Evans v. Bayles

• Decision Date: 01 June 2016
• Docket Number: No. 15–0600,15–0600
• Court: West Virginia Supreme Court
• Parties: Jeffrey N. Evans, individually and in his capacity as an employee or agent of Ameriprise Financial Services, Inc., Ameriprise Financial Services, Inc., Kristina Nicholls, individually, and Stephen Bayles, individually, Defendants Below, Petitioners v. Debra K. Bayles, Plaintiff Below, Respondent

237 W.Va. 269

787 S.E.2d 540

Jeffrey N. Evans, individually and in his capacity as an employee or agent of Ameriprise Financial Services, Inc., Ameriprise Financial Services, Inc., Kristina Nicholls, individually, and Stephen Bayles, individually, Defendants Below, Petitioners

v.Debra K. Bayles, Plaintiff Below, Respondent

No. 15–0600

Supreme Court of Appeals of West Virginia.

Submitted: April 19, 2016

Filed: June 1, 2016

Edward P. Tiffey, Esq., Tiffey Law Practice, PLLC, Charleston, West Virginia, Counsel for Petitioners, Jeffrey N. Evans and Ameriprise Financial Services, Inc.

Herman D. Lantz, Esq., Lantz Law Offices, Moundsville, West Virginia, Counsel for Respondent.

Deva A. Solomon, Esq., Steptoe & Johnson, PLLC, Morgantown, West Virginia and Ancil G. Ramey, Esq., Steptoe & Johnson, PLLC, Huntington, West Virginia, Counsel for Petitioners Kristina Nicholls and Stephen Bayles.

LOUGHRY

, Justice:

The petitioners, Ameriprise Financial Services, Inc. (“Ameriprise”), Jeffrey N. Evans (“Mr. Evans”), Kristina Nicholls, and Stephen Bayles (collectively referred to as “the petitioners”), appeal the Circuit Court of Marshall County's May 19, 2015, order denying their motion to dismiss and to compel arbitration. Relying upon the doctrine of contra proferentem ,¹ the circuit court found the absence of a signature on a brokerage agreement created an ambiguity that invalidated the arbitration clause set forth therein. Upon our careful review of the briefs, the arguments of counsel, the record submitted, and the applicable law, we reverse the circuit court's order and remand this action to the circuit court for further proceedings consistent with this opinion.

I. Facts and Procedural Background

In 2012, William Bayles (“Mr. Bayles” or “the decedent”), the late husband of the respondent, Debra Bayles (“Mrs. Bayles”), rolled over his 401(k) retirement account into individual retirement accounts with Ameriprise. Through Mr. Evans' assistance, Mr. Bayles signed a Brokerage Individual Retirement Account (IRA) Application (“IRA Application”), bearing account number 264133,² on June 21, 2012. Soon thereafter, Mr. Evans again assisted Mr. Bayles when he signed an Active Portfolios Application–IRA Account Application (“Portfolios Application”), bearing account number 961133, on September 5, 2012.³ The first page of each application states that a copy of the related client agreement (“Brokerage Agreement”) must be provided to the client. In addition, the IRA Application contains a paragraph stating:

You acknowledge that you have received and read the Ameriprise Brokerage Client Agreement (“Agreement”) and agree to abide by its terms and conditions as currently in effect or as they may be amended from time to time. You hereby consent to all these terms and conditions with full knowledge and understanding of the information contained in the Agreement. This brokerage account is governed by a predispute arbitration clause which is found on Section 26, page 3 of the Agreement. You acknowledge receipt of the predispute arbitration clause.⁴

(Footnote added.). Similar language is provided in the Portfolios Application:

You acknowledge that you have received and read the Ameriprise Active Portfolios Client Agreement (version K, dated 03/12), the Ameriprise Managed Accounts Client Disclosure Brochure and the Ameriprise Brokerage Client Agreement, which is hereby incorporated by reference, and agree to abide by the terms and conditions as currently in effect or as they may be amended from time to time. You hereby consent to all these terms and conditions with full knowledge and understanding of the information contained in them. This account is governed by a predispute arbitration provision which is found in Section 25, Page 9 of the Active Portfolios Client Agreement and Section 26, Page 3 of the Brokerage Client Agreement. You acknowledge receipt of the predispute arbitration provision.⁵

(Footnote added.). The arbitration clause in each Brokerage Agreement begins with the words: “This agreement contains a predispute arbitration clause. By signing this Agreement the parties agree as follows ....” (Bold in original.).⁶

Mr. Bayles died on March 26, 2013.⁷ Although Mrs. Bayles believed she was the intended beneficiary on the Portfolios account, Ameriprise's documentation, including a change of beneficiary form, indicated that Kristina Nicholls and Stephen Bayles, the decedent's children, were the designated primary beneficiaries in equal shares on both the IRA and the Portfolios accounts.

