such as Merrill Lynch and

Security Pacific cannot violate Dillard’s constitutional rights,

and in Dillard II this court held that “the Seventh Amendment

does not preclude ‘waiver’ of the right to jury trial through the

signing of a valid arbitration agreement.” 961 F.2d at 1155

n.12. Dillard argues that enforcement of contractual arbitration

clauses violates the Seventh Amendment where the contract is one

of adhesion and there is a great disparity of bargaining power.

Even if Dillard correctly states the law, his argument fails for

the reasons given above: Dillard has produced no evidence that

the clause is unconscionable, oppressive, or was made under

duress.

Because Dillard failed to show that he would be relieved of

his contractual obligation to arbitrate, and because all of his

claims are arbitrable, his claims were properly ordered to

arbitration.

5 B. Security Pacific

Dillard asserted claims for malicious prosecution, abuse of

process, defamation, and violations of RICO, Hobbs Act, civil

rights laws, and antitrust laws, against Security Pacific, Inc.,

Security Pacific Brokers, Inc., and Financial Clearing & Services

Corp. (FCSC). Dillard has agreed to arbitrate his claims against

these entities. Dillard asserted all but the antitrust claims

against J&G, with whom he opposes arbitration.

Dillard’s claims against J&G are based on acts J&G took as

an agent of Security Pacific Brokers in matters related to

Dillard’s margin and option accounts. Claims against an agent of

a signatory to an arbitration agreement are arbitrable if such

claims fall within the scope of the arbitration agreement.

Taylor v. Investors Assoc., Inc., 29 F.3d 211, 213 (5th Cir.

1994) (defendant’s motion to compel arbitration must be granted

where the defendant is an agent or third-party beneficiary of an

arbitration agreement between the plaintiff and a co-defendant).

Because claims against J&G fall within the scope of the

arbitration agreement, the district court properly issued orders

compelling arbitration of those claims, dismissing the case

against the Security Pacific defendants and J&G, and denying

these defendants’ motion for summary judgment.

6 C. Securities Industry Association, Inc. (SIA)

Prior to Dillard II, the district court had dismissed the

antitrust claims against SIA for failure to state a claim. In

Dillard II, this court reversed after noting that Dillard was not

required to produce facts to support his allegations at that

stage in the proceedings. Dillard II, 961 F.2d at 1159. Dillard

filed an amended complaint in 1993, asserting causes of action

for antitrust and RICO violations against SIA. SIA moved for

summary judgment on the antitrust and RICO claims on January 20,

1994, and the district court granted the motion on March 27,

1995. Dillard now appeals. We review de novo the district

court’s order granting summary judgment.

Under Fed. R. Civ. P. 56(c), the moving party bears the

initial burden of demonstrating an absence of a genuine issue for

trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 106

S.Ct. 1348, 1355-56 (1986). Once the moving party has met its

burden, the non-movant must come forward with specific,

admissible evidence demonstrating a genuine issue of material

fact for trial. Matsushita, 106 S.Ct. at 1356.

In order to prevail on his antitrust claim, Dillard must

prove (1) the existence of a conspiracy (2) affecting interstate

commerce (3) that imposes an unreasonable restraint of trade.

Dillard II, 961 F.2d at 1158. If defendants had no rational

economic motive to conspire, and if their conduct is consistent

with equally plausible, legal explanations, the conduct does not

7 give rise to an inference of conspiracy. Matsushita, 106 S.Ct.

at 1356. To survive a motion for summary judgment, Dillard must

present evidence that tends to exclude the possibility that the

alleged conspirators acted independently. Id. SIA submitted

evidence that brokerage firms use arbitration because it is a

quicker and less expensive way to resolve litigation. This meets

SIA’s burden under Rule 56(c).

Dillard failed to present any evidence of an alleged

conspiracy, admitting in his deposition that he lacks specific

facts to support his assertion that SIA and its members conspired

to establish adhesion arbitration clauses in brokerage contracts.

Dillard also admitted that SIA had no control over its members

and did not compel members to include arbitration clauses in

their contracts governing margin and option accounts.

Dillard argues, however, that sufficient discovery has not

been conducted, and that the district court’s denial of

additional time for discovery was an abuse of discretion. This

contention is meritless. The district court points out that this

case has been pending for seven years and related litigation for

ten years. SIA responded to Dillard’s discovery requests and he

served no additional requests on SIA for more than a year before

the judge ruled on SIA’s motion for summary judgment. Dillard

filed no Rule 56(f) affidavit, and although his response to SIA’s

motion for summary judgment detailed discovery that Dillard

believed should have been produced by SIA and Merrill Lynch, he

never explained why the information was essential to justify his

8 opposition to SIA’s motion, as Rule 56(f) requires. See Fed. R.

