No. 92-540 IN THE SUPREME COURT OF THE STATE OF MONTANA 1993

MARLENE CHOR and MARTIN ANDRE, Plaintiffsand Respondents,

PIPER, JAFFRAY & HOPWOOD, INCORPORATED,and JOHN LAWRENCE SCHULTZ, Defendants and Appellants.

APPEAL FROM: District Court of the Second Judicial District, In and for the County of Silver Bow, The Honorable James E. Purcell, Judge presiding.

COUNSEL OF RECORD: For Appellants: John G. Crist and James L. Jones, Dorsey & Whitney, Billings, Montana For Respondents: Gregory 0. Morgan and Charles F. Proctor, Bozeman, Montana

Filed: Submitted: July 15, 1993 Decided: October 18, 1993Chief JusticeJ. A. Turnage delivered the Opinion of the Court. The District Court for the Second Judicial District, Silver Bow County,refusedtoenforce three arbitration agreements entered between Harlene Chor and Piper, Jaffray & Hopwood, Inc. (Piper). Piper appeals. We reverse and remand. The issues are: 1. Did the court err by refusing to enforce the agreements because Piper did not fully comply with Rule 21 of the National Association of Securities Dealers? 2. Did the District Court errby relying on Choresintentnot tobe bound by the legal consequencesof thearbitration clauses in the agreements she signed? 3. Did thecourterrby concluding the arbitration agreements

are void because theyare ixxxz?scionableor contracts cf adhesicn? 4. Did the court err by concluding that the agreements are void because Piper committed actual and constructive fraud by not explaining the legal implications of the arbitration clauses to Chor when she signed the agreements? Marlene Chor was forty-seven years old when this matter was heard in the District Court. Although she was not a sophisticated investor in securities, shehas a college degreeandwaspresident, part-owner, and operator of a million-dollar-a-year gambling machinebusiness. Sheand herbrother,MartinAndre,became owners of the business after their father's death in 1985.In 1988, Chor became acquainted with defendant John Schultz. Schultzwas a broker for Piper and was registered as a securities salesman. Relying on Schultz's advice,Chor invested in stock and bought an annuity through Piper. Chor testified that she signed many papers with Piper and that Schultz pointed out the important items in the documents and explained their impact to her. InAugust of 1989,based upon Schultz's advice and direction, Chor wrote a check for $25,000 to "The Terran Corporation" for purchase of one of the Terran investments. The following month, she wrote a check to "Terran Financial Groupw in the amount of $25,000 and delivered it to Schultz fora secondTerran investment. Chor received certificates of a limited partnership interest in "Terran Partners I Limited Partnership." 

### In August of 1990, the Nontana State AuditorlcOfficc issucd

a cease and desist order in connection with the sale of the Terran Partnership I Limited Partnership. Chor and Andre (who had also invested in Terran) filed this suit against Piper and Schultz. Because Andre did not sign any agreements containing arbitration clauses,Piperhasnot challengedtheDistrictCourt's jurisdiction to decide his claim. Piper contends it had no role inmarketing the Terran investments and that Schultzwas acting independently in selling them to Chor. The validity of that defense has not yet been decided. Here, Piper argues that if it is held responsible in this action,Chor's claims are subject to arbitration, pursuant to three agreements she signed. The first agreement, denominated a "Co-owner Account Agreement," was executed on June 17, 1988. Chor testified that shewas led to believe the only purpose for the agreement was so that she and her husband could hold an account jointly. The third page of the agreement includes a paragraph entitled "Arbitration:" We agree to arbitrate any disputes between PJH and us. We specifically agree and recognize that all controversieswhichmay arise between PJH, its agents, representatives or employees and us, concerning any transaction, account or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on, or subsequent to the date hereof, shall be determinedby arbitration to the full extentprovided by law. Sucharbitration shallbe inaccordance with the rules then in effect of theArbitrationCommittee of the New York Stock Exchange or the National Association of SecuritiesDealers, Inc., aswemay elect. We authorize PJH, if we do not make such election by registered mail addressed to PJH at itsmain office within fifteen (15) days after receipt of notification from PJH requesting such election, to make such election on our behalf. On September 30, 1988,Chor signed another Co-owner Account Agreement, for an account she held with her son. That agreement contained the same arbitration provision set forth above. The third arbitration agreement was contained on page 4 of a Margin Agreement Chor signed in February 1991. Chor testified she believed the purpose of the Margin Agreement was to clear up a debit balance on her account. She further testified that shebelieved the arbitration provision in the Margin Agreement would apply to future disputes only. The District Court denied Piper's motion to compel arbitration, stating that it first needed to rule on the validity of the arbitration agreements. It held a joint hearing on that question forpurposes of this case and another casewhich was also appealed to this Court, Mueske v. Piper, Jaffray & Hopwood (Mont. 19931, P. 2d 

