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Metlife Securities, Inc. v. Holt

United States District Court, E.D. Tennessee, Greeneville Division

November 14, 2016

PATSY A. HOLT, Respondent.



         This matter is before the Court on Petitioners' Petition for Order to Compel Arbitration [doc. 1] and the Hearing Transcript [doc. 48]. For the reasons herein, the Court will grant Petitioner's petition and compel arbitration of the remaining claims.

         I. Background

         Respondent Patsy A. Holt (“Ms. Holt”) opened several Individual Retirement Accounts with Petitioners (“MetLife”) in Greeneville, Tennessee, four of which are at issue in this action. [Pet. to Compel Arbitration, doc. 1, ¶¶ 1, 52; Holt Dep., doc. 1-9, at 8:4-8, 21-23, 9:17-20, 10:15-25, 11:1-3, 14:4-14; Woods Decl., doc. 4-1, ¶ 5].[1] Ms. Holt personally signed the account application for one of the four accounts-account number XXXXX9324. [Holt Dep. at 14:4-17]. At the suggestion of MetLife's authorized representative in charge of the accounts, Mark Salyer (“Mr. Mark Salyer”), Ms. Holt instructed her daughter, Lydia Salyer (“Ms. Salyer”), to sign the account applications for the three other accounts-account numbers XXXXX3828, XXXXX9931, and XXXXX8578-on her behalf. [Id. at 5:23-25, 6:1, 7:22-25, 8:1-25, 9:1-16, 10:15-25, 11:1-13].[2] Ms. Holt's name, Patsy A. Holt, appears in cursive in the signature block on those three account applications, [see Account Application 3828, doc. 1-2, at 2; Account Application 9931, doc. 1-3, at 2; Account Application 8578, doc. 1-4, at 2], but Ms. Holt did not view or read them, [Holt Dep. at 11:14-18]. In total, Ms. Holt claims to have invested more than $1, 900, 000 in the accounts. [Second Am. Compl., doc. 1-8, ¶ 19].

         According to Ms. Holt, Mr. Mark Salyer went on to misappropriate her funds, which are now almost entirely gone. [Id. ¶¶ 28, 30]. As a result, she sued Mr. Mark Salyer and MetLife in the Circuit Court of Sullivan County, Tennessee, for breach of contract, conversion, failure to supervise, fraud, and negligence, alleging that MetLife is responsible for Mr. Mark Salyer's misconduct. [Id. ¶¶ 25-35]. In response, MetLife filed in the state court a motion to compel arbitration, arguing that Ms. Holt has to arbitrate her claims because the four account applications contain arbitration provisions. [See Pet. to Compel Arbitration ¶ 9; State Court Order, doc. 7-2, ¶ 2]. In each account application, the arbitration provision reads:

MetLife . . . and the purchaser of the shares, who is the signatory below . . . agree that any controversy . . . arising out of or relating to any transactions between [them] shall be determined by arbitration. . . . This agreement and any arbitration hereunder shall be governed and construed in accordance with the laws of the State of New York . . . .

[Account Applications, doc. nos. 1-1, 1-2, 1-3, 1-4, at 3]. The court ruled that Ms. Holt's claims related to account number XXXXX9324 are subject to arbitration but reserved ruling on the arbitrability of the other claims until it could decide whether to allow discovery. [Woods Decl. ¶ 5]. Mr. Mark Salyer, however, then filed for bankruptcy, and the court stayed the case for roughly three years. [Pet. to Compel Arbitration ¶ 9]. When the case resumed after the bankruptcy proceedings, the court permitted Ms. Holt to file a revised second amended complaint so she could allege that the arbitration provisions are unenforceable contracts of adhesion. [Woods Decl. ¶ 8; see Second Am. Compl. ¶ 22].

         Around this time, MetLife renewed its motion to compel arbitration, prompting the state court to allow discovery on whether all four arbitration provisions are unenforceable contracts of adhesion. [State Court Order at 2]. The state court reserved ruling on this issue until it could conduct an evidentiary hearing, [id.], and the parties proceeded to conduct some discovery, which included depositions, interrogatories, and requests for production, [Woods Decl. ¶ 12]. MetLife, however, then brought this action, petitioning this Court to compel Ms. Holt to arbitrate her claims under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-14. [Pet. to Compel Arbitration at 5-16]. Ms. Holt filed a Response in Opposition to MetLife's Petition [doc. 6], which she titled as a “Motion to Dismiss, or in the Alternative, Motion for Summary Judgment.” [Resp't's Resp. in Opposition at 1]. Construing Ms. Holt's response as a motion for summary judgment, the Court granted MetLife's Petition to Compel Arbitration in part, requiring Ms. Holt to arbitrate her claims under Account Application 9324. [See Mem. Op., doc. 8, at 26-29, 35]. The Court ordered an evidentiary hearing to determine whether Ms. Holt is bound to the arbitration provisions in Account Applications 3828, 9931, and 8578, which she did not sign but instructed Ms. Salyer to sign on her behalf. [See Id. at 30-35]. Having now concluded the evidentiary hearing, the Court is prepared to rule on the enforceability of the remaining arbitration provisions.

         II. Legal Standard

         “When asked by a party to compel arbitration under a contract, a federal court must determine whether the parties have agreed to arbitrate the dispute at issue.” Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000) (citation omitted). If a court concludes that an arbitration agreement is valid, it must order the parties to arbitration. 9 U.S.C. § 4; Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002). If it determines, however, that the validity of the arbitration agreement is “in issue, ” 9 U.S.C. § 4, the parties must then proceed to a trial to resolve their dispute, Great Earth, 288 F.3d at 889. The burden of showing that an arbitration agreement is in issue rests with the party opposing arbitration, and a trial is necessary only if this nonmoving party can establish that a genuine issue of material fact exists as to the arbitration agreement's validity. Id. at 889; see Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000). “The required showing mirrors that required to withstand summary judgment in a civil suit.” Great Earth, 288 F.3d at 889 (citing Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 129-30 (2d Cir. 1997), cert. denied, 522 U.S. 948 (1997)). The inquiry, therefore, that a court should make is whether the evidence “is such that a reasonable finder of fact could conclude that no valid agreement to arbitrate exists.” Id. (citation omitted). When making this inquiry, it must view the facts and draw all reasonable inferences in the light most favorable to the nonmoving party- that is, the party opposing arbitration. Id.

         III. Analysis

         As the Court made clear to the parties through its previous orders, the evidentiary hearing was a limited factual inquiry into a single issue: whether Ms. Salyer bound her mother to the arbitration provisions in the account applications through an agency relationship. [See Mem. Op. at 33-34]. Under New York law, an agency relationship requires the manifestation of “[1] consent of one person to allow another to act on his or her behalf and subject to his or her control, and [2] consent by the other so to act.” Dynas v. Nagowski, 762 N.Y.S.2d 745, 748 (N.Y.App.Div. 2003) (quotation omitted). The Court reminds the parties that it has already determined that the record does not contain a genuine issue of material fact as to the first element. [Mem. Op. at 31-33]. Ms. Holt previously testified that she instructed Ms. Salyer to sign “MetLife account documents” on her behalf. [Holt Dep., doc. 1-9, at 5:6-11]. Ms. Holt also previously testified that she does not dispute that these documents included the account applications at issue:

Q: And you don't have any reason to dispute that you gave her authority to sign this application on ...

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