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John D. Thomas v. Steven M. Westlake et al

March 23, 2012

JOHN D. THOMAS, PLAINTIFF AND RESPONDENT,
v.
STEVEN M. WESTLAKE ET AL., DEFENDANTS AND APPELLANTS.



(Super. Ct. No. 37-2010-00085465-CU-FR-CTL) APPEAL from an order of the Superior Court of San Diego County, Steven R. Denton, Judge. Reversed.

The opinion of the court was delivered by: Irion, J.

CERTIFIED FOR PUBLICATION

An investment advisor and related defendants appeal the order denying their petition to compel an investor's successor in interest to arbitrate claims alleging the defendants mismanaged the investor's accounts. The trial court denied the petition on the grounds that the claims against two of the six defendants were not subject to arbitration because those defendants were not parties to any arbitration agreement, and that there was a possibility of conflicting rulings on common questions of law or fact if arbitration of the claims against the other four defendants were ordered. We reverse.

I

FACTUAL AND PROCEDURAL BACKGROUND

A. The Arbitration Agreements

Before her death, Katherine W. Thomas, an elderly widow, opened three investment accounts with defendants Ameriprise Financial Services, Inc. (AFSI),*fn1 a subsidiary of Ameriprise Financial, Inc. (AFI). Defendant Stephen M. Westlake (erroneously sued as Steven M. Westlake), a registered representative of AFSI, acted as the securities broker and investment advisor for these accounts.

Katherine opened the first investment account in her capacity as trustee of the John W. and Katherine W. Thomas Family Trust (the Family Trust). A form Katherine signed when she opened this account acknowledged she had received and read the Brokerage Client Agreement and agreed to abide by its terms and conditions. The Brokerage Client Agreement contains the following arbitration clause:

"Any controversy arising out of, or relating to, my accounts, to transactions with you or your Broker and/or employees for me or to this agreement or the breach thereof, shall be settled by arbitration and conducted pursuant to the Federal Arbitration Act, before the American Arbitration Association or the National Association of Securities Dealers Inc., Chicago Stock Exchange Inc., the New York Stock Exchange, the American Stock Exchange to the extent you may be a member of such exchange or the Municipal Securities Rulemaking Board or the independent nonindustry arbitration forum as I may elect."

Katherine later signed a Client Service Agreement for this account. The Client Service Agreement contains an arbitration clause nearly identical to the one in the Brokerage Client Agreement quoted above; the only differences are that the arbitration clause of the Client Service Agreement substitutes "Client's Service Account" for "my accounts" and "Sponsor or Sponsor's agents" for "you or your Broker."

Katherine opened the second investment account in her individual capacity. Katherine again signed a Client Service Agreement, which contained an arbitration clause identical to the one contained in the Client Service Agreement pertaining to the first account.

Katherine opened the third investment account in her capacity as trustee of the Family Trust. As part of the transaction, Katherine signed a form acknowledging she had received and read the Brokerage Client Agreement and agreed to abide by its terms and conditions. The Brokerage Client Agreement for this third investment account contained the following arbitration clause:

"You agree that all controversies that may arise between us (including, but not limited to the brokerage account and any service or advice provided by a broker or representative), whether arising before, on or after the date this account is opened shall be determined by arbitration in accordance with the rules then prevailing of either the New York Stock Exchange, Inc., or the National Association of Securities Dealers, Inc., as you designate." (Capitalization altered.)

B. The Complaint

After Katherine died, her son, plaintiff John D. Thomas, succeeded Katherine as trustee of the Family Trust; became her successor in interest (Code Civ. Proc., § 377.11); and filed this action. Initially, John sued only Westlake; Westlake's firm, Westlake, Grahl and Glover (WGG); and AFSI. He later amended the complaint to add as defendants AFI; and two insurance companies, IDS Life Insurance Company (IDS) and RiverSource Life Insurance Company (RiverSource),*fn2 which allegedly sold Katherine certain insurance policies and annuities. The operative complaint asserts claims based on breach of fiduciary duty, negligence, fraud, money had and received, violations of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) and elder abuse (Welf. & Inst. Code, § 15600 et seq.). The gist of the complaint is that ...


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