Chan v. Drexel Burnham Lambert, Inc

In Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, the defendant was a securities brokerage firm that employed the plaintiff as a stockbroker. During her employment, the plaintiff signed a uniform application to register with the National Association of Securities Dealers, the American Stock Exchange, and the New York Stock Exchange (NYSE). The application stated the plaintiff "'agreed to abide by the Statute(s), Constitution(s), Rule(s) and By-Laws . . . of the agency jurisdiction or organization with or to which she submitted the application.'" (Chan, supra, 178 Cal.App.3d at p. 636.) The NYSE's rules required registered stockbrokers to arbitrate any controversy arising out of their employment with a NYSE member. (Ibid.) When the plaintiff later sued for wrongful termination, the defendant moved to compel arbitration based on the NYSE's arbitration rule. The trial court denied the motion, rejecting the defendant's argument the application the plaintiff signed incorporated the NYSE's arbitration rule. (Id. at pp. 636-637.) The Court of Appeal affirmed, explaining "'the right to select a judicial forum, vis--vis arbitration, is a "'substantial right,'" not lightly to be deemed waived.'" (Chan, supra, 178 Cal.App.3d at p. 643.) The Chan court found the vague reference to "'the Statute(s), Constitution(s), Rule(s) and By-Laws'" of any organization to which the application was submitted did not incorporate the NYSE's arbitration rule into the application because the reference "failed to clearly and unequivocally refer to the incorporated document that included the arbitration provision" and nowhere mentioned arbitration. (Id. at p. 643.)