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BEVERE v. OPPENHEIMER & CO.

April 18, 1994

JOHN BEVERE; SALVATORE BEVERE; THOMAS McKINNEY; STEPHEN SCURKO; EDWARD WISNIEWSKI, Plaintiffs
v.
OPPENHEIMER & CO., Defendant


STANLEY R. CHESLER, U.S. Magistrate Judge, Hon. Harold A. Ackerman


The opinion of the court was delivered by: STANLEY R. CHESLER

STANLEY R. CHESLER, U.S. Magistrate

 I. Introduction

 This matter comes before the Court on the motion of defendant, Oppenheimer & Co., to stay the action now pending before the district court and to compel arbitration. This motion was referred to the undersigned by the Honorable Harold A. Ackerman, U.S.D.J. Oral argument was first heard on September 13, 1993, at which time the Court, following the decision of the United States Court of Appeals for the Third Circuit in Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923 (3d Cir. 1985), held that the statutory ERISA *fn1" claims involved in the action were not subject to arbitration and therefore denied defendant's motion.

 Subsequently, the Third Circuit issued its decision in Pritzker v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993), which overruled Barrowclough in part and held that statutory ERISA claims may be subject to arbitration under section 2 of the Federal Arbitration Act ("FAA"), codified at 9 U.S.C. § 1 et seq., if there is no dispute as to the formation of the agreement to arbitrate. The district court therefore vacated this Court's decision of September 13, 1993, and remanded the action for proceedings consistent with Pritzker. Order of Hon. Harold A. Ackerman, Civ. No. 93-1925 (HAA) (Nov. 18, 1993) (unpublished).

 The Court again heard oral argument on defendant's motion to stay the action and compel arbitration on January 24, 1994. At the conclusion of oral argument, the Court ordered the parties to make additional submissions to the Court. The parties provided their submissions in February, 1994, and no further oral argument was heard.

 II. Background

 Plaintiffs filed this action pursuant to 29 U.S.C. §§ 1109 and 1132, claiming that defendant breached statutorily imposed fiduciary obligations it owed to plaintiffs in its role as account advisor of Micro Products Engineering Company Profit-Sharing Retirement Plan, which all parties agree is an employee benefit plan, within the meaning of 29 U.S.C. § 1002, subject to the provisions of the federal Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 829, codified as amended at 29 U.S.C. § 1001 et seq. Specifically, plaintiffs, who are plan participants and beneficiaries, claim that defendant breached its statutory fiduciary duties to plaintiffs by permitting the sole shareholder of Micro Products Engineering Co. to borrow against the plan assets and to divert those funds to the corporation.

 The background of this case is complicated, but only a brief recitation is necessary here. On August 1, 1965, plaintiffs began to participate in a profit-sharing plan provided by their employer, Micro Products Engineering Company. On July 8, 1986, Micro Technology Co., a corporation wholly owned by William Helbling, purchased the assets of Micro Profits Engineering Co. and, over the next two years, Helbling contributed a total of $ 1,033.21 to plaintiffs' profit-sharing plan.

 On May 16, 1990, Helbling, acting on behalf of Micro Products, filed for bankruptcy protection pursuant to chapter 11 of the United States Bankruptcy Code. *fn2" This filing was later converted a liquidation proceeding pursuant to chapter 7 of the United States Bankruptcy Code.

 In March, 1991, Helbling, whom defendant contends was the plan administrator of plaintiffs' profit-sharing plan, opened an investment account in the plan's name with defendant Oppenheimer Co. In July, 1991, Helbling (on behalf of the plan) and Oppenheimer & Co. executed a customer agreement containing an arbitration clause that provided in relevant part:

 
26. ARBITRATION AND GOVERNING LAW. Arbitration: By maintaining my account with you, I/we agree to submit all controversies with you to arbitration in accordance with the provisions set forth below. . . .
 
All controversies which may arise between us concerning any transaction or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on, or subsequent to the date hereof, shall be determined by arbitration in accordance with the Federal Arbitration Act to the fullest extent permitted by law. The arbitration shall be determined only before, and in accordance with the rules then in effect of, either the New York Stock Exchange, Inc. or the National ...

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