the contract possessed actual or apparent authority so as to bind the corporation to an agreement to arbitrate. Id. 636 F.2d at 55. In fact the Par-Knit court held that:
A party may, in an effort to avoid arbitration, contend that it did not intend to enter into the agreement which contained an arbitration clause. A naked assertion however, by a party to a contract that it did not intend to be bound by the terms thereof is insufficient to place in issue "the making of the agreement" for the purposes of Section 4 of the Federal Arbitration Act. An unequivocal denial that the agreement had been made, accompanied by supporting affidavits, however, in most cases should be sufficient to require a jury determination on whether there had in fact been a "meeting of the minds." quoting, Introcean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673 (2d Cir. 1972).
This is not a case where plaintiff disputes the existence of the arbitration agreement, but rather a case where the plaintiff challenges the scope of the arbitration clause. In Par-Knit, the jury was confined to determining whether the agent had the authority to bind the corporation to arbitration, since if he did not, no agreement would exist. There, the jury had no role in determining the scope of the arbitration agreement itself. In this case, plaintiff's "beliefs" surrounding the execution and scope of the arbitration clause are distinguishable from the Par-Knit situation and are insufficient to raise a jury question as to the existence of the arbitration agreement itself.
Moreover, because plaintiff's defense that she was fraudulently induced into signing the arbitration agreement is unsupported both factually and legally, it must also fail.
Plaintiff's fraudulent inducement claim can only stand if she can demonstrate reliance on an affirmative false representation or the withholding of the truth when it should have been disclosed. See, Costello v. Porzlet, 116 N.J. Super 380, 282 A.2d 432 (1971), and Fidelity & Deposit Co. of Maryland v. Hudson United Bank, 493 F. Supp. 434, 440 (D.N.J. 1980).
Plaintiff attempts to support her fraudulent inducement claim in paras. 10-15 of her Affidavit. But the Affidavit is barren of any facts constituting a false or misleading statement by Smith Barney -- either as to the Form U-4 itself or as to any inducement to sign the form. Thus plaintiff is unable to demonstrate any reliance on an affirmative false representation. See generally, Costello v. Porzlet, supra.
In addition, plaintiff has failed to present any legal support establishing that Smith Barney had a duty to disclose or to explain the existence or scope of the Form U-4 arbitration clause. As a matter of law, brokers are not required to disclose or explain arbitration clauses to customers. Rush v. Oppenheimer & Co., Inc., 681 F. Supp. 1045, 1052 (S.D.N.Y. 1988), citing, Pierson v. Dean Witter Reynolds, Inc., 742 F.2d 334, 339 (7th Cir. 1984). It stands to reason then that the duty to disclose would be even less in the case of parties dealing at arms length; i.e. the plaintiff and defendant in this case.
Lastly, even if Smith Barney had explained the scope of the arbitration clause to plaintiff, the end result would have been the same; the execution of a Form U-4 is not unique to Smith Barney employees and it is not optional. It is an SEC industry-wide requirement, a prerequisite to registration with any securities firm. Thus, plaintiff could not have been fraudulently induced into signing this document or could not have detrimentally relied on any affirmative representations rendered by Smith Barney. The Form U-4 is not promulgated by Smith Barney and Smith Barney has no authority to rewrite or otherwise amend the Form U-4. Smith Barney is bound by the terms of the Form U-4 to the same extent as plaintiff is bound.
Finally, plaintiff maintains that it is contrary to public policy to compel arbitration in Title VII actions. In support of her position plaintiff relies on Swensen v. Management Recruiters International, Inc., 858 F.2d 1304 (8th Cir. 1988), cert. denied, 493 U.S. 848, 107 L. Ed. 2d 102, 110 S. Ct. 143 (1989), and Alexander v. Gardner Denver Co., 415 U.S. 3694 S. Ct. 1011, 39 L. Ed. 2d 147 (1974). However, I find plaintiff's argument to be unpersuasive in light of the Supreme Court's recent decision in Gilmer v. Interstate/Johnson Lane Corp., U.S. , 111 S. Ct. 1647, 114 L. Ed. 2d 26, (1991). That case held that an age discrimination claim brought by a former registered securities representative under the Age Discrimination in Employment Act of 1967 (ADEA) was subject to compulsory arbitration through the Federal Arbitration Act because of the mandatory arbitration clause found in the securities registration Form U-4.
Moreover, in the wake of Gilmer, two District Court decisions denying a request for compulsory arbitration under a Form U-4, were reversed and remanded. See, Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229 (5th Cir. 1991) and Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305 (6th Cir. 1991). In fact, on remand, the Alford Court wasted little time in reversing its prior decision and held that Title VII claims are subject to arbitration under the Federal Arbitration Act, pursuant to the plaintiff's securities registration application with the NYSE and NASD. The Alford Court concluded:
Because both the ADEA and Title VII are similar civil rights statutes, and both are enforced within the EEOC, compare 29 U.S.C. § 626 with 42 U.S.C. § 2000e-5, we have little trouble concluding that Title VII claims can be subjected to compulsory arbitration. Any broad public policy arguments against such a conclusion were necessarily rejected by Gilmer.
Id., 939 F.2d at 230.
In Willis, the Sixth Circuit reversed its prior decision and compelled arbitration of a Title VII claim pursuant to a Form U-4 executed by the plaintiff in 1982. Interestingly, the Form U-4 in Willis was identical to the one executed by the plaintiff in this action.
While the Third Circuit has not had the opportunity to rule on this issue since Gilmer, I find no reason not to follow the rationale of the Fifth and Sixth Circuits with regards to compelling arbitration of Title VII actions. Therefore I conclude that it is not contrary to public policy to compel arbitration of Title VII claims.
Based upon the foregoing defendants' motion to dismiss the complaint is denied; however, their request for compulsory arbitration is granted. An appropriate order shall follow.
DATED: April 8, 1992
WILLIAM G. BASSLER, U.S.D.J.