## , 50 St. Rep. 1009. After the hearing, the District Court ruled that the arbitration agreements are invalid. The court concluded that: Piper failed to correct its procedures and amend its account forms to reflect new disclosure requirements under theRules of theNational Association of Securities Dealers; Chor did not intend that the arbitration claase wo~jldhe %utilized in the event that she defrauded by Piper or one of its agents: the Co-owner Account Agreements are adhesion contracts which do not state their effect of waiving the right to trial by jury, and enforcement of the arbitration clauses would therefore be unconscionable; and Chor's consent to the Co-owner Account Agreements was obtained through actual and constructive fraud. Piper appeals. Beforewe discuss the issuesraised in this case,we point out thatcontracts requiring arbitrationofdisputesare asenforceable in Montana as are any other contracts. Section 27-5-114, MCA. Further, this Court has acknowledged the federal policy favoringarbitration. E.g., Vukasin v. D.A. Davidson & Co. (1990), 241 Mont. 126, 133, 785 P.2d 713, 718; Passage v. Prudential-Bache Securities, 1nc. {1986), 223 Mont. 60, 64, 727 P.2d 1298, 1300, cert. denied 480U.S. 905.

Did the court err in refusing to enforce the agreements because Piper did not fully comply with Rule 21 of the National Association of Securities Dealers? The arbitration agreements between Piper and Chor are governed, through operation of their terms, by the rules of the National Association of Securities Dealers (NASD). Effective September 7, 1989,NASD Rule 21(f)(3) required that: A copy of theagreement containingany such [arbitration] clause shallbe given to the customerwho shall acknowl- -Am- ----4-t the-0°C on the a~reement or on a separate *U-L A....-.-'Ly* ..I. ..&I-& document. Piper did not obtain Chor1ssignature acknowledging receipt of a copy of any of the three arbitration agreements she signed. However, by its own terms, NASD Rule 21 does not apply retroactively. The ruleprovides at subsection (f)(5) that: "The requirements of this subsection (f) shall apply only to new agreements signed

# .. . after September 7,1989.'' Therefore, the first two arbitration agreements, which Chor signed in 1988, are not subject to the requirements of Rule 21.The Margin Agreement, on the other hand, is subject to Rule 21. We held in Mueske that failure to complywith controlling law incorporated into an arbitration agreement, such as an NASD rule, renders a pre-dispute arbitration clause invalid. Mueske, 

## - P.2d at, 50 St.Rep. at 1013. Based on our holding in Mueske,

we hold that the arbitration provision in the Margin Agreement between Chor and Piper is invalid for violation of NASD Rule 21(f) (3). Without citing authority, the District Court concluded that the Xargin Agreement superseded the two previous agreements. Chor does not defend that conclusion. Because there is nothing in the Margin Agreement to indicate it supersedes or nullifies the first two agreements, and in the absence of any citation to legal

-..tL.--:t.. -..--,.-+<..- tt.,. r,<-t-4-t c.,.,.~+,# --..-'I..... 4-.. 

