Rosemann et al. v. Sigillito, et al.

Filing 362

ORDER -- In light of the foregoing, it is HEREBY ORDERED THAT: (1) The Motion to Compel Arbitration and Dismiss (docket no. 315 ) is GRANTED. (2) Counts 2 and 5 of the Second Amended Complaint (docket no. 252 ) against Millennium Trust Company, LLC are DISMISSED. Signed by Honorable Linda R. Reade on 6/26/12. (KCM)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
PHILLIP L. ROSEMANN et al.,
Plaintiffs,

No. 10-CV-1165-LRR

vs.

ORDER

MARTIN T. SIGILLITO et al.,
Defendants.
____________________
TABLE OF CONTENTS
I.

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II.

RELEVANT PROCEDURAL BACKGROUND . . . . . . . . . . . . . . . . . . . . 2

III.

RELEVANT FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 2
A.
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B.
Plaintiffs’ Claims Against Millennium . . . . . . . . . . . . . . . . . . . . . 3

IV.

ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A.
Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B.
Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.
Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
a.
2001 and 2002 Adoption Agreements . . . . . . . . . . . . . 7
b.
2003 through 2005 Adoption Agreements . . . . . . . . . 12
c.
2006 through 2008 Adoption Agreements . . . . . . . . . 13
2.
Plaintiffs’ remaining arguments . . . . . . . . . . . . . . . . . . . 14
a.
Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
b.
Arbitration provision . . . . . . . . . . . . . . . . . . . . . . . 16
3.
Scope of arbitration provision . . . . . . . . . . . . . . . . . . . . . 19
4.
Whether dismissal is appropriate . . . . . . . . . . . . . . . . . . . 20

V.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

I. INTRODUCTION
The matter before the court is Defendant Millennium Trust Company, LLC’s
(“Millennium”) “Motion to Compel Arbitration and Dismiss” (“Motion”) (docket no.
315).
II. RELEVANT PROCEDURAL BACKGROUND
On January 2, 2012, Plaintiff Phillip L. Rosemann and eighty-five other named
Plaintiffs filed a Second Amended Complaint (docket no. 252) against ten unnamed and
sixteen named Defendants, including Millennium. On April 23, 2012, Millennium filed
the Motion. On May 7, 2012, Plaintiffs filed a Resistance (docket no. 325). On May 8,
2012, Millennium filed an unopposed “Motion to Correct” (docket no. 326), in which it
explained that it inadvertently filed one exhibit twice, instead of filing two separate
exhibits, and sought leave of court to correct the error. The court subsequently entered
an Order (docket no. 334) granting the Motion to Correct. On May 9, 2012, Plaintiffs
filed a Supplemental Resistance (docket no. 328) responding to the new exhibit. On May
21, 2012, Millennium filed a Reply (docket no. 337). On May 30, 2012, Plaintiffs filed
a Sur-Reply (docket no. 345), with leave of court. On May 31, 2012, Millennium filed
an Objection (docket no. 346) to Plaintiffs’ Sur-Reply. Neither party requests a hearing
on the Motion and the court finds that a hearing is unnecessary. The Motion is fully
submitted and ready for decision.
III. RELEVANT FACTUAL BACKGROUND
A. Parties
Plaintiffs are eighty-five individuals who are citizens of various states and one
company, Braithwaite Consulting Limited. Millennium is a closely-held limited liability
company with its principal place of business in Oak Brook, Illinois. From approximately
2001 until 2008, Millennium served as a qualified custodian of self-directed individual
retirement accounts (“IRAs”) for approximately thirty-three Plaintiffs pursuant to 26

2

U.S.C. § 408(h).
B. Plaintiffs’ Claims Against Millennium
In the Second Amended Complaint, Plaintiffs1 allege two causes of action against
Millennium. In Count 2, Plaintiffs allege that Millennium conspired to violate the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962. In
Count 5, Plaintiffs allege that Millennium was negligent in its provision of professional
services.
IV. ANALYSIS
In the Motion, Millennium asks the court to compel Plaintiffs to arbitrate their
claims against Millennium and to dismiss the action. Millennium maintains that each
Plaintiff signed an Adoption Agreement wherein he or she established a self-directed IRA
with Millennium, and, under the terms of each respective Adoption Agreement, each
Plaintiff agreed to be bound by the terms of a Custodial Agreement. Millennium claims
that the Custodial Agreement, in turn, contains an arbitration clause, which the court
should enforce.
1

