1

Filed 2/6/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

PHILIP ASHBURN et al.,

Plaintiffs and Appellants,

v.

AIG FINANCIAL ADVISORS, INC. et al.,

Defendants and Respondents.

 A138620

 (Alameda County

 Super. Ct. No. HG09482316)

Plaintiffs and appellants (appellants) are five former employees of Pacific Bell

who took early retirement, with the option to take a pension or a lump sum payment. All 

appellants chose the lump sum, persuaded to do so by respondent Sharon Kearney, with 

whom each appellant had significant interaction, having first learned of her from 

presentations made at the Pacific Bell premises. And all appellants came to be clients of 

Kearney, in connection with which they signed some documents—exactly what

documents and how they came to be signed the subject of vigorous dispute—by which 

Kearney came to manage and invest appellants’ retirement proceeds, in some cases for 

years. Dissatisfied, appellants sued Kearney and AIG Financial Advisors, Inc. (AIGFA), 

the successor to the company where Kearney originally worked. 

AIGFA filed a petition to compel arbitration, supported in part by a declaration of

Kearney. Appellants filed vigorous opposition, which included direct contradiction of 

many of Kearney’s factual representations. Without holding an evidentiary hearing, the 

trial court granted the petition, ordering appellants’ claims to arbitration. That arbitration 

occurred, with the arbitrators ultimately issuing an award rejecting appellants’ claims. 

After judgment was entered on the award, appellants appealed, arguing their claims 

should not have been ordered to arbitration, contending among other things that the trial 
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court erred in not holding an evidentiary hearing. We agree such hearing was required in 

the circumstances here, and we reverse.

BACKGROUND

The Parties and the General Background

Appellants are Philip Ashburn, Adela Pena, Lauro Pena, Wiliam Percy, and Karell 

Wood. All are former employees of Pacific Bell who took early retirement: Wood and 

Percy in 1997, Adela Pena in 1998, and Lauro Pena and Ashburn in 2002. Each 

appellant was given the option of receiving a monthly pension from Pacific Bell or taking 

a lump sum payment. Each appellant ultimately agreed to take the lump sum payment, 

and each appellant ultimately agreed to allow Kearney to manage and invest their 

retirement, in connection with which they signed agreements with SunAmerica 

Securities, Inc. (SAS), Kearney’s then-employer. In sum, all of appellants’ significant 

decisions were made in reliance on representations made by Kearney. The meetings and 

conversations relevant to those representations will be discussed in detail below, as will 

the documents appellants signed.

Kearney was a registered representative of SAS, and remained such until July 

2004. That month she entered into an agreement with Pasquale (Pat) Vitucci to transfer 

to him certain of her accounts, including those of the five appellants. SAS was ultimately 

acquired by AIGFA, and for ease of reference and consistency with the briefing, we will 

refer only to AIGFA.

The investment accounts were opened at various times between 1997 and 2004, 

and appellants invested their retirement payments in them. Appellants allege that 

Kearney invested all of their funds in variable annuities, which they claim were 

unsuitable investments based on their individual circumstances, leading to the legal 

proceedings here.

The Procedural Background

The Complaint

On October 30, 2009, appellants filed a complaint for damages, naming as 

defendants AIGFA (and three predecessor entities connected with it) and Kearney. The 
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complaint alleged nine causes of action, styled as follows: intentional misrepresentation; 

reckless misrepresentation; negligent misrepresentation; fraud—false promise; fraud—

omissions; intentional breach of fiduciary duty; negligent breach of fiduciary duty; 

fraudulent conveyance; and churning. 

The Petition to Compel Arbitration

On December 2, 2009, AIGFA filed a petition to compel arbitration (petition). It 

was accompanied by a memorandum of points and authorities, and five declarations, 

those of Kearney, Marie Meier, Noah Sorkin, Vitucci, and attorney Mark Hancock. 

Kearney was the only declarant who could testify to any firsthand knowledge of the 

involvement with any of the appellants, as only she interacted with them.

Kearney’s declaration (exclusive of exhibits) was four and a half pages, and 

provided in pertinent part as follows:

“I, Sharon Kearney, hereby declare as follows:

“1. Unless otherwise noted, I have personal knowledge of the facts set forth 

herein and, if called as a witness, could competently testify thereto.

“2. In approximately December 1996 I became a registered representative of 

SunAmerica Securities, Inc. (SAS) and I remained such until July of 2004.

“3. In 2004, Pasquale (Pat) Vitucci was also a registered representative of SAS. 

On July 15, 2004, Mr. Vitucci and I entered into an agreement whereby I transferred to 

Mr. Vitucci certain accounts. This included accounts for the following individuals: 

Philip Ashburn, Connie Johnson, Adela Pena (formerly known as Adela Castro), Lauro 

Pena, William Percy and Karrell Wood. Pursuant to the terms of that agreement, I 

transferred to Mr. Vitucci the SunAmerica account files for these individuals.

“4. Plaintiff Philip Ashburn signed an agreement containing an arbitration 

provision on March 12, 2004 in my presence. I also signed that agreement. Attached 

hereto as Exhibit A are true and correct copies of pertinent pages of that agreement which 

Mr. Ashburn and I signed. . . .

“5. Plaintiff Philip Ashburn signed an agreement containing an arbitration 

provision on May 30, 2002 in my presence. I also signed that agreement. Attached 
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hereto as Exhibit B are true and correct copies of pertinent pages of that agreement which 

Mr. Ashburn and I signed.

“6. Plaintiff Adela Pena (formerly Adela Castro) signed an agreement containing 

an arbitration provision on January 17, 1998 in my presence. I also signed that

agreement. . . .

Paragraphs 10 through 18 of Kearney’s declaration went on to testify in similar

fashion concerning appellants Lauro Pena, Percy, and Wood. And her declaration 

attached as Exhibits A through O what she claimed were the agreements signed by the 

appellants.

Kearney’s declaration then continued:

“19. In the agreements plaintiffs’ signed, plaintiffs each acknowledged that the 

agreements included a pre-dispute arbitration clause.

