Opinion ID: 176906
Heading Depth: 2
Heading Rank: 1

Heading: The Hiring of Citigroup and Execution of the Account Agreements

Text: The Board manages a pension trust fund for the benefit of the firefighters and police officers of Delray Beach, Florida. See Fla. Stat. §§ 175.071, 185.06; Delray Beach, Fla., Code of Ordinances ch. 33, § 33.66. As the manager of the fund, the Board hires professional investment managers to select investments for the fund. By law, the Board must retain a professionally qualified independent consultant who shall evaluate the performance of any existing professional money manager and shall make recommendations to the board of trustees regarding the selection of money managers for the next investment term. Fla. Stat. §§ 175.071(6)(a), 185.06(5)(a). In October 1995, the Board hired Citigroup (formerly Salomon Smith Barney) as its pension consultant. The parties signed a pension consultant contract, which required Citigroup to report each quarter about the performance of the professional investment managers who made investments on behalf of the fund. The consulting contract required Citigroup to compute quarterly and annually the performance of the total fund and individual managers on no less than a quarterly basis; attend quarterly meetings; attend special meetings; and provide additional services agreed upon. The parties signed a materially similar contract in December 2000. When that contract expired in 2004, the parties, according to the complaint, continued their relationship without a written contract, orally agreeing to operate on the same terms previously agreed upon. The Board approved the consulting contract after consideration by the full Board. The Board discussed key provisions of the consulting contract, submitted the consulting contract to outside counsel Stephen Cypen for review and approval, and approved the consulting contract by a vote of the majority of the Board. The Board contends that, during negotiations of the consulting contract, the Board expressly refused to agree to arbitrate disputes under the consulting contract, but Citigroup denies that allegation. Even so, the final consulting contract did not contain an arbitration clause. The consulting contract provided, Any changes to this Agreement requested either by the Consultant or the Board may only be effected if mutually agreed upon in writing by duly authorized representatives of the parties hereto. It continued, This Agreement shall not be modified or amended or any rights of a party to it waived except by such a writing. At a meeting in November 2003, the Board decided to hire NWQ Investments as an investment manager. As the minutes from that meeting reflect, the Board agreed that once Cypen has approved the NWQ contract, Chief Adams, Chairman, be given the authority to execute the contract on behalf of the Board/Fund. Cypen approved the NWQ contract and Adams signed an agreement with NWQ. According to Citigroup, the Board needed to open an investment account through which NWQ could invest assets of the fund on behalf of the Board and, although the Board could have opened this account with any institution, the Board chose to open it with Citigroup. On December 19, 2003, Adams executed several documents to open this account. In October 2004, Adams signed several similar documents to open a similar account, also with Citigroup, for another investment manager of the Board. The account agreements contain a broad arbitration clause. Above the signature block, the account agreements state, I acknowledge that I have received the Client Agreement which contains a pre-dispute arbitration clause. The client agreement, in turn, contains a clause that requires arbitration of all claims or controversies, whether such claims or controversies arose prior, on or subsequent to the date hereof, between me and [Citigroup]. The client agreement requires arbitration of disputes concerning or arising from ... the construction, performance or breach of this or any other agreement between us.