Court Opinion

ID: 2765251
Source: CourtListenerOpinion
Date Created: 2014-12-30 16:00:51.491179+00
Date Added: 2024-06-11T10:45:16.791432
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 14a0947n.06

                                        Case No. 14-3466

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                                                                      FILED
                                                                                Dec 30, 2014
CHARLES ANDREWS, SR.,                               )                       DEBORAH S. HUNT, Clerk
                                                    )
       Plaintiff-Appellant,                         )
                                                    )       ON APPEAL FROM THE UNITED
v.                                                  )       STATES DISTRICT COURT FOR
                                                    )       THE NORTHERN DISTRICT OF
TD AMERITRADE, INC.,                                )       OHIO
                                                    )
       Defendant-Appellee.                          )
                                                    )
____________________________________/               )

Before: MERRITT, GIBBONS, and DONALD, Circuit Judges.

       MERRITT, Circuit Judge. This appeal arises from a dispute between the plaintiff,

Charles Andrews, Sr., a lawyer, and defendant, TD Ameritrade, Inc., over control of funds held

in a 401(k) trust account opened by plaintiff’s adult son, Charles Jr., in 2010. Plaintiff claims

that a power of attorney granted to him by his son gives plaintiff complete control over his son’s

financial affairs, including the Ameritrade account. Ameritrade claims that the account holder,

plaintiff’s son, revoked the power of attorney given to his father and that the necessary forms to

transfer control over the account were never received by Ameritrade.

       The primary question before us is whether the dispute regarding plaintiff’s control over

the account is within the scope of arbitration provisions included in Ameritrade’s agreements

with its clients, as the district court held. Plaintiff also appeals from two other orders issued by
Case No. 14-3466
Andrews v. TD Ameritrade, Inc.

the district court regarding the proceedings below. For the reasons that follow, we affirm the

judgment of the district court.

                                  I.     Facts and Procedural History

       Charles Andrews, Jr., the son of plaintiff Charles Andrews, Sr., opened a 401(k) trust

account with defendant TD Ameritrade in August 2010. The brokerage account is governed by a

Client Agreement. The Client Agreement requires “any controversy” arising out of and relating

to the account to be submitted to arbitration:

       I agree that any controversy between you . . . and me (including any of my
       officers, directors, employees or agents) arising out of or relating to this
       Agreement, our relationship, any services provided by you, or the use of the
       Services, . . . shall be arbitrated and conducted under the provisions of the Code
       of Arbitration . . . .

Client Agreement at ¶ 12 (attached as Ex. A to Defendant’s Brief in Opposition to Plaintiff’s

Request for a Preliminary Injunction). On October 15, 2012, Charles Jr. executed a power of

attorney giving broad powers over his financial affairs to plaintiff, including the right to

withdraw money from the Ameritrade trust account. Specifically, the power of attorney states

that Charles Jr. agrees to “relinquish all my authority to access my Team American 410k account

or to change it or to make any withdrawal or other direction to Td [sic] Ameritrade with respect

to same.” General Power of Attorney at 3 (attached as Exhibit A to Complaint). Soon thereafter,

on January 3, 2013, plaintiff faxed a Trading Authorization Agreement and a copy of the power

of attorney executed by his son to Ameritrade.         The Trading Authorization Agreement

“authorizes and appoints the Authorized Agent(s) below as the Account Owner’s agents . . . .”

and allows the agent to make purchases and withdraw funds from the account without notice to

the account owner. Trading Authorization Agreement at 1 (attached as Ex. C to Defendant’s

Brief in Opposition to Plaintiff’s Request for a Preliminary Injunction). It also states that the

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Client Agreement “shall apply equally to the Authorized Agent(s).”             Id.   The Trading

Authorization Agreement was signed by plaintiff and included the handwritten notation “by

authority of power of attorney attached.” Id. at 2.

       On January 14, 2013, shortly after receiving the power of attorney and the Trading

Authorization Agreement from plaintiff, Ameritrade contacted plaintiff’s son, the account

holder, Charles Jr., via a secure email account and acknowledged receipt of “your Power of

Attorney (POA) document,” but advising Charles Jr. that the request could not be processed

because

       [y]our state’s [Ohio] statute prohibits the trustee of a trust from delegating their
       powers as trustee to an agent such as a Power of Attorney.

