Bonnant v. Merrill Lynch, Pierce, Fenner & Smith, Inc. ( 2012 )

10-2310-cv, 11-0742-cv
Bonnant v. Merrill Lynch
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4 SUMMARY ORDER
5
6 RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
7 A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
8 GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
9 LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
10 THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
11 ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
12 A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
13 COUNSEL.
14
15 At a stated term of the United States Court of Appeals for the Second Circuit, held at the
16 Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 8th day
17 of March, two thousand twelve.
18
19 Present:
20 Pierre N. Leval,
21 Rosemary S. Pooler,
22 Circuit Judges,
23 Denise L. Cote*,
24 District Judge.
25
26 ________________________________________________
27
28 Marc Bonnant,
29
30 Plaintiff-Appellant,
31
32 v. Nos. 10-2310-cv, 11-0742-cv
33
34 Merrill Lynch, Pierce, Fenner & Smith, Inc.,
35 Merrill Lynch Capital Services, Inc,
36
37 Defendants-Appellees.
38
*
The Honorable Denise L. Cote, United States District Judge for the Southern District of
New York, sitting by designation.
1 ________________________________________________
2
3 For Plaintiff-Appellant: DAVID J. HOFFMAN, Law Offices of David J. Hoffman,
4 New York, NY.
5
6 For Defendants-Appellees: DAVID J. LIBOWSKY (Brian F. Amery, Dominick F.
7 Evangelista, on the brief), Bressler, Amery & Ross,
8 P.C., New York, NY.
9 ________________________________________________
10
11 Appeal from the United States District Court for the Southern District of New York
12 (Sullivan, J.).
13 ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and
14 DECREED that the judgment of the district court dated May 18, 2010, be and hereby is
15 VACATED and REMANDED.
16 Plaintiff Marc Bonnant appeals from the district court’s grant of summary judgment in
17 favor of Defendants Merrill Lynch, Pierce, Fenner & Smith, Inc. (hereinafter “Merrill Lynch”)
18 and Merrill Lynch Capital Services, Inc., directing Bonnant to arbitrate a claim brought against
19 him by Defendants. The district court held that, in signing a contract between Sophin
20 Investments, S.A. and Merrill Lynch to open an International Cash Management Account for
21 Sophin at Merrill Lynch, Bonnant, who signed for Sophin as its officer and representative, also
22 unambiguously identified himself as “accountholder,” or otherwise consented to arbitration. The
23 district court’s ruling cannot be sustained unless Bonnant’s status either as an accountholder, or
24 as a party to the agreement, is unambiguously established on the face of the document. The
25 district court based its interpretation primarily on the fact that Bonnant signed the agreement
26 twice. After considering the agreement in its entirety, we conclude that Bonnant’s second
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1 signature did not unambiguously identify him either as accountholder or as a party to the
2 agreement.
3 I. Background
4 Plaintiff Marc Bonnant is an attorney who resides in Switzerland. On November 12,
5 2001, Bonnant opened a Merrill Lynch Cash Management Account for Sophin by executing
6 Merrill Lynch’s three-part form for such accounts, which upon execution constitutes the
7 contract. Sophin, which is identified on the first page of the Merrill Lynch document as the
8 “accountholder” is, according to Bonnant’s declaration, a British Virgin Islands company, which
9 Bonnant set up for a client for the receipt and investment of the client’s inheritance. Bonnant is
10 identified in the Corporate Resolutions portion of Merrill Lynch’s form as Sophin’s
11 “President/Director” and “Representative.” At the end of the Application portion of the
12 agreement, Bonnant signed his name twice, first on the first signature line, captioned, “Signature
13 (Accountholder) (If Corporation, Authorized Representative)”, and again on the second signature
14 line, captioned “Signature (Accountholder)”. Just above the signature lines, and in bold print, the
15 document advises parties that by signing below they agree to arbitrate any controversies.
