Thomas v. Westlake
204 Cal. App. 4th 605
| Cal. Ct. App. | 2012Background
- Katherine W. Thomas opened three investment accounts with AFSI, Westlake acted as broker/advisor for the accounts, and arbitration clauses appeared in the account-related agreements.
- The first and third accounts were opened in trustee capacity for the Family Trust, with arbitration clauses referencing various fora; the second account was in Katherine’s individual capacity, with a similar clause.
- After Katherine’s death, John Thomas, as successor trustee and successor in interest, sued Westlake, WGG, AFSI, AFI, and two insurance entities (IDS and RiverSource) for fiduciary, negligence, fraud, and elder abuse among other claims.
- Defendants petitioned to compel arbitration under the accounts’ arbitration clauses and sought a stay, proposing FINRA arbitration; John opposed on grounds of non-signatories and potential conflicts of law/facts, and FINRA insurance-dispute exclusions.
- The trial court denied arbitration, citing potential for conflicting rulings and IDS/RiverSource not being parties to the agreements; the appellate court reversed, ordering arbitration and a stay pending arbitration.
- The decision recognizes that all defendants may enforce arbitration as either parties or alleged agents, and that FINRA arbitration is available for the dispute, with the trial court ordered to proceed accordingly.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether all defendants may enforce arbitration despite being non-signatories | Thomas contends non-signatories cannot enforce arbitration | Defendants argue agency and third-party beneficiary theories allow enforcement | All defendants may enforce arbitration as parties or agents |
| What standard governs review of arbitrability in this context | Argues for deferential standard to trial court findings | Argues for de novo review of contract-language questions | De novo review applies to arbitrability questions |
| Whether IDS and RiverSource can compel arbitration before FINRA | IDS/RiverSource cannot compel as non-members | As agents of an arbitration-signatory, they may compel arbitration before FINRA | IDS and RiverSource can compel arbitration before FINRA as agents |
| Whether insurance-dispute exception to FINRA arbitration applies | Claims are insurance-disputes excluded from FINRA arbitration | Dispute is not insurance-only; FINRA exclusion does not apply | FINRA insurance-dispute exception does not bar arbitration here |
| Whether the trial court should order arbitration and stay proceedings | Arbitration should be denial due to forum issues | Arbitration should be ordered and proceedings stayed pending arbitration | Court must order arbitration and stay proceedings until completion |
Key Cases Cited
- Laswell v. AG Seal Beach, LLC, 189 Cal.App.4th 1399 (Cal. App. 2010) (third-party beneficiary/agency-based enforcement of arbitration)
- Rowe v. Exline, 153 Cal.App.4th 1276 (Cal. App. 2007) (conflicting rulings issue in 1281.2(c) analysis)
- Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc., 129 Cal.App.4th 759 (Cal. App. 2005) (nonsignatory enforcement via agency/ostensible agency)
- Dryer v. Los Angeles Rams, 40 Cal.3d 406 (Cal. 1985) (agency-based enforcement of arbitration)
- RN Solution, Inc. v. Catholic Healthcare West, 165 Cal.App.4th 1511 (Cal. App. 2008) (agency and arbitration enforcement mechanics)
- 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199 (Cal. App. 1998) (agency/imputation concepts for arbitration)
- Provencio v. WMA Securities, Inc., 125 Cal.App.4th 1028 (Cal. App. 2005) (postdispute arbitration forum availability not available for inactive members)
- Berman v. Dean Witter & Co., Inc., 44 Cal.App.3d 999 (Cal. App. 1975) (broad arbitration clause interpretation)
- Coast Plaza Doctors Hospital v. Blue Cross of California, 83 Cal.App.4th 677 (Cal. App. 2000) (arbitration when a party meets §1281.2 requirements)
- Wachovia Bank, N.A. v. VCG Special Opportunities Master Fund, Ltd., 661 F.3d 164 (2d Cir. 2011) (FINRA arbitration framework and customer status)
- Provencio v. WMA Securities, Inc., 125 Cal.App.4th 1028 (Cal. App. 2005) (predecessor NASD rules and postdispute agreements)