Simmen v. Lehman Bros.

663 N.E.2d 71, 278 Ill. App. 3d 573, 215 Ill. Dec. 321, 1996 Ill. App. LEXIS 150
CourtAppellate Court of Illinois
DecidedMarch 20, 1996
DocketNo. 1 — 95 — 0629
StatusPublished

This text of 663 N.E.2d 71 (Simmen v. Lehman Bros.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Simmen v. Lehman Bros., 663 N.E.2d 71, 278 Ill. App. 3d 573, 215 Ill. Dec. 321, 1996 Ill. App. LEXIS 150 (Ill. Ct. App. 1996).

Opinion

JUSTICE CERDA

delivered the opinion of the court:

Plaintiff, Robert Simmen IV, appeals from the order of the circuit court of Cook County granting the motion of defendants, Lehman Brothers, Inc., and Don Dalis, to stay proceedings on plaintiff’s complaint pending arbitration. Plaintiff, a stock broker, filed a tort action for intentional interference with his economic rights against his former employer and a branch office manager. Plaintiff argues that his complaint arose out of defendants’ conduct after his employment as a broker ended and was therefore not required to be arbitrated pursuant to New York Stock Exchange Rule 347.

I. FACTS

Plaintiff’s complaint alleged that he had been employed as a broker selling securities by Lehman, a securities brokerage firm. As part of his employment plaintiff signed a U-4 form, which stated in part:

"I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register, as indicated in item 10 as may be amended from time to time.”

In May 1993 plaintiff allegedly was allowed to resign. Defendant Lehman Brothers indicated on a National Association of Securities Dealers Form U-5 that plaintiff voluntarily resigned. New York Stock Exchange Rule 345.17(a) required that the reasons for the discharge or termination of employment of any registered person be reported to the New York Stock Exchange on a U-5 form. 2 N.Y.S.E. Guide (CCH) j[2345.17 (March 1995).

After plaintiff left employment with Lehman, he was offered a position with Prudential-Bache Securities, but the day following the offer plaintiff was advised that the firm could not hire him. Plaintiff allegedly was told that the Prudential firm had called Dalis, plaintiff’s supervisor, who allegedly said that Lehman intended to amend the U-5 form "regarding plaintiff’s separation.” Dalis allegedly had the intent to prevent Prudential-Bache Securities from hiring plaintiff. Defendants never actually amended the U-5 form. Plaintiff claimed injury from the statement and sought recovery for damages to his reputation.

Defendants moved to stay the circuit court proceedings pending arbitration before the New York Stock Exchange on the basis that plaintiff had agreed that any controversy between him and Lehman arising out of employment or termination of employment be arbitrated. The motion to stay proceedings was based on provisions of both the United States Arbitration Act of 1925 (9 U.S.C.A. § 1 et seq. (West 1970)), and the Uniform Arbitration Act as adopted in Illinois (710 ILCS Ann. 5/1 et seq. (Michie 1993)).

On January 13, 1995, the trial court granted defendants’ motion to stay proceedings pending arbitration. Plaintiff then appealed.

II. ANALYSIS

Plaintiff argues that the trial court erred in ruling that New York Stock Exchange Rule 347 (NYSE Rule 347) mandated arbitration of his claim because he contends that the arbitration contract was no longer in effect after he resigned and because the agreement did not cover claims that arose after termination of his employment with Lehman.

The stay was granted pursuant to the United States Arbitration Act of 1925, which provides for a stay of the trial of an action involving arbitrable issues (9 U.S.C.A. § 3 (West 1970)) where the arbitration contract evidences a transaction involving commerce (9 U.S.C.A. § 2 (West 1970)). The intent of the Act was to move the parties out of court and into arbitration as quickly and easily as possible. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 22, 74 L. Ed. 2d 765, 784, 103 S. Ct. 927, 940 (1983). Any doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration. Moses, 460 U.S. at 24-25, 74 L. Ed. 2d at 785, 103 S. Ct. at 941. If the Act applies, it is a question of federal law whether an issue is arbitrable. Schooley v. Merrill Lynch, Pierce Fenner & Smith, 867 F. Supp. 989, 991 (W.D. Okla. 1994).

NYSE Rule 347 was made applicable to this case by the U-4 form plaintiff signed. The rule provides:

"Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member or member organization shall be settled by arbitration, at the instance of any such party, in accordance with the arbitration procedure prescribed elsewhere in these rules.” 2 N.Y.S.E. Guide (CCH) p347 (March 1995).

NYSE Rule 347 is not limited to controversies occurring during employment. The rule could apply to require arbitration of disputes arising after termination of employment because the rule has broad language that covers controversies arising either out of employment or out of the termination of employment.

The leading case of Morgan v. Smith Barney, Harris Upham & Co., 729 F.2d 1163, 1166-67 (8th Cir. 1984), rejected the timing of the conduct involved in the dispute as dispositive. Plaintiff in that case alleged that another employee stated to plaintiffs former customers that he had caused plaintiff’s demise and that he was investigating plaintiff’s books, and that he attempted to elicit complaints from plaintiffs former customers. Plaintiff also alleged that his superiors falsely stated that his broker’s license was suspended and that plaintiff stole property from the desks of other employees.

The Morgan court noted the analysis that tortious conduct arising after termination was not arbitrable for the sole reason that it arose after termination of employment; the court specifically rejected this analysis. Morgan, 729 F.2d at 1166-67. Plaintiffs claims in that case implicated his former customers, and the statements concerned the status of his broker’s license and his handling of customer accounts. Morgan, 729 F.2d at 1167. A primary issue in resolving these claims was the truth of these statements. Morgan, 729 F.2d at 1167. The court found that there was a significant relationship between plaintiffs claims and his employment. Morgan, 729 F.2d at 1167. The court concluded that other than the count alleging the falsity of statements that he stole property, the dispute arose out of either plaintiffs employment or termination of employment. Morgan, 729 F.2d at 1168. No customers or securities agencies were implicated in the theft claim.

Numerous other cases have found claims arising out of various allegedly unlawful conduct occurring after the termination of employment to be arbitrable under NYSE Rule 347. Saari v. Smith Barney, Harris Upham & Co., 968 F.2d 877, 883 (9th Cir. 1992) (former employer stated that plaintiff had stolen money belonging to a client from another employee’s desk); Fleck v. E.F.

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Bluebook (online)
663 N.E.2d 71, 278 Ill. App. 3d 573, 215 Ill. Dec. 321, 1996 Ill. App. LEXIS 150, Counsel Stack Legal Research, https://law.counselstack.com/opinion/simmen-v-lehman-bros-illappct-1996.