16 Sophin experienced large losses in the account as a result of unsuccessful trading in
17 naked options and swaps. On July 7, 2008, in accordance with the provision of the contract that
18 “[t]he parties are waiving their right to seek remedies in court” and “all controversies, which
19 may arise between us . . . shall be determined by arbitration,” Sophin commenced arbitration
20 against Defendants Merrill Lynch and Merrill Lynch Capital Services, Inc. before the Financial
21 Industry Regulatory Authority. Sophin alleged that the losses in the account were “the result of
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1 unauthorized and unsuitable trades.” In their answer in the arbitration, Defendants claimed that
2 Bonnant authorized the contested trading. They asserted a counterclaim against Sophin seeking
3 to recover the deficit in the Sophin account, as well as an early termination fee.
4 In addition, Defendants named Bonnant as a third-party defendant in the arbitration, and
5 asserted claims against him personally, claiming entitlement to indemnification by Bonnant in
6 the event the arbitration resulted in an award in Sophin’s favor. Their claim of entitlement to
7 indemnification by Bonnant was based on the contention that he authorized the trades Merrill
8 Lynch executed for Sophin and that he “may have misrepresented Sophin’s investment
9 experience, financial condition, [and] risk tolerance.”
10 Bonnant then brought this action in the district court seeking to enjoin Defendants from
11 bringing him into the arbitration. Bonnant’s suit is based on his assertion that he is “not a party
12 to any arbitration agreement with Merrill Lynch; therefore [he] cannot be required to arbitrate
13 with Merrill Lynch.” His declaration asserts that he signed the agreement opening Sophin’s
14 account “in a purely representative capacity on behalf of Sophin and never intended to be bound
15 personally by this agreement,” and that “[n]one of [his] personal funds are in Sophin.”
16 Bonnant moved for a preliminary injunction, which the district court denied, concluding
17 that Bonnant failed to demonstrate a likelihood of success on the merits. Bonnant v. Merrill
18 Lynch, Pierce, Fenner & Smith, Inc., No. 09 Civ. 3007, 2009 WL 1809980, at *5 (S.D.N.Y. June
19 25, 2009). Noting that Bonnant signed Sophin’s application twice, and citing case law which the
20 court considered as precedential support for its ruling, the court stated that “[Bonnant’s] second
21 signature, as a separate ‘[a]ccountholder,’ indicates that [Bonnant] opened the Sophin ICMA
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1 Account in both representative and personal capacities.” Id. (second alteration in original).
2 Defendants then moved for summary judgment and to compel arbitration. The district
3 court granted summary judgment in favor of Defendants, ordering Bonnant to arbitrate. Bonnant
4 v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 09 Civ. 3007 (S.D.N.Y. May 18, 2010). The
5 court gave various reasons for its conclusion that the contract unambiguously identified Bonnant
6 as an accountholder and as a party to the agreement, including by reference the reasons set forth
7 in the court’s previous order denying Bonnant’s motion for a preliminary injunction. We
8 examine each of the court’s reasons below.
9 II. Discussion
10 A. Merrill Lynch
11 We review a district court’s interpretation of contract provisions and its award of
12 summary judgment de novo. Bank of N.Y. v. First Millenium, Inc., 607 F.3d 905, 914 (2d Cir.
13 2010). “[A]rbitration is a matter of contract and a party cannot be required to submit to
14 arbitration any dispute which he has not agreed so to submit.” AT & T Techs., Inc. v. Commc’ns
15 Workers of Am., 475 U.S. 643, 648 (1986) (quoting United Steelworkers of Am. v. Warrior &
16 Gulf Navigation Co., 363 U.S. 574, 582 (1960)) (internal quotation marks omitted). Principles of
17 contract and agency determine whether a party is bound by an arbitration agreement. McAllister
18 Bros. v. A & S Transp. Co., 621 F.2d 519, 524 (2d Cir. 1980).
19 Under New York law, which governs this contract, “[t]he threshold question in a dispute
20 over the meaning of a contract is whether the contract terms are ambiguous.” Revson v. Cinque
21 & Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000). In a contract dispute, generally, a motion for
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1 summary judgment may be granted only when the contract language is “wholly unambiguous”
2 and conveys “a definite meaning.” Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir.
