Bitkowski v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 86-1839
Decision Date | 09 November 1987 |
Docket Number | No. 86-1839,86-1839 |
Citation | 866 F.2d 821 |
Parties | Eunice K. BITKOWSKI and Suzanne E. Bitkowski, Paul E. Bitkowski, Sheri E. Bitkowski, Jason A. Bitkowski, Angela S. Bitkowski and Lauri A. Bitkowski, by and on behalf of themselves individually, or by Eunice K. Bitkowski, on their behalf, Plaintiffs-Appellees, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Thomas H. Henson and Russell G. Mann, Jr., Defendants-Appellants. |
Court | U.S. Court of Appeals — Sixth Circuit |
Jack Mazzara, Butzel, Keidan, Simon, Myers & Graham, Douglas G. Graham, Rosemary G. Schikora, Bruce L. Sendek (argued), Detroit, Mich., for defendants-appellants.
Nelson Chase (argued), West Bloomfield, Mich., Christopher Lovell, New York City, for plaintiffs-appellees.
Before ENGEL and RYAN, Circuit Judges, and PECK, Senior Circuit Judge.
Defendant-appellant Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") appeals from a district court order which denied Merrill Lynch's motion to compel arbitration of a controversy with its customer, plaintiff-appellee Eunice Bitkowski, pursuant to an arbitration provision in a customer agreement signed by Bitkowski. For the reasons stated herein, we reverse the district court's order.
In October 1981 Bitkowski opened seven accounts with Merrill Lynch through its agent, Thomas Henson, on her own behalf and that of her minor children. At the meeting she executed customer agreements, each of which contained a paragraph captioned in bright blue ink, "Agreement to Arbitrate Controversies." The arbitration agreement provides in relevant part:
It is agreed that any controversy between us arising out of your business or this agreement shall be submitted to arbitration conducted under the provisions of the Constitution and Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc., as the undersigned may elect....
As the district court noted, it is undisputed that Bitkowski asked what the documents were that she was signing and Henson said that the documents were standard Merrill Lynch forms. The parties also agree that the contents were never discussed. Copies were later mailed to Bitkowski who filed them without reading them.
In March 1982 Bitkowski opened another account. At that time she signed another customer agreement which contained the same arbitration agreement. In April 1982 Bitkowski signed standard option agreements so that Merrill Lynch could engage in options transactions in her original account. That agreement also contained an arbitration clause similar to the one above. In August 1982 she signed identical standard option agreements for each of her guardian accounts. At none of these meetings did she and Henson discuss the contents of the agreements. After Henson was terminated by Merrill Lynch in October 1982 (for reasons unrelated to this litigation), Malcolm Ross serviced Bitkowski's accounts until his death in September 1985. During this period Bitkowski signed another customer agreement containing an arbitration provision. As in the previous signings, the contents of the agreement were never discussed.
In August 1985 Bitkowski filed an action against Merrill Lynch, Henson, and his supervisor under sections 10(b) and 20 of the Securities Exchange Act of 1934, 15 U.S.C. Secs. 78(j)b, 78t, section 901(a) of the Organized Crime Control Act of 1970, 18 U.S.C. Sec. 1962, and various state laws. She alleged that Henson churned her accounts and engaged in speculative options trading inappropriate to her accounts. Merrill Lynch moved to compel arbitration under the customer agreements and arbitration provisions therein which Bitkowski had signed. Bitkowski opposed the motion, alleging that Merrill Lynch fraudulently induced her to accept the arbitration provisions. The district court ordered an evidentiary hearing limited to this sole issue. After the evidentiary hearing, the district court denied Merrill Lynch's motion to compel arbitration. The district court stated in its memorandum opinion that to prove fraudulent inducement The district court found that although "Henson did not conceal the content of the Agreements at any time," Bitkowski did not have a complete understanding of the Agreements due to Henson's failure to volunteer a full disclosure and due to his description of the forms as "standard." The district court concluded that Bitkowski met her burden, and denied enforcement of the arbitration agreement.
The district court erred in its formulation of the standard for fraudulent inducement. It is well established under Michigan...
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...Bhatia v. Johnston, 818 F.2d 418 (5th Cir. 1987)............................ Bitkowski v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 866 F.2d 821 (6th Cir. Carpenter v. North River Ins. Co., 436 S.W.2d 549 (Tex. Civ. App. -- Houston [14th Dist.] 1968, writ ref'd. n.r.e.)....................
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