“20. Attached hereto as Exhibit R is a true and correct copy of a complete, blank, 

model SAS ‘New Account Form,’ including the ‘Account Agreement’ which contains 

arbitration language, reflecting the edition date of ‘6/96’ in the lower left hand corner. 

This is the form of agreement which I provided (in its entirety) to, and which was signed 

by, Adela Pena (formerly Adela Castro) on September 18, 1997 (Exhibit C), by Karrell 

Wood on November 3, 1997 (Exhibit N), and by William Percy on September 18, 1997 

(Exhibit L).

“21. Attached hereto as Exhibit S is a true and correct copy of a complete, blank, 

model SAS ‘New Account Form,’ including the ‘Account Agreement’ which contains 

arbitration language, reflecting the edition date of ‘4/97’ in the lower left hand corner. 

This is the form of agreement which I provided (in its entirety) to, and which was signed 

by, Adela Pena on July 22, 1998 (Exhibit D).

“22. Attached hereto as Exhibit T is a true and correct copy of a complete, blank, 

model SAS ‘New Account Form,’ including the ‘Account Agreement’ which contains 

arbitration language, reflecting the edition date of ‘3/98’ in the lower left hand corner. 

This is the form of agreement which I provided (in its entirety) to, and which was signed 

by, Lauro Pena on May 12, 1999 (Exhibit I.)”
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Paragraphs 23 through 25 of Kearney’s declaration went on to refer to later 

editions of “complete, blank, model” account forms or account worksheets, copies of 

which were also attached. 

Paragraph 26 of Kearney’s declaration referred to a “blank, model six-page” 

account worksheet which was the form of agreement that she testified each appellant 

signed on specific dates in March 2004. 

Kearney’s declaration then concluded as follows: 

“27. As part of my practice when working with a client to fill out new account 

forms and account worksheets, such as those signed by plaintiffs in this matter, I would 

typically place the client’s signature page in the file, but I would not necessarily place all 

of the pages with the standard arbitration language in the file. This was because these 

pages were standard forms that could be reproduced by reprinting the applicable version 

of the form. [¶] I declare under the penalty of perjury under the laws of the State of 

California that the foregoing is true and correct.” 

Kearney’s declaration was the sum total of AIGFA’s first hand evidence of what it 

claimed was signed by appellants. Vitucci’s declaration testified only that he acquired 

the accounts from Kearney in 2004, that he had retained the files, and that each appellant

“appears to have signed an agreement containing an arbitration provision” on various 

dates. The three other declarations submitted by AIGFA were those of legal analyst 

Meier, who provided what she claimed were blank forms; Sorkin, who testified about 

AIGFA’s asset transfer agreements with SAS; and Attorney Hancock, who provided 

some National Association of Securities Dealers (NASD) and Financial Industry 

Regulatory Authority (FINRA) forms. 

On December 23, 2009, appellants filed their opposition to the petition. It was a 

25-page memorandum of points and authorities, whose first argument was that “The 

Purported Arbitration Agreements Are Void For Fraud in the Execution.” The eight-page 

argument that followed urged that Kearney was a fiduciary to appellants, an argument 

supported by extensive—and we do mean extensive—testimony from the various 

appellants, all of whom testified in great detail about their dealings with Kearney. 
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Appellants’ second argument in opposition was that “The Arbitration Agreement Did Not 

Become Part of a Contract With [Appellants]. It Was Provided to Them.” This 

argument, too, was supported by extensive evidence.

Appellants’ factual assertions were supported by declarations from each of the 

appellants, declarations which together totaled 21 pages. In them, each appellant testified 

at length to his or her numerous dealings with Kearney, and what it is he or she came to 

sign, and how. The declaration of Lauro Pena is illustrative, where he testified as 

follows:

“1. I am a plaintiff in the above-entitled action.

“2. I am an early retiree from Pacific Bell. I was offered early retirement in 2002. 

I had to decide whether to take the early retirement offer, and whether to take a defined 

benefit pension from Pacific Bell, or a lump sum cash-out, if I chose to retire early.

“3. Long before I decided to take early retirement, I attended at least one seminar 

given by Ms. Kearney, at the premises of Pacific Bell, to seek her financial advice. 

Ms. Kearney told me, at this seminar, that, if I took early retirement, and elected the lump 

sum cash-out, I would receive more money each month for the rest of my life, than what 

the pension would have paid, and that there would be money left over for my family 

when I died. Ms. Kearney told me that, if I took the pension, Pacific Bell would get my 

money when I died, instead of my family.

“4. After listening to what Ms. Kearney had to say at her seminar, and hearing her

financial advice, I went home and thought about what Ms. Kearney had advised. It was 

more than a year after I had attended Ms. Kearney’s seminar, that I received my early 

retirement offer. After I had received my early retirement offer, and before I decided to 

take it, I met with Ms. Kearney at my home. At this meeting, Ms. Kearney repeated what 

she had said at her seminar. Ms. Kearney strongly advised me to take early retirement, 

and to take the lump sum cash-out. Ms. Kearney told me that, if I took early retirement, 

and elected the lump sum cash-out, I would receive more money each month for the rest 

of my life, than what the pension would have paid, and there would be money left over 

for my family when I died. Ms. Kearney told me that, if I took the pension, Pacific Bell 
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would get my money when I died, instead of my family. Ms. Kearney told me that I 

could not go wrong, if I followed her advice. I did not sign any paperwork with 

Ms. Kearney at this meeting.

“5. After thinking some more about what Ms. Kearney had advised at her 

seminar, and at our one on one meeting, I eventually decided to follow Ms. Kearney’s 

advice. About a week or two after my first one on one meeting with Ms. Kearney, Ms. 

Kearney came to my house for a second meeting. At this second meeting, Ms. Kearney 

again advised me that I should take early retirement, elect the lump sum cash-out, and 

invest the cash-out with her. It was only after having heard Ms. Kearney’s advice, for a 

third time, that I decided to take the early retirement offer, elect the lump sum cash-out 

and invest the cash-out with Ms. Kearney.