3 2008). A contract is ambiguous if it is capable of “more than one meaning when viewed
4 objectively by a reasonably intelligent person who has examined the context of the entire
5 integrated agreement and who is cognizant of the customs, practices, usages and terminology as
6 generally understood in the particular trade or business.” Int’l Multifoods Corp. v. Commercial
7 Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002) (internal quotation marks omitted).
8 Accordingly, the district court could not properly grant the motion for summary judgment
9 ordering Bonnant to submit to the arbitration unless the agreement unambiguously established
10 his agreement to arbitrate any claims Merrill Lynch would bring against him personally arising
11 out of the agreement establishing Sophin’s account.
12 The district court relied on several different theories, some explained in its opinion
13 denying Bonnant’s motion for a preliminary injunction and some explained in its brief oral
14 opinion granting summary judgment, which adopted by reference the reasons set forth in the
15 earlier ruling. We have examined each of the court’s theories and find that none of them
16 unambiguously establishes Bonnant’s agreement to arbitrate claims brought by Defendants
17 seeking to establish his personal liability. Each theory expressed by the district court relies on a
18 misreading or misinterpretation of some aspect of the contract or the legal precedents. We
19 discuss each theory below.
20
21
22 1. The District Court mistakenly read the legend preceding Bonnant’s
23 second signature to identify him as the “accountholder.”
24
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1 It appears the district court’s principal justification for its judgment was its perception,
2 first explained in the opinion denying Bonnant’s motion for a preliminary injunction, and
3 adopted by reference in the decision granting summary judgment, that Bonnant unambiguously
4 accepted the status of “accountholder” because “[o]n the signature page of the document . . .
5 [Bonnant] signed his name twice – once as Sophin’s ‘Authorized Representative’ and once as an
6 additional ‘Accounholder.’” 2009 WL 1809980, at *1. The court concluded that Bonnant’s
7 “second signature, as a separate ‘[a]ccountholder,’ indicates that [Bonnant] opened the Sophin
8 ICMA Account in both representative and personal capacities.” Id. at *5.
9 Putting aside the question of whether extrinsic evidence might show that Bonnant made
10 himself a party to the agreement, which question is beyond the scope of this appeal, we find that
11 the agreement cannot be construed to establish that status for Bonnant unambiguously, as is
12 required for grant of summary judgment. Numerous aspects of the way Bonnant filled in the
13 blanks in the Merrill Lynch form are inconsistent with the conclusion reached by the district
14 court. And, as explained below, while some of Bonnant’s entries would be consistent with his
15 being personally the accountholder, these entries are also wholly consistent with his being the
16 signatory for the corporate accountholder. To assess the question raised by the motion for
17 summary judgment, furthermore, it is not sufficient to look only at the signature line in isolation.
18 What is written on a signature line must be understood in the light of the entire agreement.
19 Accordingly, we examine several terms of the agreement establishing Sophin’s International
20 Cash Management Account.
21
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1 The agreement was made on a fourteen-page form provided by Merrill Lynch for the
2 opening of an International Cash Management Account, with numerous blanks to be filled in by
3 the applicant for the account. The form is in three parts. The first four pages are the
4 “International CMA Account Application and Agreement Form” (the “Application”), which
5 inter alia specifies the type of account (whether single, joint, corporate, trust, estate, or other)
6 and identifies the accountholder or accountholders. The next two pages are captioned
7 “Corporate Resolutions”; in the case of a corporate client, these provide the form of board
8 resolutions which will authorize the account agreement in a manner satisfactory to Merrill
9 Lynch, as well as specify who are the representatives of the corporation who are authorized to
10 give instructions and to sign on behalf of the corporate accountholder. Finally pages seven
11 through fourteen are captioned “International Cash Management Account Agreement” (the
12 “Agreement”). This latter portion specifies numerous terms and conditions of the agreement
13 required by Merrill Lynch and contains no blanks to be filled in by the applicant.
