Jevne v. Super. Ct. 11/19/03 CA2/7

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State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: B167044

Case Date: 11/19/2003

Preview:Filed 11/19/03

CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

JACK JEVNE et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; JB OXFORD HOLDINGS, INC., et al., Real Parties in Interest.

No. B167044 (Super. Ct. No. SC062784) (Jacqueline A. Connor, Judge)

ORIGINAL proceeding, application for writ of mandate. Writ denied. Zilinskas & Woosley, Victor G. Zilinskas and Eric A. Woosley for Petitioner. No appearance for Respondent. Miller Milove & Kob, Jeffrey S. Kob and W. Richard Sintek for Real Parties in Interest. Bill Lockyer, Attorney General, Andrea Lynn Hoch, Chief Assistant Attorney General, David S. Chaney, Senior Assistant Attorney General, and Amy J. Winn, Deputy Attorney General, for Amicus Curiae Attorney General Bill Lockyer. Milbank, Tweed, Hadley & McCloy, Douglas W. Henkin and M. Benjamin Valerio for Amicus Curiae New York Stock Exchange, Inc.

Gibson, Dunn & Crutcher and Mark A. Perry for Amicus Curiae NASD Dispute Resolution, Inc. Giovanni P. Prezioso, General Counsel, Jacob. H. Stillman, Solicitor, and Eric Summergrad, Deputy Solicitor; Of Counsel Meyer Eisenberg, Deputy General Counsel, for Amicus Curiae Securities and Exchange Commission. Horovitz & Levy, David S. Ettinger and Mitchell C. Tilner for Amicus Curiae Judicial Council of California

Jack Jevne and Avalon Investments, S.A. (collectively "Jevne") filed a petition for writ of mandate directing respondent Superior Court to vacate its order denying Jevne's motion: (1) to set aside the court's prior order compelling binding arbitration of Jevne's claim against Real Parties, a brokerage and financial services firm; and (2) to restore the matter to the active civil trial calendar. Below Jevne argued the agreement to arbitrate was unenforceable because the designated dispute resolution provider, NASD Dispute Resolution, Inc. (hereinafter known as "NASD") had refused to appoint a replacement arbitrator during the arbitration unless Jevne agreed to waive application of the recently enacted California ethics standards for neutral arbitrators (the "California Standards"). Jevne claimed that notwithstanding his agreement to arbitrate in accord with the NASD rules and procedures, which include provisions for arbitrator appointments, disqualifications and disclosure of conflicts of interest, he was entitled to the benefit of the California Standards. The trial court disagreed concluding, in view of his agreement to arbitrate under the NASD rules, the California Standards did not apply and were, in essence, preempted by federal law. This writ petition raises several issues of first impression for the California State Courts, including, whether the Judicial Council of California acted within its authority in drafting the California Standards and whether they are preempted by the Federal Arbitration Act (FAA) and/or the Securities Exchange Act of 1934. As we discuss more
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fully below, the Judicial Council decision to make the California Standards applicable to arbitrators appointed by dispute resolution providers was not inconsistent with the intent of the Legislature. In addition, the California Standards are not hostile to arbitration and thus, in the abstract, the FAA does not preempt them. Notwithstanding these conclusions, we find under the circumstances presented here, the California Standards are preempted by the Securities Exchange Act of 1934, in that they conflict with NASD's arbitration procedures authorized by the Securities and Exchange Commission. Consequently, we conclude the trial court did not err in denying Jevne's motion and accordingly, we deny the writ of mandate.

FACTUAL AND PROCEDURAL HISTORY In the summer of 2000, Jevne filed an action against Real Parties, a brokerage and financial services firm and a member of the NASD, asserting causes of action for negligence, breach of fiduciary duties and conversion in connection with funds which Jevne alleged had been improperly withdrawn from an account Real Parties maintained on his behalf. Real Parties moved to compel arbitration of the matter based on an arbitration provision in an agreement relating to one of Jevne's accounts. The provision required all disputes arising out of the relationship between the parties to be settled through binding arbitration in accordance with the rules and procedures of the NASD, a self-regulatory organization (SRO), registered with the Securities and Exchange Commission (SEC) to, among other functions, administer securities arbitrations.1 Jevne did not oppose the
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The Securities Exchange Act of 1934 created the SEC. (15 U.S.C.,

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