Lebenbom v. Ubs Fin. Servs., Inc.

• Decision Date: 23 October 2018
• Docket Number: No. 340973,340973
• Citation: 326 Mich.App. 200,926 N.W.2d 865
• Parties: Marjorie LEBENBOM, Plaintiff-Appellee, v. UBS FINANCIAL SERVICES, INC., Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

326 Mich.App. 200

926 N.W.2d 865

Marjorie LEBENBOM, Plaintiff-Appellee,

v.UBS FINANCIAL SERVICES, INC., Defendant-Appellant.

No. 340973

Court of Appeals of Michigan.

Submitted October 10, 2018, at Detroit.

Decided October 23, 2018, 9:05 a.m.

Weininger Law, PLLC (by Daniel W. Weininger) for plaintiff.

Saretsky Hart Michaels & Gould PC, Birmingham (by Eric A. Michaels and Janine M. Lucas ) for defendant.

Before: O'Brien, P.J., and K. F. Kelly and Fort Hood, JJ.

Per Curiam.

Defendant appeals as of right the trial court's order denying its motion for summary disposition sought pursuant to MCR 2.116(C)(7) or, in the alternative, to compel arbitration pursuant to MCR 3.602. We reverse and remand for proceedings consistent with this opinion.

I. FACTS

This appeal follows defendant's alleged action of erroneously removing funds from plaintiff's brokerage account in July 2016. The facts in this case are largely undisputed. In a two-count complaint filed May 26, 2017, plaintiff alleged statutory conversion and common-law conversion against defendant. According to the allegations in the complaint, plaintiff created a revocable trust on November 2, 1979, and the trust opened an account with defendant at its location in Birmingham, Michigan. On July 5, 2016, defendant received a "[t]ax [c]ompliance [l]evy ... from the New York State Department of Tax and Finance[.]...." The judgment debtor listed on the levy was plaintiff's husband, Milton Lebenbom. According to plaintiff, "[i]n response to this facially defective levy, [defendant] completely restricted [plaintiff's] access to all of the funds" in her account. Plaintiff's counsel contacted defendant on July 13, 2016, requesting that defendant release "the unlawful restrictions" on the funds because the funds had been incorrectly frozen. Plaintiff further alleged that from July 5, 2016 until September 29, 2016, she did not have access to the funds in her account and that defendant did not provide any information with respect to when the hold on the account would be released. As a result, during that period, plaintiff was left without monetary resources to pay her utility bills or other monthly expenses. Plaintiff stated that defendant had received an "identical levy" from the New York State Department of Tax and Finance in February 2011 and that after freezing plaintiff's assets at that time, "[defendant] expeditiously released her funds after determining that the levy was intended [for plaintiff's husband]." According to the complaint, defendant had, in fact, received multiple levies identical to the levy received in July 2016 but each time had released the funds in plaintiff's account after determining that the levies were directed to plaintiff's husband. On July 29, 2016, defendant allegedly removed $ 156,130.22—an amount that doubled the amount of the tax levy—from plaintiff’s account without plaintiff's written authorization. Finally, on September 28, 2016, after the New York State Department of Tax and Finance concluded that the levy could not attach to assets held in plaintiff's name, the levy was released.

After plaintiff filed her complaint, in lieu of filing an answer, defendant moved for summary disposition pursuant to MCR 2.116(C)(7). In the alternative, defendant sought an order from the trial court compelling arbitration pursuant to MCR 3.602. In its brief in support, defendant argued that summary disposition was appropriate because on July 20, 2004, plaintiff signed an Account Services Selection form that contained an arbitration agreement. Accordingly, defendant claimed that summary disposition should be granted because of the parties' agreement to arbitrate. In support of its motion, defendant included the form, and the portion of the form captioned "Client Agreement" contained the following language regarding arbitration:

BY SIGNING BELOW ACCOUNT HOLDER UNDERSTANDS[,] ACKNOWLEDGES AND AGREES

* * *

B that in accordance with the last paragraph of the Master Account Agreement entitled "Arbitration" the Account Holder agrees in advance to arbitrate any controversies which may arise with[,] among others[,] UBS Financial Services in accordance with the terms outlined therein[.]^{[1 ]}

The Master Account Agreement (MAA) provides the following with respect to arbitration:

Arbitration

• Arbitration is final and binding on the parties.

• The parties are waiving their right to seek remedies in court, including the right to jury trial.

• Pre-arbitration discovery is generally more limited than and different from court proceedings.

• The arbitrator's award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by the arbitrators is strictly limited.

• The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.

