Simpson v. Grimes

• Decision Date: 21 May 2003
• Docket Number: No. 2002-0869.,2002-0869.
• Citation: 849 So.2d 740
• Parties: James D. SIMPSON, et ux. v. Robert D. GRIMES, et al.
• Court: Court of Appeal of Louisiana — District of US

849 So.2d 740

James D. SIMPSON, et ux. v. Robert D. GRIMES, et al.

No. 2002-0869.

Court of Appeal of Louisiana, Third Circuit.

May 21, 2003.

Rehearing Denied August 6, 2003.

Robert G. Nida, Gold, Weems, Bruser, etc., Alexandria, LA, for Plaintiffs/Appellants, James D. Simpson, Juanita H. Simpson.

Bruce Victor Schewe, Phelps, Dunbar, L.L.P., New Orleans, LA, for Defendants/Appellees, Robert D. Grimes, Argent Investment Services, Inc.

Court composed of ULYSSES GENE THIBODEAUX, SYLVIA R. COOKS, JOHN D. SAUNDERS, BILLIE COLOMBARO WOODARD and MARC T. AMY, Judges.

JOHN D. SAUNDERS, Judge.

The plaintiffs filed suit for losses sustained in a self-directed IRA account. The defendants filed exceptions of no right and no cause of action, as well as an exception of prematurity due to an arbitration provision contained in the application to open the account. The trial court granted the exceptions and issued a stay of the proceedings while the matter continued in arbitration. The judgment was rendered final and appealable pursuant to La.Code Civ.P. art. 1915(B). The plaintiffs appeal. We reverse and remand.

Factual and Procedural Background

Juanita and James D. Simpson allege that the defendants, Robert D. Grimes and Argent Investment Services, Inc. (formerly known as TCL Securities, Inc.), are liable for losses to their Individual Retirement Account. They contend that in May of 1996 they established an account with TCL Securities under Mr. Simpson's name, with Robert Grimes acting as a broker. In a petition filed October 23, 2001, they allege they "placed approximately $200,000.00 in the IRA Account with TCL with instructions that the money was to be invested for capital appreciation or growth." The funds were distributed between a number of mutual funds.

In early 1999 the plaintiffs received a form from Mr. Grimes entitled "Trading Authorization-Limited to Purchases and Sales of Securities," which, upon signing by the Simpsons, would allow Mr. Grimes to buy, sell, and trade securities without seeking specific authorization from the Simpsons. They maintain that they did not sign this form and that the signature appearing on the copy of this form presented at trial by TCL is false.

The plaintiffs further allege that Mr. Grimes, acting under the apparent authority of this "Trading Authorization," began buying and selling securities on their account. As a direct result of Mr. Grimes' actions, the plaintiffs maintain that their IRA dramatically declined in value, experiencing losses exceeding the general decline of the market during that period.

Mr. and Mrs. Simpson filed suit, alleging that Mr. Grimes breached his fiduciary duty in a number of regards, and also that the actions of Mr. Grimes and TCL, as his employer, "constitute deceptive and unfair trade practices pursuant to La.R.S. 51:1401 in that those acts were unethical, unscrupulous and substantially injurious to petitioners as consumers of financial services." They sought damages related to the losses associated with their account, as well as damages related to their anxiety over the loss of the funds.

Mr. Grimes and Argent filed a number of exceptions, alleging that the trial court lacked jurisdiction over the matter due to an arbitration clause contained in the account application, that the matter was premature due to the arbitration clause, and also that Mrs. Simpson lacked a cause of action or right of action as the account was held by Mr. Simpson. The trial court granted the exceptions, staying the proceedings in the district court and referring the matter to arbitration. The ruling was designated a final judgment pursuant to La.Code Civ.P. art.1915.

The plaintiffs assert the following assignments of error:

1. The trial court erred in granting the defendants' declinatory exceptions and dilatory exceptions based upon the arbitration provisions of the May 7, 1996 contract.

2. The trial court erred in granting the defendants' peremptory exceptions in ruling that Juanita H. Simpson is without a cause or right of action to assert the claims involved in this litigation.

