Securities America, Inc. ("SAI"), a defendant in an action pending in the Jefferson Circuit Court, appeals from the trial court's order denying its motion to compel arbitration of the claims made against it by the plaintiffs. We affirm.
The 10 plaintiffs — Charles P. Rogers, Margaret Rogers, M. Khris McAlister, Robert F. McCullough, William S. Ringland, Adrian Ringland, Jr., Adrian Ringland III, Bertha Ringland, George Edwards, and John Taliaferro — allege that "[t]his is a case about the criminal actions of a con artist . . . who assumed his college roommate's identity and stole over $1 million from the ten individual plaintiffs." Brief of Appellees, at 4. That alleged "con artist" is Scott Wolas, who, using the name of Allen Lee Hengst, his college roommate, became a registered representative of SAI, opened a branch office in Orlando, Florida, and obtained an Alabama securities license under that assumed name.
The plaintiffs allege that acting "[o]n behalf of SAI and in violation of the Alabama Securities Act, Wolas (masquerading [as] Allen Hengst) enticed each of [them] into investing in securities approved and supported by SAI." Brief of Appellees, at 6. Further, they allege that they "lost substantial amounts of [money] as a result of the negligent, wanton and fraudulent acts of Wolas and SAI." Brief of Appellees, at 7.
SAI contends that "[p]laintiffs' claims stem solely from alleged losses arising from their dealings in bogus gold certificates with [Wolas, masquerading as Hengst], a registered representative of . . . SAI." Brief of Appellant, at 7. Further, SAI states that, "unbeknownst to [it], [Wolas, masquerading as Hengst,] had been operating a Ponzi scheme[1] selling `gold certificates' prior to his affiliation with . . . SAI and apparently continued to do so after he became registered with the firm." Brief of Appellant, at 9.
Five of the plaintiffs — M. Khris McAlister, Robert F. McCullough, Charles P. Rogers, Margaret Rogers, and William S. Ringland (the "nonsignatory plaintiffs") — never opened an account with SAI and, therefore, never signed any agreement with SAI. On the other hand, the other five plaintiffs — Adrian Ringland, Jr., Adrian Ringland III, Bertha Ringland, George Edwards, and John Taliaferro (the "signatory plaintiffs") — opened brokerage accounts with SAI, signing and receiving documents concerning those accounts. The documents were presented to the signatory plaintiffs by Wolas, who signed the documents as SAI's registered representative, using the name "Allen Hengst."
Each signatory plaintiff signed a new account application, which contains the following language directly above the client-signature line:
"I HEREBY ACKNOWLEDGE THAT I AM IN RECEIPT AND HAVE READ, UNDERSTOOD AND AGREED TO THE TERMS SET FORTH IN THE SAI CLIENT AGREEMENT AND THAT THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION AGREEMENT WHICH I HAVE READ AND UNDERSTAND."
(Capitalization in original.) Additionally, George Edwards and John Taliaferro opened retirement accounts with SAI, signing applications that contain the following language directly above the customer-signature line: *1255
"I REPRESENT THAT I HAVE READ THE CUSTOMER AGREEMENT GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH CUSTOMER AGREEMENT AS CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME. THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION AGREEMENT. . . . I ACKNOWLEDGE RECEIPT OF THE PRE-DISPUTE ARBITRATION AGREEMENT."
(Capitalization in original.)
All the signatory plaintiffs established their accounts as option accounts, which required them to execute option-account agreements. Those agreements contain the following language directly above the customer-signature line:
"I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME. THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION AGREEMENT. . . . I ACKNOWLEDGE RECEIPT OF THE PRE-DISPUTE ARBITRATION AGREEMENT."
(Capitalization in original.)
The predispute arbitration agreement contained in the SAI customer agreement, which agreement is referenced in the separate agreements executed by all the signatory plaintiffs, provides in pertinent part:
"I AGREE THAT ALL CONTROVERSIES THAT MAY ARISE BETWEEN US CONCERNING ANY ORDER OR TRANSACTION, OR THE CONTINUATION, PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US, WHETHER ENTERED INTO BEFORE, ON, OR AFTER THE DATE THIS ACCOUNT IS OPENED, SHALL BE DETERMINED BY ARBITRATION BEFORE A PANEL OF INDEPENDENT ARBITRATORS SET UP BY EITHER THE NEW YORK STOCK EXCHANGE, INC., OR NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., AS I MAY DESIGNATE."
(Capitalization in original.)
On December 13, 2001, SAI answered the complaint. It asserted as a defense that "[p]laintiffs' claims are subject to mandatory arbitration agreements." On that same date, SAI filed a motion to dismiss, or, alternatively, to stay the proceedings and compel arbitration. SAI attached to that motion the affidavit of Kevin Zemann, its director of regional supervision, to which were attached copies of those documents signed and/or received by the signatory plaintiffs.
On December 19, 2001, SAI filed a brief in support of its motion to compel arbitration. The brief was accompanied by the affidavit of Lamar S. Jones, SAI's vice *1256 president and chief operations officer. That affidavit described the interstate nature of SAI's business, as well as the interstate aspects of a sale-of-securities transaction.
On January 30, 2002, the plaintiffs filed a brief in opposition to SAI's motion to compel arbitration. On February 1, 2002, the trial court denied SAI's motion. SAI appealed.
