Arbitration: Broad Form Clauses
The courts have drawn a distinction between "broad" arbitration clauses and "narrow clauses." This categorization is fact specific and contingent on the language of the clause and its scope.
Although a "broad form" arbitration clause includes torts "arising out of the contract," not every dispute clearly outside the contemplation of the parties and their intention in contracting is covered. The California Court of Appeal illustrates this distinction in a case involving a securities transaction. The parties disputed the scope of the clause based on the definition of their contractual relationship; Valentine Capital Asset Management, Inc. v. Agahi.
Although Valentine is based on the distinction between "broad" and "narrow" arbitration clauses, the court reaches its conclusion based on the language of the pleadings. The plaintiff pled multiple causes of action alleging misconduct by various defendants. When the court ruled on a motion to compel arbitration, the legal characterization of the parties in the Complaint controlled the ruling.
Valentine is also an excellent case for reviewing the role of Self Regulating Organizations (SRO) now consolidated under the Financial Industry Regulatory Authority (FINRA)