DISCUSSION

In 1925 congress enacted the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. The purpose of the FAA was to make agreements to arbitrate disputes enforceable to the same extent as other contracts, and to counter the historic judicial hostility towards arbitration. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)

. After the enactment of the FAA, and several key cases decided by the United States Supreme Court, the Court began to recognize a strong presumption in favor of arbitration and the enforcement of arbitration agreements. This strong presumption is firmly established in federal law and jurisprudence, and is also becoming strongly favored in state law.

Louisiana law provides for the validity of arbitration agreements in La.R.S 9:4201, which provides:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

The Federal Arbitration Act, 9 U.S.C. § 1, et seq., provides a similar provision for enforcement of arbitration agreements. Section 2 of the FAA states:

A written provision in any maritime transaction or 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.

United States Supreme Court jurisprudence has consistently presented a strong and growing federal policy favoring arbitration of disputes and the enforcement of arbitration clauses and the FAA. See, e.g., Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)

; Gilmer, 500 U.S. 20,

111 S.Ct. 1647,

114 L.Ed.2d 26; Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Specifically, in Allied-Bruce the Supreme Court held that the FAA governs all contracts falling within the scope of the Commerce Clause and Congress's authority under it. In Moses H. Cone the court further stated its support for the FAA and enforcement of contractual agreements to arbitrate. "The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitral issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or like defense to arbitrability." Moses H. Cone, 460 U.S. at 24-25,

103 S.Ct. 927. "The Federal Arbitration Act (FAA) has been interpreted by the Supreme Court as mandating the enforcement of all arbitration agreements which `evidence a transaction involving commerce, unless they are revocable on contractual grounds.' Southland Corp., v. Keating, 465 U.S. 1, 11-12, 104 S.Ct. 852, 858-59, 79 L.Ed.2d 1 (1984)." Lytle v. CitiFinancial Services, Inc., 810 A.2d 643, 654 (Pa.Super.2002).

Waiver of Constitutional Rights

The plaintiffs argue that the arbitration provision contained in the May 7, 1996 contract, and in fact any arbitration clause, waives a parties' constitutional right to seek relief in court. They allege that, for a contractual waiver of constitutional rights to be enforceable, it must be brought to the attention of the party against whom it is to be enforced.

In the present case the arbitration provision, while located on the back of the application, is set out in all capital letters. The remainder of the text on the back of the application is in regular font. Despite this fact however, the dense text, relatively small font, and the placement of the arbitration provision almost directly in the middle of the page prevent the provision from being particularly noticeable. The provision in paragraph 17 provides:

17. • ARBITATION [SIC] IS FINAL AND BINDING ON THE PARTIES.

• THE PARTIES ARE WAIVING THEIR RIGHTS 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 ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF THE RULING BY THE ARBITRATIONS IS STRICTLY LIMITED.

• THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.

THE CUSTOMER AGREES AND BY CARRYING AND [SIC] ACCOUNT FOR THE CUSTOMER, TCLSI AND MORGAN KEEGAN AGREE THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN THE PARTIES CONCERNING ANY TRANSACTION OR CONSTRUCTION, PERFORMANCE, OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN U.S. PERTAINING TO SECURITIES AND OTHER PROPERTY, WHETHER ENTERED INTO PRIOR, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION, ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED PURSUANT TO THE FEDERAL ARBITRATION ACT AND THE LAWS OF THE STATE OF LOUISIANA BEFORE THE AMERICAN ARBITRATION ASSOCIATION, OR BEFORE THE NEW YORK STOCK EXCHANGE, INC. OR AN ARBITRATION FACILITY PROVIDED BY ANY OTHER EXCHANGE OF WHICH TCLSI AND/OR MORGAN KEEGAN IS A MEMBER, OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR THE MUNICIPAL SECURITIES RULE MAKING BOARD AND IN ACCORDANCE WITH THE RULES OBTAINING OF THE SELECTED ORGANIZATION. THE CUSTOMER MAY...