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A Pennsylvania federal court held that factors to be considered to determine whether a party is a "certain other" that may compel arbitration of a dispute are not conjunctive and merely serve to aid courts in determining whether the party is sufficiently immersed in a controversy.
In Marciano v. MONY Life Insurance Co., No. 05-4748, 2007 WL 152163 (E.D. Pa. Jan. 22, 2007), Marciano brought a variety of tort claims against his former employer, MONY Life, arising out of MONY Life's alleged improper sanctioning of Marciano.
Marciano, an independent contractor, signed a registered representative agreement with the National Association of Securities Dealers (NASD) and a Form U-4, which contained an arbitration agreement. MONY Life asked the court to compel arbitration pursuant to the Form U-4, under which claims between NASD members, associated persons, and "certain others" must be submitted to arbitration.
The parties disputed over whether MONY Life qualified as "certain others" and therefore could compel arbitration under the Form U-4. The Court looked to a test developed by the Second Circuit in McMahon Securities Co. L.P. v. Forum Capital Markets L.P., 35 F.3d 82 (2d Cir. 1994).
Under the McMahon test, a party qualifies as a "certain other" when that party is "sufficiently immersed in the underlying controversy." Additionally, McMahon dictates three factors to consider when deciding whether a "certain other" is a proper party to arbitration: "where (1) that party plays an active role in the securities industry, (2) is a signatory to a securities-industry arbitration agreement . . . and (3) has voluntarily participated in the particular events giving rise to the controversy underlying the arbitration." McMahon, 35 F.3d at 87-88.
Marciano argued that all three prongs of the McMahon test must be satisfied for a party to qualify as a "certain other." However, the Court disagreed and held that the McMahon factors are not conjunctive. Rather, the three factors served merely to aid in determining whether a party satisfied the sufficient immersion test.
Under this test, the Court held that MONY Life qualified as a "certain other" that may compel arbitration under the Form U-4. Because Marciano's allegations against MONY Life indicated that it played a major role in the controversy at issue, MONY Life was sufficiently immersed in the controversy.
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