953 N.E.2d 554
Ind. Ct. App.2011Background
- Receivership placed on memory gardens mortuary business after allegations that cemetery trusts were looted by former owners.
- Receiver marshaled trust assets and pursued claims against Smith Barney, which held cemetery trust accounts.
- StoneMor agreed to acquire the mortuary business; Independence Trust appointed as trustee of both old and new cemetery trusts and assigned receiver's claims to StoneMor.
- Smith Barney moved to compel arbitration based on arbitration clauses in client agreements signed by predecessor trustees; argued by successor-in-interest theory.
- Trial court denied arbitration, finding implied waiver by Smith Barney; Smith Barney appealed.
- Indiana Court of Appeals held Independence Trust was not a successor in interest to predecessor trustees and therefore not bound by arbitration; no basis to compel StoneMor to arbitrate; affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Independence Trust bound as successor in interest? | Independence Trust is bound by the predecessor arbitration clauses. | Independence Trust is not a successor in interest to the predecessors. | Not bound; no basis to compel arbitration. |
| Is StoneMor bound to arbitrate as a derivative claimant? | StoneMor's claims derive from Independence Trust's arbitration obligations. | No basis to arbitrate since Independence Trust is not bound. | No basis to compel StoneMor to arbitrate. |
| Did Smith Barney waive its arbitral rights? | Smith Barney waived by not raising arbitration in the receivership action. | Waiver occurred; rights were not preserved. | Appellate court did not base decision on waiver; affirmed on lack of successor-in-interest binding. |
Key Cases Cited
- Safety Nat'l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986 (Ind. Ct. App. 2005) (strong policy favoring enforcement of arbitration; two-pronged proof)
- Green Tree Servicing, LLC v. Brough, 930 N.E.2d 1238 (Ind. Ct. App. 2010) (arbitration contract construction is a pure question of law)
- Ryan, Beck & Co. v. Fakih, 268 F. Supp. 2d 210 (E.D.N.Y. 2003) (assumption/estoppel theories to bind non-signatories to arbitration)
- Harlow v. Parkevich, 868 N.E.2d 822 (Ind. Ct. App. 2007) (discussed successor in interest concepts in arbitration context)
- Kahn v. New York Times Co., No. 122 A.D.2d 655, 503 N.Y.S.2d 561 (N.Y. App. Div. 1986) (discusses arbitration binding of successor entities)
- Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995) (associates assumpsit and agency-based binding principles)