408 S.W.3d 336
Mo. Ct. App.2013Background
- BOA made loans (~$34.5M) to multiple borrower entities (Jamestown, Willowbrook, Whitfield, Waterstone, Shenandoah) secured by loan documents including a Loan Agreement and Whitfield Note that contain broad arbitration clauses plus a lender reservation-of-rights to seek provisional/ancillary court remedies.
- Various guaranties and a Pledge Agreement (pledging ownership interests in several affiliated "Pledge Companies") were executed by nonborrowor parties and identified the Pledge Agreement itself as a "Loan Document."
- Borrowers allegedly defaulted when the loans matured; BOA assigned its interests to SPCP, which sued in court and conducted a UCC sale of pledged payment rights.
- Appellants (various affiliated entities and individuals) filed to compel arbitration under the Loan Agreement/JAMS rules; SPCP sought ancillary remedies in court (injunctive relief, receiver, accounting) and brought counterclaims for breach of the Pledge Agreement.
- Trial court denied Appellants’ application to compel arbitration as to SPCP’s counterclaims; appeal followed. The court reviews arbitrability de novo and places burden on party asserting arbitration agreement.
Issues
| Issue | Appellants' Argument | SPCP's Argument | Held |
|---|---|---|---|
| Whether the Pledge Agreement is governed by the Loan Agreement arbitration clause | Pledge is a Loan Document and therefore incorporates the Loan Agreement arbitration clause | Arbitration clause not expressly incorporated; Pledge signatories/non-signatories not bound by Loan Agreement arbitration | Held: Pledge Agreement is a Loan Document and incorporates the Loan Agreement arbitration clause; nonsignatories can be bound given the close relationship and reliance on the Loan Agreement |
| Whether nonsignatories can be compelled to arbitrate SPCP’s claims | Same: claims arise from Loan Documents so arbitration applies | Dunn requires express incorporation; arbitration cannot be forced on nonsignatories | Held: Dunn not read so narrowly; nonsignatory parties are bound because of close relationship, overlapping signatories, and reliance on the Loan Agreement |
| Whether SPCP’s counterclaims fall within the scope of the arbitration clause | Appellants: counterclaims ultimately arise from loan defaults and are arbitrable | SPCP: claims seek ancillary/provisional remedies appropriate for court (injunction, receiver, accounting) per reservation clause | Held: Arbitration clause broad but reservation-of-rights permits lender to seek provisional/ancillary court remedies; SPCP may pursue those remedies in court notwithstanding arbitration |
| Whether Missouri notice statute bars arbitration | Appellants: FAA governs interstate transactions; FAA preempts state notice requirement | SPCP argued lack of notice clause under Mo. law invalidates arbitration | Held: FAA applies (interstate commerce); state notice requirement (Section 435.460) is preempted and inapplicable |
Key Cases Cited
- Dunn Indus. Group, Inc. v. City of Sugar Creek, 112 S.W.3d 421 (Mo. banc 2003) (guarantor/surety not bound by arbitration clause absent incorporation; federal policy favors arbitration but incorporation must be shown)
- Nitro Distribg., Inc. v. Dunn, 194 S.W.3d 339 (Mo. banc 2006) (court must determine existence and scope of arbitration agreement; standard of review)
- Whitworth v. McBride & Son Homes, Inc., 344 S.W.3d 730 (Mo.App. W.D.2011) (party asserting arbitration bears burden of proof)
- MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942 (11th Cir. 1999) (permitting nonsignatory to invoke or be bound by arbitration when relationship to signatory makes arbitration necessary to avoid evisceration or when claims rely on written agreement)
- CD Partners, LLC v. Grizzle, 424 F.3d 795 (8th Cir. 2005) (nonsignatory enforcement of arbitration clauses where claims reference or presuppose the written agreement)
- Manfredi v. Blue Cross & Blue Shield of Kansas City, 340 S.W.3d 126 (Mo.App. W.D.2011) (arbitration is matter of contract; express exclusions from arbitration are enforceable)
- Am. Refractories Co. v. Combustion Controls, 70 S.W.3d 660 (Mo.App. S.D.2002) (definition and treatment of ancillary proceedings/remedies)
- Kagan v. Master Home Products Ltd., 193 S.W.3d 401 (Mo.App. E.D.2006) (Federal Arbitration Act preempts Missouri notice-of-arbitration statute for interstate contracts)