Cedeno v. Morgan Stanley Smith Barney, LLC

Decision Date05 January 2016
Docket NumberCase No. 1:15-cv-24244-UU
Citation154 F.Supp.3d 1318
Parties Jose E. Herrera Cedeno, Plaintiff, v. Morgan Stanley Smith Barney, LLC, et al., Defendants.
CourtU.S. District Court — Southern District of Florida

Joseph Stanley Shook, Coral Gables, FL, for Plaintiff.

Peter W. Homer, Gregory J. Trask, Homer Bonner Jacobs, P.A., Miami, FL, Lauren Whetstone, Tracy Lynn Gerber, Greenberg Traurig, West Palm Beach, FL, for Defendant.

ORDER

Ursula Ungaro, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court upon Defendants Morgan Stanley Smith Barney LLC's and Citigroup Global Markets Inc.'s Motion to Compel Arbitration and for Stay. D.E. 5.

THE COURT has considered the Motion, the pertinent portions of the record and is otherwise fully advised in the premises.

BACKGROUND

On October 6, 2015, Plaintiff filed his Complaint against Defendants in the Circuit Court of the Eleventh Judicial Circuit in and for Miami–Dade County, Florida. D.E. 1–1. In the Complaint, Plaintiff asserted state law claims for negligence, fraud by inducement, fraud by omission, constructive fraud, and breach of fiduciary duty. Id. Plaintiff's claims stem from his allegation that [u]nauthorized disbursements from Plaintiff, Dr. Herrera's, account [with Defendants] were made by forged checks in the amount of US, $80,301.60.” Id. ¶ 15. On November 13, 2015, Defendants timely removed this case to the United States District Court for the Southern District of Florida pursuant to this Court's original jurisdiction under 28 U.S.C. § 1332(a). D.E. 1. On November 19, 2015, Defendants filed their Motion to Compel Arbitration, arguing that Plaintiff should be compelled to submit his claims against Defendants to arbitration under the terms of a written agreement entered into between Plaintiff and Defendants on May 9, 2008. D.E. 5–1. In addition, Defendants contend that because the entire action should be referred to arbitration, a stay of the action is mandatory under Section 3 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 3. Id.

It is undisputed that on May 9, 2008, Plaintiff signed the second page of the International Account Application (“Application”) and Client Agreement (“Client Agreement”). D.E. 5–1; D.E. 8. Between the Application and Client Agreement, there were five total pages. D.E. 5–1. Immediately above the signature line where Plaintiff affixed his signature, the Acceptance of Terms and Conditions of Agreements read as follows:

In consideration of Citigroup Globals Markets Inc. (“you”) accepting an account for me/us, I/we (I”) acknowledge that I have read, understand and agree to the terms of the attached Client Agreement in sections 1 through 11 ... I acknowledge that I have received a copy of the Client Agreement which contains a pre-dispute arbitration clause at page 4, section 6.

International Account Application and Client Agreement. D.E. 5–1 (emphasis added). Furthermore, the Client Agreement contained the following pre-dispute arbitration clauses:

