Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wilbanks
| Decision Date | 01 April 1982 |
| Docket Number | No. 63529,63529 |
| Citation | 290 S.E.2d 122,162 Ga.App. 154 |
| Court | Georgia Court of Appeals |
| Parties | MERRILL LYNCH, PIERCE, FENNER & SMITH, INC. et al. v. WILBANKS et al. |
Paul W. Stivers, Atlanta, for appellants.
Jack M. Carey, Roland H. Stroberg, Gainesville, for appellees.
The plaintiffs, Mr. and Mrs. Wilbanks, filed suit against Merrill Lynch, Pierce, Fenner & Smith, Inc., their securities broker, and Robert A. Wolter, their account executive, to recover damages for fraud and breach of fiduciary duty based on the alleged mishandling of their securities account. The defendants moved to stay the action and to compel arbitration in accordance with the following provision contained in a "Standard Option Agreement" signed by the plaintiffs, governing the purchase and sale of put and call options on their behalf: "Any controversy between us arising out of such option transactions or this agreement shall be settled by arbitration before the National Association of Securities Dealers, Incorporated, or the New York Stock Exchange, or an Exchange located in the United States upon which listed options transactions are executed, only..." The trial court declined to grant the stay, and the defendants appeal.
What the defendants are accused of specifically is "churning," that is, executing numerous securities transactions from the plaintiffs' account for the purpose of generating commissions. The plaintiffs allege that they opened the account with Merrill Lynch for the purpose of investing their $12,000 life savings and that because Mr. Wilbanks was blind and neither he nor his wife were experienced in securities matters, they were persuaded to place complete confidence in Mr. Wolter as their account executive. They further allege that, acting in accordance with Mr. Wolter's recommendations over the next six months, they engaged in over 100 securities transactions, most of them options trades, as a result of which the account was depleted by approximately $4,418 in commissions, and that during this period Mr. Wolter represented to them that the account contained more money than it actually contained. The defendants deny these allegations. Held :
Although Georgia's policy does not favor "all issues" arbitration clauses, that policy must yield where it conflicts with federal policy as set forth in the Federal Arbitration Act, 9 U.S.C.A. § 2. See West Point-Pepperell, Inc. v. Multi-Line Ind., Inc., 231 Ga. 329, 201 S.E.2d 452 (1973); Paine, Webber, Jackson & Curtis, Inc. v. McNeal, 143 Ga.App. 579(1), 239 S.E.2d 401 (1977). The federal statute provides, in pertinent part, as follows: "A written provision in ... a contract evidencing a transaction involving commerce to settle by...
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