Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kirton

• Decision Date: 05 June 1998
• Citation: 719 So.2d 201
• Parties: MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.; and Jerome T. Jordan v. Margaret KIRTON. 1970152.
• Court: Alabama Supreme Court

Page 201

719 So.2d 201

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.; and Jerome T. Jordan v. Margaret KIRTON.

1970152.

Supreme Court of Alabama.

June 5, 1998.

A. Inge Selden III, Carl S. Burkhalter, and T. Louis Coppedge of Maynard, Cooper & Gale, P.C., Birmingham, for appellants.

Lange Clark, Birmingham; Archie C. Lamb, Jr., of Levin, Middlebrooks, Mabie, Thomas, Mitchell, Papantonio & Lamb, Birmingham, for appellee.

HOUSTON, Justice.

Merrill Lynch, Pierce, Fenner & Smith, Inc., and Jerome T. Jordan, a financial consultant for Merrill Lynch (hereinafter collectively referred to as "Merrill Lynch"), appeal from the trial court's order denying their motion to compel arbitration of Margaret Kirton's claims. We reverse and remand.

Paul Burgess Adamson, Sr. ("Paul Sr."), died in 1986, leaving a wife, Alice Eliot Adamson; a son, Paul Burgess Adamson, Jr. ("Paul Jr."); and a daughter, Margaret Adamson Kirton. Pursuant to Paul Sr.'s will, Paul Jr. was appointed executor of his father's estate and trustee of a testamentary trust ("the Family Trust"). Thereafter, Ms. Adamson executed a revocable trust indenture ("the revocable trust"), in which she named Paul Jr. as trustee. This trust was funded with individual assets of Ms. Adamson. Ms. Adamson was the income beneficiary of the two trusts, and Paul Jr. and Ms. Kirton were the residual beneficiaries of the trusts. Both trust instruments gave Paul Jr. broad authority to execute documents on behalf of the trust beneficiaries.

In 1989, Paul Jr., exercising his authority as trustee for the two trusts, opened two Merrill Lynch "cash management accounts" and executed two cash management account agreements, which contained broadly worded arbitration clauses. Paul Jr. signed these agreements in his capacity as trustee.

In 1995, after having discovered that substantially all of the money was missing from the trust accounts, Ms. Adamson sued Paul Jr., alleging that he had made unauthorized use of the funds from the trusts for his own benefit. Ms. Adamson then obtained a restraining order requiring the immediate dissolution of the revocable trust and the disbursement of its corpus "jointly to [her] and [Ms. Kirton]."

Thereafter, Ms. Adamson and Ms. Kirton opened a Merrill Lynch joint account in their names and executed an "investor credit line service client agreement" ("the 1995 customer agreement"). Ms. Kirton's attorney was present when she executed the 1995 customer agreement. Paragraph 13 of the 1995 customer agreement contained a broadly worded arbitration provision, the pertinent parts of which are as follows:

"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.

"....

"The undersigned agrees, that all controversies which may arise between us, including but not limited to those involving any transaction or the construction, performance, or breach of this or any other agreement between us, whether entered into prior [to], on, or subsequent to the date hereof, shall be determined by arbitration."

(Emphasis added.) In the 1995 customer agreement, immediately above Ms. Kirton's signature, the following appeared:

"BY SIGNING THIS AGREEMENT, THE UNDERSIGNED ACKNOWLEDGES (1) THAT, IN ACCORDANCE WITH PARAGRAPH 13 [THE PERTINENT PORTIONS OF WHICH ARE SET OUT ABOVE], THE UNDERSIGNED IS AGREEING IN ADVANCE TO ARBITRATE ANY CONTROVERSIES THAT MAY ARISE WITH YOU...."

(Emphasis added.)

Ms. Adamson later amended the complaint in her action against Paul Jr., by adding Ms. Kirton as a plaintiff and adding Merrill Lynch, Pierce, Fenner & Smith, Inc., and Jerome T. Jordan as defendants. In the amended complaint, Ms. Adamson and Ms. Kirton alleged that Merrill Lynch owed them a fiduciary duty that it had breached, that it had converted a portion of the trusts' assets, and that it had fraudulently handled the trusts. Merrill Lynch filed a motion to compel arbitration and a motion for a stay pending arbitration. The trial court granted the motion to compel arbitration as to Ms. Adamson, but denied the motion to compel arbitration as to Ms. Kirton. ¹ Merrill Lynch appealed, challenging the trial court's refusal to compel arbitration as to Ms. Kirton.