14 On the opening pages of the Application, the first blank, captioned “Type of Account,”
15 directs the applicant to “check the appropriate box” to indicate the type of account being opened,
16 as between “Single, Joint, Corporate, Trust, Estate, and Other” (with a blank line for explanation
17 of what “Other” represents). The only entry in this portion is that “Corporate” has been checked.
18 The second blank on the form, captioned “Account Information,” instructs the applicant to “print
19 the names of all accountholders” (emphasis added). Above the legend “Primary Accountholder
20 Name,” “Sophin Investment” has been entered. The second half of the line calls for “Secondary
21 Accountholder Name, if Joint Account.” This portion of the line was left blank. Another line
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1 calls for the identification of “Additional Accountholders.” This line was also left blank. Thus,
2 these portions of the Application, taken by themselves, state that this is a “Corporate” account
3 and that Sophin is the sole accountholder.
4 The Corporate Resolutions portion of the agreement calls for the insertion of the name of
5 the corporation applying to open a corporate Cash Management Account at Merrill Lynch. The
6 words “Sophin Investment” have been filled in. Further down the page are three blank lines
7 calling for the names and signatures of “Representatives” who are authorized to act for and sign
8 for the corporate accountholder. Lines 1 and 2 were both filled in with the name “BONNANT
9 MARC,” followed by Bonnant’s signature. (The third line was left blank. No explanation is
10 given why Bonnant’s name and signature were written in twice.) This Corporate Resolutions
11 portion of the agreement concludes with a blank for certification by an officer or director of the
12 corporation to the due adoption of the specified resolutions by the “unanimous vote of the Board
13 of Directors of said Corporation.” These blanks have been filled in to indicate that the
14 certification on behalf of Sophin’s board is made by “Marc Bonnant,” as “President/Director of
15 Sophin Investment,” and with Bonnant’s signature at the bottom.
16 On the same date Bonnant executed these forms, he also executed IRS Form W-8BEN, a
17 Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (the “Tax
18 Certificate”), which identifies the beneficial owner of the account. The Tax Certificate lists
19 Sophin as the beneficial owner of the account, identifies Sophin as a corporation, and gives its
20 addresses. Bonnant’s signature appears at the line that reads “Signature of beneficial owner (or
21 individual authorized to sign for beneficial owner)”.
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1 The entries made in the Application under Type of Account and Account Information,
2 the Corporate Resolutions, and the Tax Certificate all consistently state that the Sophin account
3 is a corporate account, and not a single, joint, or other type of account, that the sole
4 accountholder is Sophin Investment, that Merrill Lynch’s sole counterparty to the agreement is
5 the corporation known as Sophin Investment, and that Bonnant’s role in signing the agreement
6 was as officer, director, representative, and authorized signatory of the corporate accountholder.
7 We proceed from there to examine the other portions of the agreement, which led the
8 district court to conclude that, notwithstanding the previously considered sections that
9 unambiguously identify Bonnant as the representative of the corporate accountholder, Bonnant
10 unambiguously identified himself as accountholder of the Sophin account and as a party to the
11 agreement.
12 As noted above, the district court found that Bonnant unambiguously accepted the role of
13 accountholder and thus is bound by the arbitration agreement because, in the district court’s
14 words, “[o]n the signature page of the document . . . [Bonnant] signed his name twice – once as
15 Sophin’s ‘Authorized Representative’ and once as an additional ‘Accounholder,’” 2009 WL
16 1809980, at *1. According to the court, Bonnant’s “second signature, as a separate
17 ‘[a]ccountholder,’ indicates that [Bonnant] opened the Sophin ICMA Account in both
18 representative and personal capacities.” Id. at *5 (first alteration in original).
