597 So.2d 197 (Ala. 1992), 1901747, A.G. Edwards & Sons, Inc. v. Syvrud

Docket Nº:1901747.
Citation:597 So.2d 197
Opinion Judge:KENNEDY, Justice.
Party Name:A.G. EDWARDS & SONS, INC. v. Gerhard SYVRUD.
Attorney:J. Don Foster and James G. Curenton, Jr., Daphne, for appellant. Fred K. Granade and George R. Irvine III of Stone, Granade, Crosby & Blackburn, P.C., Bay Minette, for appellee.
Case Date:March 27, 1992
Court:Supreme Court of Alabama

Page 197

597 So.2d 197 (Ala. 1992)



Gerhard SYVRUD.


Supreme Court of Alabama.

March 27, 1992

J. Don Foster and James G. Curenton, Jr., Daphne, for appellant.

Fred K. Granade and George R. Irvine III of Stone, Granade, Crosby & Blackburn, P.C., Bay Minette, for appellee.

KENNEDY, Justice.

Gerhard Syvrud filed a lawsuit against Peggy Ryder Vanover and A.G. Edwards & Sons, Inc. (a securities company, hereinafter

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referred to as "Edwards"). Vanover and Edwards jointly moved to compel arbitration of the dispute involved in the lawsuit; the court denied this motion and Edwards has appealed.

In January 1989, Syvrud opened an account with Edwards through Vanover, the branch manager of Edwards's office in Daphne, Alabama, for the purpose of investing in securities.

The issue before us relates to whether a controversy between Syvrud and the defendants regarding this account must be submitted to arbitration. Syvrud, before filing the action, had signed a customer agreement contract with Edwards that contained an arbitration provision requiring that "any controversy" between the parties be arbitrated.

Under federal law certain predispute arbitration agreements must be enforced irrespective of any state law that would render them unenforceable. See, 9 U.S.C. §§ 1-15; Ala.Code 1975, § 8-1-41; Wells v. Mobile County Bd. of Realtors, Inc., 387 So.2d 140, 144 (Ala.1980) (stating that under § 8-1-41 Alabama holds void, on public policy grounds, predispute arbitration agreements). Syvrud argues that the arbitration provision is not enforceable, under an exception to this rule applicable where a claimant challenges the making of the arbitration provision itself.

The controversy underlying this case stems from Syvrud's loss of a significant amount of money in investments Vanover made on Syvrud's behalf. He states that he relied on Vanover's advice and that he gave her considerable discretion in investing his money. However, Syvrud says, Vanover did not adhere to his general directive that his money be invested conservatively; he also says that she failed to keep him informed and that she breached a fiduciary duty to him.

Syvrud alleges that some time after Vanover began, he says, improperly handling his investments, but before he was aware of any mismanagement, she obtained Syvrud's execution of the "customer agreement" contract. As stated, the customer agreement provided in part that Syvrud submit to arbitration "any controversies" with Edwards relating to his account.

According to Syvrud, Vanover explained to him that the customer agreement was for the purpose of allowing her to borrow against his Edwards account for investment on his behalf. By affidavit, Scott Kelsaw of Edwards stated that it was Edwards's policy to secure the execution of such an agreement before Edwards would approve loans against client accounts. Syvrud does not dispute this statement, but says that Vanover did not disclose to him that the agreement contained an arbitration provision and that, based on Vanover's explanation, and at her instigation, he signed it without reading it. Syvrud says that he did not intend to assent to an arbitration provision.

Syvrud sued Edwards and Vanover on a variety of claims relating to the handling of his account, but did not aver by complaint that the arbitration provision of the customer agreement was procured by fraud. Syvrud states that he was unaware of the existence of this provision until after he had filed suit.

After Syvrud filed his complaint, the defendants jointly moved for an order to compel arbitration, citing the arbitration provision. At that time, Syvrud did not amend his complaint, but, through a series of responses to the defendants' motion to compel arbitration, made a claim that Vanover had procured the arbitration provision by fraud through a breach of a fiduciary duty of disclosure. He said that, therefore, the arbitration provision was due to be rescinded and that he was entitled to litigate his claims.

The defendants submitted to the trial court a brief in support of their motion to compel arbitration. In it, they pointed to the existence of the arbitration provision and cited numerous cases for the proposition that the Federal Arbitration Act (FAA) applies in this case. The defendants correctly stated in their brief that where the FAA applies to a customer agreement that would require, by its terms, the...

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