Court Opinion

ID: 4106453
Source: CourtListenerOpinion
Date Created: 2016-12-12 16:05:15.018025+00
Date Added: 2024-06-11T14:33:28.712833
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be                                  FILED
regarded as precedent or cited before any                         Dec 12 2016, 7:37 am
court except for the purpose of establishing
                                                                       CLERK
the defense of res judicata, collateral                            Indiana Supreme Court
                                                                      Court of Appeals
estoppel, or the law of the case.                                       and Tax Court

ATTORNEYS FOR APPELLANTS                                ATTORNEY FOR APPELLEE
Ronald A. Wright                                        Thomas M. Connor
Marsha L. Hackenberg                                    Dinsmore & Shohl LLP
Wright & Associates, PC                                 Cincinnati, Ohio
Carmel, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Afsaneh S. Kleinman and Dr.                             December 12, 2016
Elliot Kleinman,                                        Court of Appeals Case No.
Appellants-Plaintiffs,                                  49A02-1603-CC-624
                                                        Appeal from the Marion Superior
        v.                                              Court
                                                        The Honorable John F. Hanley,
Fifth Third Securities, Inc.,                           Judge
Appellee-Defendant.                                     Trial Court Cause No.
                                                        49D11-1412-CC-41876

Vaidik, Chief Judge.

Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016    Page 1 of 8
                                          Case Summary
[1]   Afsaneh and Elliot Kleinman sued Fifth Third Securities, Inc., alleging that

      they had received bad investment advice. Fifth Third Securities responded with

      a motion to dismiss the case and to compel arbitration, claiming that the

      Kleinmans had agreed that any disputes would be arbitrated. The trial court

      granted the motion, and the Kleinmans appeal. Finding no error, we affirm.

                            Facts and Procedural History
[2]   On December 17, 2012, the Kleinmans deposited $500,000 into an account

      with Fifth Third Securities. Appellants’ App. p. 47. On December 19, Afsaneh

      met with Gregory Lutterman, a financial advisor with Fifth Third Securities, to

      discuss how to invest the money. Lutterman recommended that the Kleinmans

      put the funds into Unit Investment Trusts (“UITs”).                  He also gave Afsaneh a

      Brokerage Account Application (“Account Application”) form and a UIT

      Explanation of Investments form to discuss with Elliot. The parties dispute

      whether the Kleinmans agreed to the UIT investments on December 19, but

      two days later, Fifth Third Securities used the $500,000 to purchase units in

      four UITs, and it sent the Kleinmans a notice confirming the transactions. Six

      weeks later, in February 2013, the Kleinmans met with Lutterman and signed

      an Account Application and a UIT Explanation of Investments relating to the

      investments.

      Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 2 of 8
[3]   In December 2014, the Kleinmans filed suit against Fifth Third Securities.

      They did not provide us with a copy of their complaint, but they apparently

      alleged that Lutterman had given them bad investment advice and that they had

      lost money as a result. In response, Fifth Third Securities filed a motion to

      have the case dismissed and to compel arbitration on the ground that the

      Kleinmans had agreed that any dispute would be resolved via arbitration. It

      relied on two documents: the Account Application that the Kleinmans had

      signed and a document called Brokerage Account Customer Agreement

      (“Customer Agreement”). The Account Application included the following

      provision, in a box and bold letters just above the parties’ initials and signatures:

              Pre-Dispute Arbitration

              This account is governed by a pre-dispute arbitration clause,
              which appears on the last page of the Client Agreement, and
              you acknowledge that you have received a copy of this clause.

      Id. at 19. The last page of the Customer Agreement began with the heading

      “Resolving Disputes – Arbitration” and provided, in part:

              This agreement contains a pre-dispute arbitration clause. Under
              this clause, which becomes binding on all parties when you sign
              your account application, you, we, and NFS [National Financial
              Services LLC] agree as follows:

              [introductory provisions omitted]

              All controversies that may arise between me, You and NFS
              concerning any subject matter, issue or circumstances whatsoever
              (including, but not limited to, controversies concerning any
      Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 3 of 8
              account, order or transaction, or the continuation, performance,
              interpretation or breach of this or any other agreement between
              me, You and NFS whether entered into or arising before, on or
              after the date this account is opened) shall be determined by
              arbitration in accordance with the rules then prevailing of the
              Financial Industry Regulatory Authority (FINRA) or any United
              States securities self-regulatory organization or United States
              securities exchange of which the person, entity or entities against
              whom the claim is made is a member, as I may designate.

      Id. at 25.

[4]   While the motion to dismiss was pending, the Kleinmans deposed Lutterman.

      Lutterman testified that while he could not specifically recall giving the

      Kleinmans a copy of the Customer Agreement along with the Account

      Application, it was “standard practice” to do so. Lutterman Depo. p. 14, 25

      (included in Volume of Exhibits). The next month, the Kleinmans moved to

      publish the deposition. On November 13, 2015, the trial court granted that

      motion and also issued an order granting Fifth Third Securities’ motion to

      dismiss and to compel arbitration.

[5]   The Kleinmans now appeal.

                                Discussion and Decision
[6]   The Kleinmans contend that the trial court erred by granting Fifth Third

      Securities’ motion to dismiss and to compel arbitration. We review such

      matters de novo. Brumley v. Commonwealth Bus. Coll. Educ. Corp., 945 N.E.2d
770, 774-75 (Ind. Ct. App. 2011).

      Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 4 of 8
[7]   As the party seeking to compel arbitration, Fifth Third Securities had the

      burden of showing that the parties entered into an arbitration agreement and

      that the dispute at issue is covered by the agreement. Id. at 775-76. The

      Kleinmans maintain that Fifth Third Securities failed to make these two

      showings. We disagree.1

                        I. Existence of Arbitration Agreement
[8]   The parties entered into an arbitration agreement. The Kleinmans signed the

      Account Application, and by doing so they acknowledged that (1) their account

      would be “governed by a pre-dispute arbitration clause” and (2) they “have

      received a copy of this clause.” Fifth Third Securities’ arbitration clause

      appears on the last page of its Customer Agreement, and the Kleinmans’

      acknowledgement that they received a copy of the clause is corroborated by

      Lutterman’s deposition testimony that it was “standard practice” to provide a

      copy of the Customer Agreement along with the Account Application.

[9]   The Kleinmans make much of the fact that the arbitration acknowledgement in

      the Account Application references a “Client Agreement,” whereas the

      document relied upon by Fifth Third Securities is called “Customer

      Agreement.” They note the lack of evidence that a document called “Client

      Agreement” even exists. But if the Kleinmans were concerned about the

      1
       Fifth Third Securities correctly notes that “Indiana recognizes a strong policy favoring the enforcement of
      arbitration agreements.” Koors v. Steffen, 916 N.E.2d 212, 215 (Ind. Ct. App. 2009), reh’g denied. This appeal,
      however, primarily concerns whether an agreement to arbitrate the dispute at issue even exists.

      Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016             Page 5 of 8
       absence of a document called “Client Agreement,” the time to raise that

       concern was before signing the Account Application. Had they done so, Fifth

       Third Securities no doubt would have realized its imprecise drafting and

       explained that the relevant document is called “Customer Agreement.”

       Instead, the Kleinmans simply signed the Account Application, thereby

       acknowledging their receipt of the arbitration clause. That acknowledgement—

       regardless of the precise name of the document in which the arbitration clause

       appears—is the key fact for our purposes. This fact strongly suggests that the

       Kleinmans understood “Client Agreement” to be a reference to the “Customer

       Agreement” in which the arbitration clause actually appears. The only other

       possibility is that the Kleinmans signed the Account Application without

       reading it. If that is the case, they did so at their own peril. See Clanton v. United

       Skates of Am., 686 N.E.2d 896, 899-900 (Ind. Ct. App. 1997) (“Under Indiana

       law, a person is presumed to understand the documents which he signs and

       cannot be released from the terms of a contract due to his failure to read it.”).

[10]   In support of their argument that they did not agree to arbitration, the

       Kleinmans cite Webb v. First Tennessee Brokerage, Inc., No. E2012-00934-COA-

       R3-CV, 2013 WL 3941782 (Tenn. Ct. App. June 18, 2013), in which the

       Tennessee Court of Appeals affirmed a trial court’s denial of a motion to

       compel arbitration. In that decision, the court addressed the law of Tennessee,

       not Indiana. Furthermore, the publication status and precedential value of the

       decision are unclear—the court apparently did not designate it for publication

       in the Southwestern Reporter. In any event, the trial court decision that was

       Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 6 of 8
       affirmed in that case turned in part on the fact that nowhere in the documents at

       issue did the customer “expressly say that she agrees to arbitrate.” 2013 WL
3941782 at *12. Here, on the other hand, the first line of the arbitration clause

       states, “This agreement contains a pre-dispute arbitration clause. Under this

       clause, which becomes binding on all parties when you sign your account

       application, you, we, and NFS agree as follows . . . .” Appellants’ App. p. 25

       (emphasis added). This fact distinguishes this case from Webb.

                          II. Scope of Arbitration Agreement
[11]   The Kleinmans also assert that even if an arbitration agreement exists, it does

       not cover the dispute at issue. They base this argument on the fact that they did

       not sign the Account Application until February 2013, six weeks after Fifth

       Third Securities put their money into the UITs. The Kleinmans contend that

       the agreement “was not in place at the time the investment was made, therefore

       it does not apply to the actions taken by the bank in December 2012.”

       Appellants’ Br. p. 18. We cannot say that this delay rendered the arbitration

       clause inapplicable to the parties’ dispute. The clause is written very broadly to

       cover “[a]ll controversies . . . concerning any subject matter, issue or

       circumstances,” including “controversies concerning any account, order or

       transaction, or the continuation, performance, interpretation or breach of this or

       any other agreement between me, You and NFS whether entered into or

       arising before, on or after the date this account is opened[.]” Appellants’

       App. p. 25 (emphasis added).

       Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 7 of 8
[12]   In a final attempt to avoid the arbitration clause, the Kleinmans suggest that

       because they did not sign the Account Application until after Fifth Third

       Securities had completed the UIT transactions, Fifth Third Securities’ actions

       were taken “without authorization” and were “illegal” and therefore fall

       outside the scope of the arbitration agreement. Appellants’ Br. p. 19. They do

       not support this argument with cogent reasoning, so it is waived. See Ind.

       Appellate Rule 46(A)(8)(a); City of Indianapolis v. Buschman, 988 N.E.2d 791,

       795 (Ind. 2013). Waiver notwithstanding, the Kleinmans’ claim that the

       transactions were not authorized is belied by the fact that when Fifth Third

       Securities sent them a notice confirming the transactions, they did not question

       the transactions or seek to have them reversed. Instead, the Kleinmans waited

       six weeks and then signed the Account Application, thereby ratifying the earlier

       investments. In short, the time for claiming that Fifth Third Securities’ initial

       actions were “illegal” has long passed.

[13]   Affirmed.

       Baker, J., and Najam, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1603-CC-624 | December 12, 2016   Page 8 of 8