Derbin v. Access Wealth Mgmt. LLC
| Decision Date | 07 October 2011 |
| Docket Number | Civil Action No.: 11-812(FLW) |
| Parties | J. TODD DERBIN and HOPE TASSIE DERBIN, Plaintiffs, v. ACCESS WEALTH MANAGEMENT, LLC; ELEANORE K. SZYMANSKI; LAWRENCE ZAGOROLA; HOWARD HOOK; MICHAEL PALAZZOLO; and DARREN ZAGAROLA; Defendants. |
| Court | U.S. District Court — District of New Jersey |
*NOT FOR PUBLICATION*
Presently before this Court is a motion to compel arbitration and to stay proceedings, filed by Defendants, Access Wealth Management, LLC. ("AWM"), Eleanor K. Szymanski, Lawrence Zagarola, Howard Hook, Michael Palazzolo, and Darren Zagarola ("Individual Defendants") (collectively, "Defendants"). This case arises out of a dispute related to a series of agreements (the "Agreements") executed between Plaintiffs J. Todd Derbin and Hope Tassie Derbin ("Plaintiffs") and EKS Associates, LLC ("EKS"), for services to invest and manage Plaintiffs' finances. After initially bringing claims against AWM, EKS, Szymanski and Zagarola in an arbitration proceeding, Plaintiffs withdrew all claims from arbitration except thoseagainst EKS, and brought those claims to this Court. In the instant motion, Defendants move to compel Plaintiffs to arbitrate their claims pursuant to the arbitration clause contained in the Agreements. For the reasons set forth herein, the Court finds that Plaintiffs' claims are arbitrable and thus, Defendants' motion is GRANTED and this case is STAYED.
For the purposes of this motion, the Court will only recount relevant facts.1 In February 2006, Plaintiffs hired Szymanski, former managing partner of EKS, to create and implement a comprehensive plan to manage and invest Plaintiffs' finances by entering into a written Financial Planning Agreement. See Compl., ¶¶ 1, 22. Pursuant to that agreement, EKS would prepare a written financial plan for Plaintiffs based upon their stated investment objectives. Id. In September 2006, the parties entered into a second Financial Planning Agreement whereby EKS agreed to provide financial planning services to Plaintiffs. Id. at ¶75. Pursuant to a third Financial Planning Agreement, dated January 1, 2007, Plaintiffs renewed the September 2006 agreement for services to be performed in 2007. Id. at ¶ 115. These agreements included an arbitration provision which states:
Arbitration: All controversies arising out of or relating in any manner to the ASSETS, to transactions effected with or by the PLANNER or relating to advice rendered by the PLANNER or its initiation or implementation of transactions based upon such advice, or any other matter arising under the Agreement or relating to any alleged breach thereof... shall be determined by arbitration... It is understood that such arbitration is final and binding upon the parties and that by executing this Agreement the CLIENT is waiving his/herright to seek remedies in court, including the right to a jury trial, and CLIENT has had a reasonable opportunity to review same, and discuss this arbitration provision with counsel of his/her choosing, prior to the execution of this Agreement.
See 2006 Financial Planning Agreement, ¶ 7 (bold in original).
In August 2007, EKS sent a letter to Plaintiffs stating its intention to merge with defendant AWM. Included in the letter was a request for Plaintiffs' signature to permit AWM access to Plaintiffs' financial information during the transition. Compl., ¶¶ 149-50. Plaintiffs did not sign this request; however, AWM allegedly accessed Plaintiffs' accounts through EKS. Id. at ¶ 151. According to the Complaint, EKS and AWM's alleged merger was completed by October 2007. Id. at ¶ 161. However, Plaintiffs stress that they did not consent to the merger, nor sign a new agreement with AWM. Id. at ¶¶ 163, 164, 166. Plaintiffs explain that they were under the impression that post-merger, EKS would continue to be responsible for the management of Plaintiffs' accounts. Nevertheless, Plaintiffs allege that AWM professionals were managing Plaintiffs' account beginning in October 2007. Id. at ¶¶ 171-72, 214.