“6. After Ms. Kearney had convinced me to take early retirement, elect the lump 

sum cash-out, and invest the cash-out with her, Ms. Kearney gave me numerous forms, 

and instructed me to sign them. Ms. Kearney did not explain the forms to me. Ms. 

Kearney did not tell me anything about arbitration. Kearney did not tell me what 

arbitration meant. Kearney did not tell me that, by signing the forms, I was giving up my 

right to a jury trial in the event of a dispute, and agreeing to binding arbitration with no 

right of appeal. Ms. Kearney did not tell me that, not only was I losing my right to a jury 

trial, by signing the forms as instructed, but that I would also be forced to arbitrate in a 

forum where one of the arbitrators is affiliated with the securities industry.

“7. I did not read the forms before signing them, because I trusted Ms. Kearney. 

Ms. Kearney did not give me sufficient time to read the forms. My meeting with Ms.

Kearney was approximately 30-45 minutes. There were too many forms for me to read in 

that time. I relied upon Ms. Kearney’s honesty, and signed the forms where she told me 

to sign.

“8. I understand that Ms. Kearney claims that she gave me a Customer 

Agreement, with language describing arbitration. She did not. I kept all of the 

paperwork Ms. Kearney gave to me. I do not have a Customer Agreement.
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“9. I understand that Ms. Kearney claims that I signed an agreement containing an 

arbitration provision, March 17, 2004, in her presence. That would have been 

impossible. I did not meet with Ms. Kearney in 2004, let alone sign anything in her 

presence.” 

Each of the appellants filed similar declarations testifying to their interactions with 

Kearney, differing from Mr. Pena’s as to dates, numbers of meetings with Kearney, and 

other facts unique to him or her. The essential aspects of each appellant’s testimony—

their reliance on Kearney, and the circumstances of how they came to sign any 

document—were similar to those of Mr. Pena.

Appellants’ opposition also included declarations from their attorneys Jordan 

Stanzler and Melinda Steuer, both of which had exhibits attached, which exhibits totaled 

some 500 pages. Included among those exhibits were numerous brochures, fliers, and 

other marketing materials the attorneys had obtained, most of them in discovery in other 

lawsuits involving Kearney and/or her employers and/or Vitucci. Those materials 

indicated that Kearney was allowed to give presentations and meet with prospective 

clients onsite at the Pacific Bell premises; that Kearney represented she would thoroughly 

explain Pacific Bell’s retirement options, and what they meant to each prospective 

retiree; and that Kearney would help prospective Pacific Bell retirees with important 

questions and issues regarding their retirement. Such materials included a 1997 notice 

from Kearney to a Pacific Bell employee announcing her change of employment to SAS, 

concluding with this representation: “For our upcoming retirees, I will continue to have 

informal seminars and informative one-on-one sessions to thoroughly explain what your 

Pacific Bell offer means to you. I will answer questions like . . . Should I take the offer? 

What can I live on? Will my money run out? What does the interest rate mean to my 

lump sum? What impact will the merger have on me?” Kearney’s slogan was “Making 

Your Retirement Simple,” and other materials represented that Kearney would simplify 

the retirement process, eliminate jargon and discuss options in clearly defined terms, 

anticipate each client’s individual needs, and provide a knowledgeable and experienced 
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team of specialists working directly with Pacific Bell employees. Indeed, these materials 

represented that SAS would even complete all requisite forms. 

Particularly significant here, following the discussion of appellants’ evidence in 

support of their arguments in their memorandum in opposition to the petition, that 

memorandum observed that “Where, as here, there are material factual disputes as to 

issues relevant to the enforceability of the arbitration agreements, the proper procedure is 

to have an evidentiary hearing on the matter.”

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 And appellants’ memorandum concluded 

with this last sentence: “If the court believes there are factual disputes which could 

influence its ruling, plaintiffs respectfully request this honorable court set this matter for 

an evidentiary hearing.” 

On December 30, 2009, AIGFA filed a reply memorandum, along with 14 pages 

of objections to evidence. The objections asserted 23 separate objections, the first 16 to 

attorney Steuer’s declaration, the last seven to a portion of attorney Stanzler’s declaration 

and five exhibits referred to in it. AIGFA’s reply also included a supplemental 

declaration from Kearney, which declaration was all of six paragraphs long, not one word 

of which took issue with any of the facts set forth in any appellant’s declaration.

2

 

1

For support of this proposition appellants cited: Rosenthal v. Great Western Fin. 

Securities Corp. (1996) 14 Cal.4th 394 (Rosenthal); Brown v. Wells Fargo Bank, N.A. 

(2008) 168 Cal.App.4th 938 (Brown); Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 

144 Cal.App.4th 754 (Hotels Nevada).

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The essence of Kearney’s declaration was that she agreed to be bound by any 

arbitration award, the declaration reading in its substantive entirety as follows:

“2. I understand that I have been named as a defendant in the October 30, 2009 

Complaint filed in this action . . . . 

“3. I understand that the other defendants in this action have filed a Petition to

Compel Arbitration (the Petition) based, in part, on a declaration I provided which was 

dated November 24, 2009. . . .

“4. I also understand that the court intends to refer all claims alleged in the 

Complaint, against all defendants, to arbitration before the Financial Industry Regulatory

Authority (FINRA), in accordance with the Arbitration Agreements, if I: (a) make a 

general appearance in this action: and (2) agree to submit to FINRA arbitration the claims 

alleged against me in the Complaint.
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Interestingly, despite that AIGFA provided no evidence contrary to that introduced 

by appellants, AIGFA’s reply memorandum states, however conclusorily, that appellants’ 

“argument that they were never provided with copies of the arbitration provisions is both 

false and irrelevant.” And, the reply went on, “As explained below, Ms. Kearney and 

Mr. Vitucci each provided Plaintiffs with the New Account/Customer Agreements 

containing the arbitration provisions, and their claims to the contrary are not credible and 

are directly impeached by their own written and signed representations.” 

That was the setting against which the petition was to be heard: voluminous and 

specific testimony from appellants as to their interactions with, and reliance upon, 

Kearney, the advice she had given them, the circumstances surrounding all those 

interactions, and how they came to sign whatever it is they signed. And AIGFA’s

assertion that appellants’ position was “false,” their positions “not credible.” 