# .,--.-... -1.. 2,. UUL""I"Y I3Upp"I &I.'., C8.G UII3G.L &I-C +"UL C I3 I-",I\-ILlYI",', I= +"'I+IUU~ that the court was in error. We will therefore proceed to analyze the remaining issues as to the first two arbitration agreements. 

### II Did the District Court err by relying on Chor's intent not to be bound by the legal consequences of the arbitration clauses in the agreements she signed? As Piper has pointed out, Chor does not address this issue in herbrief to this Court,effectively conceding it. When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, ifpossible. Section 28-3-303,MCA. We hold that the District Court erred in relying upon Chor's subjective intent not to be bound by the legal consequences of the arbitration clauses in the agreements she signed. 111 Did the courterrby concluding thearbitration agreements are void because they are unconscionable or contracts of adhesion? In Passaqe, this Court held that an arbitration clausemay be enforced even if the agreement in which the clause appears is an adhesion contract, absent evidence that the arbitration clause was not within the partiessreasonable expectations or that the clause is oppressive or unconscionable. 

### , 727 P.2d at 1302. Chor maintains that this casepresents an exception to the general rule stated in Passaae because, here, the District Court specifically conc.--'ed that t>,- cla"ses ?+,-re not -itkin the reasonable expectations. This conclusion was erroneous, based on Chorssown deposition testimony. Chor testified thatsheread thearbitration agreementsbefore signing them and thather understanding of the first agreementwas "if 

### Iwere to have any problems, that we would agree to arbitrate the problem." As to her claim that she did not fully understand the legal impact of the arbitration clauses, a party cannot avoid the legal consequences of an agreement simply by later claiming that shedid not understand the impact of theplain languageof the contract on her legal rights. SeeWright v. Blevens (1985), 217Mont. 439, 444, 705 P.2d 113, 117. More specifically, "[algreements to arbitrate disputes in accordance with SEC-approved procedures are not unconscionable as a matter of law." Cohen v. Wedbush, Noble, Cooke, Inc. (9thCir. 1988), 841 F.2d 282, 286. Chor also claims thather agreementswith Piperare contracts of adhesion. Contracts of adhesion arise when a standardized form of agreement, usually drafted by the party having superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity to negotiate its terms. Finkle and Ross v. A.G. Becker Paribas, Inc. (D.C.N.Y. 1985), 622 F.Supp. 1505, 1511, as cited in Passaqe, 727 P.2d at 1301. This claim is not convincing in light of Chor's deposition testimony. Chor testified that since 1983 she had investment accounts with five other brokerage houses besides Piper, none of which required her to consent to arbitrate future disputes. She clearly had the ability to go elsewhere if the terms of the agreement with Piper did not suit her. Indeed, she did so in the spring of 1990,when Schultz left Piper. At that time, Chor terminated her accounts with Piperand transferred them to another brokerage firm for a few months, before returning to Piper. The arbitration clauses here discussed, by their plain meaning, concern stock transactions. By no stretch of judicial fictionor fantasydoes thisopinion suggestthat the clauseswould bind Chor to arbitratea claimbased on anautomobile accidentwitha Piper secretary, or other torts not related to stock transactions, as postulated in the concurring and dissenting opinion. We hold that the District Court erred in concluding the arbitrationagreementsarevoid duetounconscionability orbecause they are contracts of adhesion.IV Did the court err by concluding that the agreements are void because Piper committed actual and constructive fraud by not explaining the legal implications of the arbitration clauses to Chor when she signed the agreements? A prima facie caseof actual fraud or constructive fraudwould require, among other elements of proof, evidence that Piper misrepresented or omitted some material fact. Van Ettinger v. Papin (1978): 180 Mont. 1, 10, 588 P.2d 988, 994 (actual fraud): Hartfield v. City of Billings (1990), 246 Mont. 259, 263, 805 P.2d 1293, 1296 (constructivefraud). TheDistrict Court concluded that Pipermade a materially false representation to Chor by failing to informher that shewaived her right to a jury trial by signing the first two arbitration agreements. Inorder foran omission, ratherthan an affirmativemisrepresentation, to constitute fraud, the plaintiff must first demonstrate that thedefendanthad a duty to disclose the fact at issue. Chiarella v. United States (1980), 445 U.S. 222, 228, 100 S.Ct. 1108, 1114, 63 L.Ed.2d 348, 356. According to Chor, a duty arose from the commercial nature of the relationship between herself and 10Piper, theadmissions of Piper,and 5 30-10-301(1), MCA, concerning prohibited practices in securities transactions. Char cites McJunkin v. Kaufman & Broad Home Systems (1988)