As Millennium points out, “Plaintiffs use the generic term ‘Plaintiffs’ in the claims
against [Millennium].
However, only thirty-three Plaintiffs had a relationship
with . . . [Millennium].” Memorandum of Law in Support of the Motion (“Millennium
Brief”) (docket no. 316) at 2 n.1. The Plaintiffs that established self-directed IRAs with
Millennium include: (1) Melba J. Aguilar; (2) Richard Aguilar; (3) Patricia N.
Ambrose; (4) Nina M. Blaylock; (5) David L. Caldwell; (6) Teresa Diane Caldwell;
(7) Albert D. Carrell; (8) Jerry Cronkhite; (9) Samuel R. Currier; (10) Carol K. Green;
(11) Odis A. Hash (spelled Otis Hash in the caption of the case); (12) Donna Sue
Hogshooter; (13) Audrey L. Holland; (14) John R. Holland; (15) Donald W. Horner;
(16) Stanley C. Kuhlo, Jr.; (17) Carl A. Lavender; (18) Wanda Lavender; (19) Stanko K.
Matayo; (20) Lorena B. Messenger; (21) Bob K. Moore; (22) Rudolf Owens (spelled
Rudolph Owens in the caption of the case); (23) Ronald Pastor; (24) Iris Pearson (spelled
Ira Pearson in the caption of the case); (25) Carol B. Phillips; (26) William H. Phillips;
(27) Buddy M. Quessenberry; (28) Betty J. Rollon; (29) Leonard Roman; (30) Phillip L.
Rosemann; (31) David C. Schultz; (32) Winston D. Vines; and (33) Loren Winterhof. For
ease of reading, the court will refer to Plaintiffs collectively.
3

Plaintiffs resist, arguing that: (1) the Adoption Agreements do not expressly agree
to arbitration; (2) Plaintiffs signed three different classes of Adoption Agreements with
Millennium, none of which incorporate a purported Custodial Agreement by reference;
(3) the documents Millennium provided to the court do not have the same titles as the
documents referenced in the various Adoption Agreements; (4) the documents Millennium
provided do not include choice-of-law provisions; (5) there is no clear and unmistakable
evidence of intent to arbitrate; (6) Millennium cannot incorporate by reference documents
not yet in existence; (7) the incorporating language does not sufficiently describe an
agreement to arbitrate because it does not include certain required language; and (8) the
arbitration clause is unconscionable.
A. Applicable Law
“Congress enacted the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16 (1994),
‘to reverse the longstanding judicial hostility to arbitration agreements . . . and to place
arbitration agreements upon the same footing as other contracts.’” Gannon v. Circuit City
Stores, Inc., 262 F.3d 677, 679 (8th Cir. 2001) (quoting Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 24 (1991)). The FAA “makes written arbitration agreements ‘valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of a contract.’” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 629-30 (2009)
(quoting 9 U.S.C. § 2). The FAA applies to contracts “involving commerce.” 9 U.S.C.
§ 2. The United States Supreme Court has held that “the word ‘involving’ is broad and
is indeed the functional equivalent of “affecting.” Allied-Bruce Terminix, Cos. v. Dobson,
513 U.S. 265, 273-274 (1995). The parties appear to agree, and the court finds, that the
FAA governs the contracts at issue in this case. Accordingly, the court will undertake its
review under the FAA, which “evinces a ‘liberal federal policy favoring arbitration
agreements.’” Gannon, 262 F.3d at 680 (quoting Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24 (1983)).

4

“Before a party may be compelled to arbitrate under the [FAA], the district court
must engage in a limited inquiry to determine whether a valid agreement to arbitrate exists
between the parties and whether the specific dispute falls within the scope of that
agreement.” Houlihan v. Offerman & Co., Inc., 31 F.3d 692, 694-95 (8th Cir. 1994).
“When deciding whether the parties agreed to arbitrate a certain matter . . . , courts
generally . . . should apply ordinary state-law principles that govern the formation of
contracts.” First Options of Chic., Inc. v. Kaplan, 514 U.S. 938, 944 (1995); see also
Aurthur Andersen LLP, 556 U.S. at 630-31 (noting that state law applies to determine
which contracts are binding and enforceable).
Millennium argues that Illinois law should control this dispute because there is an
Illinois choice-of-law provision in the Custodial Agreement. However, a choice-of-law
provision in a contract “can have no effect until the court determines the validity of the
contract itself.” John T. Jones Constr. Co. v. Hoot Gen. Constr. Co., Inc., 613 F.3d 778,
782-83 (8th Cir. 2010). Because district courts, whether sitting in diversity or deciding
supplemental state law claims, are required to use the choice-of-law rules for the state in
which it sits, see DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 895 (8th Cir.
2006), the court must apply Missouri law in determining whether the Adoption Agreements
incorporated by reference the 2008 version of the Custodial Agreement.
“The cardinal principle for contract interpretation is to ascertain the intention of the
parties and to give effect to that intent.” Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d
15, 21 (Mo. 1995) (en banc). “‘In determining the intent of the parties to a contract, [the
court] review[s] the terms of a contract as a whole, not in isolation.’” Lacey v. State Bd.
of Registration for the Healing Arts, 131 S.W.3d 831, 838 (Mo. Ct. App. 2004) (quoting
Tuttle v. Muenks, 21 S.W.3d 6, 11 (Mo. Ct. App. 2000)).
“Where the contract is unambiguous, a court will ascertain the
intent of the parties from the contract alone and will not resort
to construction.” Monsanto Co. v. Garst Seed Co., 241
5