The petition to compel was scheduled for a continued hearing on January 22, 

2010, having been continued from January 7.3 Prior to that date, the court published a 

tentative ruling granting the petition, which became the order of the court. The order was 

eight paragraphs long and, making absolutely no reference to appellants’ request for a 

hearing, began as follows: “Petitioners have provided prima facie evidence that each 

Plaintiff signed a contract expressly incorporating by reference an arbitration agreement. 

Plaintiffs have failed to provide any facts which, if true, would demonstrate that the 

contract is void due to fraud in the execution because a Defendant breached some 

fiduciary duty to a Plaintiff, under Rosenthal v. Great Western Fin. Securities 

 

“5. Based on, and subject to, my understanding expressed in paragraph 4 of this 

declaration, I agree to make, and hereby do make, a general appearance in this action, in 

order to dispense with the necessity of personal service of the Complaint on me.

“6. Also based on, and subject to, my understanding expressed in paragraph 4 of 

this declaration, I agree to submit to FINRA arbitration the controversy existing between 

plaintiffs and me, as alleged in the Complaint, in accordance with the Arbitration 

Agreements.” 

3

The petition was continued from that day because counsel for appellants advised 

the court that they had been unable to serve Kearney. 
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Corp.[, supra,] 14 Cal.4th 394, Brown v. Wells Fargo Bank, N.A.[, supra,] Cal.App.4th 

938, or Hotels Nevada v. L.A. Pacific Center, Inc. [,supra,] 144 Cal.App.4th 754. 

Plaintiffs have also failed to demonstrate that the parties somehow failed to incorporate 

the arbitration agreement into their contracts.” 

Following six short paragraphs addressing issues not pertinent here, and making 

no ruling on any evidentiary objection, the order concluded as follows: “Based upon the 

foregoing, the Petition is GRANTED and this action is STAYED pending further order of 

the Court. Plaintiffs, Petitioners and (through her consent) Defendant Sharon Kearney 

are ORDERED to submit to arbitration before the Financial Industry Regulatory 

Authority (FINRA). The Court will place the matter on the compliance/dismissal 

calendar on October 21, 2010, for review of the status of the arbitration and will dismiss 

this matter if all proceedings are concluded by then.” 

The Arbitration

An arbitration before a three-member FINRA arbitration panel began on January 

7, 2013 and concluded on January 18. On January 31, the arbitrators issued their award, 

as follows: 

“AWARD

“After considering the pleadings, the testimony and evidence presented at the 

hearing, and the post-hearing submissions, the Panel has decided in full and final 

resolution of the issues submitted for determination as follows:

“1. Claimants’ claims are denied in their entirety.

“2. Any and all relief not specifically addressed herein, including punitive and 

exemplary damages, is denied.” 

The Judgment

On March 14, 2013, the trial court entered judgment confirming the arbitration 

award, from which appellants filed a timely appeal. 
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DISCUSSION

The Appeal Is Properly Before Us

Preliminarily we must address an issue unrelated to the substance of the appeal: 

AIGFA’s motion to dismiss it. In July 2013, AIGFA filed a motion to dismiss the appeal, 

asserting two grounds: (1) appellants appealed from a stipulated judgment, and no 

exception to the rule that stipulated judgments are not appealable is applicable; and 

(2) appellants failed to move to correct or vacate the arbitration award before the trial 

court.

Appellants filed opposition to the motion to dismiss, which included a declaration 

of appellants’ attorney Steuer, who testified in detail as to what occurred in the trial court 

leading to the stipulated judgment, testimony supported in its entirety by accompanying 

exhibits. Ms. Steuer’s testimony was as follows:

In early February 2013, AIGFA’s attorney Hancock advised her that he thought 

each side should file a separate status report for the upcoming case management 

conference. Ms. Steuer did so, and in it she “informed the Court and opposing counsel 

that 1) plaintiffs were reserving the right to appeal the court’s order granting the petition 

to compel arbitration; 2) plaintiffs opposed dismissal of their complaint because that 

could constitute a waiver of their right to appeal; and 3) plaintiffs wished to have 

judgment entered on the award so that their appeal could proceed.” This status report 

was accompanied by Ms. Steuer’s declaration, which among other things expressly 

“requested that the court enter judgment on the arbitration award so that the plaintiffs’ 

appeal may proceed.” 

Ms. Steuer’s declaration to us then testified to what occurred at the status 

conference below, and after it:

“I attended the status conference with the trial court on this matter via court call on 

February 28, 2013. At this status conference, the trial court suggested that the parties 

stipulate to the entry of judgment, because both sides had requested it in their Status 

Conference Statements, and a stipulated judgment would avoid the need for either or both 

of the parties to go through the exercise of filing a petition for an order confirming the 
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arbitration award. I reiterated that plaintiffs intended to appeal from the court’s order 

granting the petition to compel arbitration and were seeking entry of judgment for the 

purpose of obtaining an appealable judgment. I also stated that plaintiffs would be 

willing to stipulate to a judgment in order to allow their appeal to proceed. Mr. Hancock 

responded that he did not believe that the order granting arbitration was reviewable, but 

that he believed his clients would be willing to stipulate to a judgment so long as their 

stipulation was not construed as an agreement that plaintiffs had the right to appeal the 

order granting arbitration. At the conclusion of the conference, it was decided that the 

parties would stipulate to a judgment confirming the award for the sake of judicial 

efficiency, but that if the parties were unable to agree on the wording of a stipulated 

judgment, then [AIGFA] would file a petition to confirm the award.

“On March 11, 2013, Mr. Hancock sent me a proposed stipulation to enter 

judgment and a proposed judgment which stated that the arbitration award shall be 

confirmed and the complaint dismissed with prejudice. At no time did plaintiffs, nor I on 

behalf of plaintiffs, indicate that the plaintiffs had changed their mind about appealing the 

ruling compelling arbitration. On the contrary, I amended the stipulation and proposed 

judgment to add language which stated that judgment shall be entered upon the award. I 

made this proposed amendment because I believed that the entry of judgment was 

necessary in order for the appeal to proceed. I also deleted language in the proposed 

stipulation which called for dismissal of the complaint with prejudice. I deleted that 

language because I believed that a dismissal could have had the effect of barring an 

appeal. On March 12, 2013, Mr. Hancock responded that the changes were acceptable 

and attached the documents for signature. Mr. Hancock also reminded me that, in 

stipulating to the judgment, he was not agreeing that plaintiffs/claimants have the right to 

appeal the order granting the petition to compel arbitration.”

