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Littman v. Witter

February 14, 2001


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4271-99.

Before Judge Stern, A. A. Rodríguez and Collester.

The opinion of the court was delivered by: Stern, P.J.A.D.


Argued November 8, 2000

Plaintiff, Jonathan K. Littman, appeals from an order entered on August 6, 1999, compelling him "to arbitrate his claims against Defendants in the National Association of Security Dealers, Inc. ["NASD"] in accordance with the terms of the executed Form U-4" and dismissing his complaint, and from an order of September 14, 1999, denying his motion for reconsideration. Plaintiff's complaint alleged violations of the Conscientious Employee Protection Act ("CEPA"), N.J.S.A. 34:19-1 et seq. He asserts that "the reason for plaintiff's termination . . . was the result of plaintiff's refusal to participate in the 'Monopoly Game'" which is "nothing more than an unsophisticated company-wide policy of institutional tax fraud," resulting from a fabrication of expense receipts in exchange for cash.*fn1

Plaintiff argues that the trial court erred in dismissing the CEPA count because he "is only required to submit to arbitration those claims for which the NASD requires arbitration," that the NASD rules do not require litigation of statutory discrimination claims including CEPA claims, and that "even if [a] CEPA claim is not a 'statutory employment discrimination claim[,]' [it] is still not subject to arbitration." Hence, the principal issue before us, in plaintiff's words, "is whether a claim under [CEPA] is a 'statutory employment discrimination claim' as that phrase is defined by the [NASD]."


For purposes of the defendants' "motion to compel arbitration," we must accept the following facts as asserted by plaintiff. Plaintiff was hired by defendant Morgan Stanley Dean Witter ("MSDW") as a financial advisor in 1997. He received "positive performance reviews" in 1997 and 1998, and was ranked "seventh (7th) nationally in his graduating class of one hundred forty seven." In fact, "[h]e was even recruited [by MSDW] to give a speech . . . at the firm's next training class" for new broker dealers.

Plaintiff claims that in or about December 1988, he expressed concern to defendant Richard Less, MSDW's Fairfield branch manager, regarding "the legality of an employee bonus program called the 'Monopoly Game.'" Specifically, plaintiff questioned the fact "that the fabrication of expense receipts in exchange for cash was in violation of the federal tax code as he understood it." Less had allegedly been previously notified of the concern by Colleen McLaughlin, a sales assistant in the Fairfield office, "as early as September 1998." Plaintiff further contends that on or about December 7, 1998, he informed Less of his intention to marry McLaughlin and that Less responded by saying that plaintiff "could no longer work with McLaughlin." Plaintiff was terminated shortly thereafter, he says "in or about December of 1998," for "insubordination."*fn2 At that time, plaintiff was informed that he would have to "turn over" his "book of clients" to MSDW. He claims that when he refused to do so, Less contacted the Fairfield Police who escorted plaintiff out of the building.


"The NASD is a self-regulatory organization of securities brokers and dealers, as defined by 15 U.S.C.A. § 78c(a)(26), subject to regulation by the Securities and Exchange Commission ("SEC"). [See 15 U.S.C.A. § 78o-3 et seq.] See generally []15 U.S.C. § 78[a] et seq." Young v. Prudential Ins. Co. of Am., Inc., 297 N.J. Super. 605, 609 (App. Div.), certif. denied, 149 N.J. 408 (1997). The NASD Code of Arbitration Procedure has been promulgated by the NASD of which defendant MSDW is a member. Plaintiff was required to register with the NASD as a condition of employment. In so doing, he was required to sign the "Uniform Application for Securities Industry Registration or Transfer" Form ("Form U4") which reads, "THE APPLICANT MUST READ THE FOLLOWING VERY CAREFULLY." Immediately following this instruction, the Form U-4 provides the following:

I swear or affirm that I have read and understand the items and instructions on this form and that my answers (including attachments) are true and complete to the best of my knowledge. I understand that I am subject to administrative, civil or criminal penalties if I give false or misleading answers.

The Form U-4 further provides:

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations indicated in Item 10 as may be amended from time to time . . . .

In Item 10 of the Form U-4, plaintiff registered with the NASD and agreed to be bound by the NASD Code.

Rule 10201(a) of the NASD Code identifies the controversies that are subject to mandatory arbitration, as follows:

Except as provided in paragraph (b), a dispute, claim, or controversy eligible for submission under the Rule 10100 Series between or among members and/or associated persons, and/or certain others, arising in connection with the business of such member(s) or in connection with the activities of such associated person(s), or arising out of the employment or termination of employment of such associated person(s)

with such member, shall be arbitrated under this Code at ...

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