Douglas v. Trustmark National Bank et al
Filing
23
ORDER denying 18 Motion to Compel Arbitration and Stay Proceedings Signed by Chief District Judge Louis Guirola, Jr on 11/05/2012 (Guirola, Louis)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
SHIRLEY DOUGLAS, Successor in
interest of Schwartz & Associates,
P.A. and Interstate Fire and
Casualty Co.
PLAINTIFF
VS.
CAUSE NO. 3:12CV523-LG-FKB
TRUSTMARK NATIONAL BANK
and REGIONS BANK
DEFENDANTS
MEMORANDUM OPINION AND ORDER
DENYING MOTION TO COMPEL ARBITRATION
BEFORE THE COURT is Regions Bank’s Motion to Compel Arbitration and
to Stay Proceedings [18]. Regions contends that an arbitration agreement signed by
Plaintiff Shirley Douglas in 2002 for a Union Planters bank account that was closed
in 2003 compels her to arbitrate her current, unrelated claim against Union
Planters’ successor, Regions Bank. The Court has reviewed the Motion, the related
pleadings, and the relevant authority and is of the opinion, for the reasons more
fully explained below, that the Motion should be denied.
FACTS
The parties agree that in August 2002 Douglas opened a checking account
with Union Planters Bank by signing a Signature Card that bound her to the terms
of a Deposit Account Agreement and Disclosure. The Agreement contained an
arbitration provision that stated, in part:
By using or maintaining your account, you agree that, in the event of
any dispute, disagreement, claim or controversy (a “dispute” or
“disputes” as defined herein) between you and us or any of our agents
or employees, or our parent, subsidiary or sister corporations or their
employees or agents, any such dispute will, at the election of you or us,
be resolved through the process of binding arbitration (“arbitration”),
regardless of when the dispute arose. . . . “Disputes” shall have the
broadest possible meaning and shall include by way of example and not
by limitation, any claim, controversy or dispute arising from or related
in any way to (i) this Agreement, (ii) any related agreement (iii) any
agreement that this Agreement supercedes, (iv) the relationships,
accounts or balances on the accounts resulting from this Agreement or
such other agreements, including the validity, enforceability, or scope of
this Arbitration provision or any amendments or supplements to this
Agreement, (v) any related schedules, rules, statements, or disclosures;
(vi) any related services we may provide you at our banking offices,
ATM machines, or other facilities; (vii) advertisements, promotions or
oral or written statements relating to such agreements, accounts, or
balances. Disputes include, but are not limited to, any Disputes based
on contract, tort, fraud and other intentional torts, statutes,
regulations, common law, equity (including claims of any injury or
damage to person or property), claims for breach of fiduciary duty or
wrongful acts . . . . This Arbitration Provision . . . will remain in effect
if you close your account or accounts with us and is irrevocable.
(Def.’s Mot., Ex. 2 to Ex. A at 5-6, ECF No. 18-1). Douglas’ account was closed on or
about May 7, 2003. Union Planters merged with Regions Bank on June 29, 2005.
Regions argues, and Douglas does not dispute, that Regions is the legal successor to
Union Planters.
On June 14, 2012, Douglas sued Regions and Trustmark Bank, claiming that
the banks failed to report an attorney to the appropriate authorities for embezzling
money from client trust accounts. Douglas contends that if the banks had not
breached their alleged duty to report the attorney’s misconduct, he would not have
had the opportunity to embezzle settlement funds that belonged to Douglas.
Regions argues that, as the successor to Union Planters, it is entitled to
enforce the arbitration provision in Douglas’ Agreement with Union Planters.
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Regions further contends that any dispute as to the scope of the arbitration
agreement must, itself, be submitted to arbitration. Douglas argues that she did not
agree to arbitrate her dispute with Regions, and she claims that this is an issue that
may be resolved by the Court.
DISCUSSION
I. THE EFFECT OF THE DELEGATION CLAUSE
Section 2 of the Federal Arbitration Act provides that arbitration agreements
are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2. Arbitration is, essentially, a
matter of contract, and arbitration agreements should be treated like other contracts
and enforced according to their terms. AT&T Mobility LLC v. Concepcion, 131 S. Ct.
