Larsen v. Opie, 88-404
| Decision Date | 19 April 1989 |
| Docket Number | No. 88-404,88-404 |
| Citation | 237 Mont. 108,771 P.2d 977,46 St.Rep. 660 |
| Parties | Richard LARSEN, Plaintiff and Appellant, v. Robert OPIE and Piper, Jaffray & Hopwood, a Delaware Corporation, Defendants and Respondents. |
| Court | Montana Supreme Court |
J. Daniel Hoven & Oliver Goe, Browning, Kaleczyc, Berry & Hoven, Helena, for plaintiff and appellant.
John G. Crist, Dorsey & Whitney, Billings, for defendants and respondents.
Appellant Larsen sued Piper, Jaffray & Hopwood and their seller Robert Opie in the District Court of the Thirteenth Judicial District for misrepresentation and fraud in the inducement of signing option agreements and margin contracts. This suit was filed in response to respondents' motion to compel arbitration for a dispute arising between the parties. On June 30, 1988, Judge Russell K. Fillner granted respondents' motions and ordered appellant to submit to arbitration. We affirm.
The issues on appeal are:
1. Whether the District Court's order compelling appellant to arbitrate is an appealable order?
2. Whether the issue of fraud in the inducement regarding the margin agreement and customer option agreement is to be determined by the court or by arbitration?
Robert Opie, an investment executive with Piper, Jaffray & Hopwood, negotiated with appellant Larsen to sell Larsen "Margin and Customer Option Agreements." Larsen alleges that he was a "neophyte" investor and had informed Piper, Jaffray & Hopwood that he would refuse to enter any agreement which would subject him to possible unlimited loss. Appellant also alleges that Opie was aware of this but nonetheless coerced appellant to enter the highly volatile area of margin agreements and option agreements.
Larsen contends that, when signing the option agreement and margin agreement, he did not read either contract but instead relied on the oral assertions of respondent. Appellant refers to two specific clauses of which he was unaware: first, with each agreement was supplied "level four and level five agreements" which stated that the investor understood the high risks involved in selling uncovered put options and that he could be exposed to unlimited loss; second, the agreements contained an arbitration clause which stated:
We [Larsen] specifically agree and recognize that all controversies which may arise between Piper, Jaffray & Hopwood Incorporated, its agents, representatives or employees and me, concerning any transaction, account, or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on, or subsequent to the date hereof, shall be determined by arbitration to the fullest extent provided by law.
Because of appellant's contention that he never read the agreements, he claims he was unaware of either of these clauses at the time of signing. Appellant subsequently lost money on the margin and option agreements when the stock market crashed dramatically on October 19, 1987. His stock was sold to cover losses and respondents claim that he still owes $15,000, debited to his account.
Piper, Jaffray & Hopwood sought to arbitrate the matter, but Larsen filed a suit in District Court alleging breach of duty of good faith and fair dealing, fraud, constructive fraud, and that the contracts were void. Appellant argues that if a contract is void from its inception, the arbitration clause contained therein cannot compel arbitration to decide the validity of the contract itself. Respondents claim that the issue of fraud is for the arbitrator's review, compelled by the Arbitration Act, 9 U.S.C. sections 1-14 (1947).
The first issue is whether the decision of the District Court is an appealable order.
The Montana Rules of Appellate Procedure, Title 25, Chapter 21, provide that:
(a) Upon appeal from a judgment in a civil case, the court may review the verdict or decision, and any intermediate order or decision excepted or objected to within the meaning of Rule 46 of the Montana Rules of Civil Procedure, which involved the merits, or necessarily affects the judgment, except a decision or order from which an appeal might have been taken.
Respondent argues that the appeal by Larsen is an interlocutory appeal and is subject to the Judicial Improvements and Access to Justice Act, P.L. 100-702, Section 1019, which states that an appeal may not be taken from an interlocutory order compelling arbitration. However, the appeal to this Court is from a final determination of the District Court. In finding that Larsen's claims were subject to arbitration, the District Court made a final determination regarding the claims by plaintiff at the state court level. Any arguments by either party were thereafter subject to arbitration as prescribed by the Arbitration Committee of the New York Stock Exchange or the National Association of Securities Dealers, Inc. The order was final and is appealable.
The second issue is whether the issue of fraud in the inducement regarding the margin agreements and customer option agreement is to be decided by the District Court or by arbitration.
The Arbitration Act, 9 U.S.C., applies to any contract involving commerce. Section 2 of the Act states:
... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
In Southland Corp. v. Keating (1984), 465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1, 12, the Court stated:
In enacting [section] 2 of the federal Act, Congress declared a national policy favoring...
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