VSR Fin. Servs., Inc. v. McLendon

• Decision Date: 14 August 2013
• Docket Number: No. 05–12–01016–CV.,05–12–01016–CV.
• Citation: 409 S.W.3d 817
• Court: Texas Court of Appeals
• Parties: VSR FINANCIAL SERVICES, INC., Chapman Hext & Co., P.C., Gregory W. Hext, CH Wealth Management, LLC, White Rock Advisors, LLC, and Charles E. Chapman, Appellants v. Gordon B. McLENDON, Jr., and Tri–State Theatres, Appellees.

409 S.W.3d 817

VSR FINANCIAL SERVICES, INC., Chapman Hext & Co., P.C., Gregory W. Hext, CH Wealth Management, LLC, White Rock Advisors, LLC, and Charles E. Chapman, Appellants

v.Gordon B. McLENDON, Jr., and Tri–State Theatres, Appellees.

No. 05–12–01016–CV.

Court of Appeals of Texas, Dallas.

Aug. 14, 2013.

Robert P. Oliver, Gary Kessler, Kessler & Collins, Dallas, for Appellants.

Alan S. Loewinsohn, Loewinsohn Flegle Deary, LLP, Scott A. Whisler, Grau Law Group, PLLC, Dallas, for Appellees.

Before Justices O'NEILL, FRANCIS, and FILLMORE.

OPINION

Opinion by Justice FILLMORE.

Appellant VSR Financial Services, Inc. (VSR), and appellants Chapman Hext & Co., P.C. (Chapman Hext), Gregory W. Hext (Gregory Hext), CH Wealth Management, LLC (CHWM), White Rock Advisors, LLC (White Rock Advisors), ¹ and Charles E. Chapman (Charles Chapman) (collectively referred to as the Chapman appellants) brought their interlocutory appeals of the trial court's denials of their motions to compel arbitration of the claims of Gordon B. McLendon, Jr. (McLendon) and Tri–State Theatres (Tri–State) (collectively referred to as appellees). In two issues, VSR contends the trial court erred by (1) failing to compel arbitration of appellees' claims because a valid agreement to arbitrate the claims existed between appellees and VSR and VSR's “representative,” Charles Chapman, and (2) striking portions of Charles Chapman's affidavit. In three issues, the Chapman appellants contend (1) the trial court erred by failing to compel arbitration of appellees' claims that arise from agreements containing an arbitration provision; (2) because appellees rely on agreements containing an arbitration provision in asserting their claims against non-signatories, the trial court erred by failing to compel appellees to arbitrate their claims against the non-signatories; and (3) because appellees raise allegations of “substantially interdependent and concerted misconduct” by both non-signatories and one or more of the signatories to agreements containing an arbitration provision, the trial court erred by failing to compel appellees to arbitrate their claims against the non-signatories. We affirm the trial court's order denying the motions to compel arbitration.

Background

Appellees sued VSR and the Chapman appellants as a result of an investment loss sustained by appellees. According to appellees' live pleading, the Chapman appellants provided them accounting services and investment advice prior to and during calendar years 2006 and 2007. The investment advice provided by the Chapman appellants included direction on how, where, and to what extent money should be invested by various McLendon business ventures. Appellees allege that the Chapman appellants “recommended and caused [appellees] to purchase notes from DBSI, through what was called DBSI 2006 Secured Notes Corporation.” Appellees also claim that the Chapman appellants, acting as appellees' agent, chose VSR, a registered broker-dealer, to make investments, including the DBSI investment, on behalf of the appellees.

In December 2006, McLendon sought to open an individual investment brokerage account with VSR by signing a “VSR New Account Form.” The VSR New Account Form, which was tailored to “individual and joint accounts,” was also signed by Charles Chapman, in the capacity of a “Registered Rep,” and by an unidentified “Principal.” The VSR New Account Form required that McLendon provide client profile and risk tolerance information, but does not contain the terms and conditions of any services to be provided by VSR and does not contain an arbitration provision. The record contains no agreement signed by VSR and McLendon specifying the terms and conditions upon which VSR would provide broker-dealer services to McLendon.

