STRATTON OAKMONT, INC., JORDAN BELFORT, AND STEVEN COHEN, APPELLANTS,
v.
JEFF GOLDSTEIN, APPELLEE
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Stratton Oakmont and its principals appealed the denial of their motion to compel arbitration of a customer's fraud claim. The Florida appellate court reversed, holding that the customer's securities fraud dispute fell within the scope of an arbitration clause in the brokerage customer agreement, and that Stratton was entitled to enforce the clause as a third-party beneficiary.
The court held that Stratton could enforce the arbitration clause as a third-party beneficiary, and that the customer's fraud claims concerning his account fell within the scope of the arbitration provision requiring all controversies concerning the account to be arbitrated.
[1] Arbitration clauses in brokerage agreements are valid, invocable, and enforceable.
[2] A stock brokerage firm's customer agreement can confer third-party beneficiary status on an introducing broker for the purpose of enforcing an arbitration clause.
Previewing 2 of 4 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“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.”
The broad arbitration clause in the customer agreement that required disputes concerning the account to be arbitrated
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Join FLexlaw to unlock all legal intelligenceGoldstein opened a securities account with Stratton Oakmont, an introducing broker, while Bear Stearns & Company served as the clearing broker. When o…
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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 bro-ker_ 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 Strat-ton 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.
Cases With Similar Vibessemantic neighbors from the corpus
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Breckenridge v. Farber, 640 So. 2d 208 (Fla. 4th DCA 1994)…y to the signature card, the broker is a beneficiary of the arbitration clause either by virtue of his third party beneficiary status or his then-existing employee-employer relationship with Thomson McKinnon. See Stratton Oakmont, Inc. v. Goldstein, 615 So. 2d 183 (Fla. 3d DCA 1993); Zac Smith & Co. v. Moonspinner Condo. Ass’n, 472 So. 2d 1324 (Fla. 1st DCA 1985); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Melamed, 453 So. 2d 858 (Fla. 4th DCA 1984). Thus, as the broker may enforce the rights of the signa…
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Hirshenson v. Spaccio, 800 So. 2d 670 (Fla. 5th DCA 2001)…hin the ambit of the arbitration clause. Third Party Beneficiary Status Arbitration clauses in brokerage agreements may be valid and enforceable. See Oppenheimer & Co., Inc. v. Young, 475 So. 2d 221 (Fla.1985); Stratton Oakmont, Inc. v. Goldstein, 615 So. 2d 183 (Fla. 3d DCA 1993). Florida courts have generally held that arbitration clauses in contracts may be enforced by and are binding on third party beneficiaries. Martha A. Gottfried, Inc. v. Paulette Koch Real Estate, Inc., 778 So. 2d 1089 (Fla. 4th DCA…
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Nestler-Poletto Realty, Inc. v. Kassin, 730 So. 2d 324 (Fla. 4th DCA 1999)…broker was regarded as a party to the contract only as to' the brokerage clause, and was otherwise purely an incidental participant. We have considered Breckenridge v. Farber, 640 So. 2d 208 (Fla. 4th DCA 1994), Stratton Oakmont, Inc. v. Goldstein, 615 So. 2d 183 (Fla. 3d DCA 1993), and Jones v. Atlas Realty Corp., 154 So. 2d 905 (Fla. 2d DCA 1963), and deem them inapposite. As to all other matters asserted, we also affirm. STONE, C.J., FARMER and GROSS, 33., concur.…
Authorities Cited
- Oppenheimer & Co., Inc. v. Young, 475 So. 2d 221 (Fla. 1985)
- Branch v. State, 495 So. 2d 869 (Fla. 2d DCA 1986)