959 N.E.2d 309
Ind. Ct. App.2011Background
- A mortuary business placed in receivership due to alleged misappropriation of cemetery trust funds.
- StoneMor purchases the mortuary business and Independence Trust is appointed trustee of existing and new cemetery trusts.
- Receiver sues Smith Barney, which held some cemetery trust accounts, alleging participation in misappropriation.
- Smith Barney moves to compel arbitration claiming Independence Trust and StoneMor are bound by arbitration clauses in client agreements signed by the trustees.
- Trustees argued they were not parties to the agreements and Independence Trust was not a successor in interest to the predecessor trustees.
- The trial court denied arbitration, finding implied waiver by Smith Barney; appellate court initially affirmed the denial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Independence Trust is bound by arbitration. | Smith Barney argues Independence Trust is bound as successor in interest. | Independence Trust did not sign and is not a successor in interest to the client agreements. | Independence Trust is not bound; no basis to compel StoneMor to arbitrate. |
| Whether successor trustees can be bound by arbitration through contract. | Trustees as successors may be bound by predecessor arbitration clauses. | Client agreements do not indicate a 'successor trustee' binding and Independence Trust did not sign. | No, successor trustees are not bound by the client agreements; no privity or effective incorporation. |
| Whether the arbitration issue was waived by Smith Barney. | Smith Barney waived by not asserting arbitration defense earlier. | Waiver is not dispositive where no enforceable arbitration clause applies. | Waiver argument not controlling; court affirmed on lack of enforceable arbitration. |
| Whether contract-law principles govern arbitration consequences in trust context. | Trust law supports treating successor trustees as bound to contract. | Arbitration is a matter of contract; status as successor does not create binding arbitration without signing. | Arbitration is contract-based; independence as successor in interest did not bind without signing. |
| What law governs the arbitration agreements in this case. | New York law controls client agreements; favors arbitration where signed. | Indiana law also applies; contracts analyzed for plain language binding successors in interest. | New York law governs but results align with Indiana law; lack of signed agreement defeats enforcement. |
Key Cases Cited
- Safety Nat'l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986 (Ind. Ct. App. 2005) (arbitration enforcement policy and de novo review standard)
- Green Tree Servicing, LLC v. Brough, 930 N.E.2d 1238 (Ind. Ct. App. 2010) (arbitration is a matter of contract; plain meaning governs)
- Harlow v. Parkevich, 868 N.E.2d 822 (Ind. Ct. App. 2007) (discussion of successor trustee concepts in trust context)
- MAG Portfolio Consultant, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58 (2d Cir. 2001) (non-signatories bound by arbitration through various doctrines)
- Isp.com LLC v. Theising, 805 N.E.2d 767 (Ind. 2004) (privity concept in arbitration contracts)