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PANEK v. BOGUCZ

May 10, 1989

THEODORE K. PANEK, Plaintiff,
v.
JOHN BOGUCZ and PAINEWEBBER INC., Defendants



The opinion of the court was delivered by: BISSELL

 This matter arises before the Court on the basis of a motion by defendants John Bogucz, account executive, and Painewebber, Inc. for dismissal of Count II of the complaint (an alleged violation of section 12(2) of the Securities Act of 1933, 15 U.S.C. § 77 (l); and a cross-motion by plaintiff Theodore Panek for a determination that his claim under the same section is not subject to arbitration.

 On July 15, 1988, plaintiff Panek filed a complaint that contained several allegations. Plaintiff charged that defendants had violated (1) § 10(b) and Rule 10b-5 of the Securities and Exchange Act of 1934 (SEA) (Count I); (2) section 12(2) of the Securities Act of 1933, 15 U.S.C. § 77l (Count II); (3) certain rules of the National Association of Securities Dealers (NASD) and the Chicago Board Options Exchange (CBOE) (Count III); and (4) common law fraud, breach of fiduciary duty, negligence and negligent misrepresentation (Counts IV, V and VI).

 Following a hearing on August 29, 1988, the Court ruled on initial motions and cross-motions, relating both to the arbitrability and the admissibility of Count II of the complaint. The pertinent text of that order follows:

 
1. The plaintiff's motion and application to bar and enjoin the pending arbitration [of all counts of the complaint] from proceeding and for an order determining that the parties are not obligated to arbitrate pursuant to a written provision in the account agreements between them is DENIED: and it is
 
2. FURTHER ORDERED, that defendants' cross-motion to compel arbitration is GRANTED as to all counts except Count Two which purports to assert claims under Section 12(2) of the Securities Act of 1933; and plaintiff (should he desire not to waive arbitrable claims not already asserted in the pending arbitration) shall make prompt application in those proceedings to amend and expand his claims, said application to be considered and ruled upon by the arbitrator; and it is
 
. . .
 
4. FURTHER ORDERED, that unless Count Two is withdrawn by the plaintiff prior thereto, the defendants shall cause to be filed on or before September 15, 1988 a motion returnable October 24, 1988 to strike or dismiss plaintiff's claim under Section 12(2) of the Securities Act of 1933 for failure to state a claim upon such other basis as defendants may deem appropriate, and that on or before October 3, 1988, plaintiff shall file his memorandum in opposition to such motion and shall further cross move for an order determining that plaintiff's claim under Section 12(2) of the Securities Act of 1933 is not subject to the arbitration agreement between the parties, and defendants' memorandum in opposition to plaintiff's cross-motion shall be received on or before October 14, 1988; and it is
 
5. FURTHER ORDERED, that the within action be and the same hereby is stayed in all respects pending the Court's resolution and disposition of the motions aforestated in paragraph 4 of this Order.

 Order of Sept. 6, 1988, pp. 2, 3.

 Pursuant to the Court's order, defendants brought the present motion for dismissal of Count II or, in the alternative, for summary judgment. Plaintiff has moved for a determination of non-arbitrability of Count II. The Court's analysis will begin with defendants' motion to dismiss or for summary judgment. If that motion is granted, it will be unnecessary to rule on the question of non-arbitrability.

 DISCUSSION

 A. Dismissal and Summary Judgment Motions

 Under Rule 8(a) of the Federal Rules of Civil Procedure, "a pleading which sets forth a claim for relief, . . . shall contain . . . (2) a short and plain statement of the claim showing that the pleader is entitled to relief." Although motions to dismiss for failure to state a claim are generally viewed by the courts with disfavor, Madison v. Purdy, 410 F.2d 99, 100 (5th Cir. 1969), and it is the policy of the federal rules to determine actions on their merits, Oil, Chemical and Atomic Workers International Union v. Delta Ref. Co., 277 F.2d 694, 698 (6th Cir. 1960), when the allegations of the complaint are viewed in the light most favorable to the plaintiff, but still demonstrate no cognizable claim, dismissal is to be granted. Richardson v. Pennsylvania Department of Health, 561 F.2d 489, 492 (3d Cir. ...


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