S.W.3d 401, 407 (Mo. Ct. App. 2007). A court will not find
that a contract is ambiguous merely because the parties
disagree as to the construction of the contract. Dunn Indus.
Group, Inc. v. City of Sugar Creek, 112 S.W.3d 421, 428
(Mo. 2003). Rather, a court must examine whether the
contract is “reasonably susceptible to different constructions.”
Burrus v. HBE Corp., 211 S.W.3d 613, 617 (Mo. Ct. App.
2006) (emphasis added). A court will presume that “the intent
of the parties is expressed by the natural and ordinary meaning
of their language.” Id. (quotation omitted). “The terms of a
contract are read as a whole to determine the intention of the
parties and are given their plain, ordinary, and usual
meaning.” Dunn Indus., 112 S.W.3d at 428 (citations
omitted). “[E]ach term of a contract is construed to avoid
rendering other terms meaningless.” Id. If any uncertainty
exists in a contract, the language will “be construed against the
drafter.” Livers Bronze, Inc. v. Turner Const. Co., 264
S.W.3d 638, 641-42 (Mo. Ct. App. 2008).
Liberty Mut. Fire Ins. Co. v. Centimark Corp., No. 4:08CV230-DJS2009 WL 1588454,
at *3 (E.D. Mo. June 5, 2009) (internal citations altered).
“[T]he parties to a contract may incorporate contractual terms by reference to a
separate, noncontemporaneous document, including a separate agreement to which they
are not parties, and including a separate document which is unsigned.” Intertel, Inc. v.
Sedgwick Claims Mgmt. Servs., Inc., 204 S.W.3d 183, 196 (Mo. Ct. App. 2006).
“Matters incorporated into contract by reference are as much a part of the contract as if
they had been set out in the contract in haec verba.” Id. However, a document can only
be incorporated by reference, and thereby become part of the agreement, if the underlying
contract “makes clear reference to the document [to be incorporated] and describes it in
such terms that its identity may be ascertained beyond doubt.” Liberty Mut. Fire Ins. Co.,
2009 WL 1588454, at *3 (quoting Livers Bronze, 264 S.W.3d at 643) (internal quotation
mark omitted).

6

B. Discussion
1.

Incorporation

As noted above, each Plaintiff that established a self-directed IRA with Millennium
signed an Adoption Agreement. Millennium’s Adoption Agreement varied somewhat
throughout the years. As a result, the court must consider the language of four different
versions of the Adoption Agreement that Millennium used during the years 2001 through
2008.
a.

2001 and 2002 Adoption Agreements

In 2001 and 2002, seventeen Plaintiffs executed Adoption Agreements with
Millennium, which state:
I acknowledge that I have read and understood both the Trust
Agreement and Disclosure Statement, including the current fee
schedule which I understand may periodically change without
notice. I acknowledge receipt of the Trust Agreement and
Disclosure Document, and understand that I am responsible for
the tax effects and requirements noted therein . . . .
Jeanne Reder Affidavit Exhibits (docket nos. 316-2 through 316-3) 1 (Melba Aguilar
Adoption Agreement), 2 (Richard Aguilar Adoption Agreement), 3 (Patricia N. Ambrose
Adoption Agreement), 4 (Nina M. Blaylock Adoption Agreement), 5 (David L. Caldwell
Adoption Agreement), 6 (Teresa Diane Caldwell Adoption Agreement), 10 (Carol K.
Green Adoption Agreement), 15 (Donald W. Horner Adoption Agreement), 17 (Carl A.
Lavender Adoption Agreement), 18 (Wanda Lavender Adoption Agreement), 22 (Rudolf
Owens Adoption Agreement), 24 (Iris Pearson Adoption Agreement), 25 (Carol B. Phillips
Adoption Agreement), 26 (William H. Phillips Adoption Agreement), 28 (Betty J. Rolon
Adoption Agreement), 29 (Leonard Roman Adoption Agreement), 32 (Winston D. Vines
Adoption Agreement) at 2.
Millennium provided the court with a copy of the Trust Agreement referenced in
the 2001 and 2002 Adoption Agreements. Millennium’s Special Projects Manager, Jean
7

Moran, averred that the document Millennium provided the court as Exhibit 1 to Moran’s
first affidavit is a true and correct copy of the Trust Agreement referenced in the 2001 and
2002 Adoption Agreements. The Trust Agreement is labeled with the following heading:
Individual Retirement Trust Account, Form 5305 (Rev.
January 2000) Department of the Treasury Internal Revenue
Service, Millennium Trust Company Individual Retirement
Trust Account (Under Section 408(a) of the Internal Revenue
Code), DO NOT FILE with the Internal Revenue Service.
First Affidavit of Jean Moran (docket no. 316-4), Exhibit 1 (docket no. 316-5) at 1
(structure of quotation not replicated). The first paragraph of the Trust Agreement states:
This Individual Retirement Account Agreement (hereinafter
called the “Agreement”) is made between Millennium Trust
Company, LLC, an Illinois Limited Liability Company
regulated by the Illinois Office of Banks and Real Estate
(hereinafter called the “Trustee”) and each individual
(Hereinafter called the “Grantor”) who executes an Adoption
Agreement, incorporating the terms of this Agreement, for the
purpose of establishing an individual retirement account
(hereinafter called the “trust account”) as described in Section
408(a) of the Internal Revenue Code 1986, as amended, or any
successor statute (hereinafter called the “Code”), upon the
terms set forth herein.
Id.
The court finds that the Adoption Agreements that seventeen Plaintiffs signed in
2001 and 2002 clearly incorporate by reference the Trust Agreement. The seventeen
Plaintiffs that signed Adoption Agreements in 2001 and 2002 “acknowledge[d] that [they]
read and understood . . . the Trust Agreement,” “acknowledge[d] receipt of the Trust
Agreement,” and “underst[ood] that [they were] responsible for the . . . requirements
noted therein.” Jeanne Reder Affidavit Exhibits 1, 2, 3, 4, 5, 6, 10, 15, 17, 18, 22, 24,
25, 26, 28, 29, 32 at 2. Furthermore, the Adoption Agreements are labeled “IRA
Adoption Agreements” and expressly anticipate the creation of a self-directed IRA under

