Bixler v. Next Fin. Grp., Inc.
| Citation | 858 F.Supp.2d 1136 |
| Decision Date | 14 March 2012 |
| Docket Number | No. CV 11–2–H–CCL.,CV 11–2–H–CCL. |
| Parties | Jeanette BIXLER, Plaintiff, v. NEXT FINANCIAL GROUP, INC., a Virginia corporation, Gary Falber, Ryan Falber, and Does 1 through 10, Defendants. |
| Court | U.S. District Court — District of Montana |
OPINION TEXT STARTS HERE
Recognized as Preempted
John M. Morrison, Morrison Motl and Sherwood, Helena, MT, for Plaintiff.
Fred N. Knopf, Michelle M. Arbitrio, Todd E. Lerner, Wilson Elser Moskowitz Edelman & Dicker, White Plains, NY, Michael F. McMahon, McMahon Wall & Hubley Law Firm, Helena, MT, for Defendant.
Before the Court is Defendants' Motion to Compel Arbitration (Doc. 35). Plaintiff opposes the motion. The Court has heard oral argument from counsel and received testimony from the parties on December 14, 2011, and January 11, 2012. Defendants were represented at hearing by Michelle M. Arbitrio, and Plaintiff was represented at hearing by John Morrison and Linda Deola. After reviewing the briefs and arguments of counsel and all the record, the Court is prepared to rule on the Motion.
In this case, the Court sits in diversity jurisdiction pursuant to 28 U.S.C. § 1332. This Court has subject matter jurisdiction to determine the threshold question of whether a valid agreement to arbitrate exists.
The dispute in this case centers upon a Client Agreement between Plaintiff Jeanette Bixler, an individual investor, and Defendant Gary Falber, a securities broker and representative of NEXT Financial Group, Inc. The purpose of the agreement was to establish a client-broker relationship between Gary Falber and Jeanette Bixler. The first page is entitled “Account Information Form,” and it incorporates by reference an attached privacy policy information sheet and a two-page document entitled “Client Agreement.” 2 (Def. Ex. B.) Jeanette Bixler does not dispute that she signed the Account Information Form or that she intended to make Gary Falber her broker. Plaintiff does dispute, however, that she ever intended to purchase an annuity from him. However, Plaintiff did sign a “JNL Fixed and Variable Annuity Application,” and as a result she purchased a variable annuity from the Jackson National Life Insurance Company.
In her Complaint, Plaintiff claims that she was induced by actual fraud and deceit to purchase the variable annuity. Plaintiff claims that Defendants breached their fiduciary duty to her and were negligent in their conduct toward her, also breaching the implied covenant of good faith and fair dealing and intentionally and negligently inflicting emotion distress. Plaintiff claims that Defendants violated the Securities Act of Montana. Plaintiff seeks to amend her Complaint in order to assert Montana Insurance Code violations, and the Court will address this request at the conclusion of this opinion. Plaintiff agrees to arbitrate all but her claims grounded upon Montana insurance law. Plaintiff asserts that Montana law invalidates any agreement to arbitrate her insurance claims.
The Federal Arbitration Act (“FAA”) governs this dispute. 9 U.S.C. § 1, et seq. By enacting the FAA, Congress has set a policy favoring arbitration unless grounds exist at law or in equity to revoke the contract. 9 U.S.C. § 2. In Southland Corp. v. Keating, 465 U.S. 1, 4–5, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), the United States Supreme Court held that the FAA “create[d] a body of federal substantive law,” which was “applicable in state and federal courts.” 465 U.S. at 12, 104 S.Ct. 852 (internal quotation marks omitted). State law (even state claims brought in state court) cannot bar enforcement of § 2 of the FAA. See id. at 10–14, 104 S.Ct. 852,see also Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270–73, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Section 2 provides that
A written provision in ... a contract ... to settle by arbitration a controversy thereafter arising out of such contract ... or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Challenges that go specifically to the making of the agreement to arbitrate itself can be decided by a court. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–04 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). However, challenges against the contract generally must be decided by an arbitrator. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). Under state law, also, once an arbitration provision is determined to be valid, “challenges to the contract as a whole are properly decided via arbitration, given the existence of an arbitration clause.” Martz v. Beneficial Montana, Inc., 332 Mont. 93, 135 P.3d 790, 794 (2006); see also In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001).
The contract in question in this case consists of a one-page “NEXT Account Information Form” signed by Plaintiff (Doc. 37–2), that incorporates by reference a two-page document titled “NEXT Client Agreement” (Doc. 37–4). The arbitration clause is contained within the NEXT Client Agreement as ¶ 20(A)-(J). It provides that:
20. Arbitration: This agreement contains a pre-dispute arbitration clause. By signing an arbitration agreement, the parties agree as follows:
A. All parties to this agreement are giving up the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
B. Arbitration awards are generally final and binding: a party's ability to have a court reverse or modify an arbitration award is very limited.
C. The ability of the parties to obtain documents, witness statements, and other discovery is generally more limited in arbitration than in court proceedings.
D. The arbitrators do not have to explain the reason(s) for their award.
E. The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
F. The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
G. The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement.
H. This agreement to arbitrate constitutes a waiver of the right to seek a judicial forum unless such a waiver would be void under the Federal securities laws.
I. Any controversy arising out of or relating to my accounts, to transactions with you, your officers, directors, agents, employees, clearing agent, this Agreement or the breach thereof, whether such transaction or agreement was entered in prior, on, or subsequent to the date hereof, shall be settled by arbitration in accordance with the rules then in effect of the Financial Industry Regulatory Authority (“FINRA”). I understand that the FINRA eligibility requirement bars claims brought more than six (6) years after the event giving rise to the claim. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
J. No person shall bring a punitive or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a punitive class action; or who is a member of a punitive class action who has not opted out of the class with respect to any claims encompassed by the punitive class action until: (i) the class certification is denied; or (ii) the class is decertified; or (iii) the client is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein.
(Doc. 37–4 at 2–3 (bolded in original).)
The Court finds that after a lengthy discussion between Defendant Gary Falber and Plaintiff Jeannette Bixler, the Plaintiff decided to make the Defendant her investment adviser. Jeannette Bixler signed a form that she knew meant that Gary Falber and NEXT Financial were going to handle certain financial transactions for her. Bixler knew that the Client Agreement contained an arbitration clause, which was explained in detail to her by Falber. She knew that she was giving up her right to litigate in court any dispute that arose from her relationship with Gary Falber and NEXT Financial.
Gary Falber was a credible witness. He was using the meeting with Bixler to train his son (a newly licensed securities broker) in the proper techniques of client interview and in the proper establishment of client relationship. He had an extra incentive to follow proper procedures in signing up a new client. Falber spent hours with Bixler and explained the Account Information Form and Client Agreement in detail, including the arbitration provision. Falber did not apply undue pressure upon Bixler or cause her to suffer duress. Having just experienced a loss of over $150,000 in the value of her stocks in the previous 12 months, Bixler brought into her meeting with Falber her keen desire to modify her investment portfolio to prevent future losses.
The Court finds that Bixler is a sophisticated investor. She was not a credible witness. Whenever Bixler was asked pointed questions on cross-examination, Bixler provided rambling, confusing, and non-responsive answers. However, when asked peripheral, technical questions, Bixler demonstrated that her mind was sharp and that she did, indeed, possess a sophisticatedunderstanding of her investments and the procedures related to purchasing and liquidating investments. Bixler purchased stocks online utilizing the internet, and she had invested aggressively in ADRs, limited partnerships, real estate investments, and other...
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