Harris v. SAL Financial Services, Inc., A04A0926.

Citation270 Ga. App. 230,606 S.E.2d 293
Decision Date29 October 2004
Docket NumberNo. A04A0926.,A04A0926.
PartiesHARRIS et al. v. SAL FINANCIAL SERVICES, INC.
CourtUnited States Court of Appeals (Georgia)

OPINION TEXT STARTS HERE

Chaiken & Klorfein, Fredric Chaiken, Kaufman, Miller & Sivertsen, Robert J. Kaufman, Perrell & Wright, Charlotte K. Perrell, Atlanta, for appellants.

Parker, Hudson, Rainer & Dobbs, G. Wayne Hillis, Jr., Aaron W. Lipson, Atlanta, for appellee.

ADAMS, Judge.

We granted an interlocutory appeal to review the trial court's order granting the motion of defendant/appellee SAL Financial Services, Inc. ("SAL") to compel arbitration and stay proceedings in the trial court.1 We now conclude that the trial court erred in determining that an arbitrator, and not the court, should determine whether the arbitration provision at issue in this case is enforceable, and reverse and remand this case for reconsideration in light of this opinion.

The facts underlying this appeal are as follows: Charles Warren Jordan hired J. Houston Lennard, an attorney, to establish a charitable remainder trust. Lennard was also named trustee of the trust. Lennard, as trustee, entered into a New Account Application and Client Account Agreement with the predecessor of SAL. Lennard signed these documents above the line that said "Customer" and the line that said "Registered Representative." The document was also signed by Edward C. Bonowitz as "Supervisory Principal" of SAL. These agreements allowed Lennard, a licensed stockbroker, to act as a stock and investment broker for the trust and buy and sell securities on behalf of the trust. The following language appeared just above the signature lines: "I/WE UNDERSTAND THAT THE CUSTOMER AGREEMENT ON THE REVERSE OF THIS APPLICATION CONTAINS IN NUMBERED PARAGRAPH 19 A PRE-DISPUTE ARBITRATION CLAUSE REQUIRING ALL DISPUTES UNDER THIS AGREEMENT TO BE SETTLED BY BINDING ARBITRATION. BY SIGNING BELOW CUSTOMER ACKNOWLEDGES RECEIVING A COPY OF THIS AGREEMENT."

Jordan's family became dissatisfied with Lennard's handling of the trust, and the plaintiffs, who are the trustees who replaced Lennard and a representative of Jordan, filed suit against Lennard and his law firm alleging breach of fiduciary duties, fraud, and wanton and deliberate damage to the trust. The plaintiffs subsequently amended their complaint and filed suit against SAL, alleging, inter alia, that SAL failed to properly supervise Lennard with regard to the investments and other transactions he made on behalf of the trust, and that SAL breached the fiduciary obligation it owed to the trust as its brokerage company by failing to act with reasonable diligence to ensure that Lennard did not have a conflict of interest by acting as the broker, trustee and attorney for the trust.

SAL moved to stay the court action and compel arbitration pursuant to the arbitration provision contained in the client/account agreement Lennard had signed on behalf of the trust. Plaintiffs challenged the motion to compel arbitration, arguing that the arbitration provision was unenforceable because Lennard executed it while impermissibly acting as an agent of both the trust and SAL. The trial court, relying on Merrill Lynch, Pierce, Fenner & Smith v. Wilbanks, 162 Ga.App. 154, 155, 290 S.E.2d 122 (1982) granted SAL's motion and compelled arbitration under the Federal Arbitration Act.2

"Similar to our review of the grant of summary judgment, which involves the elimination of all genuine issues of material fact, the standard of review from the grant of a motion to compel arbitration is whether the trial court was correct as a matter of law. Tigner v. Shearson-Lehman Hutton, Inc., 201 Ga.App. 713, 715, 411 S.E.2d 800 (1991)." Moore & Moore Plumbing v. Tri-South Contractors, 256 Ga.App. 58, 60-61(1), 567 S.E.2d 697 (2002).

In Merrill Lynch, Pierce, Fenner & Smith v. Wilbanks, 162 Ga.App. at 155, 290 S.E.2d 122 (1982) this court, relying on the seminal United States Supreme Court case of Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) held that "where ... the plaintiff attacks the entire contract based on allegations of fraud or breach of fiduciary duty, rather than specifically attacking the validity of the arbitration agreement, the issue must be decided by the arbitrator rather than by the courts." (Emphasis supplied.) In this case, the plaintiffs did not attack the validity of the client/account agreement in their original or amended complaint. In essence, the basis of their claims was that Lennard and SAL had acted negligently and breached their obligations to the trust in their performance under that agreement. However, when SAL moved to compel arbitration, plaintiffs did specifically attack the enforceability of the arbitration provision, arguing that Lennard acted improperly by binding the trust to arbitration while acting as both an agent for the trust and an agent for the brokerage company. In this situation, where the challenge is to the arbitration provision and not the entire contract, the court and not an arbitrator should decide the enforceability of the arbitration provision. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. at 395, 87 S.Ct. 1801; Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 854-855 (11th Cir.1992); Stewart v. Favors, 264 Ga.App. 156, 158, 590 S.E.2d 186 (2003). Moreover, as in Stewart, plaintiffs have "also presented evidence showing unconscionability, which the trial court had the authority to consider." Id. at 159, 590 S.E.2d 186. See also Tigner v. Shearson-Lehman Hutton, Inc., 201 Ga.App. at 716, 411 S.E.2d 800 (1991) (case remanded for trial court to consider whether arbitration...

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7 cases
  • Bickerstaff v. SunTrust Bank, s. A14A1780
    • United States
    • United States Court of Appeals (Georgia)
    • March 30, 2015
    ...or denial of a motion to compel arbitration is whether the trial court was correct as a matter of law. Harris v. SAL Financial Svcs., Inc., 270 Ga.App. 230, 231, 606 S.E.2d 293 (2004). “The construction of an arbitration agreement, like any other contract, presents a question of law, which ......
  • Triad Health Mgmt. of Georgia v. Johnson
    • United States
    • United States Court of Appeals (Georgia)
    • June 3, 2009
    ...as a matter of law." Ashburn Health Care Center v. Poole, 286 Ga.App. 24, 648 S.E.2d 430 (2007). See Harris v. SAL Financial Svcs., 270 Ga.App. 230, 231, 606 S.E.2d 293 (2004). So viewed, the record shows that on September 27, 2005, Matthew Johnson was admitted to a Triad-operated nursing h......
  • Ashburn Health Care Center, Inc. v. Poole, A07A0572.
    • United States
    • United States Court of Appeals (Georgia)
    • June 20, 2007
    ...as a matter of law. See Cash in Advance of Florida v. Jolley, 272 Ga.App. 282, 612 S.E.2d 101 (2005); Harris v. SAL Financial Svcs., 270 Ga.App. 230, 231, 606 S.E.2d 293 (2004). So viewed, the record shows that Poole's mother was admitted to a nursing home owned and operated by Ashburn Heal......
  • Jones v. State, No. A04A1022.
    • United States
    • United States Court of Appeals (Georgia)
    • October 29, 2004
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