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Patrick v. Moran
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MAINE SUPREME JUDICIAL COURT							Reporter of Decisions
Decision:	2001 ME 6
Docket: 	Ken-00-85		
   on Briefs:  	November 21, 2000	
Decided:	January 12, 2001




	[¶1]  Edward Moran, Daren Hachey, and Robert Thomas Securities,
Inc. (RTS) appeal from the judgment of the Superior Court (Kennebec
County, Studstrup, J.) denying their motion to compel arbitration.  This
action was brought by Richard Patrick against Moran, Hachey, and RTS for
breach of fiduciary duty, interference with advantageous business
relationships, and misrepresentation.  The three defendants argue that an
arbitration agreement exists and Patrick's claims are arbitrable.  We
conclude that Moran, Hachey, and RTS failed to demonstrate that they are
entitled to an order compelling arbitration, and we affirm the denial of their
	[¶2]  Patrick is a licensed securities broker in Augusta.  In July 1996,
Patrick became affiliated with RTS as a registered representative, and RTS
operated a clearinghouse through which Patrick processed stock trades for
his clients.  Moran and Hachey were Patrick's associates and had contact
with his clients.  In October 1997, RTS notified Patrick that after
November 11, 1997, it would no longer operate as a clearinghouse in
Augusta, but it offered to assist Patrick in obtaining an alternate
clearinghouse.  Moran and Hachey told Patrick they would continue to work
for him under a new clearinghouse.  Patrick reached an agreement with
another clearinghouse which required that Moran and Hachey continue to
work for Patrick.
	[¶3]  In spite of the representations of RTS, Moran, and Hachey to
Patrick, the three defendants agreed to join together and continue working
in Augusta. By the time Patrick learned of this, he had no alternate
clearinghouse in place through which he could process his clients' stock
trades, and RTS,  Moran, and Hachey acquired Patrick's clients.
	[¶4]  When Patrick filed his complaint for breach of fiduciary duty and
other claims against RTS, Moran, and Hachey, they responded with the
motion to compel arbitration pursuant to 14 M.R.S.A. § 5928(1) (1980).{1} 
The statute provides that a court shall order arbitration upon a showing of an
agreement to arbitrate, but if a party denies the existence of an arbitration
agreement, the court summarily determines the issue.  Id.  After hearing,
the Superior Court denied the motion, finding that arbitration was not
required.  Moran, Hachey, and RTS appealed pursuant to 14 M.R.S.A.
§ 5945(1)(A) (1980),{2} which provides an exception to the final judgment
rule by allowing an appeal from the interlocutory order denying arbitration. 
See Saga Communications of New England, Inc. v. Voornas, 2000 ME 156,
¶ 6 n.4, 756 A.2d 954, 957 n.4.
	[¶5]  We review the question of substantive arbitrability, that is,
whether the parties intended to submit their dispute to arbitration, for
errors of law.  Roosa v. Tillotson, 1997 ME 121, ¶ 2, 695 A.2d 1196, 1197;
Westbrook Sch. Comm. v. Westbrook Teachers Ass'n, 404 A.2d 204, 206 n.3
(Me. 1979).  "Maine has a broad presumption favoring substantive
arbitrability," and a dispute is subject to arbitration when the parties have
agreed generally to arbitrate disputes and the dispute is governed by the
arbitration agreement.  Roosa, 1997 ME 121, ¶ 3, 695 A.2d at 1197.  
Parties are not ordered to arbitrate their dispute unless they have agreed to
do so in writing.  Id. ¶ 4, 695 A.2d at 1197-98;  Nisbet v. Faunce, 432 A.2d
779, 782 (Me. 1981).
	[¶6]  RTS submitted two documents which, it claims, manifest the
parties' intention to arbitrate.  The first document is entitled "Uniform
Application for Securities Industry Registration or Transfer," known in the
industry as a "U-4 form."  Patrick signed the U-4 form on June 26, 1996. 
The pertinent portion reads as follows:
I agree to arbitrate any dispute, claim or controversy that may
arise between me and [RTS] . . . or any other person, that is
required to be arbitrated under the rules, constitutions, or
bylaws of the organizations indicated in item 10 . . . .
Item 10 of the U-4 form has only one organization checked:  "NASD."  
Neither the U-4 form itself, nor any other document in the record of this
case, contains any rules, constitutions, or bylaws of any of the organizations
indicated in item 10.  Therefore, the Superior Court was unable to
determine if any rule, constitution, or bylaw of NASD requires this dispute
between Patrick and RTS to be arbitrated.  The U-4 form alone does not
establish an agreement to arbitrate because it compels arbitration only when
required by rules, constitutions, or bylaws, none of which were submitted to
the court.  See Prudential Ins. Co. of Am. v. Lai, 42 F.3d 1299, 1302 (9th Cir.
1994) (noting U-4 form alone does not compel arbitration of any dispute). 
RTS has failed to show that the U-4 form is an agreement to arbitrate this
	[¶7]  The second document on which RTS relies is entitled "Annual
Certification of Review of Account Executive's Instructions and Ethics Policy
for Independent Contractors of Robert Thomas Securities."  It is signed by
Patrick and dated January 8, 1997.  Attached to it is an undated interoffice
memorandum from Raymond James Financial Services which states that by
signing the annual certification, the signer agrees to each provision of the
ethics policy.  The ethics policy, which is also contained in the record of
this case, provides in part:
In the event of any controversy between [Patrick] and [RTS]
arising out of the independent contractor relationship, including
such matters as compensation, termination, Title VII
discrimination claims, ADEA, ADA or ERISA, both parties agree
such matter shall be determined exclusively by arbitration before
the National Association of Securities Dealers (NASD) in
accordance with the NASD rules then in effect.  [Patrick]
understands and acknowledges that consent to this provision
constitutes a waiver of certain rights, including the right to a
jury trial, which might otherwise be available in the absence of
an arbitration agreement.
	[¶8]  Patrick points out that the ethics policy, which is not separately
signed, is dated February 1999, a year and several months after his
relationship with RTS ended.  He argues that he cannot be bound by a
document dated two years after he signed the annual certification.  We agree
that in the absence of any evidence explaining the February 1999 date on
the unsigned arbitration agreement, or evidence of an arbitration agreement
contemporaneous with the annual certification, the February 1999
document does not establish an agreement to arbitrate because it does not
appear to have been in existence at the time Patrick agreed to be bound by
the ethics policy.
	[¶9]  On this record, RTS has failed to show the existence of an
enforceable arbitration agreement and is not entitled to an order compelling
arbitration.  Likewise, Moran and Hachey, who did not produce any
documents evidencing an agreement between them and Patrick, have failed
to show any basis for an order compelling arbitration. 
	The entry is:
			Judgment affirmed.

Attorneys for plaintiff: Paul F. Macri, Esq. William D. Robitzek, Esq. Berman & Simmons, P.A. P O Box 961 Lewiston, ME 04243-0961 Attorney for defendants: Stephen E. F. Langsdorf, Esq. Preti, Flaherty, Beliveau, Pachios & Haley, LLC P O Box 1058 Augusta, ME 04332-1058
FOOTNOTES******************************** {1} . This section provides in relevant part: 1. Application. On application of a party showing [an arbitration] agreement described in section 5927 and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied. {2} . This section states: 1. Grounds for appeal. An appeal may be taken from: A. An order denying an application to compel arbitration made under section 5928.