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ILLYES v. JOHN NUVEEN & CO.

November 19, 1996

JOHN W. ILLYES, JR., Plaintiff,
v.
JOHN NUVEEN & COMPANY, INC. JOHN NUVEEN & COMPANY, INC. EMPLOYEES' PROFIT SHARING PLAN PROFIT SHARING PLAN COMMITTEE AND EACH OF ITS MEMBERS, INCLUDING MICHAEL G. GAFFNEY, CHAIRMAN, ANNE T. GOETZ, LARRY W. MARTIN, EDMUND T. MEHRING, O. WALTER RENFFTLEN, and THOMAS SPALDING, Defendants.



The opinion of the court was delivered by: GETTLEMAN

 Plaintiff John W. Illyes, Jr. has filed a ten count amended complaint against his former employer, John Nuveen & Company, Inc. ("Nuveen"), the Nuveen Profit Sharing Plan, the John Nuveen Profit Sharing Plan Committee, and each of its members, (jointly as the "Plan Committee"), alleging violations of various sections of the Employment Retirement Income and Security Act ("ERISA") (Counts I through III); violations of the Americans With Disabilities Act ("ADA") (Count IV); violations of the Age Discrimination and Employment Act ("ADEA") (Counts V and VI). In Count VII, plaintiff seeks a declaratory judgment that his claims are not subject to the mandatory arbitration rules of the National Association of Security Dealers ("NASD"). Counts VIII through X are state law claims against Nuveen for libel, intentional infliction of emotional distress, and false light. Defendants have moved to strike certain portions of the complaint and to dismiss or stay this action and compel arbitration. For the reasons set forth below, defendants' motion to stay is granted in part, and the motions to strike and to compel arbitration are denied.

 FACTS

 Defendant Nuveen is a member of the NASD, a self-regulated organization under Section 28(b) of the Securities Exchange Act of 1934 that regulates investment brokers and broker-dealers. 15 U.S.C. § 78(b)(b)(1). On October 18, 1976, defendant hired plaintiff as a bond analyst. To be associated with a member of the NASD, plaintiff was required to and did execute a Uniform Application for Securities and Commodity Industry Representative and/or Agent (Form U-4) in March 1979. Defendant Nuveen has apparently filed two amendments to plaintiff's Form U-4, updating plaintiff's residential history and verifying that his registration remains current. Plaintiff did not sign any of those updates.

 Defendant fired plaintiff on January 17, 1995. On February 16, 1995, defendant executed a Form U-5, which states that plaintiff was discharged for "unsatisfactory performance."

 DISCUSSION

 To determine whether plaintiff's claims are arbitrable the court must determine: (1) whether there is an agreement to arbitrate; (2) whether the claims fall within the scope of the agreement; and (3) whether there was a waiver of the right to arbitrate. Wojcik v. Aetna Life Insurance and Annuity Co., 901 F. Supp. 1282, 1286 (N.D. Ill. 1995). "Arbitration is a matter of contract, and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 648, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986).

 In the instant case, plaintiff challenges both the existence of any agreement to arbitrate, and assuming an agreement, whether his claims fall within the scope of the agreement. It is undisputed that plaintiff has no contract with his employer, Nuveen, that contains an arbitration clause. Nor does the version of the Form U-4 that plaintiff signed in 1979 contain the standard arbitration provision contained in the current version. *fn1" The 1979 Form U-4 did contain, however, a compliance provision pursuant to which plaintiff agreed to:

 
"Abide by the statute(s), constitution(s), rules and bylaws as any of the foregoing may be amended from time to time, or the agency, jurisdiction, or organization with or to which you are filing or submitting this application."

 At the time plaintiff executed the Form U-4 the NASD had a code of arbitration procedures requiring arbitration of certain disputes. That code did not specifically provide for arbitration of disputes arising out of employment or termination of employment, and the Seventh Circuit has held that the code did not cover such disputes. See Farrand v. Lutheran Brotherhood, at 993 F.2d 1253 (7th Cir. 1993). After Farrand, however, the NASD amended its rules in October 1993 to specifically provide for arbitration of:

 
"any dispute, claim, or controversy . . . arising out of the employment or termination of employment of associated person(s) with any member."

 It is this version of the NASD code that was in effect at the time Nuveen terminated plaintiff.

 Plaintiff argues that because he never signed a document containing an arbitration clause, he had no agreement to arbitrate any dispute with defendants. Of course, a contract need not contain an explicit arbitration clause if it validly incorporates by reference an arbitration clause in another document. R. J. O'Brien & Associates, Inc. v. Pipkin, 64 F.3d 257 (citing Geldermann Inc. v. CFTC, 836 F.2d 310, 318 (7th Cir. 1987)). Defendants counter that the Form U-4 that plaintiff signed incorporated by reference the NASD rules, which contained an arbitration clause. Therefore, according to defendants, plaintiff did in effect agree to arbitrate certain disputes, and he also agreed to arbitrate any other disputes that the NASD required by later rule amendment.

 The Seventh Circuit has twice addressed this exact issue. In Geldermann, the plaintiff, Geldermann, was a member of the Chicago Board of Trade ("CBOT"), a commodities exchange. Geldermann sued CBOT, the Commodities Futures Trading Commission ("CFTC") and a customer, seeking to enjoin the exchange from requiring Geldermann to arbitrate a dispute with the customer. As a precondition of membership in CBOT, Geldermann had signed a written agreement to "observe and be bound by the Charter, Rules and Regulations of the Association, and all amendments subsequently made thereto." Subsequent to Geldermann's signing of the agreement and its admission as a CBOT member, CBOT amended its rules to include Regulation 620.01(B). By its prior agreement, Geldermann consented to ...


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