       Please consult your trust document to determine the provisions for removing or
       replacing a trustee. Please address any questions to your legal counsel. Please
       submit the attached Account Registration Conversion form along with a copy of
       your trust documents so we can make the necessary changes.

Email sent to Charles Andrews from TD Ameritrade, Jan. 14, 2013 (attached as Ex. D to

Defendant’s Brief in Opposition to Plaintiff’s Request for a Preliminary Injunction). The record

does not reflect whether plaintiff knew about this email. Ameritrade represented that it never

received any of the documentation requested in the email. Aff. of Jeff Plummer in Support of

Defendant’s Brief in Opposition to Plaintiff’s Request for Preliminary Injunction at 2, ¶ 6. The

record does not reflect, nor does either party claim, that there was any further contact between

plaintiff and Ameritrade for over 10 months.

       On November 26, 2013, plaintiff sent a letter to Ameritrade and requested that the

account be liquidated and all proceeds sent to him. Charles Jr. notified Ameritrade by phone that

day that he did not authorize his father to liquidate the account. Ameritrade responded to

plaintiff that its regulatory department would review the matter and get back to him. On

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Andrews v. TD Ameritrade, Inc.

December 12, 2013, Ameritrade informed plaintiff that it could not comply with his request

because the power of attorney had been revoked.

       On December 16, 2013, plaintiff filed a complaint against Ameritrade in Ohio state court

bringing a litany of claims: breach of contract, breach of fiduciary duty, theft or conversion,

breach of the duty of loyalty, and a request for a temporary restraining order to prevent

Ameritrade from disregarding the power of attorney and Trading Authorization Agreement, a

request to prohibit anyone other than plaintiff from removing funds from the account and a

request to force Ameritrade to liquidate the account and send the proceeds to plaintiff. The state

court granted a temporary restraining order preventing Ameritrade from allowing anyone other

than plaintiff to make changes to or withdraw money from the account, but it denied plaintiff’s

request to force Ameritrade to liquidate the account and give the proceeds to plaintiff.

Ameritrade removed the complaint to federal court on the basis of diversity jurisdiction.

Plaintiff moved for a preliminary injunction or to continue the temporary restraining order and

Ameritrade countered by moving to dissolve the temporary restraining order and deny the

request for a preliminary injunction.

       The district court denied the motion for a preliminary injunction and dissolved the

temporary restraining order, finding that plaintiff failed to establish a likelihood of success on the

merits and did not demonstrate irreparable harm. Order dated Jan. 6, 2014. Plaintiff moved for

reconsideration of the January 6, 2014, Order, attaching an affidavit that explained that his son

was using the money in the account to fund a drug addiction. The motion for reconsideration

was denied by the district court on the ground that it was a “rehashing” of the original motion.

Order dated Feb. 7, 2014. Ameritrade then filed a Motion to Dismiss or, in the Alternative, to

Compel Arbitration and Stay Proceedings pursuant to Federal Rule of Civil Procedure 12(b)(1).

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The district court granted the motion, compelled arbitration on all of plaintiff’s claims and

dismissed the complaint in its entirety. Andrews v. TD Ameritrade, Inc., No. 1:13 CV 2811,

2014 WL 1761562 (N.D. Ohio May 1, 2014). Plaintiff filed a timely appeal of the January 6,

2014, Order denying the request for a preliminary injunction and dissolving the temporary

restraining order, the February 7, 2014, Order denying reconsideration, and the May 1, 2014,

Order dismissing the complaint in its entirety and compelling arbitration of all claims.

                                           II.         Discussion

   A. Decision to Compel Arbitration

       There are two arbitration provisions at issue in this matter. One is contained in the Client

Agreement that governs the brokerage account, as quoted above. Plaintiff did not sign this

Agreement, but it is the agreement by which his son agreed to be bound in opening a brokerage

account with Ameritrade. As plaintiff purports to be his son’s agent for purposes of the trust

account through the power of attorney, the plain language of the Client Agreement binds plaintiff

as well as his son. The broad language of the arbitration provision (“any controversy between

you [Ameritrade] and me [client or his agent] shall be arbitrated . . . ”) covers the dispute

between Ameritrade and anyone claiming control over one of its accounts.