In December 2007, a quarterly investment report was sent to Plaintiffs. Included in this report was a statement notifying Plaintiffs of the completion of the merger between EKS and AWM. Id. at ¶ 175. In January 2008, EKS sent Plaintiffs a financial planning agreement to renew their services for 2008; Plaintiffs did not sign this agreement. Id. at ¶ 177. Despite the non-renewal, Plaintiffs continued their financial relationship with the purported merged entity. Id. at ¶¶ 209.
Disputes, relating to the alleged mismanagement of Plaintiffs' finances, subsequently arose between Plaintiffs and Defendants. As a result, Plaintiffs sent a letter to EKS notifying EKS of their desire to arbitrate claims arising from the alleged breach of contract, professional negligence, and fraud. Id. at ¶ 227. Thereafter, in August 2010, relying on the arbitration provision in the Agreements, Plaintiffs requested arbitration with the American Arbitration Association ("AAA") against both EKS and AWM. See Plaintiffs' Demand for Arbitration. In their original arbitration demand, Plaintiffs alleged:
Initially, Plaintiffs, defendant AWM, and EKS proceeded in arbitration. EKS and AWM answered the arbitration demand in October 2010. See Carlis Dec., ¶ 5. In December 2010, Plaintiffs field an amended demand for arbitration to bring claims against defendants Szymanski and Zagarola, individually. See Amended Demand for Arbitration. Notably, in their demand, Plaintiffs made no distinctions as to which entity or individual is liable for the alleged conduct; rather, the defendants were referenced in the demand collectively.
During the course of the arbitration proceeding, Plaintiffs served EKS and AWM with "voluminous and detailed requests for information." Compl., ¶ 231. Specifically, Plaintiffs requested information regarding EKS' and AWM's merger.According to Plaintiffs, neither entity provided any information to substantiate the merger. Moreover, because Plaintiffs did not discover any records of the merger between AWM and EKS, in February 2011, Plaintiffs withdrew their arbitration claims against AWM, Syzmanski, and Zagarola, and initiated this action. Plaintiffs reason that because there is no agreement to arbitrate between Plaintiffs and Defendants, the claims against Defendants are properly before this Court. In response, Defendants filed the instant motion to stay proceedings and compel arbitration.
The Federal Arbitration Act ("FAA") provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
9 U.S.C. § 2. Under the FAA, "[a]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit." Steelworkets v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960). "Where the contract contains an arbitration clause, there is a presumption of arbitrability." McKinstry Co. v. Sheet Metal Workers' Int'l Ass'n, Local Union No. 16, 859 F.2d 1382, 1385 (9th Cir. 1988).
When examining the arbitrability of an issue, a court should "'independently review the agreement'" and "'exercise plenary review to determine whether the matter is arbitrable.'" Int'l Union of Bricklayers & Allied Craftworkers, Local 5 v. Banta Tile & Marble Co., Inc., 344 Fed. Appx. 770, 772 (3d Cir. 2009) (quoting McKinstry Co., 859 F.2d at 1385 (9th Cir. 1988) (citation omitted)). The Third Circuit has held that the FAA "provides that a court should not order arbitration unless it is satisfied that the making of the agreement for arbitration... is not in issue." Par-Knit, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980). If the making of the arbitration agreement is at issue, the court shall proceed to resolve that issue. Id. In that regard, the Supreme Court has explained that courts should be aware of their limited role in deciding these questions:
While a court ... must determine whether there is a valid agreement to arbitrate and, if so, whether the specific dispute falls within the substantive scope of that agreement, its function is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator. In these circumstances the moving party should not be deprived of the arbitrator's judgment, when it was his judgment and all that it connotes that was bargained for.
United Steelworkers of Am. v. American Mfg. Co., 363 U.S. 564, 567-68 (1960); see also United Paperworks Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36-37 (1987).
In determining whether to enforce an arbitration agreement, a court must engage in a "two-step inquiry into (1) whether a valid agreement to arbitrateexisted and (2) whether the particular dispute falls within the scope of the agreement." Trippe Mfg. Co. v....
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