19 The district court’s conclusion that the second signature unambiguously made Bonnant
20 the accountholder was based on a misreading of the legend provided in Merrill Lynch’s form
21 beneath the signature line where Bonnant placed his second signature. This legend did not say
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1 that, by placing his or her signature on the line, the person signing thereby identifies himself or
2 herself as the accountholder. What it said was simply, “Signature (Accountholder).” If Bonnant
3 was indeed the authorized signatory for the accountholder Sophin, as indicated in the
4 Application and the Corporate Resolutions of the Agreement, then the line calling for “Signature
5 (Accountholder)” calls for his signature, as the signatory for Sophin, the accountholder. There is
6 no reason to read his placement of his signature on that line as unambiguously identifying
7 himself as the accountholder, as such a reading would contradict everything he entered in the
8 preceding portions of the Application and Corporate Resolutions.
9 We recognize that the second signature can be seen as introducing an ambiguity. The
10 second signature line calling for “Signature (Accountholder)”, if considered in isolation, would
11 normally be read to identify the person signing as the accountholder. Were it not for the
12 information provided in the overall agreement as to the Type of Account, the Account
13 Information, and the Corporate Resolutions of Sophin, Bonnant’s signature on a line calling for
14 “Signature (Accountholder)” would identify him unambiguously as the accountholder. But when
15 that signature is considered in the context of the full agreement, the overall contract cannot be
16 read to say unambiguously that Bonnant is the accountholder.
17 His signature on a line calling for “Signature (Accountholder)” is fully consistent with
18 the portions of the contract identifying Sophin as the sole accountholder and Bonnant as its
19 representative and signatory. If the question is considered why Bonnant signed twice as
20 representative of Sophin, at least one possible answer is that Merrill Lynch’s standard form for a
21 corporate account could be read to ask twice for the signature of the representative of the
22 corporate accountholder.
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1 2. New York law does not support the proposition that a corporate
2 representative renders himself liable on the corporation’s contract
3 merely by signing twice.
4
5 The district court seems to have read New York law as providing that a corporate
6 representative who signs a contract for the corporation and then signs a second time thereby
7 makes himself personally liable. See 2009 WL 1809980, at *5. When ruling on Bonnant’s
8 application for a preliminary injunction, the district court stated, quoting from Salzman Sign Co.
9 v. Beck, 176 N.E.2d 74, 76 (N.Y. 1961) and Ainbinder v. Kelleher, No. 92 Civ. 7315, 1997 WL
10 420279, at *13 (S.D.N.Y. July 25, 1997), “[E]veryone in business knows that an individual
11 stockholder or officer is not liable unless he signs individually, and where individual
12 responsibility is demanded the nearly universal practice is that the officer signs twice – once as
13 an officer and again as an individual.” 2009 WL 1809980, at *5. However, nothing in the record
14 supports the proposition that it is a convention of the business world that a corporate
15 representative signing for the corporation renders himself personally liable by signing twice. Nor
16 do the cases cited by the district court, or any other precedent known to us, support such a rule.
17 Under New York law, it is well-established that an “agent will not be personally bound
18 unless there is clear and explicit evidence of the agent’s intention to substitute or superadd his
19 personal liability for, or to, that of his principal.” Mencher v. Weiss, 114 N.E.2d 177, 179 (N.Y.
20 1953). For a corporate representative to be personally bound by a contract, the officer must sign
21 both in a representative and in an individual capacity. See Ainbinder, 1997 WL 420279 at *13;
22 Salzman Sign, 176 N.E.2d at 76. In Salzman Sign, which the district court cited in support of its
23 conclusion, the plaintiff company attempted to recover an amount owed to it by a corporate
24 entity from the corporation’s president in his personal capacity. 176 N.E.2d at 75. The plaintiff
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1 argued that the contract language specifically stated that any officers signing on behalf of the
2 corporation also individually guaranteed payment. Id. The Court stated that “everyone in
3 business knows that an individual stockholder or officer is not liable for his corporation’s
4 engagements unless he signs individually, and where individual responsibility is demanded the
5 nearly universal practice is that the officer signs twice–once as an officer and again as an
6 individual.” Id. at 76. Because the contract had been signed once by the corporation’s president,
7 signing on behalf of the corporation, the court concluded that the president was not personally
8 liable. Id. at 75-76. The Court of Appeals neither held nor implied that a corporate representative
9 is personally bound under the corporation’s contract merely as a consequence of signing twice.