AIGFA filed a reply on its motion to dismiss, which reply did not contain any 

declaration from anyone. In short, the reply did not take issue with any aspect of 

Ms. Steuer’s testimony. 
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Following that reply, we entered an order on August 7, 2013, denying the motion 

without prejudice. We now deny it with prejudice.

As to the first ground, the undisputed factual record leading to the stipulated 

judgment demonstrates that the stipulated judgment was only to allow for an appeal of 

the order granting the petition to compel arbitration. It is equally clear that AIGFA was 

fully aware that appellants intended to appeal that order, and were consenting to the entry 

of judgment for that purpose, which judgment is required in order to obtain review of an 

order compelling arbitration. Finally, and importantly, the stipulated judgment was 

advised and encouraged by the trial court as the most efficient way to obtain the 

judgment that both parties had requested in their status conference statements. The 

appeal is proper, the stipulation for judgment having been merely to facilitate the appeal. 

(Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 399–403; see Martinez v. Robledo (2012) 

210 Cal.App.4th 384, 387, fn. 2; Monticello Ins .Co. v. Essex Ins. Co. (2008) 

162 Cal.App.4th 1376, 1383–1384.)

AIGFA’s second ground for dismissal is that appellants failed to move to correct 

the arbitration award. In claimed support of this argument, AIGFA cites several cases, all 

of which involved appeals in which the appellant was attacking the arbitration award. 

But this is not appellants’ position here, which attacks the order granting the petition to 

compel arbitration. 

An order granting a petition to compel arbitration is not appealable, but is 

reviewable on appeal from a subsequent judgment on the award. (Code Civ. Proc., 

§§ 1294 & 1294.2; Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 

648–649.) That, of course, is what appellants are doing here. And properly—and 

without the need to seek to vacate the award. 

United Firefighters of Los Angeles v. City of Los Angeles (1991) 231 Cal.App.3d 

1576 is illustrative. There, in the course of a lengthy opinion, the Court of Appeal held 

that the failure by the city to timely request vacation of the arbitration award did not 

prohibit it from arguing on appeal that the firefighter lacked standing to lodge a grievance 

subject to arbitration. Put otherwise, the court held that the city was not required to 
15

attempt to vacate the award to argue that arbitration should not have been compelled: 

“We think it clear, however, appellants are not appealing the correctness of the award. 

Rather, they are attacking the authority of the trial court to compel them to submit the 

matter to arbitration. An order to compel arbitration is an interlocutory order which is 

appealable only from the judgment confirming the arbitration award, or in certain 

exceptional situations is reviewable by writ of mandate. [Citations.] As Professor 

Witkin has observed: ‘A party does not waive his right to attack the order by proceeding 

to arbitration; the order is reviewable on appeal from a judgment confirming the award. 

[Citations.]’ [Citation.] [¶] “We also think it important to note that because appellants 

had nothing new to add to their opposition to the arbitration, requiring them to make a 

request to vacate the award would be a needless act and a waste of judicial resources.” 

(Id. at pp. 1581–1582.)

To the same effect is Maaso v. Signer (2012) 203 Cal.App.4th 362, 370–371, 

which ended its discussion on the issue this way: “We agree with Signer that had he 

brought a motion to vacate the second arbitration hearing on the same grounds he had 

asserted two years earlier before the same trial judge, the ruling would undoubtedly have 

been the same and would have been waste of judicial resources.” (Quoting United 

Firefighters of Los Angeles v. City of Los Angeles, supra, 231 Cal.App.3d at p. 1582.)

In sum, the appeal is properly before us, and we thus turn to the merits of that 

appeal, and conclude that merit it has.

The Court Should Have Held An Evidentiary Hearing

Juxtaposing the order of their arguments below, appellants first assert that the 

arbitration agreements were not contained in the forms appellants signed, but in a 

separate document that was not properly incorporated by reference. Elaborating, 

appellants begin this argument as follows: 

“The arbitration agreement at issue are [sic] not contained in the NAFs and/or 

Account Worksheets which appellants signed and/or which respondents claim appellants 

signed. Instead, it is contained in a separate document, entitled ‘Account Agreement’ or 

‘Customer Agreement’. Appellants each attested that the Account/Customer Agreement 
16

with the arbitration agreement was NOT provided to any of the appellants, before, nor at 

the time, they signed the NAFs/Account Worksheets which purported to incorporate the 

separate Account/Customer Agreement. If appellants’ attestations are true, then the 

arbitration agreement could not have become part of any contract with appellants, and 

there is no enforceable agreement to arbitrate.

“The issue of whether the Account/Customer Agreements which contained the 

arbitration agreement were provided or reasonably available to appellants prior to, or at 

the time, they signed the NAFs/Account Worksheets was a material disputed fact. This 

factual dispute could only have been resolved through an evidentiary hearing. The trial 

court denied appellants’ request for an evidentiary hearing. Appellants were never given 

the opportunity to prove that the arbitration agreements were not provided nor reasonably 

available to them, and that there was no valid incorporation.” 

Along the same lines, appellants’ second argument here contends that the 

purported arbitration agreements are unenforceable for fraud in the execution. That 

argument proceeds for over 10 pages, in the course of which appellants rely on their 

testimony about the extent and nature of their interactions with Kearney, testimony, 

appellants assert, that demonstrated a fiduciary relationship. 