In denying Merrill Lynch's motion to arbitrate Ms. Kirton's claims against it, the trial court wrote:

"[Ms. Kirton] did not sign ... the 1989 agreement upon which [Merrill Lynch] ... relies in its motion for binding arbitration.... [T]here is no agreement between [Ms. Kirton] and [Merrill Lynch] to arbitrate any dispute under the 1989 agreement. That agreement was between [Paul Jr., the trustee] and Merrill Lynch and does not bind [Ms. Kirton].

"Pursuant to an earlier order in this action, [Ms. Adamson and Ms. Kirton] opened a new Merrill Lynch account to attempt to preserve what few assets were left in the trusts. In connection with the opening of that new account on October 10, 1995, [Ms.] Adamson and [Ms.] Kirton signed a new account agreement which also contained an arbitration clause. This action was pending at the time although Merrill Lynch had not been named a defendant [nor had Ms. Kirton been named a plaintiff]. Nevertheless, considering all of the existing circumstances at the time, the court finds that the 1995 documents were not an agreement between [Ms.] Adamson and [Ms.] Kirton to arbitrate the claims asserted in this action."

Merrill Lynch maintains that the trial court erred in refusing to compel arbitration of Ms. Kirton's claims, in light of her execution of the broadly worded arbitration agreement in 1995. According to Merrill Lynch, the holding of the trial court overlooks the clear terms of the arbitration clause in the 1995 customer agreement, which, it says, "are decidedly not limited to disputes involving [Ms. Kirton's] joint account." (Emphasis in original.) Rather, Merrill Lynch argues, the breadth of the language of the arbitration clause is "quite clear" and requires the arbitration of "all controversies which may arise between [Merrill Lynch and Ms. Kirton], including but not limited to those involving any transaction or the construction, performance, or breach of this or any other agreement between [Merrill Lynch and Ms. Kirton], whether entered into prior [to], on, or subsequent to the date hereof." We agree.

Ms. Kirton and Ms. Adamson executed the 1995 customer agreement in connection with the creation of their joint account at Merrill Lynch. At her deposition, Ms. Kirton testified that before she signed that agreement, she had just "glanced at it" but that no one had prevented her from reading it. Moreover, she testified, she was represented by counsel when she signed that document. See Burroughs v. Jackson Nat'l Life Ins. Co., 618 So.2d 1329, 1332 (Ala.1993) ("When the plaintiff ... [consults an expert in a field] ... [t]he knowledge and understanding of [that] expert are attributed to the plaintiff."). She also testified that she had no personal knowledge whatever of any wrongdoing by Merrill Lynch. Furthermore, Ms. Kirton and Merrill Lynch made no exceptions to their agreement that would have specifically excluded certain types of claims from arbitration. See Ex parte Dyess, 709 So.2d 447 (Ala.1997); Jones v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 604 So.2d 332 (Ala.1991); H.L. Fuller Constr. Co. v. Industrial Dev. Board of the Town of Vincent, 590 So.2d 218 (Ala.1991); Ex parte Warrior Basin Gas Co., 512 So.2d 1364 (Ala.1987). See, also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).

The 1995 customer agreement contains a broadly worded arbitration clause that is clear on its face--it covers "any" and "all" controversies that may arise between Merrill Lynch and Ms. Kirton--and, like unambiguous statutes, it leaves no room for interpretation. See, Allied-Bruce Terminix Companies, Inc. v. Dobson, 684 So.2d 102, 103 (Ala.1995) (discussing the rule that general principles of contract law apply to the interpretation of an arbitration provision); Coastal Ford, Inc. v. Kidder, 694 So.2d 1285, 1286 (Ala.1997) (holding that the language of an arbitration clause applying to "all claims, demands, disputes, or controversies of every kind or nature that may arise ... concerning the vehicle" was not ambiguous and was broad enough to encompass the claims at issue); Ex parte Lorance, 669 So.2d 890, 892-93 (Ala.1995) (holding that the language of the arbitration clause--" '[a]ny controversy or claim arising out of ...--' " was broad enough to encompass the plaintiff's claim alleging fraud in the inducement of the contract); Ex parte Dickinson, 711 So.2d 984 (Ala.1998) (holding that a clause providing for arbitration of "all claims ... and controversies of every kind or nature that may arise between [the Buyer and the Dealer]" was broad enough to cover the plaintiff's claims of conversion and wrongful repossession); Jones v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra (holding that language in a Merrill Lynch "customer account agreement" that the plaintiff signed upon opening the first account--providing for arbitration of "any controversy ... arising out of [its] business"--applied to the disputed second account even though the plaintiff did not sign a separate customer account agreement for the second account).

See, also the following cases, from other jurisdictions, addressing the effect of broadly worded arbitration provisions on the scope of arbitration: Levine v. Merrill Lynch, Pierce, Fenner & Smith, Inc., ...