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West Virginia Supremes Enforce Arbitration Clause in Unsigned Brokerage Agreement: Evans & Ameriprise Financial Services, Inc. v. Bayles
Posted on Categories Court Decisions, Securities ArbitrationTags , ,

By Sarah G. Anderson

An unsigned arbitration agreement may be enforced against the signatory of a separate but related agreement, where the latter clearly and unequivocally refers and calls attention to the arbitration agreement and the signatory acknowledges that he received and read the arbitration agreement.

Evans & Ameriprise Financial Services, Inc. vs. Bayles, No. 15-0600 (W. Va., 6/1/16).

In the Court Below

Debra Bayles brought suit against her late husband’s broker, Jeffrey Evans, and Evans’ employer, Ameriprise Financial, in a West Virginia state circuit court, complaining that they improperly paid out the proceeds of her late husband’s brokerage accounts, including an IRA account, to his children (also named as defendants), as indicated by forms signed by the husband, when she believed herself to be the intended beneficiary. Defendants moved to dismiss and to compel arbitration, based on an arbitration clause in a Brokerage Client Agreement. The husband signed, among other things, an IRA Application, which included a clause stating, in part: “You acknowledge that you have received and read” a Brokerage Client Agreement (“Brokerage Agreement”) and that it was governed by the arbitration clause, but he did not sign the Brokerage Agreement itself. The circuit court denied the motion, holding that the lack of a signature on the Brokerage Agreement created an ambiguity that must be construed against the defendants, as Ameriprise drafted it. That decision was subject to an immediate, interlocutory appeal, and defendants took that opportunity.

The Ruling on Appeal

Reviewing the decision de novo, the Supreme Court of Appeals reverses the circuit court’s ruling that the arbitration agreement is invalid. A majority of courts, it notes, hold that for the terms of one document to be incorporated by reference into a writing executed by the parties, (1) the reference must be clear and unequivocal, calling it to the attention of the other party, who must assent to it; (2) the reference must describe the other writing in such terms that its identify may be ascertained beyond doubt; and (3) it must be certain that the parties knew of and assented to the incorporated document. The Court finds that each of these factors is satisfied. Here, the IRA Application indisputably made multiple, clear references to the Brokerage Agreement, describing it in terms that leave no doubt as to its identity, and Mr. Evans stated in an affidavit that he called to Mr. Bayles’ attention and explained the arbitration agreement. Courts generally allow an unsigned document as long as the signed paper specifically refers to the unsigned document, available to the parties. In the case at bar, the decedent signed the IRA Application, expressly acknowledging that he received and read the Brokerage Agreement with its arbitration clause and consented to all terms, including the arbitration clause.

Nevertheless, the Circuit Court finds unresolved issues that preclude it from enforcing the arbitration clause, including whether it is unconscionable and whether Mrs. Bayles’ claims fall within its scope. The Court previously held that it will not consider on appeal non-jurisdictional questions not considered and decided by the court below. Therefore, all outstanding issues are remanded to the circuit court and the order is reversed.

(S. Anderson)

(SLC Ref. No. 2016-23-01)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA)from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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