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RYAN v. LISS

April 7, 1988

Frank J. Ryan and Evelyn M. Ryan, Plaintiffs,
v.
Liss, Tenner & Goldberg Securities Corp., et al., Defendants


Wolin, Alfred M., U.S.D.J.


The opinion of the court was delivered by: WOLIN

In June, 1983, plaintiff Frank J. Ryan and Evelyn M. Ryan opened an account with defendant Liss, Tenner & Goldberg Securities Corporation (LTG), in order to purchase and sell stocks and bonds. LTG required the Ryans to execute three separate forms as part of the process of opening their account. The first form was a basic information sheet which required personal data and an investment objective. The second form, preprinted on Bradford Broker Settlement, Inc. letterhead, constituted the Customer's Agreement for Cash and/or Margin Accounts (Customer Agreement). In pertinent part that form states:

 
ARBITRATION OF DISPUTES
 
Any controversy arising out of or relating to any account(s) of the undersigned [plaintiffs], transactions with you on behalf of the undersigned, or this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules, then in effect, of the National Association of Securities Dealers, Inc., the Board of Governors of the New York Stock Exchange, or the arbitration panel of any other exchange which has jurisdiction over the transaction in dispute, as the undersigned may elect . . . . It is understood that this Agreement to arbitrate does not constitute a waiver of the right to a judicial forum where such waiver would be void under the securities laws and specifically does not prohibit the undersigned from pursuing any claim or claims arising under the federal securities laws in any court of competent jurisdiction.

 The third and final form signed by the Ryans was the joint account agreement, which in general, set forth the obligations and liabilities of the parties and which in relevant part, directly above the date and signature of the parties, states:

 On or about April 12, 1985, LTG sold plaintiffs Wichita County Texas Health Facilities 12% bonds, due December 1, 2011. These bonds were originally issued in 1983 by an instrumentality of the State of Texas, and the State of Texas authorized the issuance through the Texas Health Facilities Development Act, Article 1528 Vernon's Annotated Texas Civil Statutes, as amended. The purpose of the bonds was to finance a residential and health care facility for aged Texans in Wichita Falls, Texas.

 On March 31, 1986, plaintiffs filed a complaint against LTG with the New Jersey Superior Court, Law Division, sitting in Passaic County, which alleged a series of state law claims arising from a dispute between the parties in connection with the Wichita bonds transaction.

 On May 6, 1986 LTG made a written demand upon plaintiffs that they submit their dispute to arbitration pursuant to the arbitration clause in the Customer Agreement. Plaintiffs did not respond to LTG's demand.

 LTG thereafter moved in the state court to compel arbitration. Plaintiffs opposed LTG's motion and cross-moved for leave to amend their complaint in order that they might add several federal causes of action. The court granted LTG's motion on June 18, 1986 and denied plaintiff's cross-motion on July 18, 1986.

 On April 10, 1987 plaintiffs filed this action against LTG in the United States District Court, District of New Jersey. The complaint sets forth a series of purported violations of federal securities laws and other federal statutes based upon the Wichita bonds transaction.

 Currently before the court is defendant's motion to compel arbitration and/or for summary judgment dismissing plaintiffs' claims. Defendants move to compel arbitration of this matter on the grounds that there has already been a finding that a valid arbitration agreement exists between the parties, that such agreement has been held to apply to the controversy between the parties in connection with the Wichita bonds transaction and that the Federal Arbitration Act requires the arbitration agreement to be enforced. In addition, defendants contend that the federal securities claims and the RICO claim are not excepted from the arbitration agreement. For the reasons set forth below defendants' motion is granted.

 DISCUSSION:

 Defendants first contend that plaintiffs should not be permitted to relitigate issues which have already been decided in the prior state court proceedings. In particular, defendants assert that any debate as to whether the arbitration clause in the Customer Agreement Form is enforceable by LTG has been determined, in favor of LTG, by the state court. As a result, defendants argue that any claims brought by the plaintiffs in the present action which are ...


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