As noted, the trial court’s order began as follows: “Petitioners have provided 

prima facie evidence that each Plaintiff signed a contract expressly incorporating by 

reference an arbitration agreement. Plaintiffs have failed to provide any facts which, if 

true, would demonstrate that the contract is void due to fraud in the execution because a 

Defendant breached some fiduciary duty to a Plaintiff, under Rosenthal v. Great Western 

Fin. Securities Corp.[, supra,] 14 Cal.4th 394, Brown v. Wells Fargo Bank, N.A.[, supra,]

168 Cal.App.4th 938, or Hotels Nevada v. L.A. Pacific Center, Inc. [, supra,] 

144 Cal.App.4th 754. Plaintiffs have also failed to demonstrate that the parties somehow 

failed to incorporate the arbitration agreement into their contracts.” 

In light of the record here, we do not understand how the trial court could have 

made such a finding without an evidentiary hearing. 
17

The general background begins with the tenet that the law favors enforcement of 

arbitration agreements. (Armendariz v. Foundation Health Psychcare Services (2000) 

24 Cal.4th 83, 96–97.) The applicable statute mandates that a court shall order arbitration 

“if it determines that an agreement to arbitrate the controversy exists . . . .” (Code Civ. 

Proc., § 1281.2.) “The petitioner bears the burden of proving the existence of a valid 

arbitration agreement by the preponderance of the evidence, and a party opposing the 

petition bears the burden of proving by a preponderance of the evidence any fact 

necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 

951, 972.) In sum, arbitration must be compelled where the petition shows a written 

agreement to arbitrate, a controversy between the parties that is subject to that agreement, 

and the other party’s refusal to arbitrate. (Code Civ. Proc., § 1281.2.) 

And as to how that petition is generally to be determined, Code of Civil Procedure 

section 1290.2 provides that the petition is heard “in a summary way in the manner . . . 

provided by law for the making and hearing of motions.” That “manner” does not entitle 

one to an evidentiary hearing.

Case law, however, has added a caveat, illustrated by the California Supreme 

Court’s discussion in Rosenthal, supra, 14 Cal.4th 394, a case, like here, involving 

investors who sued a securities company. Defendants petitioned to compel arbitration, 

which was denied, and defendants appealed. While the Supreme Court reversed on that 

issue, it did so with the following observations in response to the defendants’ argument 

that the court must hold a “bench trial”: 

“[H]earing and determination ‘in the manner . . . provided by law for the . . . 

hearing of motions’ ([Code of Civ. Proc.,] § 1290.2) would ordinarily mean the facts are 

to be proven by affidavit or declaration and documentary evidence, with oral testimony 

taken only in the court’s discretion. [Citations.] [¶] GWFSC nevertheless maintains that 

when the declarations and documentary evidence present a material factual dispute as to 

the existence or enforceability of the arbitration agreement, ‘the trial court must proceed 

to a summary bench trial’ of the issues. In cases of this sort, GWFSC insists, ‘the failure 

to resolve a material issue of fact by an evidentiary hearing is an abuse of discretion.’ 
18

We decline to embrace the broad rule proposed by GWFSC. There is simply no authority 

for the proposition that a trial court necessarily abuses its discretion, in a motion 

proceeding, by resolving evidentiary conflicts without hearing live testimony. 

Nonetheless, we agree that where—as is common with allegations of fraud such as are 

made here—the enforceability of an arbitration clause may depend upon which of two 

sharply conflicting factual accounts is to be believed, the better course would normally be 

for the trial court to hear oral testimony and allow the parties the opportunity for 

cross-examination. As the trial court here remarked, ‘it’s pretty difficult to weigh 

credibility without seeing the witnesses.’ ” (Id., at pp. 413-414.)

Elaborating on Rosenthal, Toal v. Tardif (2009) 178 Cal.App.4th 1208, 

1219-1220, explained it this way: “Thus, our Supreme Court has clearly stated that a 

court, before granting a petition to compel arbitration, must determine the factual issue of 

‘the existence or validity of the arbitration agreement.’ (Rosenthal, supra, 14 Cal.4th at 

pp. 402, 413.) In this way, a court’s role, though limited, is critical. ‘There is indeed a 

strong policy in favor of enforcing agreements to arbitrate, but there is no policy 

compelling persons to accept arbitration of controversies which they have not agreed to 

arbitrate and which no statute has made arbitrable.’ (Freeman v. State Farm Mut. Auto. 

Ins. Co. (1975) 14 Cal.3d 473, 481.)” The court went on to remand the matter for such 

factual determination even after the arbitration had been held. (Toal v. Tardif, supra,

178 Cal.App.4th at p. 1224.) 

Here, as indicated above, there is no indication in the record that the trial court

exercised any discretion. Such failure to exercise discretion is “itself an abuse of 

discretion.” (Marriage of Gray (2007) 155 Cal.App.4th 504, 515.) As we put it in 

Fletcher v. Superior Court (2002) 100 Cal.App.4th 386, 392, “ ‘Failure to exercise a 

discretion conferred and compelled by law constitutes a denial of a fair hearing and a 

deprivation of fundamental procedural rights, and thus requires reversal.’ ” 

But even if the record could be read to show that the trial court exercised its 

discretion, we would hold that discretion was abused, in light of the significant factual 

issues presented here.
19

Hotels Nevada, supra, 144 Cal.App.4th 754 is persuasive. The dispute there was 

between a buyer and seller in a real estate transaction. The buyer filed a petition to 

compel arbitration; the seller opposed it, contending that its allegations of fraud in the 

execution rendered the agreement void. The trial court denied the petition, stating that if 

the facts were as alleged, there would have been no contract. (Id. at pp. 760–761.) 

The Court of Appeal reversed, beginning its opinion with reference to Rosenthal, 

with the observation that “[t]he role of the trial court is to sit as a trier of fact, weighing 

any affidavits, declarations, and other documentary evidence, together with oral 

testimony received at the court’s discretion, to reach a determination on the issue of 

arbitrability. [Citation.] Thus, the trial court was required to hold an evidentiary hearing 

before, not after, ruling on appellant’s motion to compel arbitration.” (Hotels Nevada, 

supra, 144 Cal.App.4th at p. 758.) The court then went on to distinguish between fraud 

in the inducement and fraud in the execution—the fraud appellants assert here—and how 

fraud in the execution would preclude a contract, and therefore arbitration. The court 

then remanded, directing the trial court “to conduct an evidentiary hearing.” (Id. at 

pp. 763-764, 766.) 

