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KATCHEN v. SMITH BARNEY

August 2, 2005.

SAMUEL KATCHEN and CHARLES L. FERRARI, Plaintiffs,
v.
SMITH BARNEY, INC., and its successor in interest, SALOMON SMITH BARNEY INC., CITIGROUP, THE CITIGROUP 2000 STOCK PURCHASE PLAN, TRAVELERS GROUP 401(K) SAVINGS PLAN, THE TRAVELERS GROUP PENSION PLAN and CITIGROUP GLOBAL PRIME BROKERAGE, Defendants.



The opinion of the court was delivered by: JOSE LINARES, District Judge

OPINION & ORDER

This matter comes before the Court on Defendants', Smith Barney, Inc., Salomon Smith Barney, Inc., Citigroup Global Markets, Inc., The Citigroup 2000 Stock Purchase Plan, The Citigroup 401(k) Plan and the Citigroup Pension Plan (hereinafter collectively referred to as "Defendants"), motion to compel arbitration and stay this proceeding. The Court decides this motion without oral argument pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the reasons that follow, this Court concludes that Defendants' motion should be GRANTED.

BACKGROUND FACTS

  The relevant facts in this matter are largely undisputed. Plaintiffs, Charles Ferrari and Sam Kitchen (hereinafter collectively referred to as "Plaintiffs"), were formerly employed by Smith Barney as Financial Consultants. They joined Smith Barney in 1996. Plaintiffs commenced the present action after Smith Barney allegedly failed and refused to pay them substantial commission and finder's fees that are due and owing.

  Plaintiffs commenced this action upon allegations of breach of contract, constructive termination, violations of ERISA, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and fraud and misrepresentation. According to Plaintiffs, this matter is primarily a breach of contract action arising out of the Smith Barney Financial Consultant Compensation Plan book (the "Compensation Book"). (Pl. Opp. at 2). Plaintiffs acknowledge that certain claims against Smith Barney must be arbitrated and that their ERISA Count must be "stayed", however since the Compensation Book does not contain an arbitration clause, Plaintiffs argue that claims arising out of compensation issues are not subject to arbitration. (Pl. Opp. at 1).

  The Uniform Application for Securities Industry Registration or Transfer ("Form U-4") contains the following provision:
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 rule, constitutions, or by-laws of the organizations indicated in Item 10. . . .
(Maribeth Robinson Affidavit ("Robinson Aff."), Uniform Application for Securities Industry Registration or Transfer ("Form U-4"), Ex. L; Robinson Suppl. Aff., Ex. A).
  The Employment Application, signed by both Plaintiffs, contains the following arbitration clause:
I understand that the Company has adopted alternative dispute resolution procedures to resolve any dispute related to my employment or termination of employment. I agree to comply with Travelers Group Dispute Resolution Procedures and Travelers Group Employment Arbitration Policy in any such dispute with the Company, its employees or agents.
(Robinson Aff., Employment Application, Exs. A and B).
  The Smith Barney Human Resources Division Principals of Employment identifies the following claims that must be arbitrated:
Fourth, you agree to follow our dispute resolution/arbitration procedures for employment disputes. While we hope that disputes with our employees will never arise, we want them resolved promptly. These procedures include all employment disputes (including termination of employment) that you might have with Travelers Group . . .
These include, but are not limited to, all claims, demands or actions under title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, and all amendments to the aforementioned, any other Federal, State or local statute or regulation regarding employment, discrimination in employment, the terms and conditions of employment, or the termination of employment, and the common law of any state.
(Robinson Aff., Smith Barney Human Resources Division Principals of Employment, Ex. D).
  The Smith Barney Human Resources Division Employee Acknowledgment compels arbitration in the following circumstances:
I agree that any controversy or claim arising out of or otherwise relating to my employment or termination of employment shall be resolved through binding arbitration in accordance with the arbitration procedures of the New York Stock Exchange (NYSE). . . . without limiting the generality of the foregoing, claims, demands or actions under title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, and the other Federal state and local statute or regulation recording of, discrimination in employment, or the termination of employment, at the common law of any state.
(Robinson Aff., Smith Barney Human Resources Division Employee Acknowledgment, Ex. F).
  The Travelers Group/Smith Barney Employment Arbitration Policy specifies the following with regard to arbitration:
The Policy makes arbitration the required, and exclusive, forum for the resolution of all disputes based on legally protected rights (i.e., statutory, contractual or common law rights) that may arise between an employee or former employee and the Travelers Group . . . including claims, demands or actions under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act of 1974 and any other Federal, State or local statute, regulation or common law doctrine, regarding employment discrimination, conditions of employment or termination of employment.
(Robinson Aff., Travelers Group/Smith Barney Employment Arbitration Policy, Ex. C at 5).

  "Plaintiffs concede that the `ERISA' claim must be stayed pursuant to the relevant agreements." (Pl. Opp. at 1). However they continue to argue that their "claims do not derive from common law or statutory law. This is a breach of contract claim, where the contract at issue does not contain an arbitration clause." (Id.).

  Defendants presently move before this Court to compel arbitration, arguing that Plaintiffs have knowingly waived their right to pursue a claim in court. Accordingly, Defendants maintain that they are entitled to an Order compelling arbitration of all of the claims set forth in Plaintiffs Complaint and to stay this proceeding pending the conclusion of arbitration.

  ...


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