10 What it said was that for a corporate officer to be personally bound, he must sign the
11 corporation’s agreement in both a representative capacity and in his personal capacity. See id. at
12 76.
13 As the district court stated the proposition of law, it is undoubtedly correct. A corporate
14 officer who signs on behalf of the corporation is not liable unless he signs as an individual (in
15 addition to signing as the corporate representative). Thus, if individual liability of the officer is
16 intended, the officer would sign twice–once as representative, and once as an individual. The
17 district court’s correct statement of that legal proposition, however, in no way implies that the
18 representative’s mere placement of his signature twice on the contract commits him to individual
19 contractual liability. If the contract is the corporation’s contract and the representative’s first
20 signature is as the corporation’s representative, the corporation’s representative who signs twice
21 is not liable under the contract unless the second signature is in a context showing that the
22 representative is agreeing to assume personal responsibility. The mere fact of signing twice says
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1 no such thing.
2
3 3. Nor did Bonnant make himself personally liable merely by placing his
4 signature once on the Application.
5
6 The district court also reasoned that, under express language in the Agreement, any
7 individual who placed his signature, even once, on the Application, thereby bound himself
8 personally to arbitrate any dispute with Merrill Lynch arising out of the Agreement. The court
9 stated in its oral ruling on summary judgment “[T]he agreement itself specifically provides . . .
10 ‘In this agreement, ‘I,’ ‘me,’ ‘my,’ or ‘accountholder’ means each natural or legal person who
11 signs [the Application.]’” The court then pointed out that the signature page of the Application
12 also stated “I acknowledge . . . I am agreeing in advance to arbitrate any controversies which
13 may arise with you.” The district court thus concluded that under the plain language of the
14 Agreement, Bonnant, as a natural person who signed the Application, became an “I” or “me” of
15 the Agreement, and, as such, had made a personal contractual commitment to arbitrate disputes
16 with Merrill Lynch.
17 Through this reasoning, the district court found Bonnant liable to arbitrate Merrill
18 Lynch’s claims against him asserting his personal liability–not because he signed twice, but
19 merely because he signed for Sophin. Under the district court’s reading of this aspect of the
20 Agreement, any time a corporate entity opened a Merrill Lynch account using Merrill Lynch’s
21 forms, the corporate representative signing for the corporate accountholder would make himself
22 personally liable by the mere act of signing for the corporation (at least unless he took pains to
23 expressly negate the boilerplate clause on which the district court relied).
24 This construction is at odds with basic principles of agency and was expressly
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1 contradicted by the New York Court of Appeals in Salzman Sign, cited above. In that case, the
2 contract contained boilerplate to the effect that an officer for the contracting corporation who
3 signed on its behalf thus rendered himself personally liable. 176 N.E.2d at 75. The Court of
4 Appeals, as noted above, rejected the contention that by signing the contract the corporate
5 representative undertook personal responsibility. Id. at 76. If there is a difference between this
6 contract and the one at issue in Salzman Sign, the difference is that the boilerplate at issue in
7 Salzman Sign was far clearer in its intention to impose personal liability on an individual based
8 on his signing in a representative capacity. The boilerplate language in Salzman Sign expressly
9 and unambiguously stated that one who signed as a corporate representative undertook to
10 guarantee the corporation’s liabilities. Nonetheless the Court of Appeals refused to read the
11 contract as supporting individual liability of the corporate representative who signed. Here the
12 language says nothing of the kind, and seems not to have intended such meaning.
