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Joanne Johannsen, Individually and As v. Morgan Stanley Credit Corporation

January 10, 2012

JOANNE JOHANNSEN, INDIVIDUALLY AND AS TRUSTEES OF THE JOHANNSEN FAMILY TRUST DATED OCTOBER 18, 1988, AND THE JOHANNSEN FAMILY SURVIVORS TRUST DATED OCTOBER 18, 1988, PLAINTIFFS,
v.
MORGAN STANLEY CREDIT CORPORATION, A DELAWARE CORPORATION; ET AL., DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Presently before the Court is Defendants' motion seeking an order compelling Plaintiffs (both Joanne Johannsen individually and in her capacity as trustee of two family trusts) to submit their claims, as set forth in the complaint on file herein, to arbitration under the auspices of the Financial Regulatory Authority, Inc. ("FINRA").

Defendants further request an order staying all proceedings in this matter pending completion of that arbitration. As set forth below, Defendants' motion will be granted.*fn1

BACKGROUND

In approximately 2002, following the death of her husband, Plaintiff Joanne Johannsen ("Plaintiff" or "Ms. Johannsen") met Russell Abbott, a representative for Morgan Stanley Smith Barney,*fn2 at an investment seminar in Rocklin, California.

Ms. Johannsen subsequently engaged Mr. Abbott's assistance in handling certain of her investments.

On November 21, 2002, Plaintiff opened an Individual Retirement Account with Morgan Stanley by executing an IRA Adoption Agreement. See Decl. of Russell Abbott, Ex. 1. Immediately above Plaintiff's signature on that document, a statement in bold type memorialized Ms. Johannsen's understanding that the account was governed by a predispute arbitration clause, a copy of which she acknowledged receiving.

In 2006, Plaintiff decided to purchase real property in Rocklin and was advised by Mr. Abbott that Morgan Stanley could provide the necessary financing for that transaction. Pl.'s Decl., ¶ 7.

In order to arrange that financing, Plaintiff, as Trustee of the so-called Survivor's Trust, executed on October 26, 2006 an Active Assets Account Agreement. Ex. 6 to Abbott Decl. That Account Agreement, in turn, incorporated the terms of the Morgan Stanley Active Assets Account Client Agreement. Id. at Ex. 7.

The Account Agreement contained a boldfaced admonition, also above Plaintiff's signature and further highlighted by placement in a box format, that confirmed Plaintiff's understanding that the Survivor's Trust Account was governed by a predispute arbitration clause, as stated within the Client Agreement, which Plaintiff acknowledged receiving. Ex. 6 at p. 11. The Client Agreement provided for arbitration as follows:

Arbitration of Controversies*

You*** agree that all controversies between you and its agents (including affiliated corporations) arising out of or concerning any of your accounts, order or transactions, or the construction, performance, or breach of this or any other agreement between the the Account is opened, shall be determined by parties, whether entered into before or after the date arbitration only. Such arbitration shall be conducted before the National Association of Securities Dealers, Inc., the New York Stock Exchange, Inc., or any other self-regulatory organization's arbitration forum before which the controversy may be arbitrated, as you may elect. If you make no written election addressed to Morgan Stanley at 2000 Westchester Avenue, Purchase, NY 10577, Attn: Law Department by registered mail within five days after receiving a written demand for arbitration from Morgan Stanley, then you authorize Morgan Stanley to elect one of the above-listed forums for you.

The rules of the selected forum, as such rules may be amended from time to time, shall govern any arbitration proceeding between the parties any ...


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