1740, 1745 (2011). Because arbitration is a matter of contract, “a party cannot be
required to submit to arbitration any dispute which he has not agreed so to submit.”
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002).
“Arbitrability” is the question of whether the parties have agreed to arbitrate
a particular dispute. Id. Generally, the question of arbitrability is a matter for the
courts to decide, rather than an arbitrator. AT&T Techs, Inc. v. Commc’ns Workers
of America, 475 U.S. 643, 649 (1986). Nevertheless, “[t]he question of ‘who has the
primary power to decide arbitrability’ turns upon what the parties agreed about that
matter.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995). The
Court cannot simply “assume that the parties agreed to arbitrate arbitrability unless
there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.” Id. at 944 (quoting
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AT&T Techs., 475 U.S. at 649); see also Rent-A-Center, West, Inc. v. Jackson, 130 S.
Ct. 2772, 2777 (2010). An agreement to submit disputes concerning arbitrability to
arbitration may be memorialized in a delegation clause. Agere Sys., Inc. v. Samsung
Elecs. Co. Ltd., 560 F.3d 337, 339 (5th Cir. 2009). The arbitration provision at issue
in the present case contains such a clause, providing that the arbitrator will decide
disputes concerning “the validity, enforceability, or scope of this Arbitration
provision . . . .” (Def.’s Mot., Ex. 2 to Ex. A at 5, ECF No. 18-1). Even when an
agreement contains a delegation clause, a dispute as to “the very existence of an
agreement” must first be decided by the court. DK Joint Venture 1 v. Weyand, 649
F.3d 310, 317 (5th Cir. 2011).
In support of its Motion, Regions relies on cases in which the parties did not
dispute that an arbitration agreement existed between them. For example, in Allen
v. Regions Bank, 389 F. App’x 441 (5th Cir. 2010), the plaintiffs, a husband and his
wife, had both a home equity loan and a demand deposit account with the
predecessor banks to Regions. Id. at 442. There was no arbitration agreement
associated with the home loan, but the plaintiffs had executed a customer agreement
containing an arbitration provision when they opened the demand deposit account.
Id. at 443. When Regions became the successor to those banks, it mailed the
plaintiffs a new deposit account agreement containing an arbitration agreement
covering “any account, contract, loan, transaction, business, contact, interaction or
relationship you may have” with Regions Bank. Id. When the husband was
diagnosed with cancer, he made a claim under the disability policy that was
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allegedly purchased in connection with the home loan, and both the bank and the
insurance company denied the existence of such a policy. Id. at 442. The plaintiffs
sued in federal court, and Regions moved to compel arbitration. Id. The plaintiffs
did not deny that they accepted the terms of the arbitration agreement connected
with their demand deposit account, but they argued that it did not apply to their
home equity loan. Id. at 443, 445. The Fifth Circuit held that the issue was one for
the arbitrator, because the plaintiffs challenged the applicability of the arbitration
agreement to the dispute, not its validity. Id. at 445.
Similarly, in AmSouth Bank v. Steadman, 339 F. Supp. 2d 778 (S.D. Miss.
2004), a customer filed a lawsuit against the bank after a relative committed an
unauthorized conversion of a certificate of deposit. The customer also had a
personal checking account with AmSouth that was governed by an account
agreement containing an arbitration clause. Id. at 779. That clause mandated
arbitration of any dispute between the customer and the bank, as well as any
disagreement as to whether any claim was subject to arbitration. Id. The Court
explained, “[I]t cannot be denied that the 2000 account agreement includes a valid
agreement to arbitrate between the parties.” Id. at 781. Thus, the Court held that
the dispute as to the scope of the arbitration clause should be decided by an
arbitrator. Id.
In another case relied upon by Regions, Jones v. Regions Bank, 719 F. Supp.
