For a third-party to enforce a contract, the parties to that contract must have intended to "confer a benefit on him when contracting; it is not enough that some benefit incidental to the performance of the contract may accrue to him." Lester, 676 F. Supp. at 484 (citation omitted). Third-party beneficiary status has been conferred previously on an introducing broker and a broker-dealer in almost identical circumstances to those present in this case. In Ziegler, the court, analyzing an identical Cowen account agreement, found that the broker-dealers had third- party beneficiary status based on the provision contained in the agreement which made the arbitration clause applicable to a broker-dealer. 786 F. Supp. at 743. In making its determination, the court also noted that the plaintiff admitted that the arbitration clause applied to Cowen's relationship with the broker-dealers and that several documents notified the plaintiff of the existence of a relationship between the clearing broker and the broker-dealers. Id. Finally, the court concluded that the language in the agreement was clear and unambiguous, and therefore the plaintiff was "presumed to have read and assented to its terms, including the arbitration provisions." Id.
The instant case falls squarely within the facts and holding of Ziegler. The Whislers do not dispute that they signed the account agreement containing a clause stating that "the terms and conditions of this agreement, including the arbitration provision, shall be applicable to all matters between such other broker dealer and me." (emphasis added). Furthermore, they cannot be heard to claim that they did not know that a relationship existed between Meyers and Cowen. When Mr. Robinson first contacted Mr. Whisler, he identified himself as an employee of Meyers. Complaint P 8. Furthermore, Mr. Robinson contacted Mr. Whisler on several subsequent occasions to discuss trades. Id. P 10. The Whislers also received quarterly statements from Meyers which detailed their account activity and listed Mr. Robinson's name with the label of "account executive" at the top of those statements. Plaintiffs' Resp., Ex. A. Based on these contacts, the Whislers had sufficient indication that Meyers and Mr. Robinson were acting as their direct broker-dealers. Yet they also knew, even before they signed the account agreement, that Cowen acted as the clearing broker for Meyers.
In a Meyers statement covering the period from June to September, 1993, there is a notice which states "when submitting a deposit or payment to your account, please make your check payable to 'Cowen & Co."; our clearing firm where your account is held." Plaintiffs' Resp., Ex. A. Hence, the Whislers had notice prior to signing the account agreement that Cowen was the clearing broker for Meyers.
As the court found in Ziegler, the language of the arbitration clause itself and the provision making it applicable to "such other broker-dealer" is clear on its face. The Whislers have not claimed that the defendants engaged in any fraud or misconduct in connection with the signing of this agreement, and thus they are "conclusively presumed to know its [the agreement's] contents and assent to its terms." Ziegler, 786 F. Supp. at 743. Given the surrounding circumstances, the general reference to the defendants as broker-dealers in the account agreement permits them to invoke the arbitration clause. See id.
Scope of the Arbitration Clause
The Whislers also argue that, regardless of the applicability of the arbitration clause to the defendants, the clause does not apply to the transactions conducted prior to their signing of the account agreement. Essentially, they contend that these trades fall outside the scope of the clause. I disagree.
Under the Federal Arbitration Act (FAA), 9 U.S.C. § 2 (1994), which applies to this case, a strong presumption in favor of arbitration exists, and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. . . ." Moses H. Cone Mem'l Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24-25, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). The arbitration clause at issue states that it will apply to " any controversy arising out of or relating to any of my accounts . . . ." (emphasis added). Such a statement "speaks in terms of relationships and not timing," and therefore, the transactions that occurred prior to the signing of the account agreement also must be submitted for arbitration. See Rand Bond of No. Amer., Inc. v. Saul Stone & Co., 726 F. Supp. 684, 687-88 (N.D. Ill. 1989) (Shadur, J.); see also Trott v. Paciolla, 748 F. Supp. 305, 308-09 (E.D. Pa. 1990) (holding that "if this contention has any merit at all, it addresses the scope of the arbitration clause, and is therefore an issue for the arbitrators"). Consequently, the Whislers' argument that the arbitration clause cannot be applied retroactively must fail. See Zink v. Merrill Lynch Pierce Fenner & Smith, Inc., 13 F.3d 330, 333-34 (10th Cir. 1993); R.M. Perez & Assocs. v. Welch, 960 F.2d 534, 539 (5th Cir. 1992); Shotto v. Laub, 632 F. Supp. 516, 522 (D. Md. 1986) (holding that "whether plaintiffs signed the agreements before or after opening their accounts, or even before or after the claims arose, does not change the fact that they signed written agreements to arbitrate claims arising out of their account").
For the foregoing reasons, the defendants motion to compel arbitration is granted. Accordingly, I also will grant their motion to stay the proceedings in this Court. The plaintiffs motion for leave to take depositions is denied.
Elaine E. Bucklo
United States District Judge
Dated: December 23, 1996