Opinion ID: 4563969
Heading Depth: 3
Heading Rank: 1

Heading: The Breach of Fiduciary Duty Challenge

Text: Plaintiffs aver that Artex and Tribeca had a fiduciary duty to point out and explain the Arbitration Clause, which they failed to do. Thus, Plaintiffs claim, Artex and Tribeca effectively suppressed its existence in the less than ten-page Agreements that Plaintiffs received and signed, and thereby committed the legal equivalent of fraud. 5 Fraud is a basis to revoke a contract under Arizona law. U.S. Insulation, Inc. v. 5 Plaintiffs made a similar argument in challenging the Clause as procedurally unconscionable. The district court rejected that argument, finding that that the record demonstrates that “Plaintiffs are sophisticated people and businesses capable of negotiating this type of commercial relationship.” The court further explained that although Plaintiffs argued that Artex and Tribeca rushed them into signing the Agreements, only one Plaintiff identified a time frame for signing an Agreement, which spanned “a few weeks.” Plaintiffs do not challenge in this appeal the court’s determination that the Clause is not unconscionable. SHIVKOV V. ARTEX RISK SOLUTIONS 13 Hilro Constr. Co., Inc., 705 P.2d 490, 493–94 (Ariz. Ct. App. 1985). However, to show fraud on the ground raised here, Plaintiffs must show that Artex and Tribeca owed the fiduciary duty that Plaintiffs claim exists under Arizona law. We will assume arguendo that a fiduciary relationship arose between Plaintiffs and Artex at some point in Defendants’ provision of captive insurance services. 6 Even assuming so, Plaintiffs have not shown that, under Arizona law, it would encompass a duty to point out and fully explain an arbitration clause. Plaintiffs direct us to a federal district court decision interpreting Arizona law. See Katt v. Riepe, No. CV-1408042-PCT-DGC, 2014 WL 3720515 (D. Ariz. July 25, 2014). However, “we must adhere to state court decisions— not federal court decisions—as the authoritative interpretation of state law.” Daniel v. Ford Motor Co., 806 F.3d 1217, 1223 (9th Cir. 2015). Neither did the underlying Arizona state court decision on which Katt relied hint at the existence of a duty that would require a contracting party to point out and fully explain an arbitration clause. See Leigh v. Loyd, 244 P.2d 356 (Ariz. 1952); Lerner v. DMB Realty, LLC, 322 P.3d 909 (Ariz. Ct. App. 2014). Although these decisions articulated a fiduciary duty to disclose all material facts, that duty arose in the context of the fiduciary relationship between a real estate broker and the broker’s principal. See Leigh, 244 P.2d at 358 (“It is well settled that a confidential relation exists between a real estate agent and his principal,” which “impose[s] a duty on [the agent] to disclose the true facts.”); Lerner, 322 P.3d at 919 (“A [real estate] broker owes a fiduciary duty to disclose 6 Because we assume this relationship, it is unnecessary to address Plaintiffs’ request for additional discovery about whether a fiduciary relationship existed. 14 SHIVKOV V. ARTEX RISK SOLUTIONS material facts to its client.”). No such relationship existed here. The case before us is like one that the Arizona Court of Appeals has already considered. In Dueñas v. Life Care Centers of America, Inc., 336 P.3d 763 (Ariz. Ct. App. 2014), the plaintiff challenged the enforceability of an arbitration agreement by arguing that an asserted fiduciary’s failure to obtain the plaintiff’s signature for the agreement rendered the agreement unenforceable. Id. at 771. The court rejected that argument because the plaintiff had identified no authority establishing that the duties involved in a fiduciary relationship extend to “the purely commercial aspects of their relationship.” Id. Like the plaintiff there, Plaintiffs fail to identify any Arizona authority that would subject Artex and Tribeca to a fiduciary duty in connection with an arbitration clause. Thus, Plaintiffs have failed to show that the Clause is unenforceable on this ground.