8

26 U.S.C. § 408(h). The Adoption Agreements state:
I acknowledge that it is my sole responsibility to direct the
investment of the assets of my IRA and that the TRUSTEE
shall have NO LIABILITY for any loss, damage, or tax,
including a prohibited transaction tax or plan disqualification
tax, resulting from transactions executed by the TRUSTEE
based on directions received from me or my Investment Agent.
I agree to hold the TRUSTEE harmless for its actions
hereunder which were directed by me or my Investment Agent
and will indemnify the TRUSTEE for any and all claims and
costs arising from transactions executed by the TRUSTEE
based on directions received from me or my Investment Agent,
including, but not limited to, court costs, attorney fees and
other expenses incurred.
Jeanne Reder Affidavit Exhibits 1, 2, 3, 4, 5, 6, 10, 15, 17, 18, 22, 24, 25, 26, 28, 29,
32 at 2.
However, the Adoption Agreements alone are insufficient to establish a self-directed
IRA. Instead, to create an IRA, 26 U.S.C. § 408(a) requires a written instrument that
states: (1) no contribution, except rollover contributions, will be accepted unless it is in
cash; (2) the trustee is a bank or has otherwise demonstrated an ability to manage the funds
in accord with 26 U.S.C. § 408; (3) the funds will not be invested in life insurance
contracts; (4) “[t]he interest of an individual in the balance in his account is
nonforfeitable”; (5) “[t]he assets of the trust will not be commingled with other property
except in a common trust fund or common investment fund”; and (6) regulations
prescribed by the Secretary shall apply to “the distribution of the entire interest of an
individual for whose benefit the trust is maintained.” 26 U.S.C. § 408(a). The Adoption
Agreements do not contain the language required to establish an IRA. Instead, the
Adoption Agreements incorporate by reference the Trust Agreement, which contains each
of the provisions necessary to create an IRA under 26 U.S.C. § 408(a).
The court rejects Plaintiffs’ argument that the Adoption Agreements, which

9

expressly reference a Trust Agreement, do not successfully incorporate by reference the
document Millennium provided the court because it is labeled, “Millennium Trust
Company Individual Retirement Trust Account,” First Affidavit of Jean Moran, Exhibit
1 at 1, and not “Trust Agreement” or “Custodial Agreement.” The court finds that the
Adoption Agreements “make[] clear reference to the document [to be incorporated] and
describe[] it in such terms that its identity may be ascertained beyond doubt.” Liberty Mut.
Fire Ins. Co., 2009 WL 1588454, at *3 (quoting Livers Bronze, 264 S.W.3d at 643)
(internal quotation mark omitted). Accordingly, the court finds that each Adoption
Agreement executed in 2001 and 2002 should be read together with the Trust Agreement
as one complete contract. See Intertel, Inc., 204 S.W.3d at 196.
The Trust Agreement does not contain a choice-of-law provision, as Millennium
implies. However, the Trust Agreement does include an arbitration provision:
Except as provided below, disputes between the parties to this
Agreement shall first be submitted to private binding
arbitration at the demand of either party. In any arbitration,
each party shall appoint one person who is not in its employ or
under contract with it to serve as arbitrator, and the two
arbitrators shall name a third arbitrator. Except as otherwise
agreed by the parties, the Arbitration Rules of the American
Arbitration Association shall apply to the arbitration
proceeding. The parties agree that, except below, no court
action shall be taken by either party prior to arbitration, and
the majority decision of the arbitration panel shall be binding
on both parties and in any subsequent action in court.
Notwithstanding the above, the Trustee shall have the right to
bring suit against Grantor or the Trust in a court of competent
jurisdiction for the recovery of any sums owed Trustee under
this agreement, including, but not limited to, fees, costs,
expenses and sums paid by Trustee in error to or for the
benefit of the Trust.
First Affidavit of Jean Moran, Exhibit 1 at 3. The Trust Agreement also contains a