13 We recognize that Merrill Lynch’s form agreement builds in an ambiguity. It arguably
14 identifies the person who signs to be the “I” or “me” of the Agreement and elsewhere provides in
15 the boilerplate, “I am agreeing . . . to arbitrate.” This passage, if considered in isolation, arguably
16 amounts to an agreement by the signer to arbitrate. But this language cannot unambiguously
17 make the person who signs the person who agrees to arbitrate. The clause identifying “I” uses
18 the disjunctive between “individual” and “legal” person. In identifying as “I” each “natural or
19 legal person” who signs, it does not necessarily mean that each natural person who signs agrees
20 to arbitrate. It is also susceptible to the meaning that whatever type of person, natural or legal,
21 that opens an account with Merrill Lynch, agrees to arbitrate. Such an interpretation of the
22 ambiguity is more consistent with the portions of the agreement that identify the Sophin
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1 corporation as the maker of the agreement.1
2 4. Because the agreement is ambiguous the district court could not
3 properly grant summary judgment.
4
5 We conclude that the agreement contains ambiguities which bar the grant of summary
6 judgment. There are provisions in the contract which can be construed to mean that Bonnant
7 personally agreed to arbitrate. On the other hand, other provisions of the ambiguous contract are
8 difficult to reconcile with that interpretation. We therefore vacate the district court’s ruling and
9 its grant of summary judgment for Merrill Lynch. The court will need to determine whether the
10 agreement, considered in its entirety, can sensibly be construed to include Bonnant’s personal
11 agreement to arbitrate disputes arising out of the Sophin agreement, and, if so, whether extrinsic
12 evidence the parties may offer demonstrates such a status.
13 B. Merrill Lynch Capital Services
1
We note also that the consequences of construing the agreement to make Bonnant the
“I” and the “accountholder” are potentially huge. The district court may have believed nothing
more was at stake than the choice of forum. As we view it, however, the district court’s reading
of the Agreement could not only require Bonnant to arbitrate, but could also make him
personally liable for millions of dollars in liabilities of Sophin. The Agreement states in Article
21
I shall at all times be liable for the payment upon demand of any debit balance or
other obligations owing in any of my accounts with you. I shall be liable to you
for any deficiency remaining in any such accounts in event of the liquidation
thereof, in whole or in part, by you or by me. I will pay such obligations and
indebtedness upon demand.
If, as the district court viewed it, “I” means any individual who places his signature on the
Application, then it would seem to follow that by signing on behalf of Sophin, Bonnant made
himself personally liable for all deficiencies in Sophin’s account. Arbitrators adjudicating the
dispute might well regard the equivalency between Bonnant and “I” as conclusively and
bindingly established by the district court’s opinion, and with it, Bonnant’s liability to pay upon
demand all deficiencies in Sophin’s account. We do not agree that the face of the Agreement
unambiguously established that Bonnant undertook any form of personal responsibility merely
by affixing his signature, as Sophin’s authorized representative, to the Application.
The district court, apparently mindful of such dangers, stated that its ruling was “[w]ith
respect to arbitrability only –and I want to be very clear about that.” Notwithstanding the district
court’s effort to limit the scope of its ruling, the arbitrator might well conclude that, if the word
“I” means Bonnant in one clause of the contract, it also means Bonnant in the other clauses of
the contract.
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1 The district court determined that Bonnant was required also to arbitrate disputes with
2 Merrill Lynch Capital Services. The court relied on an estoppel theory. 2009 WL 1809980, at
3 *6-7. To bind a party under this theory a court must first find that there was a valid agreement to
4 arbitrate between two parties. See JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 177 (2d
5 Cir. 2004). Because we disagree with the court’s conclusion the Agreement unambiguously
6 bound Bonnant to arbitrate disputes with Merrill Lynch, we cannot agree with the district court’s
7 conclusion that under an estoppel theory Bonnant also must arbitrate disputes with Merrill Lynch
8 Capital Services. The district court’s judgment compelling Bonnant to arbitrate disputes with
9 Merrill Lynch Capital Services is also vacated.
10 III. Conclusion
11 The judgment of the district court is VACATED, and the case REMANDED for further
12 proceedings consistent with this order.
13
14 FOR THE COURT:
15 CATHERINE O’HAGAN WOLFE, CLERK
16
17
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