Kenneth Morgan Thomas, Plaintiff-Respondent v. Barclay Perry, et al., Defendants-Appellants.

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Kenneth Morgan Thomas, Plaintiff-Respondent v. Barclay Perry, et al., Defendants-Appellants.

No. B014485

Decided: April 10, 1986

Respondent Kenneth Morgan Thomas sued his former employer, Kidder, Peabody & Company, Inc., and two of its employees, appellants Barclay Perry and James Johnston.   Thomas sought to recover a $40,000 commission he alleged is due to him by virtue of an oral contract with Kidder, Peabody and appellants.   He sued for breach of contract, seeking damages of $40,000, and for conversion, conspiracy and breach of fiduciary duty, seeking damages of $150,000 for each cause of action.   Thomas also sought punitive damages of $11/212 million.

Appellants filed a motion to compel arbitration pursuant to an agreement Thomas signed at the time he was hired by Kidder, Peabody.1  It is undisputed that Kidder, Peabody brought a similar motion in federal court and is not a party to this appeal.

The trial court denied appellants' motion to compel, following Merrill Lynch, Pierce, Fenner & Smith v. Ware, (1973) 414 U.S. 117.   The trial court found Thomas's suit to be “fundamentally an action to recover commissions.”   Under Ware, an action to collect wages may be pursued despite a private arbitration agreement, in accordance with California Labor Code section 229.2

Appellants contend first that Thomas's suit against them is not one for wages.   They do not dispute that a commission is included in the statutory definition of wages found in Labor Code section 200.   They argue that Thomas was not their employee and therefore could not have a wage claim against them.   We agree with the trial court, however.   Appellant Perry appears to have been Thomas's superior at Kidder, Peabody;  Perry hired Thomas.   Thus he may have been in a position to interfere with Thomas's receipt of his commission.   Furthermore, Thomas alleged that appellants wrongfully received his commission.   He seeks to recover it under a variety of theories.   His action against appellants is an action for wages.

Appellants contend that Labor Code section 229 is preempted by the Arbitration Act, 9 United States Code sections 1 through 14.   They argue that Ware resolved the narrow issue of whether section 229 was preempted by the Securities and Exchange Act of 1934, 15 United States Code sections 78a through 7811, leaving open the question of preemption by the Arbitration Act.   In fact, Ware does mention the Arbitration Act in footnote 15 at page 135.   The footnote implies that the intrepretation of the Securities and Exchange Act and the arbitration clauses found in stock exchange contracts are unaffected by the Arbitration Act.   Moreover, the footnote indicates that the court had the Arbitration Act before it.   If section 229 were preempted by the Arbitration Act, the court could have and presumably would have said so in Ware.

Appellants ask this court to find Ware superseded by subsequent changes in the Securities and Exchange Act, relying on Drayer v. Krasner, (2d Cir.1978) 572 F.2d 348, 357-358, cert. den. 436 U.S. 948.)   We decline to so hold.   Drayer discussed the amendment to the Securities Exchange Act and the Ware opinion in deciding whether the New York Stock Exchange requirement that all disputes between member firms and brokers be arbitrated violated federal antitrust statutes.   Drayer was not a preemption case.   Furthermore, the court in Drayer was speculating with respect to whether Ware would have had a different result had Congress amended the Securities and Exchange Act before Ware was decided.   Finally, the Supreme Court itself cited Ware as recently as 1983 on the issue not before the court in Drayer, i.e., state preemption.  (See Arkansas Elec. Coop. v. Ark. Public Serv. Comm'n (1983) 461 U.S. 375, 389.)   We take this action by the Supreme Court to mean that Ware is still a vital case, and still binding on us.3  (Chesapeake & Ohio Ry. v. Martin, (1931) 283 U.S. 209, 221).

We agree with the trial court's conclusion that Thomas has brought a suit for the recovery of wages under several theories.   The contract cause of action arises out of the oral agreement giving Thomas a right to commissions on certain stock sales.   The law imposes obligations apart from agreements between parties to a contract.   If, as is alleged, appellants interfered with Thomas's receipt of a commission, if they wrongfully deprived him of wages by their tortious conduct, they will be liable for the damages that flow therefrom.   We do not agree with appellants' suggestion that Thomas's wage claim is severable from his tort claims, and that the later are arbitrable under Dean Witter Reynolds, Inc. v. Byrd, (1985) 470 U.S. 213, 105 S.Ct. 1238.

The judgment is affirmed.


1.   Thomas raises for the first time on appeal the issue of whether appellants have standing to enforce the arbitration agreement.   Because the issue was not raised at the trial court we will not consider it here.   (Apra v. Aureguy (1961) 55 Cal.2d 827, 831.)

2.   Labor Code section 229 states in pertinent part:  “Actions ․ for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”

3.   Because we base our decision squarely on Ware we do not reach Thomas's alternative ground supporting the trial court's decision.


EAGLESTON, J. and HASTINGS, J.:  We concur.

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