• Client agrees, and by carrying an account for Client UBS Financial Services agrees that, any and all controversies which may arise between UBS Financial Services, any of UBS Financial Services' employees or agents and Client concerning any account, transaction, dispute or the construction, performance or breach of this Agreement or any other agreement, whether entered into prior to, on or subsequent to the date hereof, shall be determined by arbitration. Any arbitration under this Agreement shall be held under and pursuant to and be governed by the Federal Arbitration Act, and shall be conducted before an arbitration panel convened by the New York Stock Exchange, Inc. or the National Association of Securities Dealers, Inc. Client may also select any other national securities exchange's arbitration forum in which UBS Financial Services is legally required to arbitrate the controversy with Client, including, where applicable, the Municipal Securities Rulemaking Board. Such arbitration shall be governed by the rules of the organization convening the panel. Client may elect in the first instance the arbitration forum, but if Client fails to make such election by certified mail, return receipt requested, or telegram addressed to UBS Financial Services at its main office, and to the attention of the Legal Department, before the expiration of five (5) days after receipt of a written request from UBS Financial Services to make such election then UBS Financial Services may make such election. The award of the arbitrators, or of the majority of them, shall be final, and judgment on the award rendered may be entered in any court of competent jurisdiction.

In her response to the motion, plaintiff claimed that FINRA,² the forum in which the claims would be arbitrated, did not have the authority to arbitrate her claims and that the arbitration clause did not encompass her claims alleging wrongful conversion against defendant. Plaintiff also asserted that the terms of the arbitration clause were ambiguous. In its reply brief, defendant maintained that arbitration was required by FINRA and that plaintiff's claims fell within the confines of the arbitration clause. After conducting a hearing on defendant's motion, the trial court denied the motion. Defendant now appeals as of right.

II. SCOPE OF THE ARBITRATION AGREEMENT

Defendant first argues that the trial court erred by determining that the parties' arbitration clause does not encompass plaintiff's claims alleging conversion against defendant. We agree.

A. STANDARD OF REVIEW

In Galea v. FCA U.S. LLC , 323 Mich. App. 360, 368, 917 N.W.2d 694 (2018), this Court recently set forth the standard of review for a motion for summary disposition brought pursuant to MCR 2.116(C)(7) :

We review de novo a trial court's decision to grant or deny a motion for summary disposition under MCR 2.116(C)(7). Hicks v. EPI Printers, Inc. , 267 Mich. App. 79, 84, 702 N.W.2d 883 (2005). A motion under MCR 2.116(C)(7) is appropriately granted when a claim is barred by an agreement to arbitrate. Maiden v. Rozwood , 461 Mich. 109, 118 n. 3, 597 N.W.2d 817 (1999). "A party may support a motion under MCR 2.116(C)(7) by affidavits, depositions, admissions, or other documentary evidence." Id . at 119, 597 N.W.2d 817. However, "a movant under MCR 2.116(C)(7) is not required to file supportive material, and the opposing party need not reply with supportive material. The contents of the complaint are accepted as true unless contradicted by documentation submitted by the movant." Id . Whether an arbitration agreement exists and is enforceable is a legal question that we review de novo. Hicks , 267 Mich. App. at 84, 702 N.W.2d 883.

Questions regarding the interpretation of contractual language are reviewed de novo. VHS Huron Valley-Sinai Hosp., Inc v. Sentinel Ins. Co. (On Remand) , 322 Mich. App. 707, 715, 916 N.W.2d 218 (2018).

B. ANALYSIS

The pivotal issue to be resolved in this appeal is whether the arbitration clause in the parties' MAA encompasses plaintiff's claims against defendant to the extent that plaintiff's claims are barred by the agreement to arbitrate. As an initial matter, the parties do not dispute that this case is governed by the Federal Arbitration Act (FAA), 9 USC 1 et seq . State courts are mandated, pursuant to the Supremacy Clause of the United States Constitution, U.S. Const., art. VI, cl. 2, to adhere to the FAA's substantive provisions. Abela v. Gen. Motors Corp. , 257 Mich. App. 513, 524, 669 N.W.2d 271 (2003), aff'd 469 Mich. 603, 677 N.W.2d 325 (2004).

In Amtower v. William C. Roney & Co. (On Remand ), 232 Mich. App. 226, 234, 590 N.W.2d 580 (1998), this Court, citing precedent from the United States Supreme Court,³ recognized that when determining "whether the parties agreed to arbitrate a certain matter, courts should ordinarily apply basic state-law principles that govern the formation of contracts."

" ‘The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties .’ " Goodwin, Inc. v. Orson E [E.] Coe, Pontiac, Inc , 392 Mich. 195, 209, 220 N.W.2d 664 (1974), quoting McIntosh v.

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