### , 229 Mont. 432, 748 P.2d 910, as authority establishing a duty on the part of Piper to disclose the legal effect of the arbitration clause to her, as a result of the commercial relationship between them. In McJunkin, the buyer of a mobile home alleged that the seller failed to inform him of structural defects therein, This Court stated: We have recognized that a sufficient duty can arise in a commercial transaction such as the one at hand. [Citation omitted.] We find the defendants had a duty to refrain from intentionally or negligently creating a false impression by words or conduct. [Citations omitted.] McJunkin, 748 P.2d at 915. The admissions of Piper upon which Chor relies are contained in the deposition of her Piper stockbroker. He "admitted" that he owed her a duty to assess her needs and to recommend to her appropriate investments to fit those needs. He also ttadmittedv that it is reasonable for a customer to rely upon her broker's informationand that thebroker owes 

### a duty to use reasonable care in giving information to customers. Section 30-10-301(1), MCA, provides: It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, in, into, or from this state, to: (a) employ any device, scheme, or artifice to defraud;(b)make any untrue statement of amaterial fact or omit to state a material fact necessary in order to make the statementsmade, in the light of the circumstancesunder which they are made, not misleading; or

[c) engage in any act, practice, or course of business which operates orwould operate asa fraud ordeceit upon any person. This Court has stated that 

### 5 30-10-301(1), MCA, creates an implied code of conduct for brokers, violation of which may constitute a breach of the duty that a broker owes to his customer. Brown v. Merrill Lynch, Pierce, Fenner, Etc. (1982), 197 Mont. 1, 9-10, 640 P.2d 453, 457. 

### Brown involved a broker's alleged failure to warn

a customer of the amount of risk involved in a "tax straddle" investment. We are unwilling to construe this Court's rulings inMcJunkin and 

### Brown so broadly as to state that a stockbroker has a duty to disclose to his customers every possible misunderstanding which might be reached upon signing a contract. Nor do the "admissions" of Chor's Piper stockbroker establish a duty to inform a customer of the specific legal ramifications of an agreement to arbitrate. His "admissions" only emphasize that the central focus of a relationship between a stockbroker and an investor is the wise investment of funds according to the goals of the investor. In Cohen, the Ninth Circuit Court of Appeals considered investors'claims of fraudagainsttheir stockbroker forpersuading them to sign an agreement to arbitrate future disputes with the broker. The investors alleged that the broker had told them theagreement to arbitrate would "not compromise any of [their] rights." -, Cohen 841 F.2d at 286. The Ninth Circuit stated: We know of no caseholding thatparties dealing at arm's lengthhave a duty to explain to each other the terms of a written contract. We decline to impose such an obligation where the languageofthecontract clearlyand explicitly provides for arbitration of disputes arising out of the contractual relationship. Cohen, 841 F.2d at 287. We agree with the Ninth Circuit Court of Appeals. The plaintiffs' case in

