Next, Lehman contends that the NYSE arbitration fee structure justifies confining non-members to brokers or dealers. Lehman asserts that Rule 629 (i) sets lower filing fees for "customer" arbitration claims than for what the firm declares are non-member "industry claims." See 2 N.Y.S.E. Guide (CCH) P 2629 (Nov. 1995). The firm submits that the NYSE's use of the terminology " industry claims" shows that the Exchange considers non-members to mean securities-related personnel only.
Lehman is wrong. Rule 629(i) has nothing to do with non-member claims, and therefore sheds no light on the definition of "non-member" in Rule 600(a). While Rule 629(i) does state that customer claims are, logically, those brought by customers, industry claims are defined as those submitted by a NYSE "member, allied member, registered representative, member firm or member corporation against a public customer or other non-member." 2 N.Y.S.E. Guide (CCH) P 2629 (emphasis added). The word "industry" in Rule 629(i) thus refers to the fact an industry entity or person, specifically a NYSE member, initiated the action. Consistent with its duty to protect investors, the NYSE could very well have determined that it should be easier, i.e., less expensive, for customers than for NYSE members to compel arbitration.
Finally, even if this Court were to find the word "non-member" ambiguous, the Supreme Court requires all doubts, including those concerning contract language, to be resolved in favor of arbitration. Moses H. Cone, 460 U.S. at 24-25. This Court must send parties to arbitration unless it is certain that the asserted dispute falls outside the scope of the agreement. AT&T Tech, Inc., 475 U.S. at 650. Far from being positive that the term "non-members" excludes Investors, the Court finds that they fit comfortably within its definition.
2. Alternatively, Investors Are Customers
Nor can the Court positively conclude that Investors are not customers. Neither the NYSE nor the courts have defined "customer" as used in Rule 600(a). And the term's lay usage is not decisive. Dictionaries differ on its scope; while the American Heritage Dictionary broadly includes within customer "[a] person with whom one must deal," Webster's confines the term to "one that purchases usually, systematically or frequently a commodity or service" or "one that is a patron." The American Heritage Dictionary 357 (2d College ed. 1982); Webster's New Collegiate Dictionary 280-81 (1973). Still, the ordinary use of the word "customer" contemplates, for example, the person who spends time browsing in a department store, but decides not to buy.
Lehman, however, contends that under Rule 600(a), a person is a customer only with respect to the firm that sold the person the security. Because Investors did not purchase the GACC stock from Lehman, the firm argues that they are not its customers.
Lehman cites Wheat, First Sec., Inc. v. Green, 993 F.2d 814, 819-20 (11th Cir. 1993) to strengthen its position. But that decision did not clarify the meaning of the word "customer." It merely specified that customer status is determined at "the time of the occurrence of events that constitute the factual predicate for the causes of action contained in the arbitration complaint." Id. at 819-20. Because Wheat, First had "absolutely no relationship" with the defendant investors at the time of the misconduct they sought to arbitrate, the investors could in no sense of the word be called the firm's customers. Id. at 818. Here, by contrast, Investors clearly had some kind of relationship with Lehman at the time its employees were providing them with false and misleading information.
Defining customers to include not only those who executed purchases with member firms, but also those who maintained a less formal business relationship at the time of the alleged misconduct, furthers NYSE policy and recognizes market reality. The Seventh Circuit noted in Carlson v. Bear, Stearns, & Co., 906 F.2d 315, 318 (7th Cir. 1990) that the sale of securities "is usually a rather complex and convoluted transaction which requires the expertise and involvement of several parties to succeed." To allow Lehman to solicit Investors using allegedly bad market information without repercussion defeats the NYSE's goals of "maintaining high standards of commercial honor and integrity among its members." NYSE Const. art. I, § 2. The Court has considered these goals, along with the federal mandate to resolve all doubts in favor of arbitration. In doing so, the Court finds that permitting Investors to compel arbitration as "customers" upholds the parties' reasonable expectations.
The Court finds as follows: first, the parties have agreed to arbitrate under NYSE Arbitration Rule 600(a); second, Investors' claims are within the scope of the Rule. Having met both prongs of the arbitrability test, Investors are entitled to pursue their claims before the NYSE's arbitral body. Investors' cross-motion for summary judgment is therefore granted. Because Investors may arbitrate their claims against Lehman, Lehman's request for a permanent injunction and declaratory judgment to the contrary is denied. For the same reason, Lehman's cross-motion for summary judgment is denied.
The Clerk of the Court is hereby directed to enter final judgment in favor of all defendants and against the plaintiff.
United States District Judge
September 5, 1996
JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to a hearing before the Court. The issues have been heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED Pursuant to this Court's Memorandum Opinion and Order entered on September 5, 1996, Summary judgment is entered in favor of the defendants, Certified Reporting Company, James K. Arthur, Aquarius Travel Agency, Inc., John J. Henely as trustee of the John J. Heneley, Ltd. Profit Sharing and Pension Plan, John J. Henely, Ltd., Fred M. Parker, Louise Parker, Leonard S. Bird, Jr., Jacob J. Ivezich and Donna Ivezich and against the plaintiff, Lehman Brothers, Inc. Lehman Brothers, Inc.'s request for a permanent injunction and declaratory judgment is denied.
This cause of action is dismissed in its entirety. There being no just reason for delay, this is a final and appealable order.
September 5, 1996