Corey v. New York Stock Exchange

Corey v. New York Stock Exchange

Opinion

 [*1207]  KENNEDY, Circuit Judge.

Corey appeals from the District Court's dismissal of his lawsuit against the New York Stock Exchange (NYSE) in which he claimed that the procedures followed in an arbitration proceeding sponsored by the NYSE and to which he was a party were wrongful and caused him injury. Corey sought to hold the NYSE liable for the conduct of the arbitrators and the NYSE's arbitration director, Cavell. We agree with the District Court that Corey's claims against the NYSE for the acts of the arbitrators are barred by arbitral immunity and those based on Cavell's acts constitute no more than an impermissible collateral attack [**2]  on the arbitrators' award. ²

In 1965, Corey began to invest in the stock market under the guidance of a long-time friend, Wright, who was an account executive with Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch). Wright suffered a paralyzing stroke in 1968, but returned to work thereafter and reestablished his business relationship with Corey. In 1972 and 1973, Corey invested heavily in the stock market, allegedly because of Wright's advice. Medical concerns prompted Wright's retirement in 1973 and Corey's account was transferred to another Merrill Lynch employee. The stock in Corey's portfolio depreciated in value and he was forced to liquidate it to meet the margin requirements of his account. Corey claims to have lost approximately $175,000 [**3]  as a result of the liquidation.

Corey elected to initiate arbitration proceedings against Merrill Lynch in April 1976. Article VIII of the Constitution of the NYSE, gives non-members the option of submitting a claim against a member brokerage corporation for arbitration, ³ [**5]  instead of pursuing remedies at law. ⁴ In his statement  [*1208]  of claim Corey alleged that his loss resulted directly from Wright's impaired judgment as a result of his stroke and from the negligence of Merrill Lynch in permitting Wright to return to work before he was capable of intelligently advising customers. The rules of the NYSE, which sponsored the arbitration, governed the selection of the five arbitrators responsible for Corey's case as well as the procedural rules to be followed. Cavell, the Assistant Arbitration Director for the NYSE, administered arbitrations between members and nonmembers of the NYSE. He was responsible for overseeing the preliminary arrangements for arbitrations, including the obtaining of written submissions, arranging for the appointment of arbitration panels, scheduling hearing dates, acting as a moderator on behalf of the arbitration panel and furnishing the parties with [**4]  written notification of arbitration decisions. Upon selection of the arbitration panel, two hearings were held in Detroit at which Corey appeared without counsel. In March 1977, the arbitrators dismissed Corey's claim against Merrill Lynch and assessed $700 in costs against him. Cavell mailed a copy of this decision to Corey in early April 1977. Corey was not informed of his right to appeal and did not avail himself of the appeal provisions of the federal Arbitration Act. 9 U.S.C. §§ 1 et seq.

 [**6]  In early 1978, Corey filed suit in Ingham County Circuit Court against Merrill Lynch claiming Merrill Lynch and the NYSE conspired to deprive him of a fair hearing before the arbitrators. Neither the NYSE, Cavell nor the individual arbitrators were named as defendants. Corey challenged the composition of the arbitration panel as violative of the NYSE rules and asserted procedural irregularities that prevented him from submitting evidence, caused hearings to be postponed over his objection and allowed the arbitrators to dominate the proceedings with the purpose of defeating his claims. A motion for accelerated judgment was granted in favor of Merrill Lynch on the ground that the arbitrators' award was final and binding and that the court lacked jurisdiction over the parties and the subject matter of the suit. Corey did not appeal this decision.

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