### &&,en was strongerthan that of Chor, because Chor has only alleged an omission, rather than a positive misrepresentation. Further,there isno evidence that Piper or its agents concealed information from Chor. Shetestified that shehad ample opportunityto ask questionsof Schultzand thathe responded to all questions she asked. Chor argues that Schultz's role as her investment advisor supports a finding that a fiduciary relationship existed between them and that his breach of his duty as a fiduciary to explain to her the effect of the arbitration clause justifies her claim of constructive fraud. Absent special circumstances, a fiduciary duty is required toprove constructive fraud. Bottrell v. American Bank (1989), 237 Mont. 1, 20-21, 773 P.2d 694, 706. However, "a fiduciary relationship is not automatically established in a stockbroker-client relationship." United Methodist Churchv. D.A. Davidson (1987), 228 Mont. 288, 296,741 P.2d 794,799 (Sheehy,J., dissenting). In the absence of discretionary authority by astockbroker to buy and sell in a customer's account,no fiduciary relationshipiscreated inabroker-customer relationship. Caravan Mobile Home Sales v. Lehman Bros. Kuhn Loeb (9th Cir. 1985), 769 F.2d 561, 567. Chorhasnotalleged thatPiper stockbrokershad discretionary authority over her accounts. She stated that Schultz "acted as if he did," but that shemade it clear tohim thathe did not have the authority to buy and sell stocks in her account without her permission. The District Court's finding that Piper had de facto control over Chor's accounts is therefore clearly erroneous. Chor hasprovided no legal or factual reason for thisCourt to ignore Cohen and the general rule binding a person to the written agreements she enters. We conclude that no duty has been established on the part of Piper to explain to Chor, at the time the first two arbitration agreementswere entered, thatby signing the agreements to arbitrate future disputes, shewaived her right to a jury trial. We therefore hold that the District Court erred in concluding that the arbitration agreements are void based upon actual or constructive fraud. Finally, Chor maintains in her brief to this Court that the language of the arbitration agreements is too narrow to include matters outside the contracts themselves. This claim was not raised in the court below. It thereforewill not be considered. We hold that the arbitration agreements entered between Chor and Piper on June 17, 1988, and on September 30, 1988, are binding 14and enforceable. Reversed and remanded for further proceedings consistent with this Opinion.

We concur:

Justices

### Justice James C. 

### Nelson speciallyconcurs and dissents. 

### Iconcurwith theCourt's discussionandholdingon issues 2., 3. 

### and 4. 

### I respectfully dissent from the Court's discussion and holding on issue 1. on the basis of my dissent in Mueske v. Piper, Jaffray & 

### Hopwood, Cause No. 92-539,decided August 27, 1993. 

### Specifically, in Mueske, we held that a failure to comply with controllinglaw incorporatedinto an arbitrationagreement,suchas
an NASD rule, renders a pre-dispute arbitration clause invalid. However, if the NASD rule is "controlling lawi',as held by the Court here and in Mueske, then all of the NASD rules should control. The NASD rules provide that a violation of Rule 21 can result in sanctions being issued against the violating dealer. There isnoprovision for invalidatingthearbitration agreement in its entirety. If there is some legal basis for the Court to determine that a violation of a choice of law provision' can result in a remedy not provided for by that law, this legal basis should be clearly articulated. If there is no legalbasis for allowing this remedy,

one should not be artificially created. For the foregoing reasons, 

### I respectfully d sent from the Court's decision on Issue 1.

JusticeKarla

### M. Gray concurs if;,j& foregoing special concurrence and dissent. &K 3

1 

### Idonot believe that the referenceby the District

# our&^ or by this Court to the provision at issue asbeing one of nchoice of law*'isaccurate inthe context inwhich that concept isusually understood.Justice Terry N. Trieweiler concurring in part and dissenting in part.I concur with the majority's conclusions under Issues I and 11. I dissent from the majority's conclusions under Issues I11 and IV. However, it isnot necessary to conclude that the arbitration clauses at issue are contracts of adhesion, nor that they were induced by fraud. Neither federal nor state law permits enforcement of anyprovision sobroad asthe arbitration agreements relied on in this case. In fact, I conclude that the arbitration clauses in plaintiffs' contracts with Piper, Jaffray & Hopwood, Inc., are void by reason of the fact that they violate public 