Civ. P. 56(f). Dillard was particularly concerned about copies

of newsletters, bulletins, and letters allegedly sent from SIA to

the membership “exhorting them to adopt the model [arbitration]

clause.” Dillard failed to establish, in his motion opposing

summary judgment or elsewhere, how an exhortation to adopt an

arbitration clause gives rise to an inference of antitrust

conspiracy. Simply put, Dillard has failed to present any

evidence that tends to exclude the possibility that the alleged

conspirators acted independently. See Matsushita, 106 S.Ct. at

1356 (requiring antitrust plaintiffs to come forward with such

evidence or lose on summary judgment). For all of these reasons,

the district court did not abuse its discretion in ruling on the

motion for summary judgment before allowing Dillard additional

time for discovery.

Because Dillard did not introduce evidence raising a fact

issue about the existence of a conspiracy, the district court

properly granted summary judgment on Dillard’s antitrust claims.

Dillard’s RICO claims fail for the same reason. To establish a

RICO claim, a plaintiff must allege and prove the commission of

at least two predicate acts. 18 U.S.C. §§ 1962, 1961(5). The

predicate acts Dillard alleged all depended on violations of the

antitrust laws. Dillard’s failure to establish an antitrust

violation requires summary judgment on the RICO claims as well.

9 D. Denial of Dillard’s Preliminary Injunction

On July 27, 1994, Dillard moved for a preliminary injunction

proscribing monopolization and barring the enforcement of

arbitration clauses if brokerage firms required traders to sign

them as a precondition to trading in securities. The district

court denied the injunction without entering findings of fact or

conclusions of law, as required by Fed. R. Civ. P. 52(a).

Dillard appeals the denial of his motion and the failure to enter

findings of fact and conclusions of law. We have jurisdiction

over the ruling on the preliminary injunction.3 We review the

district court’s denial of a preliminary injunction for abuse of

discretion. Lakedreams v. Taylor, 932 F.2d 1103, 1107 (5th Cir.

1991).

The prerequisites for a preliminary injunction are:

(1) substantial likelihood of success on the merits; (2) irreparable injury; (3) the threatened injury outweighs the damage the injunction may cause the opposing party; and (4) no adverse effect on the public interest.

Id.

3 After the district court denied Dillard’s motion for a preliminary injunction, Dillard timely filed motions for new trial and amendment of the judgment under rules 52(b) and 59. The district court denied these motions on March 27, 1995, the same date on which it issued the final orders forming the basis of this appeal. Dillard again timely moved for new trial or reconsideration under rules 52(b) and 59, which motions the district court again denied. Dillard then timely appealed to this court. Furthermore, while the preliminary injunction is moot with regard to SIA, it is not moot with regard to Merrill Lynch and Security Pacific.

10 Dillard cannot prove irreparable injury because he has an

adequate remedy at law--namely, arbitration and this action for

damages--and because he waited nearly six years to request

injunctive relief, strongly implying that delay was not causing

irreparable harm. See, e.g., Oakland Tribune, Inc. v. Chronicle

Pub. Co., 762 F.2d 1374, 1377 (9th Cir. 1985) (long delay implied

lack of irreparable harm in newspaper’s action for Sherman Act

antitrust violation). As our discussion above demonstrates,

Dillard also cannot prove substantial likelihood of success on

the merits.

When it denied the injunction, the district court failed to

enter findings of fact and conclusions of law, as required by

Fed. R. Civ. P. 52(a). Dillard timely filed motions under Rule

52(b) and 59, asking the court to reconsider or clarify its

ruling on the preliminary injunction, and also filed a motion for

partial summary judgment. The district court denied these

motions after entering findings of fact and conclusions of law in

its final orders of March 27, 1995, the orders from which Dillard

now appeals. These findings of fact and conclusions of law

suffice under Rule 52(a).

II.

For the foregoing reasons, we AFFIRM the orders of the

district court (1) compelling arbitration with Merrill Lynch,

Security Pacific, and Jenkens & Gilchrist; (2) granting summary

11 judgment to SIA; and (3) denying Dillard’s motions for a

preliminary injunction and partial summary judgment.

AFFIRMED.