VSR Financial Services, Inc v. Gordon B. McLendon
2013 Tex. App. LEXIS 10187
| Tex. App. | 2013Background
- McLendon (individually and as Tri-State’s managing partner) invested in DBSI through brokerage accounts opened with paper forms: two VSR New Account Forms (no arbitration clause) and two “Advantage Account” agreements (signed only by McLendon/Tri‑State) that incorporate “Advantage Account Terms and Conditions” containing an arbitration clause covering disputes with the “Introducing Firm,” “Clearing Agent,” and others; the Agreements do not name or define “Introducing Firm.”
- Appellees sued VSR (broker‑dealer) and multiple Chapman entities/individuals for losses from the DBSI investment asserting tort and contract claims (breach of fiduciary duty, negligence, negligent misrepresentation, fraud, breach of contract, civil conspiracy, disgorgement, and securities claims against VSR).
- VSR and the Chapman appellants moved to compel arbitration; trial court denied the motions. VSR also sought to admit portions of Charles Chapman’s affidavit; the trial court struck two contested sentences as conclusory/lacking personal knowledge.
- Appeals followed: VSR raised (1) arbitrability as to VSR/its representative and (2) error in striking parts of Chapman’s affidavit; Chapman appellants raised arbitrability as to them both as purported agents/signatories and under equitable‑estoppel theories (direct benefits and concerted‑misconduct doctrines).
- The court affirmed the trial court: (1) VSR failed to show it was a party to or clearly the “Introducing Firm” identified in the arbitration clause, (2) the excluded affidavit statements were properly stricken as conclusory/lacking foundation, and (3) non‑signatory Chapman appellants could not compel arbitration under direct benefits or substantially interdependent/concerted‑misconduct equitable estoppel doctrines because plaintiffs’ claims stand independently of the account agreements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether VSR is bound by the Advantage Account arbitration clause | McLendon: No clear basis to bind VSR because arbitration clause references an undefined “Introducing Firm” and VSR is not a signatory | VSR: The account documents establish VSR was the “Introducing Firm,” so plaintiffs agreed to arbitrate claims against VSR and its representatives | Held: VSR failed to prove it was a party/rightful enforcer of the arbitration clause; trial court did not err denying arbitration |
| Admissibility of portions of Charles Chapman’s affidavit | McLendon: Objections — statements are conclusory, speculative, lack personal knowledge, and violate best evidence | VSR: The statements describe circumstances/intent re account opening and show VSR acted as Introducing Firm; admissible foundation exists | Held: Trial court properly struck the contested sentences as conclusory/lacking personal knowledge; exclusion not shown to be reversible error |
| Whether Chapman appellants (non‑signatories) can compel arbitration under direct benefits estoppel | McLendon: Plaintiffs’ claims do not rely on the account agreements; they sue Chapman for independent advice/services and do not seek direct benefits from the account contracts | Chapman appellants: Plaintiffs’ claims arise from and rely on agreements containing arbitration clauses, so non‑signatories may compel arbitration | Held: Direct benefits estoppel inapplicable — plaintiffs’ claims stand independently of the Agreements; arbitration not compelled |
| Whether Chapman appellants can compel arbitration based on substantially interdependent/concerted misconduct estoppel | McLendon: Plaintiffs did not plead concerted misconduct with VSR; allegations concern independent advice by Chapman entities | Chapman appellants: Plaintiffs allege interdependent misconduct involving signatory (VSR) and non‑signatories, so estoppel should apply | Held: No allegation of substantially interdependent/concerted misconduct with VSR; estoppel inapplicable and arbitration denied |
Key Cases Cited
- Interstate Northborough P’ship v. State, 66 S.W.3d 213 (Tex. 2001) (standard for appellate review of evidentiary rulings)
- In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571 (Tex. 1999) (party seeking to compel arbitration bears evidentiary burden to show agreement exists)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (elements to compel arbitration and limits of direct‑benefits estoppel)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (whether agreement imposes duty to arbitrate is a question of law)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (direct benefits estoppel and arbitration for non‑signatories)
- Meyer v. WMCO‑GP, LLC, 211 S.W.3d 302 (Tex. 2006) (equitable estoppel cannot give non‑parties greater arbitration rights than parties)
- Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir. 2000) (substantially interdependent and concerted misconduct doctrine for non‑signatories seeking arbitration)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (use of ordinary contract principles to determine who is bound to arbitrate)