# -_

....., - 2 . -.L.. LL. L policy in the State 

### of i.ioiitaiia. xu exp~a~lt WLIY LII~L ~uii~lusi~ii is necessary, further factual background is helpful. The arbitration clauses relied on by PJH and enforced by the majority's decision were included in two co-owner account agreements signed by plaintiff Marlene Chor. The first agreement

was entered into among PJH, Marlene Chor, and her husband, John Michael Chor, on June 17, 1988. It related only to PJH account number 730-194699-500. Itspurpose was to authorize either of the co-owners of that account to deal with PJH individually and provided that each co-owner would be bound by the actions and decisions of the other with regard to that account.The second co-owner account agreementwas entered into among PJH, Marlene Chor, and her son, John Martin Chor. It related to PJHaccountnumber 730-194696-500. Itspurposewas the sameas the previous co-owner account agreement, but related to a different account owned by different parties. The fact that the two agreements were separate agreements relating to different subject matters and involving different parties 

### is evident from the fact that two separate agreements were required by PJH. Referring to the two co-owner account agreements and the margin agreement in its appellate brief, PJH's attorneyscorrectly pointed out that "[elach agreement isa separate document,executed at a different time. The three agreements created three separate and disiinci accounts with different account numbers. Even rhe parties are different." The cause of action which is the subject of this appeal is based on plaintiffstallegation that John Schultz, while employed by PJH, sold Marlene Chor and her brother, Martin Andre, unregistered Terran Partnership investments in violation of the Montana SecuritiesAct. This transaction was unrelated to any of the three accounts for which Marlene Chor had signed co-owner account agreements or a margin agreement. In fact, it is PJH1s position that it neither underwrote nor marketed the Terran Partnership securities and that Schultzwas unauthorized by PJH to sell them.Thepoint of all thisbackground is that PJH is relying on an arbitration provision in three account agreements to compel arbitration of a dispute arising out of a transaction which is unrelated to any of those accounts, and therefore, unrelated to those specific agreements. According to PJH, because the arbitration provision in its

co-owner account agreements is so broad, once Marlene Chor signed them, shebecame bound to arbitrate every future dispute with PJH, regardless of thebasis for thatdispute. In other words,based on the arbitration agreement in the co-owner account agreements, if

one of PJH's secretaries ran over Marlene Chor while she was a pedestrian crossing a Butte city street with a green light and a dispute arose over liability for that collision,Marlene Chorwould be bound todrbiirdie indidispute and would be denied her right of

access to Montana's courts and her right to a jury trial. To approve enforcement of an arbitration provision so broad, under the circumstances in this case, is unconscionable and shows

a blatant disregard for the importanceof access to our courtsand the jury system. The public policy in Montana is clearly set forth at 

### 5 28-2-708, MCA, where it provides that: Every stipulationor condition in a contractbywhich any party thereto is restricted from enforcing his rights under the contract by the usual proceedings in the ordinary tribunals or which limits the time within which he may thus enforce his rights is void. This section does not affect thevalidity of an agreement enforceable under Title 27, chapter 5.Title 27, chapter 5, isknownasMontana's UniformArbitration Act. Section 27-5-114, MCA, of the Act provides that with some exceptions, an agreement to submit a controversy to arbitration is

a valid and enforceable agreement. However, an important qualification is found in subsection (4)which provides: Notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters on the first page of the contract; and unless such notice isdisplayedthereon,thecontractmay not be subject to arbitration. Neither of the two co-owner account agreements complied with this requirement. However, more importantly, a contract to purchase an interest in the Terran Partnership was a separate agreement for which no notice whatsoever was given that plaintiff would be required to arbitrate disputes arising from that transaction. It is correct that, to the extent Montana's public policy requiring a judicial forum for the resolution of claims is inconsistent with federal policy, Montana's policy is preempted. Sourhlalzd Cop v. Keating (1984), 465 U.S. 1, 104 S. Ct. 852, 79 L. Ed. 2d 1. However, the Federal Arbitration Act is not inconsistent in this respect. Piper, Jaffray & Hopwood concedes that the Federal Act's starting point for determining whether this claim must be arbitrated is found at 9U.S.C. 5 2 (1925). That sectionprovides, in relevant part, as follows:

### A written provision in any

# .. . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arisina out of such contractor transaction, or the refusal toperform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arisina out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. [Emphasisadded]. All that is authorized by 5 2 

### of the Federal Arbitration Act is a contract provision requiring arbitration of disputes which arise from the contractwhich includes the arbitrationprovision. There is nothing in the Federal Arbitration Act which allows a party to a contract to include in that contract the requirement that the other party to the contract submit every future dispute between thepartiestoarbitration regardless of whether the future dispute relates to the contract in question. To include such a sweeping provision in a contract of adhesion, like the one in question, is simply unconscionable. While on the subjects of adhesion andunconscionability, it is important to take a look at this Court's previous analysis of brokerage agreements in the context of the District Court's findings in this case. In Passagev.Prudential-BacheSecurities,

### Inc. (1986)

## , 223 

### Mont. 60, 727 

### P.2d 1298, 

### we cited with approval the following rule fromFinkleand Ross v.A.G. BeckerParibus, Inc. 

### (D.c.N.Y. 1985), 622 

### F. Supp. 1505,

### Contracts of adhesion arise when a standardized form of agreement,usually drafted by the party having superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity tonegotiate its terms. (citationomitted.) Here, the investor is faced with an industry wide practiceofincluding ArbitrationClauses instandardized brokerage contracts. As the investor faces the possibility ofbeing excluded from the securitiesmarket unless he accepts a contract with such an agreement to arbitrate, such clauses come within the adhesion doctrine. Passage, 727 P.2d at 1301. The District Court made the following findings of factwhich satisfy the above legal criteria of an adhesion contract: 19. 

# . . . The co-owner account agreement was drafted by PJH, printed on PJH form, and filled out by Schultz. 

# . .

# . 20. 

### Schultz presented the co-owner account agreement to her representing that it was necessary to sign it in order to open the account. Chor was given no alternative to signing. 21. OsNeilfurther testified that the customerhad no choice in agreeing to arbitration. If a customer refused to so agree, OINeilsaid he would refuse to accept the account. He stated the customer would Isgo down the roadss and do business elsewhere. The above findings are supported by substantial evidence. They clearly satisfythe requirements for an adhesion contract,as set forth above. By finding that this contractwas not a contract of adhesion, the majority simply retried that issue of fact. Establishment of anadhesioncontract is,however, not the end of our inquiry. The rule cited inPussage goes on to provide: However, mere inequality in bargaining power does not render a contract unenforcible [sic], (citation omitted) nor are all standardized contracts unenforcible [sic].

### (citations omitted.) As a consequence of current commercial realities, form forum clauses will control, absent a strong showing it should be set aside. (citationomitted.) For sucha contract or clause tobe void, it must fall within judicially imposed limits of enforcement. Itwill not be enforced against the weaker party when it is: (1) 

### not within the reasonable expectations of said party or (2)within the reasonable expectations of the party, but, when considered in its context, isunduly oppressive, unconscionableor against public policy. Passage, 727 P.2d at 1301-02. While the arbitration agreements in Passage andFinkle 

### were found to be within the investor's expectation and consistent with public policy, the arbitration provisions in this case were neither. In this regard, the District Court made the following findings, which were supported by substantial evidence: 21. Marlene Chor testified that sheunderstood the purpose of this co-owner account agreement 

### (Char's Exhibit No. 4) 

### was to create a joint account.

27. Thedocument, on its face, iscalled a co-owner account agreement. The "imwortant notice: wlease read carefully" notice on the front page deals entirely with the type of account. The identification of the name of the account on the front page was printed by someone else.28. On the third page of the agreement (Chorls Exhibit No. 4), 

### there appears a paragraph entitled "arbitration:" in the following language: [Agreementdeleted]. 29. The insertion of the arbitration provision in the co-owner accountagreement alters the stated purpose of the document from a joint account agreement to one establishinga joint accountandrequiringarbitrationof "all controversieswhich may arise

# . ..

# .:I30. 

### Schultz did not point out or explain what the arbitration clausemeant. There is nothing on the front page of the co-owner account agreement which indicates that the document containsanarbitrationclause. Nor is there anything on the signature page of the document which indicates that the document containsanarbitration clause. 31. 