In connection with establishing his individual VSR investment brokerage account, McLendon also signed a form captioned “Advantage Account ^SM Agreement” (the McLendon Agreement). Immediately below the caption of the form, a box has been checked indicating McLendon was making an “Application” for an Advantage Account ^SM. McLendon's signature is the only signature on the form; there is no signature line on the preprinted form for any counterparty. ² The McLendon Agreement contains an arbitration provision encompassing disputes between the account owner and the “Introducing Firm, Clearing Agent and any Sub–Advisor (and/or any other agent).” Incorporated by reference into the McLendon Agreement is another document entitled “Advantage Account Terms and Conditions” (the Terms and Conditions). The Terms and Conditions document indicates it contains “important information regarding your Advantage Account ... and your acknowledgment of certain understandings between you, your Introducing Firm (‘Introducing Firm’) and First Clearing Corporation, LLC (‘Clearing Agent’, ‘Broker’) in opening your Advantage Account.” The Terms and Conditions contain an arbitration provision identical to the arbitration provision in the McLendon Agreement. In neither the McLendon Agreement nor the incorporated Terms and Conditions is the term “Introducing Firm” defined or declared to be VSR or any other entity. The record contains no agreement signed by First Clearing Corporation, LLC (FCC) and McLendon specifying the terms and conditions under which FCC would provide clearing agent services to McLendon.

In January 2007, McLendon used his individual VSR investment brokerage account to purchase notes from DBSI through the DBSI 2006 Secured Notes Corporation (the DBSI Investment). According to appellees, they committed $1,050,000 to the DBSI Investment.

In July 2007, McLendon opened an investment brokerage account with VSR in the name of Tri–State. McLendon signed on behalf of Tri–State, as its Managing Partner, a VSR New Account Form tailored to “business and trust accounts.” This subsequent VSR New Account Form was also signed by Charles Chapman in the capacity of a “Registered Rep,” but contained no signature of a “Principal.” The VSR New Account Form required that McLendon provide client profile and risk tolerance information, but does not contain the terms and conditions of any services to be provided by VSR and does not contain an arbitration provision. The record contains no agreement signed by VSR and Tri–State specifying the terms and conditions upon which VSR would provide broker-dealer services to Tri–State.

In connection with establishing the Tri–State investment brokerage account with VSR, McLendon also signed on behalf of Tri–State the form captioned “Advantage Account ^SM Agreement” (the Tri–State Agreement). Immediately below the caption of the form, a box has been checked indicating McLendon was making an “Application” for an Advantage Account ^SM. McLendon's signature is the only signature on the form; there is no signature line on the preprinted form for any counterparty. In all respects material to this opinion, the Tri–State Agreement is identical to the McLendon Agreement; it contains the same arbitration provision and incorporates by reference the Terms and Conditions. Accordingly, in neither the Tri–State Agreement nor the incorporated Terms and Conditions is the term “Introducing Firm” defined or declared to be VSR or any other entity. The record contains no agreement signed by FCC and Tri–State specifying the terms and conditions under which FCC would provide clearing agent services to Tri–State.

Following creation of the Tri–State investment brokerage account with VSR, the DBSI investment was transferred from McLendon's individual investment brokerage account to the Tri–State investment brokerage account. Subsequently, DBSI filed for bankruptcy protection. According to appellees, as a result of the DBSI bankruptcy proceeding, they will be unable to recover “all the monies due to them relating to the DBSI Investment and as a result have been damaged.”

In their fourth amended petition, which was appellees' live pleading at the time the trial court denied appellants' motions to compel arbitration, appellees assert causes of action for breach of fiduciary duty, negligence, negligent representation, fraud, breach of contract, and civil conspiracy against the Chapman appellants. Appellees also seek disgorgement of payments made to the Chapman appellants. Appellees assert causes of action for negligence and violations of Texas securities law against VSR.³

Motions to Compel Arbitration

McLendon signed the McLendon Agreement in his individual capacity, and he signed the Tri–State Agreement in the capacity of Managing Partner of Tri–State. Each agreement incorporated the Terms and Conditions. Each agreement includes “information concern[ing] the arbitration of controversies”:

This Agreement contains a predispute arbitration clause. By signing an arbitration agreement, the parties agree as follows:

• All of the parties to this Agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which the claim is filed.

The agreements also include the following arbitration provision:

It is agreed that all controversies or disputes which may arise between you and Introducing Firm, Clearing Agent and any Sub–Advisor (and/or any other agent), (collectively, “us”) concerning any transaction or the construction, performance or breach of this Agreement or any other agreement between us, whether entered into prior to, on, or subsequent to the date of this Agreement, including any controversy concerning whether an issue is arbitrable, shall be determined by arbitration conducted before, and only before, an arbitration panel set up by either the National Association of Securities Dealers, Inc. (“NASD”) or the New York Stock Exchange, Inc. (“NYSE”) in accordance with their respective procedures. Any of us may initiate arbitration by filing a written claim with the NASD or NYSE. Any arbitration under this Agreement...