10

provision that allows the Trust Agreement to be amended:
Without prior notice to or consent of the Grantor or Grantor’s
beneficiaries, the Trustee may amend this Agreement from
time to time in order to comply with the provisions of the
Internal Revenue Code and the regulations thereunder and may
also make such other amendments consistent with the Code
and regulations as the Trustee shall deem desirable. The Trust
Account is created and shall be administered for the exclusive
benefit of the Grantor and his beneficiaries, and no amendment
shall permit any part or all of the Trust Account to be used or
diverted to any other purpose. A copy of each amendment
shall be mailed to the Grantor, if living, otherwise to the
beneficiaries entitled to receive payments from the Trust
Account at the time of the amendment, within thirty (30) days
of the date such amendment is to be effective. Furthermore,
other amendments may be made upon proper notice of the
Grantor. The rights, duties and responsibilities to the Trustee
shall not be changed without its written consent.
Id. at 4.
Considering the Adoption Agreement, together with the Trust Agreement, the court
finds that the seventeen Plaintiffs that signed Adoption Agreements and created selfdirected IRAs with Millennium in 2001 and 2002 agreed to the provisions in the Trust
Agreement, including the arbitration provision and the amendment provision. Millennium
amended the Trust Agreement several times from 2001 through 2008, and, by 2008, the
Trust Agreement was re-labeled the “Traditional IRA Custodial Agreement.” First
Affidavit of Jean Moran, Corrected Exhibit 2 (docket no. 316-6) at 1. The Custodial
Agreement contains additional provisions, including a choice-of-law provision, that states,
“All questions arising with respect to the provisions of this Agreement shall be determined
by application of the laws of the State of Illinois.” Id. at 10. However, the arbitration
provision remains unchanged in the revised Custodial Agreement. As discussed above,
Millennium was acting under its contractual rights when it revised the Trust Agreement.
Accordingly, Plaintiffs are bound by the 2008 version of the Custodial Agreement, as
11

amended.2 The court rejects Plaintiffs’ argument that it cannot be bound by an arbitration
provision in a contract that has not yet been written because, as the court has already
noted, the arbitration provision became effective when Plaintiffs signed the Adoption
Agreements and the arbitration provision has not been changed in the Custodial
Agreement. Consequently, the seventeen Plaintiffs that signed Adoption Agreements in
2001 and 2002 are bound by the 2008 version of the Custodial Agreement, and the
arbitration provision therein.
b.

2003 through 2005 Adoption Agreements

In 2003 through 2005, six Plaintiffs executed Adoption Agreements with
Millennium that state:
I acknowledge that I have read and understood the Custodial
Agreement and Disclosure Statement, and understand that I am
responsible for the tax effects and requirements noted
therein . . . .
Jeanne Reder Affidavit Exhibits 7 (Albert D. Carrell Adoption Agreement), 9 (Samuel R.
Currier Adoption Agreement), 23 (Ronald Pastor Adoption Agreement), 30 (Phillip L.
Rosemann Adoption Agreement), 31 (David C. Schultz Adoption Agreement), 33 (Loren
Winterhof Adoption Agreement) at 2. The Adoption Agreements Plaintiffs signed in 2003
through 2005 expressly reference and incorporate the Custodial Agreement that was in
effect at the time each Plaintiff signed his or her respective Adoption Agreement. Once
again, the Adoption Agreements make clear Plaintiffs’ intent to form self-directed IRAs,
and the Adoption Agreements alone were insufficient to establish an IRA. Instead, the
language in the Custodial Agreement, which was incorporated by reference in the Adoption
Agreements, was necessary to establish an IRA. See 26 U.S.C. § 408(a).
Although the court does not have a copy of each version of the Custodial Agreement

2

The 2008 version of the Custodial Agreement was the last version in effect when
Plaintiffs terminated their accounts with Millennium.
12

that was in effect from 2003 through 2005, Millennium maintains, and Plaintiffs do not
refute, that each version of the Custodial Agreement contains an identical arbitration
provision and a provision allowing Millennium to amend the Custodial Agreement.
Accordingly, for the reasons discussed above, each of the six Plaintiffs that signed
Adoption Agreements from 2003 through 2005 are bound by the 2008 version of the
Custodial Agreement, including the arbitration provision therein.
c.

2006 through 2008 Adoption Agreements

In 2006 through 2008, eight Plaintiffs executed Adoption Agreements with
Millennium, which state:
I acknowledge that I have received a copy of the Individual
Retirement Account Custodial Agreement and the
accompanying Disclosure Statement, and I understand and
agree to be bound by the terms, and conditions in both.
Jeanne Reder Affidavit Exhibits 11 (Odis A. Hash Adoption Agreement), 12 (Donna Sue
Hogshooter Adoption Agreement), 13 (Audrey L. Holland Adoption Agreement), 14 (John
R. Holland Adoption Agreement), 16 (Stanley C. Kuhlo, Jr. Adoption Agreement), 20
(Lorena B. Messenger Adoption Agreement), 21 (Bob K. Moore Adoption Agreement),
27 (Buddy M. Quessenberry Adoption Agreement) at 3; see also Jeanne Reder Affidavit
Exhibit 31 at 5 (David C. Schultz first signed an Adoption Agreement in 2003 and signed
another in 2008). In 2006 through 2008, two Plaintiffs executed Adoption Agreements
with Millennium, which state:
I acknowledge that I have received a copy of the Individual
Retirement Custodial Account Agreement and the
accompanying Disclosure Statement, and I understand and
agree to be bound by the terms, and conditions in both.
Jeanne Reder Affidavit Exhibits 8 (Jerry Cronkhite Adoption Agreement, 19 (Stanko K.
Matayo Adoption Agreement) at 3. The Adoption Agreements Plaintiffs signed in 2006
through 2008 expressly reference and incorporate the Custodial Agreement that was

13

effective at the time each Plaintiff executed his or her respective Adoption Agreement.
Thus, for the reasons discussed above, each of the ten Plaintiffs that executed an Adoption
Agreement with Millennium from 2006 though 2008 is bound by the 2008 version of the
Custodial Agreement, including the arbitration provision therein.
2.