6. Arbitration
This agreement contains a predispute arbitration claim. By signing an arbitration agreement the parties agree as follows:
• All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
• Arbitration awards are generally final and binding; a party's ability to have a court reverse or modify an arbitration award is very limited.
• The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in the arbitration than in court proceedings.
• The arbitrators do not have to explain the reason(s) for their award.
The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
• The rules of some arbitration forums may impose time limits for binding a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
• The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement.
I agree that all claims or controversies, whether such claims or controversies arose prior, on or subsequent to the date hereof, between me and SB [Smith Barney] and/or any of its present or former officers, directors, or employees concerning or arising from (i) any account maintained by me with SB individually or jointly with others in any capacity; (ii) any transaction involving SB or any predecessor firms by merger, acquisition or other business combination and me, whether or not such transaction occurred in such account or accounts, or (iii) the construction, performance or breach of this or any other agreement between us, any duty arising from the business of SB or otherwise, shall be determined by arbitration before, and only before, any self-regulatory organization or exchange of which SB is a member.
* * *
No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action; or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class until: (i) the class certification is denied; (ii) the class is decertified; or (iii) the customer is excluded from the class by the court.
7. The provisions of this Agreement shall be continuous, shall cover individually and collectively all accounts which I may open or reopen with SB, and shall inure to the benefit of SB's present organization, and any successor organization or assigns; and shall be binding upon my heirs, executors, administrators, assigns or successors in interest. Should any term or provision of this Agreement be deemed or held to be invalid or unenforceable, the remaining terms shall continue in full force and effect. Except for statutes of limitation applicable to claims, this Agreement and all the terms herein shall be governed and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of laws, the statute of limitations applicable to any claims shall be that which would be applied by the courts of the state in which I reside or if I do not reside in the United States, the statute of limitations shall be that which would be applied by the courts in the state where the SB office servicing my account(s) is located.

International Account Application and Client Agreement, 4 ¶ 6–7 (D.E.5–1).

In moving to compel arbitration, Defendants argue that arbitration is appropriate because Plaintiff expressly and unambiguously agreed to the terms of the Client Agreement, which contained a pre-dispute arbitration clause. D.E. 5. Defendants argue that the Agreement is valid, irrevocable, and enforceable under the requirements of the FAA. Id. Defendants filed the Declaration of Dalia F. Botero (“Botero”), who is a Senior Complex Risk Officer employed by Defendant, Morgan Stanley Smith Barney LLC. D.E. 5–1. In her Declaration, Botero attests to the authenticity of the International Account Application and Client Agreement, signed by Plaintiff and dated May 9, 2008. Id. ¶ 5. In addition, she attests, “Citi/Smith Barney's established and standard business practice was to provide the entire 5–page Application and Agreement to customers at the time an account was applied for and opened.” Id. ¶ 9. Botero also stated, [t]he documents attached ... are true and correct copies of documents stored in Citi/Smith Barney's and MSSB's business records, and were kept and maintained in the ordinary course of Citi/Smith Barney's and MSSB's businesses as part of Citi/Smith Barney's and MSSB's regular business practices.” Id. ¶ 13.

In opposing Defendants' Motion, Plaintiff argues that at the time he signed the Application, he did not receive the Client Agreement containing the pre-dispute arbitration clause. D.E. 8. In addition, Plaintiff asserts: (1) there was no mutual assent to the essential and material terms of the arbitration provision; (2) the Court should consider parol evidence to determine the intent of the parties at the time of entering into the Client Agreement; (3) the fees associated with arbitration are unconscionable and render the enforcement of the arbitration provision unenforceable; and (4) the Financial Industry Regulatory Authority (“FINRA”) is not the appropriate forum for arbitration.1

LEGAL STANDARD

Federal policy favors arbitration over litigation. Seaboard Coast Line R.R. Co. v. Trailer Train Co., 690 F.2d 1343, 1348 (11th Cir.1982). Claims are subject to arbitration where they fall within the scope of a valid and enforceable arbitration agreement. See, e.g., Benoay v. Prudential–Bache Sec., Inc., 805 F.2d 1437, 1440 (11th Cir.1986). Pursuant to the Federal Arbitration Act, a written arbitration provision in a “contract evidencing a transaction involving commerce” is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. If a party is “aggrieved by the alleged failure, neglect or refusal of another to arbitrate under a written agreement,” it may petition a federal district court “for an order directing that such arbitration proceed in the manner provided for in [the] agreement.” 9 U.S.C. § 4. When addressing a § 4 motion, the district court is required to determine whether there is a binding agreement to arbitrate and, if so, whether the nonmovant has breached its obligation to arbitrate under that agreement. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22 n. 27, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (citing 9 U.S.C. §§ 4, 6 )).

“The party opposing a motion to compel arbitration or to stay litigation pending arbitration has the affirmative duty of coming forward by way of affidavit or allegation of fact to show cause why ...

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