       The other relevant document is the Trading Authorization Agreement, which was signed

by plaintiff and sent to Ameritrade on January 3, 2013. That document allows for authorized

agents of the account owner to purchase and sell securities in the account owner’s name. It states

that “[t]he Client Agreement set forth in the Account Agreement (including arbitration of

disputes) . . .   shall apply equally to the Authorized Agent(s).”         Trading Authorization

Agreement at 1. By executing the Trading Authorization Agreement and holding himself out as

his son’s agent, plaintiff became bound by the terms of the Client Agreement and the Trading

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Authorization Agreement, both of which contain arbitration requirements. Plaintiff relies on

both the power of attorney and the Trading Authorization Agreement as the basis for his control

over the account. See Complaint Counts I, IV. Plaintiff cannot seek the powers conveyed by the

Trading Authorization Agreement and simply ignore its arbitration clause. See Javitch v. First

Union Secs., Inc., 315 F.3d 619, 625-26 (6th Cir. 2003) (receiver’s rights as a plaintiff are

subject to the same claims and defenses as the received entity he represents).

       The Federal Arbitration Act codifies a national policy in favor of arbitrating claims when

parties contract to settle disputes by arbitration. A district court should dismiss or stay a suit

involving an arbitration clause as follows:

       If any suit or proceeding be brought in any of the courts of the United States upon
       any issue referable to arbitration under an agreement in writing for such
       arbitration, the court in which such suit is pending, upon being satisfied that the
       issue involved in such suit or proceeding is referable to arbitration under such an
       agreement, shall on application of one of the parties stay the trial of the action
       until such arbitration has been had in accordance with the terms of the agreement,
       providing the applicant for the stay is not in default in proceeding with such
       arbitration.

9 U.S.C. § 3. The threshold question, then, is “whether the dispute is arbitrable, meaning that a

valid agreement to arbitrate exists between the parties and that the specific dispute falls within

the substantive scope of the agreement.” Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 561

(6th Cir. 2008). Any doubts regarding arbitrability should be resolved in favor of arbitration.

Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

       The Sixth Circuit analyzes the following four factors to determine whether to grant

motions to dismiss and compel arbitration: (1) Whether the parties agreed to arbitrate; (2) the

scope of the agreement to arbitrate; (3) if federal statutory claims are involved, whether Congress

intended those claims to be arbitrable; and (4) if only some of the claims are subject to

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arbitration, whether the nonarbitrable claims should be stayed pending arbitration. Fazio v.

Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003).

       Plaintiff argues that the only question at issue is the adequacy of the power of attorney

under Ohio law, which is a question of law that should be answered in the first instance by the

courts, not an arbitrator. But that is not true in this case in the face of the broad arbitration

provision included in the Client Agreement and the Trading Authorization Agreement. Even if

the power of attorney was adequate under Ohio law to appoint plaintiff his son’s agent for

purposes of controlling the account—a point Ameritrade disputes—it was within Ameritrade’s

rights to require further confirmation from its account holder to protect itself and to ensure that

the account holder’s wishes are followed. What those further requirements are, if any, is within

the scope of the arbitration provision.

       In addition to challenging the scope of the arbitration provision in the Client Agreement,

plaintiff makes several other claims of error regarding the district court’s decision to compel

arbitration. Plaintiff’s contention that Ameritrade waived reliance on the arbitration provision by

removing the complaint to federal court and failing to raise the issue in the Notice of Removal is

without merit. Removal to federal court does not waive a party’s otherwise enforceable right to

arbitrate. Dantz v. Am. Apple Grp., 123 F. App’x 702, 707 (6th Cir. 2005). No special notice is

required.   He also argues that the district court erred in considering evidence outside the

pleadings submitted by Ameritrade with its motion to compel arbitration and dismiss the

complaint. However, Ameritrade filed its motion pursuant to Fed. R. Civ. Pro. 12(b)(1), lack of

subject-matter jurisdiction, not Rule 12(b)(6), dismissal for failure to state a claim. The district

court must undertake a limited review of evidence to determine whether it has the authority to

hear a case or compel arbitration. Javitch, 315 F.3d at 625. The Plummer affidavit and the