Plaintiffs’ remaining arguments
a.

Incorporation

In their Resistance, Plaintiffs advance additional arguments as to why the Adoption
Agreements do not incorporate the Custodial Agreement by reference. The court will
attempt to address each of Plaintiffs’ arguments in turn.
First, Plaintiffs maintain that the language used in the different versions of the
Adoption Agreement is insufficient to incorporate the Custodial Agreement by reference.
However, Plaintiffs misconstrue the language of the Adoption Agreements. The seventeen
Plaintiffs that signed Adoption Agreements in 2001 and 2002 “acknowledge[d] that [they]
read and understood . . . the Trust Agreement,” “acknowledge[d] receipt of the Trust
Agreement,” and “underst[ood] that [they were] responsible for the . . . requirements
noted therein.” Jeanne Reder Affidavit Exhibits 1, 2, 3, 4, 5, 6, 10, 15, 17, 18, 22, 24,
25, 26, 28, 29, 32 at 2. The six Plaintiffs that signed Adoption Agreements in 2003
through 2005 “acknowledge[d] that [they] read and understood the Custodial
Agreement . . . and underst[ood] that [they were] responsible for the . . . requirements
noted therein.” Jeanne Reder Affidavit Exhibits 7, 9, 23, 30, 31, 33 at 2. Eight Plaintiffs
that executed Adoption Agreements with Millennium in 2006 through 2008
“acknowledge[d] that [they] received a copy of the Individual Retirement Account
Custodial Agreement . . . and [they] underst[ood] and agree[d] to be bound by the terms,
and conditions [therein].” Jeanne Reder Affidavit Exhibits 11, 12, 13, 14, 16, 20, 21, 27
at 3. Finally, two Plaintiffs that executed Adoption Agreements with Millennium in 2006
through 2008 “acknowledge[d] that [they] received a copy of the Individual Retirement

14

Custodial Account Agreement . . . and [they] underst[ood] and agree[d] to be bound by
the terms, and conditions [therein].” Jeanne Reder Affidavit Exhibits 8, 19 at 3. Such
language is sufficient to incorporate the applicable Custodial Agreement by reference. See
11 Richard A. Lord, Williston on Contracts § 30:25 (4th ed. 2012).
Next, Plaintiffs maintain that the different versions of the Adoption Agreement do
not incorporate by reference the document Millennium purports to be the Custodial
Agreement because it has a different title than the document referenced in the Adoption
Agreements. The Adoption Agreements Plaintiffs signed in 2001 and 2002 incorporate by
reference a “Trust Agreement.”3 See Jeanne Reder Affidavit Exhibits 1, 2, 3, 4, 5, 6, 10,
15, 17, 18, 22, 24, 25, 26, 28, 29, 32 at 2. The document that served as the Trust
Agreement in 2001 and 2002 was labeled with the following heading:
Individual Retirement Trust Account, Form 5305 (Rev.
January 2000) Department of the Treasury Internal Revenue
Service, Millennium Trust Company Individual Retirement
Trust Account (Under Section 408(a) of the Internal Revenue
Code), DO NOT FILE with the Internal Revenue Service.
First Affidavit of Jean Moran, Exhibit 1 at 1 (structure of quotation not replicated). The
court finds that it is irrelevant that the document that served as the Trust Agreement in
2001 and 2002 was not labeled “Trust Agreement,” because the Adoption Agreements
“make[] clear reference to the [Trust Agreement] and describe[] it in such terms that its
identity may be ascertained beyond doubt.” Liberty Mut. Fire Ins. Co., 2009 WL
1588454, at *3 (quoting Livers Bronze, 264 S.W.3d at 643) (internal quotation mark
omitted). As discussed above, the Adoption Agreements expressly state that Plaintiffs
received the Trust Agreement and understood that they were responsible for the
requirements in the Trust Agreement. Furthermore, Plaintiffs’ express intent in executing

3

As discussed above, Millennium subsequently amended the Trust Agreement and
retitled it the Custodial Agreement.
15

the Adoption Agreements was to establish a self-directed IRA. Because the Adoption
Agreements alone are insufficient to create an IRA, the Adoption Agreements incorporate
by reference the Trust Agreement, which includes the language necessary to create an
IRA. The language in the Trust Agreement also makes clear that it is the document
incorporated by reference in the Adoption Agreement. See First Affidavit of Jean Moran,
Exhibit 1 at 1 (“This Individual Retirement Account Agreement . . . is made between
Millennium Trust Company, LLC. . . and each individual . . . who executes an Adoption
Agreement, incorporating the terms of this Agreement, for the purpose of establishing an
individual retirement account . . . .”). Accordingly, the court finds that Plaintiffs’ focus
upon the title of the Trust Agreement is misplaced, and the Trust Agreement is expressly
incorporated by reference in the Adoption Agreements.
Similarly, the Adoption Agreements that Plaintiffs executed in 2003 through 2008
incorporate by reference either a “Custodial Agreement,” see Jeanne Reder Affidavit
Exhibits 7, 9, 23, 30, 31, 33 at 2, an “Individual Retirement Account Custodial
Agreement,” see Jeanne Reder Affidavit Exhibits 11, 12, 13, 14, 16, 20, 21, 27 at 3, or
an “Individual Retirement Custodial Account Agreement,” see Jeanne Reder Affidavit
Exhibits 8, 19 at 3. The document that served as the Custodial Agreement from 2003
through 2008 was labeled with the heading: “Traditional IRA Custodial Agreement.” First
Affidavit of Jean Moran, Corrected Exhibit 2 at 1. Again, it is irrelevant that the Adoption
Agreements Plaintiffs executed in 2003 through 2008 use language similar to, and not
identical to, the heading on the Custodial Agreement. The Adoption Agreements Plaintiffs
executed in 2003 through 2008 make clear reference to the Custodial Agreement and
sufficiently incorporate the Custodial Agreement by reference.
b.

