Ryoti v. Paine, Webber, Jackson & Curtis, Inc.

371 N.W.2d 454, 142 Mich. App. 805

• Court: Michigan Court of Appeals
• Decided: May 8, 1985
• Docket: Docket 78512
• Status: Published

Opinion

Per Curiam.

This is an action for wrongful termination of employment. Plaintiff Ronald Ryoti worked for defendant Paine, Webber, Jackson & Curtis, Inc., and was registered with the New York Stock Exchange. To become registered with the exchange, plaintiff Ronald Ryoti had to sign an arbitration agreement which stated, in part, that any dispute between members of the exchange must be submitted to an arbitration panel which is selected by the exchange. While plaintiff Ronald Ryoti signed this agreement at work, he had the opportunity to take it home and review it. He also took classes in which this agreement was explained before becoming registered with the exchange. Plaintiff Ronald Ryoti argued that the agreement was a contract of adhesion and, therefore, unenforceable. The lower court held a hearing pursuant to GCR 1963, 116.3, and found that the arbitration agreement was valid. The lower court granted accelerated judgment in favor of defendant. Plaintiffs now appeal as of right.

Plaintiffs first argue that the lower court erred in finding that the agreement to arbitrate was not a contract of adhesion. Plaintiffs rely on Hope v Superior Court of Santa Clara County, 122 Cal App 3d 147; 175 Cal Rptr 851 (1981), in which an identical arbitration agreement with the New York Stock Exchange was found to be a contract of adhesion. In Hope, the Court found that the agreement was offered on a take-it or leave-it basis, that the bargaining strength of the brokerage firm was patently greater than that of the employee and that the provision for arbitration was unconscionable in that the arbitration body was so associated with a party to the contract that it was presumptively biased in favor of that party. We initially note that this state uses a similar standard for determining whether a contract is adhesive. In Barck v Grant State Bank, 137 Mich App 440, 445-446; 357 NW2d 872 (1984), this Court stated the standard we must apply:

"Plaintiffs’ second argument is that, even if the challenged clause of the mortgage agreement does not violate MCL 438.31c(2); MSA 19.15(1c)(2), it is unenforceable because the agreement was a contract of adhesion. The two-pronged test for determining whether a contract is one of adhesion and unenforceable is:

" '(1) What is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?; (2) Is the challenged term substantively reasonable?’ Allen v Michigan Bell Telephone Co, 18 Mich App 632, 637; 171 NW2d 689 (1969), lv den 383 Mich 804 (1970).

Even if the contract is adhesive under the first prong, still the challenged term is enforceable if it is substantively reasonable and not oppressive or unconscionable. Allen, supra, p 638; Brown v Siang, 107 Mich App 91, 107; 309 NW2d 575 (1981).”

As in Barck, plaintiffs in the instant case raised a genuine issue of material fact as to whether the arbitration agreement with the New York Stock Exchange was adhesive. It is undisputed that, if plaintiff Ronald Ryoti wished to be employed with defendant, he had to sign the agreement. Plaintiffs, however, have failed to make a showing that evidence existed making the substantive reasonableness of the arbitration agreement a genuine issue.

In a similar case, the Court in Drayer v Krasner, 572 F2d 348, 359-360 (CA 2, 1978), found that the New York Stock Exchange’s arbitration tribunals were not so unfair as to be invalid under antitrust laws:

"We do not think that, absent evidence of actual unfairness in the operation of the NYSE arbitration tribunals, cf. Paramount Famous Lasky [Corp v United States, 282 US 30, 35-36; 51 S Ct 42; 75 L Ed 145 (1930)], their composition is so improper as to invalidate the program under the antitrust laws. The mere fact that the three members not engaged in the securities business are drawn from a panel appointed by the Chairman of NYSE does not reflect upon their fairness in a dispute between a member and a registered representative; the arduous and generally thankless task of acting as an arbitrator represents rendition of a service rather than receipt of a perquisite. Such difficulty as exists comes from the required presence of a member of NYSE and another person 'engaged in the securities business,’ who, of course, could be a registered representative but apparently rarely is. The Special Study [2 Report of Special Study of Securities Markets, pp 559-561 (1963)] noted the composition of the arbitration tribunal in controversies between members and nonmembers without objection. It also noted that for the years 1957-1961, the claimant had prevailed in 53 cases and had lost in 69. 13 Registered representatives have a trade association, the Association of Investment Brokers, see Jacobi [v Bache & Co, Inc, 520 F2d 1231, 1235 (CA 2, 1975)]; presumably the Association would have complained to the SEC if it believed the arbitration procedure was working unfairly. On what we have before us we cannot say that NYSE’s compulsory arbitration procedure for disputes between members and registered representatives was so far beyond the area of permissible self-regulation as to violate the rule of reason._

