Clearing Firm’s Arbitration Agreement Includes Claims Against Introducing Firm

Hirshenson v. Spaccio, Case No. 5D00-2145 (Fla. App., 11/30/01).

Appealability – Arbitrability ? Breadth of Agreement ? Scope of Agreement – State Statutes Interpreted (Fla. Stats. Ch. 517) ? State Law, Applicability of.

Customer’s fraud claims against introducing broker, including claims under Florida Securities Act, are subject to arbitration under broad arbitration clause in clearing broker agreement signed by customer. Introducing brokers, Spaccio and Anchor Management Group, allegedly induced plaintiff and her husband to open an account and invest their life savings in Keller Financial Services’ automobile financing loans, despite their need for a conservative investment and protection for the wife in the event of the husband’s death.

When Keller went bankrupt prior to the note’s maturity date and shortly before husband’s death, plaintiff lost everything.

The complaint, filed in court, alleges fraud, negligence, negligent misrepresentation, breach of fiduciary duty and violations of Fla. Securities Act, Ch. 517. The Circuit Court granted defendants’ motion to compel arbitration, stay all proceedings and/or dismiss based on an arbitration clause in the customer agreement between plaintiff and clearing broker, due to defendants’ third party beneficiary status under the clearing agreement.

In this interlocutory appeal, the Appellate Court analyses the issue under the three-pronged test of Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999), which requires it to determine (1) valid agreement to arbitrate; (2) arbitrable issue; and (3) whether arbitration was waived. To claim third party beneficiary status, Florida law requires that the parties in the contract clearly express an intent to primarily and directly benefit the third party. Although the contract is clear in creating this status for the introducing broker, plaintiff argues that the arbitration clause is not broad enough to include her claims.

The Court holds that the arbitration clause, which covers arbitration as to all claims “arising out of or relating to” the contract, covers all plaintiff’s claims, including her statutory claim, in that all relate to suitability and defendants’ wrongful conduct. The Court finds that broad language in the clause, “clearly indicates the intention of the parties that any and all disputes between the parties, regardless of whether they may arise from the contract, be subject to arbitration.” (SLC Ref. 2002-02-02)

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.