On September 5, 2014, Mrs. Bayles filed a complaint in her individual capacity challenging Ameriprise's payout of the proceeds in the Portfolio account (number 961133) to the decedent's children. She asserted claims against Ameriprise and its agent, Mr. Evans, related to both accounts, including negligence, detrimental reliance, respondeat superior, and breach of a contract.⁸ She also asserted an unjust enrichment claim against the decedent's children in relation to their receipt of the proceeds from the Portfolios account.

On November 17, 2014, the petitioners filed a motion to dismiss and compel arbitration. The circuit court held a hearing on the motion on February 27, 2015. On May 19, 2015, the circuit court entered its order denying the motion.

The circuit court's order only addressed the IRA account (number 264133). The circuit court found the IRA Application for this account referenced the Brokerage Agreement, which included an arbitration clause that stated, in part: “By signing this Agreement, the parties agree as follows....”⁹ Observing the IRA Application was signed, but the Brokerage Agreement was not, the circuit court found “the absence of a signature within the Brokerage Agreement create[d] an ambiguity to be construed against the drafter, Defendant Ameriprise Financial Services, Inc. ... under the doctrine of contra proferentem .”¹⁰ Based on this finding, the circuit court ruled “as a matter of law that the decedent [Mr. Bayles] did not enter into a valid arbitration agreement with Ameriprise[.]” This appeal followed.

II. Standard of Review

The circuit court's denial of the petitioners' motion to dismiss and to compel arbitration is subject to an immediate appeal. In Credit Acceptance Corp. v. Front , 231 W.Va. 518, 745 S.E.2d 556 (2013)

, we held: “An order denying a motion to compel arbitration is an interlocutory ruling which is subject to immediate appeal under the collateral order doctrine.” 231 W.Va. at 519, 745 S.E.2d at 557, syl. pt. 1. Further,

[w]hen an appeal from an order denying a motion dismiss is properly before this Court, our review is de novo . See, e.g. , Syl. pt. 4, Ewing [v. Bd. of Educ. ], 202 W.Va. 228, 503 S.E.2d 541 [ (1998) ]

(“When a party, as part of an appeal from a final judgment, assigns as error a circuit court's denial of a motion to dismiss, the circuit court's disposition of the motion to dismiss will be reviewed de novo .”).

Credit Acceptance , 231 W.Va. at 525, 745 S.E.2d at 563

. To the extent our analysis requires us to consider the circuit court's interpretation of a contract, our review is also plenary. Zimmerer v. Romano , 223 W.Va. 769, 777, 679 S.E.2d 601, 609 (2009) (“[W]e apply a de novo standard of review to the circuit court's interpretation of the contract.”) (citation omitted). Accordingly, we proceed with our de novo review of the circuit court's ruling in this matter.

III. Discussion

The sole issue before this Court is whether the circuit court erred by invalidating the arbitration clause in the Brokerage Agreement associated with the IRA account (number 264133). The circuit court found the absence of a signature on the Brokerage Agreement created an ambiguity to be construed against the drafter, Ameriprise, under the doctrine of contra proferentem . The petitioners assert that because the decedent signed the IRA Application, which incorporated the Brokerage Agreement by reference, the absence of a signature on the Brokerage Agreement did not create an ambiguity under the doctrine of contra proferentem. Relying upon language in the arbitration clause expressly contemplating a signature on the Brokerage Agreement, Mrs. Bayles argues the absence of her late husband's signature on that agreement demonstrates the parties did not intend to be bound by the arbitration clause and creates an ambiguity that must be construed against Ameriprise.

We begin our analysis by observing that the validity of an arbitration agreement is a matter of state contract law. See State ex rel. Clites v. Clawges , 224 W.Va. 299, 305, 685 S.E.2d 693, 699 (2009)

( “[I]ssue of whether an arbitration agreement is a valid contract is a matter of state contract law[.]”). Recently, in State ex rel. U–Haul Co. v. Zakaib , 232 W.Va. 432, 752 S.E.2d 586 (2013), we applied contract principles in addressing the denial of a motion to compel arbitration. In analyzing U–Haul's argument that a “single contract may be comprised of separate documents,”¹¹ we recognized that “[a] majority of courts hold that for the terms of one document to be incorporated by reference into a writing executed by the parties, ‘the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto [.]’ ” Id. at 438, 442, 752 S.E.2d at 593, 596 (citation omitted). Relevant to the matter currently before us, we held in U–Haul that

[i]n the law of contracts, parties may incorporate by reference separate writings together into one agreement. However, a general reference in one writing to another document is not sufficient to incorporate that other document into a final agreement. To uphold the validity of terms in a document incorporated by reference, (1) the writing must make a clear reference to the other document so that the parties' assent to the reference is unmistakable; (2) the writing must describe the other document in such terms that its identity may be ascertained beyond doubt; and (3) it must be

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