The opinion of the court was delivered by: Debevoise, Senior District Judge
This matter is before the court on Defendants', Siebert & Co. ("Siebert"), Gerard Koske, Ronald Bono, Muriel Siebert ("Ms. Siebert") and National Financial Services LLC ("NFS"), motion to dismiss Plaintiff's, Andrew Walzer ("Plaintiff"), Complaint or in the alternative to stay the action or in the alternative to transfer it to the Southern District of New York. Siebert is a stock brokerage firm. NFS is a clearing broker for smaller stock brokerage firms, including Siebert. Koske is a compliance manager at Siebert; Bono is Vice President of operations at Siebert; and Ms. Siebert is chair and majority owner of Siebert.
Plaintiff filed this lawsuit against Defendants alleging the issuance of improper margin calls resulting in the sale of securities in his Siebert account. Specifically, Plaintiff alleges that having traded on margin for twenty years, he was not subject to the margin requirements of Siebert or NFS, because he did not sign a margin agreement. Defendants' motion is based in part on their contention that the claims contained in Plaintiff's Complaint are barred by, inter alia, the doctrine of res judicata and collateral estoppel. For the reasons set forth herein, Defendants' motion to dismiss will be granted and the Complaint dismissed with prejudice.
Plaintiff, having opened a personal brokerage account with Siebert in 1980, was a client with Siebert for approximately 20 years. His investing activities over the years involved both cash and margin accounts. In 1982, Plaintiff signed an options agreement for his personal brokerage account and it was at that time that he was informed that he would be given margin privileges per the options agreement. Plaintiff contends that in mid-2002, Siebert arbitrarily changed the rules it previously followed governing his margin account. The basis of the change, he claims, was an agreement Siebert claimed he made, but an agreement that Siebert refused to show him.*fn1 The alleged change raised Plaintiff's margin-maintenance requirements and permitted discretionary margin calls. At some point, Plaintiff's account became unstable and as a result, he received numerous margin-call letters and phone calls from Siebert requesting that additional cash be deposited in his account in order to avoid sell-out.*fn2 Many of Plaintiff's securities and stocks were sold by issuing the margin calls and the sales resulted in significant losses.
Siebert relied on Plaintiff's 1992 Margin Account Application. Directly above Plaintiff's signature the agreement states in capital letters:
I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS (ON THE REVERSE SIDE OF THIS DOCUMENT) AS CURRENTLY IN EFFECT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME. THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION CLAUSE WHICH IS ENCLOSED. I ACKNOWLEDGE RECEIPT OF THE PREARBITRATION CLAUSE.
On or about December 4, 2003, Plaintiff filed an action against Siebert in the New York State Supreme Court alleging, inter alia, the improper sale of his securities and the mailing by Siebert of a fraudulent, forged account and margin agreement. The complaint in the New York action listed the securities that Plaintiff complained were improperly sold on margin calls and claimed they had a total value of $803,258. The court held a hearing*fn3 to determine whether Plaintiff and Siebert had agreed to arbitrate per the 1992 arbitration clause. On December 21, 2004, the court rendered a decision holding that Plaintiff had agreed to arbitrate the issues enumerated in the New York action. The court's opinion read, in part, as follows:
Plaintiff argues: 1) that because his prior agreements with the defendants did not contain pre-dispute arbitration clauses, he did not agree to arbitration; 2) that he did not read the margin agreement and therefore it is unenforceable; and 3) that his signature on a subsequent 1996 account is a forgery and this somehow taints the enforceability of the 1992 agreement to arbitrate.
At the outset, it is important to note that Mr. Walzer holds a graduate degree in business from New York University and also operates his own manufacturing and importing company. (Walzer Trans. 53, 11. 8- 17). He has had at least three additional accounts, one for his corporation and two for his children. Each of these accounts contain similar arbitration clauses.
As a business major, plaintiff knew or should have known that his failure to read the agreement before signing it was not a defense to this action. As a business major, Mr. Walzer knew or should have known that the 1992 Agreement superseded the 1980 and 1982 agreements. And finally as a business major, Mr. Walzer knew or should have known that if the 1996 agreement was [sic], which contained an arbitration clause, was a forgery and voided, the 1992 agreement would be in full force and effect, which would of course compel arbitration.
This court finds Mr. Walzer's testimony, and the positions he has taken in this litigation, incredible. The court is of the belief that Mr. Walzer was aware of and consented to arbitration.
The court is aware that Mr. Walzer and indeed many investors are distrustful of the arbitration process in the securities industry. However, the Federal Arbitration Act manifests a liberal federal policy favoring arbitration agreements (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991)), and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration" (Flanagan v. Prudential-Bache Securities, 67 N.Y.2d 500 (1986). Similarly, "it is the strong public policy of this State to favor the resolution of disputes in arbitration as a means of conserving scarce judicial resources" (Bank of Tokyo-Mitsubishi, Ltd. v. Kvaerner, 243 AD2d 1, 9 [1st Dept. 1998]).
Accordingly, the cross-motion of the defendant to compel arbitration is granted and the ...