Arbitration provision

Plaintiffs also advance several arguments regarding the insufficiency of the
arbitration provision. The court will attempt to address each of Plaintiffs’ arguments in

16

turn. First, Plaintiffs’ argument that the Adoption Agreements themselves do not expressly
agree to arbitration is irrelevant in light of the fact that the court has found that each
Adoption Agreement incorporates by reference a Trust Agreement or Custodial
Agreement, which do contain an arbitration provision.
Furthermore, the court rejects Plaintiffs’ argument that the FAA requires “clear and
unmistakable evidence” of an agreement to arbitrate. Resistance at 5-6. Although such
a requirement would be satisfied in this case, Plaintiffs misconstrue the applicable law.
The cases Plaintiffs cite merely state that there must be clear and unmistakable evidence
that the parties agreed to arbitrate the issue of arbitrability. See First Options of Chi.,
Inc., 514 U.S. at 944-45. In fact, the case Plaintiffs cite recognizes that, generally, any
doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,
but that “the law reverses the presumption” when the matter is whether the parties have
agreed to arbitrate the issue of arbitrability. Id. at 945. Because Millennium has asked
the court to decide whether an agreement to arbitrate exists, and Millennium has not asked
the court to allow the arbitration panel to decide whether the parties agreed to arbitrate this
dispute, the “clear and unmistakable evidence” standard does not apply. See Rent-ACenter, W., Inc. v. Jackson, ___ U.S.___, ___, 130 S. Ct. 2772, 2782-84 (2010).
Next, the court rejects Plaintiffs’ argument that the arbitration provision is
insufficient because Missouri’s Arbitration Act requires specific language in an agreement
to arbitrate that is not present in the Custodial Agreements. Because the FAA controls the
instant action, Missouri’s Arbitration Act is preempted. See Bunge Corp. v. Perryville
Feed & Produce, Inc., 685 S.W.2d 837, 839 (Mo. 1985) (en banc) (holding that the
Missouri Arbitration Act “may not be applied to defeat the arbitration provision of a
contract which is within the coverage of the [FAA]”); see also Paetzold v. Am. Sterling
Corp., 247 S.W.3d 69, 74 (Mo. Ct. App. 2008) (holding that the specific language
required in section 435.460 of the Missouri Arbitration Act does not apply to cases

17

governed by the FAA).
Finally, the court rejects Plaintiffs’ argument that the arbitration clause at issue is
unconscionable. Assuming without deciding that the contracts at issue are adhesion
contracts, that alone is insufficient to make the contracts unconscionable. See, e.g., Cicle
v. Chase Bank USA, 583 F.3d 549, 555 (8th Cir. 2009) (“These sorts of take-it-or-leave-it
agreements between businesses and consumers are used all the time in today’s business
world. If they were all deemed to be unconscionable and unenforceable contracts of
adhesion, or if individual negotiation were required to make them enforceable, much of
commerce would screech to a halt.”). Plaintiffs argue that the Custodial Agreement “may
not have been provided to [P]laintiffs,” Resistance at 15, at the time they signed the
Adoption Agreement.

However, this argument lacks merit because Plaintiffs

acknowledged that they “read and understood” or “received a copy of” the Custodial
Agreement. See Jeanne Reder Affidavit Exhibits 1-33.
Plaintiffs next argue that the Custodial Agreement is unconscionable because it gives
Millennium the right to unilaterally amend the agreement. However, Plaintiffs’ argument
is unavailing as Plaintiffs provide no support for the position that a contract provision
allowing one party to amend the agreement is unconscionable.
Plaintiffs also argue that the Custodial Agreement is unenforceable for lack of
mutuality because the arbitration provision gives Millennium the right to bring suit to
recover sums owed under the agreements but requires Plaintiffs to arbitrate all disputes.
To support their position, Plaintiffs cite an Eighth Circuit Court of Appeals case that notes,
under Arkansas law, a contract clause requiring one party to submit to arbitration, and
allowing the other to pursue any remedy at law or equity, is unenforceable. See Wiser v.
Wayne Farms, 411 F.3d 923, 925 (8th Cir. 2005). Nonetheless, under Illinois law, as well
as Missouri law, an arbitration provision that requires one party to arbitrate disputes, and
allows another party to litigate certain disputes, is not unenforceable for lack of mutuality,

18

so long as the contract, as a whole, is supported by consideration.4 See, e.g., Molton,
Allen & Williams, LLC v. Cont’l Cas. Ins. Co., No. 09-cv-6924, 2010 WL 780353, at *46 (N.D. Ill. Mar. 3, 2010) (collecting cases); State ex rel. Vincent v. Schneider, 194
S.W.3d 853, 858-59 (Mo. 2006) (en banc) (“The majority of courts adhere to the
Restatement of Contract’s view that mutuality is satisfied if there is consideration as to the
whole agreement, regardless of whether the included arbitration clause itself was onesided.” (quotation omitted)). The court finds that the Adoption Agreements, read together
with the Custodial Agreement, are supported by adequate consideration.
Accordingly, the court finds that each of Plaintiffs’ arguments regarding the
unenforceability of the arbitration provision fail and the arbitration provision is
enforceable.
3.

