California Court of Appeals, First District, Second Division
Alameda Superior Court Honorable Frank Roesch No. HG09482316
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Law Offices of Melinda Jane Steuer and Melinda Jane Steuer for Plaintiffs and Appellants.
White & Woods, Benjamin W. White and Kevin J. Woods for Defendants and Respondents.
Plaintiffs and appellants (appellants) are five former employees of Pacific Bell who took early retirement, with the option to take a pension or a lump sum payment. All appellants chose the lump sum, persuaded to do so by respondent Sharon Kearney, with whom each appellant had significant interaction, having first learned of her from presentations made at the Pacific Bell premises. And all appellants came to be clients of Kearney, in connection with which they signed some documents-exactly what documents and how they came to be signed is the subject of vigorous dispute-by which Kearney came to manage and invest appellants’ retirement proceeds, in some cases for years. Dissatisfied, appellants sued Kearney and AIG Financial Advisors, Inc. (AIGFA), the successor to the company where Kearney originally worked.
AIGFA filed a petition to compel arbitration, supported in part by a declaration of Kearney. Appellants filed vigorous opposition, which included direct contradiction of many of Kearney’s factual representations. Without holding an evidentiary hearing, the trial court granted the petition, ordering appellants’ claims to arbitration. That arbitration occurred, with the arbitrators ultimately issuing an award rejecting appellants’ claims. After judgment was entered on the award, appellants appealed, arguing their claims should not have been ordered to arbitration, contending among other things that the trial court erred in not holding an evidentiary hearing. We agree such hearing was required in the circumstances here, and we reverse.
The Parties and the General Background
Appellants are Philip Ashburn, Adela Pena, Lauro Pena, Wiliam Percy, and Karell Wood. All are former employees of Pacific Bell who took early retirement: Wood and Percy in 1997, Adela Pena in 1998, and Lauro Pena and Ashburn in 2002. Each appellant was given the option of receiving a monthly pension from Pacific Bell or taking a lump sum payment. Each appellant ultimately agreed to take the lump sum payment, and each appellant ultimately agreed to allow Kearney to manage and invest their retirement, in connection with which they signed agreements with SunAmerica Securities, Inc. (SAS), Kearney’s then-employer. In sum, all of appellants’ significant
decisions were made in reliance on representations made by Kearney. The meetings and conversations relevant to those representations will be discussed in detail below, as will the documents appellants signed.
Kearney was a registered representative of SAS, and remained such until July 2004. That month she entered into an agreement with Pasquale (Pat) Vitucci to transfer to him certain of her accounts, including those of the five appellants. SAS was ultimately acquired by AIGFA, and for ease of reference and consistency with the briefing, we will refer only to AIGFA.
The investment accounts were opened at various times between 1997 and 2004, and appellants invested their retirement payments in them. Appellants allege that Kearney invested all of their funds in variable annuities, which they claim were unsuitable investments based on their individual circumstances, leading to the legal proceedings here.
The Procedural Background
On October 30, 2009, appellants filed a complaint for damages, naming as defendants AIGFA (and three predecessor entities connected with it) and Kearney. The complaint alleged nine causes of action, styled as follows: intentional misrepresentation; reckless misrepresentation; negligent misrepresentation; fraud-false promise; fraud-omissions; intentional breach of fiduciary duty; negligent breach of fiduciary duty; fraudulent conveyance; and churning.
The Petition to Compel Arbitration
On December 2, 2009, AIGFA filed a petition to compel arbitration (petition). It was accompanied by a memorandum of points and authorities, and five declarations, those of Kearney, Marie Meier, Noah Sorkin, Vitucci, and attorney Mark Hancock. Kearney was the only declarant who could testify to any firsthand knowledge of the involvement with any of the appellants, as only she interacted with them.
Kearney’s declaration (exclusive of exhibits) was four and a half pages, and provided in pertinent part as follows:
“I, Sharon Kearney, hereby declare as follows:
“1. Unless otherwise noted, I have personal knowledge of the facts set forth herein and, if called as a witness, could competently testify thereto.
“2. In approximately December 1996 I became a registered representative of SunAmerica Securities, Inc. (SAS) and I remained such until July of 2004.
“3. In 2004, Pasquale (Pat) Vitucci was also a registered representative of SAS. On July 15, 2004, Mr. Vitucci and I entered into an agreement whereby I transferred to Mr. Vitucci certain accounts. This included accounts for the following individuals: Philip Ashburn, Connie Johnson, Adela Pena (formerly known as Adela Castro), Lauro Pena, William Percy and Karrell Wood. Pursuant to the terms of that agreement, I transferred to Mr. Vitucci the SunAmerica account files for these individuals.
“4. Plaintiff Philip Ashburn signed an agreement containing an arbitration provision on March 12, 2004 in my presence. I also signed that agreement. Attached hereto as Exhibit A are true and correct copies of pertinent pages of that agreement which Mr. Ashburn and I signed....
“5. Plaintiff Philip Ashburn signed an agreement containing an arbitration provision on May 30, 2002 in my presence. I also signed that agreement. Attached hereto as Exhibit B are true and correct copies of pertinent pages of that agreement which Mr. Ashburn and I signed.
“6. Plaintiff Adela Pena (formerly Adela Castro) signed an agreement containing an arbitration provision on January 17, 1998 in my presence. I also signed that agreement....
Paragraphs 10 through 18 of Kearney’s declaration went on to testify in similar fashion concerning appellants Lauro Pena, Percy, and Wood. And her declaration attached as Exhibits A through O what she claimed were the agreements signed by the appellants.
Kearney’s declaration then continued:
“19. In the agreements plaintiffs’ signed, plaintiffs each acknowledged that the agreements included a pre-dispute arbitration clause.
“20. Attached hereto as Exhibit R is a true and correct copy of a complete, blank, model SAS ‘New Account Form, ’ including the ‘Account Agreement’ which contains arbitration language, reflecting the edition date of ‘6/96’ in the lower left hand corner. This is the form of agreement which I provided (in its entirety) to, and which was signed by, Adela Pena (formerly Adela Castro) on September 18, 1997 (Exhibit C), by Karrell Wood on November 3, 1997 (Exhibit N), and by William Percy on September 18, 1997 (Exhibit L).
“21. Attached hereto as Exhibit S is a true and correct copy of a complete, blank, model SAS ‘New Account Form, ’ including the ‘Account Agreement’
which contains arbitration language, reflecting the edition date of ‘4/97’ in the lower left hand corner. This is the form of agreement which I provided (in its entirety) to, and which was signed by, Adela Pena on July 22, 1998 (Exhibit D).
“22. Attached hereto as Exhibit T is a true and correct copy of a complete, blank, model SAS ‘New Account Form, ’ including the ‘Account Agreement’ which contains arbitration language, reflecting the edition date of ‘3/98’ in the lower left hand corner. This is the form of agreement which I provided (in its entirety) to, and which was signed by, Lauro Pena on May 12, 1999 (Exhibit I.)”
Paragraphs 23 through 25 of Kearney’s declaration went on to refer to later editions of “complete, blank, model” account forms or account worksheets, copies of which were also attached.
Paragraph 26 of Kearney’s declaration referred to a “blank, model six-page” account worksheet which was the form of agreement that she testified each appellant signed on specific dates in March 2004.
Kearney’s declaration then concluded as follows: “27. As part of my practice when working with a client to fill out new account forms and account worksheets, such as those signed by plaintiffs in this matter, I would typically place the client’s signature page in the file, but I would not necessarily place all of the pages with the standard arbitration language in the file. This was because these pages were standard forms that could be reproduced by reprinting the applicable version of the form. ...