STRATTON OAKMONT, INC. v. GOLDSTEIN

Citation Codes

Equivalent Citations

citation codes

Docket Number

No. 92-2432.

Advocates

Fowler, White, Burnett, Hurley, Banick Strickroot, Steven D. Sandler, and Ronald D. Shindler, Miami, for appellants. Gilbride, Heller Brown, and Dyanne E. Feinberg, Miami, for appellee.

Judges

PER CURIAM.

See more information ...

Smart Summary

Factual and Procedural Background

Jeff Goldstein invested in securities through Stratton Oakmont, Inc. ("Stratton"), a stock brokerage firm acting as the "introducing broker" for his account, while Bear Stearns Company ("Bear Stearns") served as the "clearing broker." When Goldstein opened his account, he signed a customer agreement with Bear Stearns, which included an arbitration clause. Goldstein later sued Stratton alleging losses caused by fraudulent misrepresentations. Stratton moved to compel arbitration and stay the lawsuit, but the trial court denied this motion, holding that the dispute did not fall within the scope of the arbitration clause despite Stratton being a third-party beneficiary of the agreement.

Legal Issues Presented

Whether Stratton, as a third-party beneficiary of the Bear Stearns customer agreement, is entitled to compel arbitration under the arbitration clause in that agreement.
Whether the dispute between Goldstein and Stratton falls within the scope of the arbitration clause requiring arbitration of controversies concerning the account or agreements between the parties.

Arguments of the Parties

Appellants' Arguments (Stratton Oakmont, Inc., Jordan Belfort, and Steven Cohen)

The plain language of the Bear Stearns agreement requires arbitration of any claims arising out of the relationship between the parties, including disputes "between or among" them.
Stratton is a third-party beneficiary of the arbitration provisions and therefore entitled to enforce the arbitration clause.
The controversy regarding Goldstein's account and the claims against Stratton fall squarely within the scope of the arbitration clause.

Appellee's Arguments (Jeff Goldstein)

The arbitration clause applies only to disputes between Goldstein and Bear Stearns concerning his account with Bear Stearns.
The dispute with Stratton does not fall within the arbitration clause's scope and thus arbitration should not be compelled.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Oppenheimer Co., Inc. v. Young, 475 So.2d 221 (Fla. 1985)	Validity and enforceability of arbitration clauses in brokerage agreements.	Supported the principle that arbitration clauses in brokerage agreements are valid, invocable, and enforceable.
Wieneke v. Raymond, James Associates, Inc., 495 So.2d 869 (Fla. 2d DCA 1986)	Enforcement of arbitration provisions in securities brokerage contracts.	Reinforced the enforceability of arbitration clauses applicable to disputes arising from brokerage agreements.

Court's Reasoning and Analysis

The court examined the language of the Bear Stearns customer agreement, which explicitly provided that controversies arising between the parties would be resolved by arbitration. The agreement identified Stratton as a third-party beneficiary entitled to enforce the arbitration provision. The court found that the dispute concerned Goldstein's account and the agreements between the parties, thus falling within the scope of the arbitration clause. The trial court erred in denying the motion to compel arbitration because the arbitration clause was applicable to the controversy. Accordingly, the appellate court reversed the denial and remanded with directions to refer the matter to arbitration.

Holding and Implications

REVERSED and REMANDED with directions to compel arbitration.

The court's decision mandates that the dispute between Goldstein and Stratton be resolved through arbitration pursuant to the arbitration clause in the Bear Stearns agreement. This directly affects the parties by requiring arbitration rather than litigation. No new legal precedent was established beyond affirming the enforceability of arbitration clauses and third-party beneficiary rights in this context.

Show full summary ...

STRATTON OAKMONT, INC., JORDAN BELFORT, AND STEVEN COHEN, APPELLANTS, v. JEFF GOLDSTEIN, APPELLEE.

PER CURIAM.

Appellants, Stratton Oakmont, Inc., Jordan Belfort, and Steven Cohen, collectively (Stratton), appeal an order denying a motion to compel arbitration and to stay action. We reverse.

Appellee, Jeff Goldstein (Goldstein), invested in securities through Stratton, a stock brokerage firm. Stratton was the "introducing broker" for Goldstein's account, while Bear Stearns Company (Bear Stearns) was the "clearing broker". The "introducing broker" deals directly with the customer and relays orders to the "clearing broker", who has access to the relevant stock exchanges.

When Goldstein opened his account with Stratton, he signed a customer agreement with Bear Stearns. That agreement provided in bold face print:

YOU AGREE, AND BY MAINTAINING AN ACCOUNT FOR YOU BEAR STEARNS AGREES, THAT CONTROVERSIES ARISING BETWEEN YOU AND BEAR STEARNS CONCERNING YOUR ACCOUNTS OR THIS OR ANY OTHER AGREEMENT BETWEEN YOU AND BEAR STEARNS, WHETHER ENTERED INTO PRIOR TO, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION.

Another part of the agreement provided:

Bear Stearns Securities carries your account as clearing agent for your broker. . . . You agree that your broker (including Bear Stearns Company, Inc.) is a third party beneficiary of this agreement, and that the terms and conditions hereof, including the arbitration provision, shall be applicable to all matters between or among any of you, your broker or Bear Stearns Securities.

Goldstein sued Stratton for losses suffered in his securities account. Goldstein alleged that his losses in the stock market were a direct result of fraudulent misrepresentations of Stratton.

Stratton filed a motion to compel arbitration and stay the action. The trial court denied the motion, finding that although Stratton was a third party beneficiary of the agreement, this case is not within the scope of the arbitration clause.

Stratton asserts that the plain language of the agreement requires that the parties arbitrate any claims arising out of their relationship, including disputes "between or among" them. Goldstein contends that this matter does not fall within the arbitration clause because the arbitration clause only applies to disputes which arise between Goldstein and Bear Stearns concerning an account with Bear Stearns.

Arbitration clauses in brokerage agreements are valid, invocable and enforceable. Oppenheimer Co., Inc. v. Young, 475 So.2d 221 (Fla. 1985); Wieneke v. Raymond, James Associates, Inc., 495 So.2d 869 (Fla. 2d DCA 1986). The terms of the agreement clearly provide that Stratton was a third party beneficiary of the arbitration provisions of the agreement. The arbitration clause provided that any controversy concerning the account on this or any other agreement, would be arbitrated.

It is clear that this controversy concerns the account or the agreement between the parties, and thus should have been arbitrated. Accordingly, we reverse and remand for the trial court to refer the matter to arbitration.

Reversed and remanded with directions.