993 F.3d 253
4th Cir.2021Background
- Barry and Donna Rowland retained financial advisor Sandeva “Sandy” Morris and her firm (SMF) to manage investment accounts; in 2017 Rowland signed SMF’s Asset Management Agreement (AMA) via DocuSign.
- The Rowlands submitted an AMA (the Rowland AMA) that listed one account and left certain Risk Profile Questionnaire (RPQ) fields blank; Rowland signed that PDF.
- SMF produced a different AMA (the SMF AMA) signed by SMF’s Chief Compliance Officer that added a second account and filled in RPQ fields (risk tolerance, objectives, and experience) in a different ink/color.
- Plaintiffs sued in North Carolina state law for contract and fraud claims after investment losses; Morris and SMF moved to compel arbitration under the AMA’s arbitration clause.
- The district court denied the motion to compel arbitration, concluding no agreement to arbitrate was formed because SMF unilaterally made material changes after Rowland signed; the Fourth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a valid arbitration agreement was formed | Rowland: No meeting of the minds; the version he signed controls and SMF’s post-signing changes are not agreed to | SMF: The AMA (as SMF filed and signed) is the operative contract and Rowland assented via DocuSign | Held: No contract formed — material unilateral changes (extra account, filled RPQ) prevented agreement to arbitrate |
| Whether arbitrability is for the court or arbitrator to decide | Rowland: Court must decide because formation of the arbitration agreement is in dispute | SMF: Incorporation of AAA rules delegates gateway questions to the arbitrator | Held: Court decides whether a contract to arbitrate exists; incorporation of AAA rules does not remove the court’s duty to resolve contract formation |
| Procedural standard for resolving formation disputes (trial/jury vs. summary) | Rowland: Disputed facts support denying arbitration without sending to arbitration | SMF: urged enforcement based on its signed copy | Held: Courts apply summary-judgment standard; here undisputed documentary differences meant, as a matter of law, no meeting of the minds so no trial required |
| Effect of electronic signing and document exchange on contract formation | Rowland: DocuSign signature he returned binds only the version he signed; electronic processes do not validate unilateral alterations | SMF: Electronic transmission and signature of their version suffices to form contract | Held: Electronic contracting does not alter basic contract principles; identical material terms are required and unilateral post-signing changes defeat formation |
Key Cases Cited
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (rejected judicial refusal to compel arbitration based on a “wholly groundless” objection)
- Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013) (limits on judge-made exceptions to FAA)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preemption and enforcement of arbitration agreements)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (courts generally decide whether an arbitration agreement was formed)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (arbitration is a matter of contract and parties cannot be forced into arbitration absent agreement)
- Berkeley Cty. Sch. Dist. v. Hub Int’l Ltd., 944 F.3d 225 (4th Cir. 2019) (accept plaintiff’s complaint allegations relating to the underlying dispute when reviewing denial to compel arbitration)
- Hill v. PeopleSoft USA, Inc., 412 F.3d 540 (4th Cir. 2005) (questions of whether an arbitration agreement was formed governed by state contract law)
- Noohi v. Toll Bros., Inc., 708 F.3d 599 (4th Cir. 2013) (standard of review for denial of a motion to compel arbitration)