2d 711 (S.D. Miss. 2010), the plaintiff had financed an automobile through Regions’
predecessor, AmSouth. She was later declared disabled by the Social Security
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Administration and sought to claim the benefits of a credit disability policy that she
alleged was purchased at the time she financed the car. Id. at 712. When her claim
was denied, she sued both Regions and Lot Solutions, Inc., the administrator of the
policy, and Regions moved to compel arbitration. Id. The loan documents contained
an arbitration provision covering any dispute between the customer and the bank,
and the plaintiff “admit[ted] she bound herself to contractual arbitration provisions .
. . .” Id. at 716. She argued that her dispute with Regions was outside the scope of
the arbitration provisions and that the provisions did not cover her claims against
Lot. Id. at 716. Noting that the arbitration clause contained a broad delegation
provision, the Court ruled that the claims against Regions must be presented to an
arbitrator. Id. at 717. That ruling did not, however, automatically apply to Lot, a
non-signatory to the policy. See id. The Court separately analyzed that issue and
held that the plaintiff should arbitrate her claims against Lot because the company
fell within the terms of the arbitration provision, which covered “agents,
representatives, contractors, and subcontractors.” Id. Because Lot was a contractor
referred to in the agreement, and because the plaintiff’s claims arose out of the same
agreement that contained the arbitration clause, the court held that her claims
against Lot must be arbitrated. Id. at 718.
Regions also relies on Laura Morrison Yarbarough v. Regions Nat’l Bank &
Trust Co., No. 3:10cv161 HTW-LRA, 2012 WL 4596181 (S.D. Miss. Sept. 4, 2012). In
Yarbarough, the plaintiff sued the banks for negligence in allowing her daughter and
son-in-law to fraudulently transfer cash from her accounts. Id. at *4. She had
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opened a checking account with a predecessor bank in 1990, and that account was
later converted to a Regions account following a merger. Id. Plaintiff opened
another account with Regions just before she filed her lawsuit. Id. Regions had sent
her a revised deposit agreement containing an arbitration clause when the earlier
account was converted, and she signed documents containing arbitration provisions
when she opened the later account. Id. The plaintiff did not contend that there was
no agreement to arbitrate; rather, she argued that the provisions should not apply
because they deprived her of her constitutional right to a jury trial and were
contained in documents that a person of her advanced age would find difficult to
read. Id. The Court found that those issues should be submitted to arbitration. Id.
at *8.
Regions also argues that it is entitled to arbitration pursuant to Agere
Systems, Inc., v. Samsung Electronics Company Ltd., 560 F.3d 337 (5th Cir. 2009).
The relationship giving rise to the lawsuit in Agere Systems began when Samsung
and AT&T entered into a patent cross-licensing agreement with an accompanying
payment structure arrangement that expired in 1994. Id. at 338. The parties
agreed that they would thereafter negotiate in good faith for a new arrangement.
Id. That negotiation occurred, resulting in a new agreement that lasted until 1999,
which again contained a provision for good faith negotiation after that date. Id.
Lucent Technologies became AT&T’s successor in interest and, in 2000, it negotiated
a new payment structure agreement with Samsung that expired in 2004. Id. The
2000 agreement contained an arbitration provision with a clause delegating
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questions of arbitrability to the arbitrator. Id. In 2004, Agere became Lucent’s
successor and began negotiations for a new agreement. Id. In 2006, Agere and
Samsung agreed on an interim payment structure in an agreement that included a
“best efforts” negotiation agreement, but failed to include a reference to arbitration.
Id. at 339. When subsequent negotiations broke down, Agere filed a lawsuit, and
Samsung requested arbitration under the 2000 agreement. Id. Agere argued that
the 2000 agreement containing the arbitration clause had expired, and the 2006
agreement controlled. Id. Samsung argued that the 2000 agreement continued to
govern the process of reaching a new agreement. Id. at 340. While not deciding the
merits of the issue, the Fifth Circuit held that there was a persuasive argument that
the arbitration clause covered the dispute and referred the case to arbitration. Id.
