Ward v. Hilliard
116 N.E.3d 1011
Ill. App. Ct.2019Background
- Plaintiff June Ward opened an IRA through Hilliard Lyons after signing a 14‑page account application; only page four (the application) was signed by Ward. The separate 4‑page Account Terms of Service (ATS) given to her contained arbitration clauses in paragraphs 13–14 but was unsigned by Ward.
- Above Ward’s signature on the application was an acknowledgment stating she had received and understood the Account Terms of Service, and that Sections 13 and 14 require arbitration to resolve disputes.
- Ward sued Hilliard Lyons and its agent Mike Barnett for negligent management of her IRA. Defendants moved to dismiss or stay and compel arbitration under the ATS.
- The trial court, applying Kentucky law, denied the motion, holding the ATS was not incorporated by reference into the signed application and, as an unsigned stand‑alone agreement, violated Kentucky’s statute of frauds.
- The defendants appealed interlocutorily under Ill. S. Ct. Rule 307; the appellate court reviewed de novo whether Kentucky contract principles (incorporation by reference and statute of frauds) established an enforceable arbitration agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ATS arbitration clauses were incorporated into the signed account application | Ward: acknowledgement only shows receipt, not assent; incorporation by reference insufficient under Dixon | Defs: application’s acknowledgment that Ward received and “understood” the ATS (including §§13–14) shows assent and incorporates the ATS | The court held the signed application sufficiently incorporated the ATS by reference; Ward’s signature acknowledged she understood and agreed to arbitration |
| Whether Kentucky’s statute of frauds prevents enforcement of the unsigned ATS | Ward: ATS must be separately signed to satisfy KRS §371.010(7) because services extend beyond one year | Defs: the signed application and incorporated ATS together satisfy the statute; incorporated document need not be separately signed | The court held the statute of frauds did not bar enforcement because the signed application and the incorporated ATS constitute a single writing sufficient as a memorandum |
| Whether federal (FAA) or Kentucky arbitration law applies (raised by defendants on appeal) | Ward: state law may govern; court below did not decide FAA issue | Defs: FAA applies due to interstate commerce; asked appellate court to decide | Appellate court declined to decide on appeal and remanded to let trial court address choice‑of‑law on remand |
| Whether defendants’ alternate argument (assent by conduct) may be considered | Ward: argument was new on appeal and should be struck | Defs: conduct (opening/using account) evidences acceptance | Court declined to strike the argument as moot but did not reach its merits because incorporation by reference resolved the appeal |
Key Cases Cited
- Dixon v. Daymar Colleges Group, LLC, 483 S.W.3d 332 (Ky. 2015) (articulates Kentucky incorporation‑by‑reference analysis and interaction with statute of frauds)
- Janiga v. Questar Capital Corp., 615 F.3d 735 (7th Cir. 2010) (acknowledgment above signature that one "read and understood" arbitration clause can show assent)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (contract formation rules govern whether parties agreed to arbitrate)
- Salsitz v. Kreiss, 198 Ill. 2d 1 (Ill. 2001) (an order compelling or denying arbitration is injunctive and subject to interlocutory appeal)