Opinion ID: 61592
Heading Depth: 2
Heading Rank: 1

Heading: Making of the Agreement

Text: Because it is well established that “parties cannot be forced to submit to arbitration if they have not agreed to do so,” a district court, rather than a panel of arbitrators, must decide whether a challenged agreement to arbitrate is enforceable 5 On 6 February 2007, Dirk Zeiters et al. filed a case against Magnolia in Leon County, Florida, in connection with the same transactions at issue in Magnolia’s claims against Bear Stearns. Pursuant to that case, Magnolia noticed and took the deposition of Carrie Bell, formerly Vice President for Paragon. Bear Stearns had no notice of this deposition, and therefore, was not present. After taking this deposition, Magnolia filed a motion pursuant to Federal Rule of Civil Procedure 60(b), requesting that the district court’s judgment in favor of Bear Stearns be vacated in light of newly discovered evidence regarding the agreement to arbitrate. Magnolia explained that Bell’s testimony had not been available prior to the district court’s ruling on the motion to compel arbitration because it was only available via subpoena, and discovery in Magnolia’s case against Bear Stearns had been stayed pending the court’s order on the arbitration issue. The district court denied Magnolia’s motion on the ground that “the appeal process is far more appropriate to deal with errors of law or fact beyond mere clerical mistakes.” R2-47 at 2 (internal quotation and citation omitted). Magnolia timely appealed this order as well. Case No. 07-11222-E. Because we reverse and remand based on the court’s underlying order to compel arbitration, we do not reach the issues of the admissibility of this deposition testimony or whether it would satisfy the requirements of Rule 60. 7 against the parties in question. Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 854 (11th Cir. 1992). We have said that a party seeking to avoid arbitration must unequivocally deny that an agreement to arbitrate was reached and must offer some evidence to substantiate the denial. Id. More specifically, we require a party resisting arbitration to “substantiate[] the denial of the contract with enough evidence to make the denial colorable.” Wheat, First Secs., Inc. v. Green, 993 F.2d 814, 819 (11th Cir. 1993) (quotation and citation omitted). Once an agreement to arbitrate is thus put “in issue,” the Federal Arbitration Act (FAA) requires the district court to “proceed summarily to the trial thereof” and if the objecting party has not requested a jury trial, “the court shall hear and determine such issue.” 9 U.S.C. § 4. Observing that a district court’s order to arbitrate a contested agreement without benefit of trial is “in effect a summary disposition of the issue of whether or not there ha[s] been a meeting of the minds on the agreement to arbitrate,” the Third Circuit has applied the summary judgment standard in deciding what is sufficient evidence to require a trial on the issue of whether there was an agreement to arbitrate. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 n.9 (3d Cir. 1980). Adopting that reasoning, we agree that “[o]nly when there is no genuine issue of fact concerning the formation of the agreement should the court 8 decide as a matter of law that the parties did or did not enter into such an agreement.” Id. at 54. Further, as in the case of any other summary judgment, a district court considering the making of an agreement to arbitrate, “should give to the [party denying the agreement] the benefit of all reasonable doubts and inferences that may arise.” Id. Magnolia has met the first requirement for a § 4 trial by unequivocally denying that Reinhard signed the Options Form as an agent of Magnolia. Magnolia also produced the following evidence in connection with its first set of pleadings on the issue: (1) the affidavit of Reinhard in which he swears not to have signed the agreement as an agent of Magnolia and explains that he signed it as a registered representative of Paragon on behalf of the AmSouth investors who owned the account numbered 172-00602-9-6; (2) a fax from Paragon to Bear Stearns requesting the opening of that account by Paragon for the benefit of AmSouth investors, and listing Magnolia as an “interested party (to receive hard confirms and statements),” R1-7-2 at 8; and (3) a further fax from Paragon to Bear Stearns seeking to ensure that “Magnolia Capital” is listed as an “interested party to receive confirms and statements” on several accounts including the account at issue, id. at 9. 9 Although Bear Stearns filed a reply brief, none of the evidence accompanying that brief resolves the genuine issue of material fact raised by Magnolia’s reponse. First, the Paragon account statement bearing Magnolia’s name and address in addition to the name AmSouth, lists a different account number than that appearing on the Options Form. Second, the letter of understanding outlining Reinhard’s relationship with Paragon is not inconsistent with his explanation regarding the capacity in which he signed the Options Form: although it states that he could not sign on behalf of Paragon, it directs that he conduct all securities business as a registered representative of Paragon on behalf of his investment advisee clients. Thus, it is not illogical for him to have signed the form, as requested by Paragon, as a registered representative of theirs, on behalf of the AmSouth investors – his clients.6 Accordingly, we find that Magnolia submitted sufficient evidence to make its denial colorable. 6 Bear Stearns also argues that Reinhard’s signature, even in a representative capacity, binds him to the terms of the agreement. However, under New York law, which governs the agreement, that is only the case when the principal’s name is not disclosed or the other contracting party has no actual knowledge of the identity of the principal. See Orient Mid-East Lines v. Albert E. Bowen, Inc., 458 F.2d 572, 575 (2d Cir. 1972); Nomura Secs. Int’l, Inc. v. ETrade Secs., Inc., 280 F. Supp. 2d 184, 195 (S.D.N.Y. 2003). In this case, the principal’s name is clearly written on the Options Form in the name blank. Further, the Delivery Instructions which accompanied Paragon’s request that Bear Stearns open the account clearly establish that the account was for AmSouth Bank. 10