Likewise making the point is Bouton v. USAA Casualty Ins. Co. (2008) 

167 Cal.App.4th 412, 428, where, following quotation from Rosenthal, the Court of 

Appeal concluded as follows: “Applying that same rationale to this case, it likely will be 

the better course for the trial court on remand to hear oral testimony of witnesses in the 

event the affidavits, declarations, and other documentary evidence submitted by the 

parties are sharply conflicting on the question whether Bouton is an insured under the 

Policy.” The leading practical treatise sums it up this way: “[5.133.2] Affidavits vs. 

oral testimony: Detailed factual affidavits or declarations are usually required. Oral 

testimony is discretionary with the court. But where the facts are in dispute or credibility 

issues are involved (which is usually the case when fraud is claimed), ‘the better course’ 

is for the trial court to hear oral testimony and allow the parties the opportunity for crossexamination. [Citations.]” (Knight et al., Cal. Practice Guide: Alternative Dispute 

Resolution (The Rutter Group 2014) ¶ 5.133.2, p. 5-117.) 
20

Those cases and commentary, and the policy reflected in them, demonstrate that 

the trial court had to hold an evidentiary hearing here, as there was significant dispute 

about what appellants signed, how they came to sign it, and what they signed said—not 

to mention extensive evidence of the significant relationship Kearney had with each 

appellant before they signed anything.

By way of introduction to the issue, the parties do not even agree as to what the 

pertinent documents are even called. Thus, for example, responding to appellants’ 

descriptions of various documents in the opening brief—descriptions, as best we can tell, 

that are based on the on the label of the documents themselves—AIGFA’s brief says that 

“Appellant’s references to the account agreements is confusing. Appellants refer to the 

New Account Form and Customer Account Form as the ‘NAF’ and refer to the Account 

Worksheet as the “Account Worksheet.” In addition, Appellants refer to the page 

containing the arbitration provision as the ‘Account Agreement,’ and Appellants further 

assert that the ‘NAF,’ the ‘Account Worksheet’ and the ‘Account Agreement’ are all 

separate documents. What Appellants call the New Account Form, Customer 

Agreement, NAF, and Account Worksheet are different versions of account agreements, 

which all contained identical arbitration provisions.” 

AIGFA’s position is that the page(s) signed by each of the appellants states that 

there is a predispute arbitration provision located in a separate document. Specifically, 

AIGFA’s position is that “on page 3 of the account agreement all appellants signed, the 

following language appears immediately above their signatures: [¶] In consideration of 

your opening and/or carrying one or more accounts on my behalf, I hereby acknowledge 

that I have received, read, understand and agree to the terms set forth in the Customer 

Agreement of this application and the Disclosure of Credit Terms on Transactions. 

[¶] The Customer Agreement contains a pre-dispute Arbitration Provision. This 

Provision is contained in this agreement and appears in bold print. I hereby acknowledge 

by my signature below, receipt of a copy of this agreement.”

And AIGFA’s brief goes on, quoting from what Kearney describes as the 

“Agreement” “containing an arbitration provision,” to assert that four appellants, Percy, 
21

Wood, and both Penas, “signed an account agreement which states in pertinent part: I/we 

acknowledge that this agreement includes a pre-dispute arbitration clause located on the 

back of this form [Section 10(B)]. I/we acknowledge receiving a copy of this new 

account form and I/we have had the opportunity to read it and I/we understand it. 

Furthermore, I/we have read all information on this New Account Form. I have reviewed 

the terms and conditions of this agreement including all information contained on the 

reverse side hereof.” Thus, even under AIGFA’s version of facts, the actual arbitration 

provision, and the supposed disclosures about what arbitration means, were not on the 

signature page, nor on any of the pages which preceded it. Instead, the arbitration 

provision, and the description of what arbitration means, were on a separate, 

self-contained, preprinted document. 

But AIGFA’s version of facts was hotly disputed. While, as noted, each appellant 

did sign a new account form that refers to an arbitration provision, each appellant 

testified that Kearney never provided the “Account Agreement/Customer Agreement”—

the document that contained the arbitration provision and described what arbitration 

means. 

To illustrate, we again refer to Mr. Pena, who testified in point blank terms as 

follows:

“8. I understand that Ms. Kearney claims that she gave me a Customer 

Agreement, with language describing arbitration. She did not. I kept all of the 

paperwork Ms. Kearney gave to me. I do not have a Customer Agreement.

“9. I understand that Ms. Kearney claims that I signed an agreement containing an 

arbitration provision, March 17, 2004, in her presence. That would have been 

impossible. I did not meet with Ms. Kearney in 2004, let alone sign anything in her 

presence.”

Like Mr. Pena, all other appellants testified they did not receive the account 

agreement when they signed the new account forms. 

And while AIGFA asserts that the arbitration agreement is part of the same, single, 

multi-page document which the appellants signed, the fact is the customer agreement and 
22

the account agreement are separately titled, and completely self-contained, documents. 

In sum, appellants’ position is that they could not have knowingly agreed to the terms of 

the arbitration agreement at the time they signed the signature page(s), because they did 

not have any way of knowing what those terms were—and the separate account

agreement was not part of any contract with them.

4

 

There certainly was abundant evidence that there was no enforceable agreement to 

arbitrate. Likewise abundant evidence that could support a fiduciary duty.

We begin with the exposition in Brown, supra, 168 Cal.App.4th 938, 959–960: 

“ ‘Fiduciary’ and ‘confidential’ relationships are relationships existing between parties to 

a transaction wherein one party is duty bound to act with the utmost good faith for the 

benefit of the other. Such a relationship ordinarily arises when one party reposes a 

confidence in the integrity of the other, and the other voluntarily accepts that confidence.

