Court Opinion

ID: 1024541
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:35:14.603021+00
Date Added: 2024-06-11T10:48:13.875479
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 07-1582

HERBERT KIRSH; KEVIN KIRSH; PHILLIP D. GRANT;
MICHAEL E. PARRISH; BILLY E. HENSLEY; SUE R.
ROGERS; CHARLES H. BURRIS; WILLIAM C. MOORE;
BETTY RUSSELL; WANDA LANEY; JOANNE M. JORDAN;
DEAN E. CURTIS; EVERETT E. DEMBY; NORMAN
MONSKA; DAVID D. PRUITT, d/b/a Grits N
Groceries, and others similarly situated,

                                          Plaintiffs - Appellants,

          versus

FINOVA GROUP, INCORPORATED; FINOVA CAPITAL
CORPORATION; LEUCADIA NATIONAL CORPORATION;
BERKADIA, LLC; BERKADIA MANAGEMENT; BERKADIA
EQUITY HOLDINGS; BERKADIA II,

                                           Defendants - Appellees.

Appeal from the United States District Court for the District of
South Carolina, at Rock Hill.   G. Ross Anderson, Jr., District
Judge. (0:07-cv-00371-GRA)

Submitted:   December 3, 2007          Decided:     December 20, 2007

Before KING, SHEDD, and DUNCAN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Richard R. Gleissner, FINKEL, ALTMAN & BAILEY, LLC, Columbia, South
Carolina, for Appellants. Daniel P. Shapiro, Andrew R. Cardonick,
Steven A. Levy, GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD.,
Chicago, Illinois; Wallace K. Lightsey, Matthew T. Richardson,
WYCHE BURGESS FREEMAN & PARHAM, P.A., Greenville, South Carolina;
Terry E. Richardson, Jr., James L. Ward, Jr., RICHARDSON, PATRICK,
WESTBROOK & BRICKMAN, LLC, Mount Pleasant, South Carolina, for
Appellees.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

           Herbert Kirsh and co-appellants (collectively “Kirsh”)

appeal the district court’s order granting The Finova Group, Inc.,

and co-appellees’ (collectively “Finova Group”) motion to compel

arbitration and dismissing the complaint.*

           Kirsh’s complaint alleged numerous claims arising from

the allegedly fraudulent sale of Senior Subordinated Term Notes

(“the Notes”) from Thaxton Life Partners, Inc., (“TLP”) to Kirsh.

Although Finova Group was not a party to the sale, Kirsh alleged

Finova Group was “unjustly enriched by manipulating [TLP] and

related   companies   to   sell   subordinated   notes   to   unsuspecting

individuals who were then swindled out of their investments.”         The

subscription agreement governing the Notes contained the following

arbitration provision:

     Arbitration. Subscriber hereby agrees that any dispute,
     controversy or claim arising out of or in connection
     with, or relating to, any subscription of the Note, or
     any   breach  or   alleged  breach   hereof,   including
     allegations of violations of federal or state securities
     law, shall upon the request of any party involved, be
     submitted to, and settled by, arbitration . . . .

           The district court relied on our decision in American

Bankers Insurance Group, Inc. v. Long, 453 F.3d 623 (4th Cir.

2006), to hold Kirsh was equitably estopped from contending the

arbitration provision did not apply to the complaint against Finova

     *
      We have jurisdiction over this final order pursuant to 28
U.S.C. § 1291 (2000).

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Group.     In Long, the court examined the identical arbitration

provision and determined it required those plaintiffs to arbitrate

their similar claims against another third party who was allegedly

complicit to TLP’s sale of securities.              Therefore, for the same

reasons explained in Long, the district court granted Finova

Group’s motion to compel arbitration and dismissed the complaint.

            The Federal Arbitration Act, set forth in 9 U.S.C. §§ 2

et seq. (2000), requires courts to compel arbitration when there is

a dispute between the parties and a written agreement that provides

for arbitration to resolve that dispute.              Adkins v. Labor Ready,

Inc., 303 F.3d 496, 500-01 (4th Cir. 2002).               A third party can

invoke the principle of equitable estoppel to compel a signatory to

an arbitration clause to arbitrate claims against the third party

when “each of [the] signatory’s claims against [the] nonsignatory

makes    reference   to    or   presumes   the    existence   of   the   written

agreement, [such that] the signatory’s claims arise out of and

relate    directly    to    the    written       agreement”   containing    the

arbitration provision. Brantley v. Republic Mortgage Ins. Co., 424
F.3d 392, 395-96 (4th Cir. 2005).

            Although the court generally reviews a district court’s

decision regarding whether to compel arbitration de novo, when the

“district court’s decision is based on principles of equitable

estoppel, [the court] review[s] the district court’s decision for

abuse of discretion. The district court abuses its discretion when

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it commits an error of law or clearly errs in making a finding of

fact.”    Long, 453 F.3d at 629.

            In Long, the court reviewed the identical arbitration

provision in another of TLP’s security sales.           The plaintiffs sued

a third party to the sale for numerous claims related to the

allegedly       fraudulent   sale,    including   securities    fraud,    civil

conspiracy, unfair trade practices, and unjust enrichment.               Id. at

625.     The court held principles of equitable estoppel required

arbitration of the claims.           In so holding, we noted that “if TLP

had never issued the [securities contract, the plaintiffs] would

have no basis for recovery against [the third party].              Each of the

[plaintiffs’] individual claims . . . are dependent upon their

allegation that [the third party] breached a duty created “solely

by [the securities contract], for without the alleged breach,

[they] would have no cause to complain.”          Id. at 630.   Accordingly,

the court held “it would be inequitable to allow the [plaintiffs]

to seek recovery on their individual claims and at the same time

deny that [the third party] was a party to the Subscription

Agreement’s arbitration clause.”          Id. at 630.

            We find the district court did not abuse its discretion

in determining Kirsh’s claims, like the claims raised in Long, were

based on a breach of a duty created solely by the terms of the

Notes,    and    that,   consequently,    Kirsh   was   required    to   pursue

arbitration.      Kirsh’s arguments attempting to distinguish Long and

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asserting    changed    circumstances    since   that   decision   are

unpersuasive.

            Accordingly, we affirm the order of the district court

granting Finova Group’s motion to compel arbitration and dismissing

Kirsh’s complaint.     Furthermore, we deny Finova Group’s motion to

dismiss the appeal or to stay proceedings pending arbitration.      We

dispense with oral argument because the facts and legal contentions

are adequately presented in the materials before the court and

argument would not aid the decisional process.

                                                             AFFIRMED

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