Similarly, we find the reasoning in Parr v Superior Court of San Mateo, 139 Cal App 3d 440; 188 Cal Rptr 801 (1983), persuasive on this issue. In Parr, the court noted that there was a presumptive bias against the New York Stock Exchange’s arbitration proceeding but that the fairness of the exchange’s rules governing arbitration rebutted this presumption. Likewise in the instant case, we find that the procedures employed by the exchange at least possess minimum levels of integrity and therefore any presumption of bias is rebutted. 1 Therefore, absent evidence of actual unfairness in the operation of the New York Stock Exchange’s arbitration tribunals, we find that the arbitration agreement plaintiff Ronald Ryoti signed is valid. The lower court, therefore, did not err in granting accelerated judgment on this issue.

Plaintiffs next argue that, since Ronald Ryoti’s discharge from employment is contrary to public policy, this dispute should not be submitted to arbitration. While this state recognizes a cause of action for wrongful discharge where the discharging of an employee is contrary to public policy, Suchodolski v Michigan Consolidated Gas Co, 412 Mich 692; 316 NW2d 710 (1982), the question of whether this discharge was improper goes to the merits of plaintiffs’ claim and should be settled pursuant to the arbitration agreement._

Plaintiffs next argue that the fact that the New York Stock Exchange determines the composition of the arbitration panel denies to plaintiff Ronald Ryoti his right to a fair decision maker and thus violates his right to due process. As we previously noted, the exchange’s arbitration tribunals seem to be fair and impartial. Drayer, supra. We also find that the procedures for selecting the arbitrators do not deprive plaintiff of a fair decision maker. Morris v Metriyakool, 418 Mich 423; 344 NW2d 736 (1984). In Morris, the Supreme Court found that the fact that a physician was required to sit on an arbitration panel that was to determine whether another physician was negligent did not deprive the plaintiff of the right to a fair decision maker. Likewise, in the instant case, the fact that the exchange chooses the composition of the arbitration panel does not deprive plaintiffs of their due process right. The exchange’s rules governing arbitration sufficiently meet due process standards.

Plaintiffs next argue that there was no bargained-for consideration given in exchange for the agreement to arbitrate. Plaintiff Ronald Ryoti’s employment with defendant was conditioned on his becoming registered with the New York Stock Exchange. To become registered with the exchange, plaintiff Ronald Ryoti had to sign the arbitration agreement. The fact that he did not sign the arbitration agreement until two weeks after he began working for defendant does not show a failure of consideration. Clearly plaintiff Ronald Ryoti was aware that he needed to satisfy the requirements to become registered with the exchange when he began employment with defendant. Plaintiffs’ reliance on Higgins v Monroe Evening News, 404 Mich 1; 272 NW2d 537 (1978), is misplaced. In that case, there was a dispute as to whether a contract of employment existed. In this case, it is undisputed that there was a contract of employment. Ruffin v Mercury Record Productions, Inc, 513 F2d 222 (CA 6, 1975), is also distinguishable. In that case, an oral promise made by the employer after a written contract had been signed was found to be unsupported by consideration. In the instant case, plaintiff Ronald Ryoti signed a written arbitration agreement which became part of his employment contract. In fact, his employment was conditioned upon his signing this agreement. Under these circumstances, it is clear that the arbitration agreement was supported by consideration.

After considering all of plaintiffs’ arguments, we find that the lower court properly granted accelerated judgment in favor of defendant.

Affirmed.

13 FjVe of these decisions were in disputes between members, allied members, and member organizations. Aside from these cases, most claimants were nonmembers. Special Study, supra, at 560. Focusing on the record for the years 1960-61, the Commission noted the impartiality of both the arbitration director and the arbitrators. Id., at 561.

"Eight of the controversies during the period covered, not included in these figures, were between firms and registered representatives. The Special Study does not indicate how these were decided.”

1 It is unsettled as to who has the burden of proving the validity of the arbitration agreement. This issue was not settled in Morris v Metriyakool, 418 Mich 423; 344 NW2d 736 (1984), as defendant argues. Defendant’s citation, 418 Mich 439, is to an opinion which was only signed by two justices. Two other justices found that this issue was not properly raised on appeal. 418 Mich 474.