[Citation.] ‘ “[B]efore a person can be charged with a fiduciary obligation, he must 

either knowingly undertake to act on behalf and for the benefit of another, or must enter 

into a relationship which imposes that undertaking as a matter of law.” ’ [Citation.] A 

stockbroker is a fiduciary, as well. (Duffy v. Cavalier [(1989)] 215 Cal.App.3d [1517,]

1531.) ‘ “The essence of a fiduciary or confidential relationship is that the parties do not 

deal on equal terms, because the person in whom trust and confidence is reposed and who 

accepts that trust and confidence is in a superior position to exert unique influence over 

the dependent party.” ’ [Citation.]”

The Court of Appeal then went on, rejecting Wells Fargo’s reliance on “authority 

providing that a stockbroker’s fiduciary relationship does not arise until after the 

brokerage agreement has been signed, and therefore does not require additional 

disclosures at the time of the execution of the agreement.” This, the court said, 

 

4 Despite the foregoing facts, AIGFA contends that the recital on the signature 

pages conclusively proves that appellants received a customer/account agreement from 

Kearney, and that the court should simply ignore all evidence to the contrary. Such 

argument has been unequivocally rejected, as, for example, in Bruni v. Didion (2008) 

160 Cal.App.4th 1272, 1291, which observed that binding appellants by such a recital 

would be “impermissible bootstrapping.” 
23

“overlooks the unique factual circumstances of this case.” (Brown, supra, 

168 Cal.App.4th at p. 961.) 

Similarly here. Appellants presented evidence that Kearney held herself out as an

expert in helping Pacific Bell retirees, marketing herself as a knowledgeable resource for 

prospective retirees who faced significant life decisions. Kearney provided specific 

advice to each of the appellants regarding these decisions, including whether to take a 

pension or a lump sum on early retirement, advising lump sum, with the further advice 

that appellants could safely withdraw more from the lump sum than what their pensions 

would have provided. Kearney influenced each of the appellants to retain her (and her 

company) to handle their retirements and their retirement investments. And all this 

before appellants signed one piece of paper. Put otherwise, appellants trusted and relied 

upon Kearney’s advice, and signed whatever they signed only after Kearney had 

convinced them to trust her. 

Such circumstances support the conclusion that Kearney was a fiduciary even 

before any account papers were signed, as it did the circumstances in Brown, which

rejected the argument that a securities broker becomes a fiduciary only after a new 

account agreement has been executed. (Brown, supra, 168 Cal.App.4th at pp. 960-961.) 

There, as here, the broker had formed a relationship of trust and reliance with the 

plaintiffs, and offered the plaintiffs financial and investment advice before the plaintiffs 

signed any documents, further explaining that the broker had knowingly induced the 

plaintiffs to rely upon him to handle their financial affairs, thus creating a fiduciary 

relationship, even before the signing of the new account agreements. (Id. at 

pp. 960-961.) Appellants’ relationship with Kearney was similar.

AIGFA dismisses appellants’ relationship with Kearney as “typical” of a 

“prospective” broker-client relationship, describing its version of Kearney’s interactions 

with appellants, however myopically, this way: “But the ‘relationship’ between Kearney 

and Appellants that preceded the signing of the account agreements was minimal. Wood 

alleged that she and Kearney had ‘many’ phone conversations over a year (but there is no 

evidence as to what exactly ‘many’ means) [citation]. A. Pena attended ‘several’ 
24

seminars Kearney gave at Pacific Bell’s offices [citation]. L. Pena attended ‘at least one’ 

of Kearney’s seminars then more than a year later had two meetings with Kearney in a 

one to two week period, one of which lasted only 30–45 minutes [citation]. Ashburn and 

Percy had only one meeting with Kearney before signing the account agreements. 

[Citations]. [¶] Based on these facts, Respondents and Appellants’ pre-agreement 

relationship was merely that which is typical of a prospective broker-customer 

relationship.” 

We read the record differently. Regardless, AIGFA cites no case remotely similar 

factually to the setting here, no case showing that it is “typical” for a broker to give such 

extensive, personalized, financial advice about retirement planning and investments over 

an extended period of time to individuals who have not yet opened accounts with the 

broker.

As to the ramifications of a fiduciary relationship here, Brown is again apt: “This 

issue usually arises when the plaintiff failed to read the terms of the contract, relying 

instead on the defendant’s representation as to the effect of the contract. Generally, it is 

not reasonable to fail to read a contract; this is true even if the plaintiff relied on the 

defendant’s assertion that it was not necessary to read the contract. (Rosenthal, supra,

14 Cal.4th at pp. 423–424.) Reasonable diligence requires a party to read a contract 

before signing it. (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1674.) 

This presumes, however, that the parties were dealing at arm’s length. When the parties 

are in a fiduciary relationship, the same degree of diligence is not required of the 

nonfiduciary party. (Stafford v. Shultz (1954) 42 Cal.2d 767, 777.) If the defendant is in 

a fiduciary relationship with the plaintiff which requires the defendant to explain the 

terms of a contract between them, the plaintiff’s failure to read the contract would be 

reasonable. (Lynch v. Cruttenden & Co. (1993) 18 Cal.App.4th 802, 808–809; see also 

Bruni v. Didion[, supra,] 160 Cal.App.4th [at p.] 1291; [citation].) In such a situation, 

the defendant fiduciary’s failure to perform its duty would constitute constructive fraud 

(Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 854), the plaintiff’s 

failure to read the contract would be justifiable (Twomey v. Mitchum, Jones & Templeton, 
25

Inc. (1968) 262 Cal.App.2d 690, 715), and constructive fraud in the execution would be 

established.” (Brown, supra, 168 Cal.App.4th at p. 959, fn. omitted.)

DISPOSITION

The judgment is reversed, and the matter is remanded for further proceedings 

consistent with this opinion. Appellants are awarded their costs on appeal. 
26

_________________________

Richman, J.

We concur:

_________________________

Kline, P.J.

_________________________

Stewart, J.
27

A138620, Ashburn v. AIG Financial Advisors, Inc.

Trial Court: Alameda Superior Court

Trial Judge: Honorable Frank Roesch

Attorney for Plaintiffs and Appellants: Law Offices of Melinda Jane Steuer, 

Melinda Jane Steuer

Attorneys for Defendants and Respondents: White & Woods, Benjamin W. White, 

Kevin J. Woods