### Marlene Chor testified that she thought the effect of the arbitration clause was that if there were a dispute that they would first negotiate it. As a lay person,Marlene Chor interpreted the provision asmerely one step in the process prior to court action. She did not understand that itmeant she waswaivingher rightto the courts and a jury trial. 32. 

### Furthermore, the co-owner account agreement does not state anywhere that she waived her right to a jury trial. 33. 

### Holland admitted in testimony that it would take someone with legal training or actual experience with arbitration to discern from the agreement that its effect istowaivedueprocess throughtheMontana court, including the right to a jury trial. Yet, PJH apparently still expected the customer to sign an agreement containing an arbitration clause. 34. 

### Both PJH's branch manager, Tom OfNeil,and Chorvscurrent personal account representative, Mike Holland, testified that they were not attorneys and therefore could not explain how the arbitration clause requiredwaiving the right to a jury trial but that they were aware that through their own experience that is the effect. 35. 

### PJHhas stipulated in the record that Chor had no input in drafting the co-owner account agreements she signed. PJH took advantage of their superiorbargaining position with regard to Chor in that, as the drafter of the document, PJH knew that the effect of the document was to accomplish more than to set up a joint account. Yet, PJH failed to inform Chor of that effect of the documentand now seeksto take advantage to thedetriment of Chor of their superiorbargaining power and knowledge which was not revealed by either their agent or the document itself. Now, PJH wishes to deny Chor the right to seek relief in the Montana courts.

### The District Court clearly found that the result of the arbitration provision, which themajority enforced,was not within the reasonable expectations of Marlene Chor. Those findingswere supported by substantial evidence. Therefore, according to this Court's prior authority,thearbitrationclause is not enforceable. Even if the clause had been found to be within Marlene Chor's reasonable expectations, it would not be enforceable under the authority of 

### Finkle and 

### Passage because it was unconscionable and against public policy for the reasons set forthpreviously. As a result of the majority's decision in this case, an unsophisticated member of the consuming public can sign a form agreementprepared by a large corporation with superiorbargaining power, assuming that it relatestoa limited transaction,and later find that they have lost all future rights of access toMontana's courts in any futuredisputeswith that corporation,no matter how totally unrelated to the subject of the original contract. With courtdocketsbeing as overcrowded as they are, the rush of the federal judiciary and this Court to embrace arbitration is understandable. However, the majority's willingness to, in the process, ignore fundamental constitutionalrightssuch asaccess to our courts and the right to jury trial, is not so understandable. For these reasons 

### Idissent from themajority opinion. I 

### also conclude that the District Court correctly found that Marlene Chor was inducedby constructive fraud to enter into these arbitration agreements,because PJH breached its duty to properlyinform her of the consequences of the agreement. However, because I conclude that the arbitration provisions are unenforceable based

on the above discussion, I feel it is unnecessary to discuss further that part of the majority opinion.

Justice William E. Hunt, Sr., joins in the foregoing concurrence and dissent.October 18,1993 CERTIFICATEOFSERVICE Ihereby certify thatthefollowingorderwassentbyUnited States mail, prepaid, to thefollowing named:

JohnG. CristandJamesL.Jones Dorsey&Whitney P.O. Box7188 Billings,MT 59103 Gregov0.MorganandCharlesF.Proctor Attorneys atLaw P.O. Box 1530 Bozeman,

### MT 59771-1530

EDSMITH CLERKOFTHE SUPREME COIJRT