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Client Agreement were part of that limited review undertaken by the district court. Plaintiff also

argues that the arbitration clause here is not valid because it uses “boilerplate” language that

constitutes a contract of adhesion. However, the case on which he relies, Sutton v. Laura Salkin

Bridal & Fashions, No. 72107, 1998 WL 45347 (Ohio Ct. App. Feb. 5, 1998), concerns an

installment sales contract where the state court found that the seller and the customer had

unequal bargaining power. That is not the case here. While the arbitration provision in the

agreement is likely a standard form prepared by Ameritrade, this was not a case of unequal

bargaining power where a commercial enterprise took advantage of an off-the-street buyer.

Plaintiff is a lawyer and he signed the Trading Authorization Agreement containing an

arbitration provision, holding himself out as his son’s agent in matters concerning all of his son’s

business dealings, including matters concerning the brokerage account. Plaintiff also attacks the

arbitration clause as “unconscionable” because he had no “meaningful” choice and was forced to

sign a contract with terms that are unreasonably favorable to the drafting party. Plaintiff was the

one who affirmatively reached out and sought control over his son’s account and he willingly

signed the Trading Authorization Agreement and sent it to Ameritrade. He was not forced to

sign the agreement, but agreed to be bound by its provisions when he signed it.

   B. Removal of the Complaint

       Ameritrade filed a Notice of Removal based on diversity jurisdiction, 28 U.S.C. §

1441(b)(1). Plaintiff contends that the district court erred in allowing the removal of the state

case to federal court because (1) the underlying claims involved purely state-law issues and the

application of state law, and (2) Ameritrade is registered to conduct business in Ohio, has an

office in Ohio and is a citizen of Ohio, thereby destroying diversity with plaintiff, an Ohio

resident. Plaintiff’s arguments are untenable. There is complete diversity between the parties

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because plaintiff is a citizen of Ohio and Ameritrade is a citizen of New York, where it is

incorporated, and Nebraska, where it maintains its headquarters and “principal place of

business.” The amount in controversy exceeds $75,000. The fact that Ameritrade maintains an

office in Ohio does not destroy diversity jurisdiction unless plaintiff can show that the office

there is the “principal place of business” or “the nerve center” of the company. Hertz Corp. v.

Friend, 559 U.S. 77, 92-95 (2010) (corporation has only one principal place of business).

Plaintiff submitted no evidence to rebut Ameritrade’s affidavit stating that its principal place of

business is in Nebraska or any evidence to show that the Ohio office is Ameritrade’s “nerve

center” or otherwise functions as its “principal place of business.”

       Plaintiff also argues that the state law claims, which here encompass all of plaintiff’s

claims, should be severed and heard in state court. Because removal was based on diversity

under § 1441(b)(1), not federal question jurisdiction under § 1441(a) or (c), the federal court has

the authority to hear the state-law claims and, in fact, could not decline to hear the state-law

claims. Charvat v. NMP, LLC, 656 F.3d 440, 446 (6th Cir. 2011).

   C. Other Claims

       Equally untenable is plaintiff’s argument that the district court should have issued an

injunction turning control of the account over to plaintiff. As we have held, this dispute is

subject to the parties’ agreement to arbitrate, a remedy inconsistent with issuing such an

injunction. The claim fails on the merits.

       Finally, the plaintiff argues that the district court erred in dismissing his complaint

instead of ordering a stay until arbitration is complete. But the law is to the contrary: where

there is “nothing for the district court to do but execute the judgment,” dismissal is appropriate.

See Catlin v. United States, 324 U.S. 229, 333 (1945). All of plaintiff’s state-law claims (breach

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of contract, breach of fiduciary duty, theft or conversion, and breach of the duty of loyalty) fall

within the scope of the arbitration provision because they concern Ameritrade’s decision not to

recognize the power of attorney as sufficient under Ohio law and their own procedures to

transfer sole authority over the account to plaintiff. Accordingly, the district court correctly

determined that the case should be dismissed rather than stayed pending arbitration.

       For the foregoing reasons, we affirm the judgment of the district court.

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