Scope of arbitration provision

Having concluded that “a valid agreement to arbitrate exists between the parties,”
the court must next determine “whether the specific dispute falls within the scope of that
agreement.” Houlihan, 31 F.3d at 694-95. As discussed above, each version of the
Custodial Agreement contains an identical arbitration provision, which states, “Except as
provided below, disputes between the parties to this Agreement shall first be submitted to
private binding arbitration at the demand of either party.” First Affidavit of Jean Moran,
Exhibit 1 at 3; First Affidavit of Jean Moran, Corrected Exhibit 2 at 8. Such an arbitration
provision is quite broad, and, by its terms, contemplates that all disputes between the
parties to the Custodial Agreement shall first be submitted to arbitration. See PRM Energy
Sys., Inc. v. Primenergy, L.L.C., 592 F.3d 830, 836-37 (finding an arbitration provision
covering “‘all disputes arising under’” an agreement was “generally broad in scope” and,

4

As discussed above, there is an Illinois choice-of-law provision in the Custodial
Agreement. However, the court need not decided whether Illinois or Missouri law
controls because application of either state’s law would have the same result.
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thus, encompassed all the claims at issue, including those arising in tort, rather than
contract); see also 3M Co. v. Amtex Sec., Inc., 542 F.3d 1193, 1199 (8th Cir. 2008)
(noting that district courts should compel arbitration “as long as the underlying factual
allegations simply ‘touch matters covered by’ the arbitration provision” (quoting Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 n.13 (1985))); Barton
Enters., Inc. v. Cardinal Health, Inc., No. 4:10 CV 324 DDN, 2010 WL 2132744, at *5
(E.D. Mo. May 27, 2010) (“When the parties have agreed to a broad arbitration clause,
‘only the most forceful evidence of a purpose to exclude the claim from arbitration can
prevail.’” (quoting Estate of Athon v. Conseco Fin. Servicing Corp., 88 S.W.3d 26, 30
(Mo. Ct. App. 2002))). Accordingly, the court finds that the specific claims Plaintiffs
raise in the instant action—that Millennium conspired to violate RICO and was negligent
in its provision of professional services—fall within the broad scope of the arbitration
provision.
4.

Whether dismissal is appropriate

As discussed above, the claims Plaintiffs raise in the instant action fall within the
scope of a valid arbitration agreement between the parties. The FAA provides that, when
a court finds the claims raised in an action are properly referable to arbitration, the court
should stay the action until arbitration proceedings are concluded. See 9 U.S.C. § 3.
“However, where all of the issues raised in the Complaint must be submitted to arbitration
in accordance with a valid and enforceable arbitration agreement, most courts agree that
dismissal of the cause, rather than imposing a stay, is appropriate.” Rothman Furniture
Stores, Inc. v. Everest Software, Inc., No. 4:10-CV-848 CDP, 2010 WL 4319707, at *2
(E.D. Mo. Oct. 22, 2010).
The Eighth Circuit recently recognized this “judicially-created exception to the
general rule which indicates district courts may, in their discretion, dismiss an action
rather than stay it where it is clear the entire controversy between the parties will be

20

resolved by arbitration.” Green v. SuperShuttle Int’l, Inc., 653 F.3d 766, 769-70 (8th Cir.
2011) (citing Jann v. Interplastic Corp., 631 F. Supp. 2d 1161, 1167 (D. Minn. 2009)).
In Green, the Eighth Circuit concluded that, because the arbitrator could find that the
plaintiffs, as transportation workers, were exempt from the FAA, the district court abused
its discretion in dismissing the action, rather than staying the action, because “it [was] not
clear all of the contested issues between the parties [would] be resolved by arbitration.”
Id. at 770. However, the instant action is distinguishable from Green because Plaintiffs
do not argue that they are exempt from the FAA, and the court has already concluded that
both of Plaintiffs’ claims against Millennium fall within the scope of a valid arbitration
provision. The arbitration provision in the instant action requires the parties to submit all
disputes to binding arbitration and provides that “the majority decision of the arbitration
panel shall be binding on both parties and in any subsequent action in court.” First
Affidavit of Jean Moran, Corrected Exhibit 2 at 8. Accordingly, the court finds that no
purpose would be served by staying the case, and dismissal is appropriate so that the
parties may proceed with arbitration.
V. CONCLUSION
In light of the foregoing, it is HEREBY ORDERED THAT:
(1)

The Motion to Compel Arbitration and Dismiss (docket no. 315) is
GRANTED.

(2)

Counts 2 and 5 of the Second Amended Complaint (docket no. 252) against
Millennium Trust Company, LLC are DISMISSED.

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DATED this 26th day of June, 2012

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