The Agere decision must be considered in conjunction with the Fifth Circuit’s
subsequent decision in DK Joint Venture 1 v. Weyand, 649 F.3d 310 (5th Cir. 2011).
In Weyand, several business entities claimed that they had been defrauded by two
individuals who served as the chief executive officer and chief financial officer of
several corporations. Id. at 312. The business entities pursued arbitration against
the CEO, CFO, and the corporations, relying on arbitration provisions contained in
contracts between the business entities and the corporations. Id. at 313. The
arbitration panel found in favor of the business entities, and the district court
confirmed the arbitration award despite the CEO and CFO’s arguments that they
had never agreed to arbitration. Id. at 313-14. The Fifth Circuit reversed the
district court’s decision in part, finding that the CEO and CFO were not bound by
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the arbitration provisions. Id. at 318-19. The Fifth Circuit rejected the business
entities’ reliance on Agere, stating, “[I]n Agere, an arbitration agreement
undisputably existed between the parties, and the dispute was over ‘whether the
arbitration clause [was] still in effect.’” Id. at 317. The Court held that “a dispute
over whether the parties entered into any arbitration agreement in the first place”
must be decided by the courts. Id.
In the present case, Douglas argues that she never agreed to arbitrate
disputes with Regions. In the opinion of the Court, this case is more analogous to
Weyand than to the cases relied on by Regions. Thus, this Court must first decide
that a valid arbitration agreement exists between Douglas and Regions before the
case can be submitted to arbitration.
II. WHETHER A VALID ARBITRATION AGREEMENT EXISTS BETWEEN DOUGLAS AND
REGIONS
“[A]rbitration is a matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed to submit.” Howsam, 537 U.S. at
83. The purpose of the FAA is to give arbitration agreements the same force and
effect as other contracts. See 9 U.S.C. § 2. Accordingly, when determining whether
the parties agreed to arbitration, courts apply “ordinary state-law principles that
govern the formation of contracts.” First Options of Chicago, 514 U.S. at 944; see
also Todd v. S.S. Mut. Underwriting Ass’n (Bermuda) Ltd., 601 F.3d 329, 336 (5th
Cir. 2010) (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (2009))
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(holding that courts should look to state law when determining whether an
arbitration clause can be invoked by a non-signatory).
The Mississippi Supreme Court has held that a signatory’s heir cannot
disclaim an arbitration agreement where the language of the arbitration agreement
expressly extended its terms to “heirs, successors and administrators.” Smith
Barney, Inc. v. Henry, 775 So. 2d 722, 727 (¶¶19-20) (Miss. 2001). However, the
Mississippi Supreme Court has refused to permit non-signatories to enforce an
arbitration agreement that failed to name them. See Qualcomm Inc. v. Am. Wireless
License Grp., LLC, 980 So. 2d 261, 269 (¶18) (Miss. 2007). In Qualcomm, the
arbitration agreement required arbitration “at the election of either Buyer or Seller.”
Id. The Seller’s current and former officers argued that they could enforce the
arbitration provision against members of the Buyer (a limited liability company). Id.
Recognizing that none of the parties was a signatory to the arbitration agreement,
the court enumerated the theories in which a non-signatory may, nonetheless,
enforce the agreement: (a) incorporation by reference; (b) assumption; (c) agency; (d)
veil-piercing/alter ego; (e) estoppel; and (f) third-party beneficiary. Id. at 269 (¶17)
(quoting Bridas S.A.P.I.C. v. Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003)). The
court in Qualcomm concluded:
The issue in this case is a rather simple question of contract
interpretation. By the plain terms of the contract, it is evident that the
parties simply did not agree to extend to non-signatories the benefit of the
arbitration clause, for they easily could have stated so. The contract
clearly reads that disputes may be submitted to arbitration at the election
of either Buyer or Seller. Because the defendants are neither the Buyer
nor Seller, they are not entitled to enforce arbitration. As we have stated
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before, this Court must “accept the plain meaning of a contract as the
intent of the parties if no ambiguity exists.” B.C. Rogers, 911 So. 2d at
487 (citing I.P. Timberlands, 726 So. 2d at 108). Moreover, “we do not
override the clear intent of the parties, or reach a result inconsistent with
the plain text of the contract, simply because the policy favoring
arbitration is implicated.” B.C. Rogers, 911 So. 2d at 487 (quoting EEOC
v. Waffle House, Inc., 534 U.S. 279, 294 (2002)).