SouthTrust Bank v. Ford,"`This Court reviews the denial of a motion to compel arbitration de novo. Green Tree Fin. Corp. v. Vintson,
, 753 So.2d 497 502 (Ala. 1999); Patrick Home Ctr., Inc. v. Karr,, 730 So.2d 1171 1172 (Ala. 1999). The party seeking to compel arbitration has the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially affecting interstate commerce. TranSouth Fin. Corp. v. Bell,, 739 So.2d 1110 1114 (Ala. 1999); Sisters of the Visitation v. Cochran,(Ala. 2000). "[A]fter a motion to compel arbitration has been made and supported, the burden is on the nonmovant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question." Jim Burke Auto., Inc. v. Beavers, 775 So.2d 759 , 674 So.2d 1260 1265 n. 1 (opinion on application for rehearing) (Ala. 1995).'"
As previously discussed, the signatory plaintiffs had entered into written agreements with SAI, while the nonsignatory plaintiffs had not. Therefore, the controlling principles must be applied separately to each group of plaintiffs.
SAI, as the party seeking to compel arbitration, had the initial burden of proving the existence of a contract calling for arbitration of the claims of the nonsignatory plaintiffs. That threshold burden is imposed upon the party seeking to compel arbitration because "`"a party cannot be required to submit to arbitration any dispute he has not agreed to submit."'" Cook's Pest Control, Inc. v. Boykin,
SAI argues that the nonsignatory plaintiffs should be compelled to arbitrate their disputes, because, SAI alleges, "the non-signatory plaintiffs are attempting to avail themselves of the benefits of [the SAI customer agreement]." Brief of Appellant, at 31. The nonsignatory plaintiffs respond that their claims are not based upon SAI's customer agreement and that they "do not allege breach of contract." Brief of Appellees, at 27. Our review of the complaint indicates that the plaintiffs are not attempting "to enforce selectively the provisions of . . . SAI's customer agreement," as alleged by SAI. Brief of Appellant, at *1257 31. Without addressing the legal merits, if any, of SAI's argument, we conclude that the argument must fail, because of a total absence of factual support.
The trial court did not err in refusing to compel the arbitration of the claims of the nonsignatory plaintiffs. Therefore, to that extent, its order denying SAI's motion to compel arbitration must be affirmed.
In Alabama Catalog Sales v. Harris,
The parties agree that SAI and its registered representatives are subject to the Alabama Securities Act, codified at §
The Act requires that every person engaged in the business of effecting transactions in securities in Alabama be registered with the Alabama Securities Commission ("the Commission"). See, generally, §
The signatory plaintiffs argue that the SAI customer agreements containing the arbitration provision cannot be enforced, because, they argue, the Act "prohibits enforcement of contracts made in violation of its provisions." Brief of Appellees, at 9. SAI responds that the Act "offers no impediment to the enforcement of the arbitration agreements," because "SAI *1258
did not know that [Wolas, masquerading as Hengst,] was anyone other than who he purported to be." Reply Brief of Appellant, at 5. Our analysis of §
Section
"(g) No person who has made or engaged in the performance of any contract in violation of any provision of this article . . . or who has acquired any purported right under such contract with knowledge of the facts by reason of which its making or performance was in violation, may base any action on the contract."
(Emphasis added.)
As previously stated, we must construe this statute most favorably to the public, including the signatory plaintiffs. Therefore, we read it as stating, in relevant part, that "no person who has made or engaged in the performance of any contract in violation of any provision of the Act may base any action on the contract." Therefore, SAI is not entitled to enforce the arbitration provision in its customer agreements.
As previously discussed, SAI contends that it is entitled to enforce the arbitration agreements because it had no knowledge of any violation of the Act. SAI's argument is based on the knowledge requirement in §
In White v. Knight,
"[P]laintiff argues that the language [of the Code section] is ambiguous, and being so dictates the use of the `doctrine of last antecedent' in discovering its meaning:
"`By what is known as the doctrine of the "last antecedent," relative and qualifying words, phrases, and clauses, are to be applied to the words or phrase immediately preceding, and are not to be construed as extending to or including others more remote; . . .'
citing 82 C.J.S. Statutes § 334 (1953).
"We appreciate the application of this general rule of statutory construction; however, we also note from the cited section that the doctrine is only an aid to construction and `will not be adhered to where extension to a more remote antecedent is clearly required by a consideration of the entire act. . . . Where several words are followed by a clause as much applicable to the first and other words as to the last, the clause should be read as applicable to all.' Ibid. See also 2A Sutherland Statutory Construction § 47.33 (Sands 4th ed. 1973)."
The antecedent immediately preceding the phrase containing the knowledge requirement is a "person . . . who has acquired any purported right under any . . . contract [in violation of any provision of the Act]." Construing the statute in favor of the public, we see no reason to apply the knowledge requirement to the more remote antecedent, that is, to a "person who has made or engaged in the performance of any contract in violation of any provision of [the Act]."
The violations of the Alabama Securities Act rendered the SAI customer *1259 agreements unenforceable by SAI. Therefore, SAI is not entitled to seek arbitration under the provisions of those agreements, and the trial court did not err in denying SAI's motion to compel the signatory plaintiffs to arbitrate their claims.
AFFIRMED.
Houston, Lyons, Brown, Johnstone, and Stuart, JJ., concur.
Moore, C.J., concurs in the result.
Harwood, J., recuses himself.