Id.; but see Sawyers v. Herrin-Gear Chevrolet Co., Inc., 26 So. 3d 1026, 1038-39 (¶34)
(Miss. 2010) (distinguishing Qualcomm where non-signatory sought to compel
arbitration clause contained in the contract that was the subject matter of the
lawsuit).
In the present case, the parties to the Agreement containing the arbitration
clause are Douglas (referred to throughout the Agreement as “you” and “your”) and
Union Planters (referred to throughout the Agreement as “we,” “our,” and “us”).
(Def.’s Mot., Ex. 2 to Ex. A, ECF No. 18-1). The arbitration clause applies to
disputes “between you and us or any of our agents or employees or our parent,
subsidiary or sister corporations or their employees or agents.” (Id.) The Agreement
provides that arbitration could be requested at the election of either Douglas or
Union Planters. (Id.) Significantly, there is no provision in the Agreement
extending its scope to disputes between Douglas and Unions Planters’ successors,
such as Regions. (See id.) Thus, under Mississippi law, Regions’ status as a
successor to Union Planters does not make it a party to the agreement to arbitrate,
nor does it automatically permit Regions to enforce the arbitration clause of the
original agreement.
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Mississippi recognizes that “a non-signatory may be bound to an arbitration
agreement if so dictated by the ordinary principles of contract and agency.” Scruggs
v. Wyatt, 60 So. 3d 758, 767 (¶20) (Miss. 2011). Thus, a non-signatory to an
arbitration agreement may enforce arbitration where principles of equitable estoppel
apply. B. C. Rogers Poultry, Inc. v. Wedgeworth, 911 So. 2d 483, 491-92 (¶28) (Miss.
2005) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir.
2000)). The principle of equitable estoppel applies where the lawsuit arises out of
the terms of the agreement containing the arbitration provision, where the
allegations raised by the signatory involve “substantially interdependent and
concerted misconduct by both the non-signatory and one or more of the signatories to
the contract,” or where the signatory’s allegations involve or depend on the terms of
the agreement containing the arbitration clause. B. C. Rogers Poultry, 911 So. 2d at
491-92 (¶¶28-30). The present case does not relate in any way to the Agreement
containing the arbitration clause. Therefore, Regions cannot rely on the doctrine of
equitable estoppel to require Douglas to submit her claims to arbitration.
CONCLUSION
The Defendant has been unable to identify any contract or agency principle
that would permit Regions to enforce the arbitration clause at issue. Regions has
likewise been unable to cite authority tending to clarify the question here. Can a
successor corporation that was a non-signatory to an arbitration agreement, and not
within any group named in the agreement as a potential party, be permitted to
invoke arbitration on a claim completely unrelated, both in time and subject matter,
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to the original agreement? Douglas agreed to arbitrate disputes with Union
Planters, its parent, sister, or subsidiary corporations, or their employees or agents.
She did not agree to arbitrate disputes with Union Planters’ successor, and she is
not relying on the Union Planters’ Agreement to pursue her claims in the present
case. Therefore, Regions cannot invoke the arbitration clause contained in the
Union Planters’ Agreement.
IT IS THEREFORE ORDERED that Regions Bank’s Motion to Compel
Arbitration and to Stay Proceedings [18] is DENIED.
IT IS FURTHER ORDERED that, in accordance with L.U. Civ. R. 16(3)(E),
Plaintiff is directed to notify United States Magistrate Judge Keith Ball of this
decision and submit a proposed Order lifting the stay of discovery in this case.
SO ORDERED AND ADJUDGED this the 5th day of November, 2012.
s/
Louis Guirola, Jr.
LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE
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