Kirsh v. Finova Group, Inc. ( 2007 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1582
HERBERT KIRSH; KEVIN KIRSH; PHILLIP D. GRANT;
MICHAEL E. PARRISH; BILLY E. HENSLEY; SUE R.
ROGERS; CHARLES H. BURRIS; WILLIAM C. MOORE;
BETTY RUSSELL; WANDA LANEY; JOANNE M. JORDAN;
DEAN E. CURTIS; EVERETT E. DEMBY; NORMAN
MONSKA; DAVID D. PRUITT, d/b/a Grits N
Groceries, and others similarly situated,
Plaintiffs - Appellants,
versus
FINOVA GROUP, INCORPORATED; FINOVA CAPITAL
CORPORATION; LEUCADIA NATIONAL CORPORATION;
BERKADIA, LLC; BERKADIA MANAGEMENT; BERKADIA
EQUITY HOLDINGS; BERKADIA II,
Defendants - Appellees.
Appeal from the United States District Court for the District of
South Carolina, at Rock Hill. G. Ross Anderson, Jr., District
Judge. (0:07-cv-00371-GRA)
Submitted: December 3, 2007 Decided: December 20, 2007
Before KING, SHEDD, and DUNCAN, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Richard R. Gleissner, FINKEL, ALTMAN & BAILEY, LLC, Columbia, South
Carolina, for Appellants. Daniel P. Shapiro, Andrew R. Cardonick,
Steven A. Levy, GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD.,
Chicago, Illinois; Wallace K. Lightsey, Matthew T. Richardson,
WYCHE BURGESS FREEMAN & PARHAM, P.A., Greenville, South Carolina;
Terry E. Richardson, Jr., James L. Ward, Jr., RICHARDSON, PATRICK,
WESTBROOK & BRICKMAN, LLC, Mount Pleasant, South Carolina, for
Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Herbert Kirsh and co-appellants (collectively “Kirsh”)
appeal the district court’s order granting The Finova Group, Inc.,
and co-appellees’ (collectively “Finova Group”) motion to compel
arbitration and dismissing the complaint.*
Kirsh’s complaint alleged numerous claims arising from
the allegedly fraudulent sale of Senior Subordinated Term Notes
(“the Notes”) from Thaxton Life Partners, Inc., (“TLP”) to Kirsh.
Although Finova Group was not a party to the sale, Kirsh alleged
Finova Group was “unjustly enriched by manipulating [TLP] and
related companies to sell subordinated notes to unsuspecting
individuals who were then swindled out of their investments.” The
subscription agreement governing the Notes contained the following
arbitration provision:
Arbitration. Subscriber hereby agrees that any dispute,
controversy or claim arising out of or in connection
with, or relating to, any subscription of the Note, or
any breach or alleged breach hereof, including
allegations of violations of federal or state securities
law, shall upon the request of any party involved, be
submitted to, and settled by, arbitration . . . .
The district court relied on our decision in American
Bankers Insurance Group, Inc. v. Long, 453 F.3d 623 (4th Cir.
2006), to hold Kirsh was equitably estopped from contending the
arbitration provision did not apply to the complaint against Finova
*
We have jurisdiction over this final order pursuant to 28
U.S.C. § 1291 (2000).
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Group. In Long, the court examined the identical arbitration
provision and determined it required those plaintiffs to arbitrate
their similar claims against another third party who was allegedly
complicit to TLP’s sale of securities. Therefore, for the same
reasons explained in Long, the district court granted Finova
Group’s motion to compel arbitration and dismissed the complaint.
The Federal Arbitration Act, set forth in 9 U.S.C. §§ 2
et seq. (2000), requires courts to compel arbitration when there is
a dispute between the parties and a written agreement that provides
for arbitration to resolve that dispute. Adkins v. Labor Ready,
Inc., 303 F.3d 496, 500-01 (4th Cir. 2002). A third party can
invoke the principle of equitable estoppel to compel a signatory to
an arbitration clause to arbitrate claims against the third party
when “each of [the] signatory’s claims against [the] nonsignatory
makes reference to or presumes the existence of the written
agreement, [such that] the signatory’s claims arise out of and
relate directly to the written agreement” containing the
arbitration provision. Brantley v. Republic Mortgage Ins. Co., 424
F.3d 392, 395-96 (4th Cir. 2005).
Although the court generally reviews a district court’s
decision regarding whether to compel arbitration de novo, when the
“district court’s decision is based on principles of equitable
estoppel, [the court] review[s] the district court’s decision for
abuse of discretion. The district court abuses its discretion when
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it commits an error of law or clearly errs in making a finding of
fact.” Long, 453 F.3d at 629.
In Long, the court reviewed the identical arbitration
provision in another of TLP’s security sales. The plaintiffs sued
a third party to the sale for numerous claims related to the
allegedly fraudulent sale, including securities fraud, civil
conspiracy, unfair trade practices, and unjust enrichment. Id. at
625. The court held principles of equitable estoppel required
arbitration of the claims. In so holding, we noted that “if TLP
had never issued the [securities contract, the plaintiffs] would
have no basis for recovery against [the third party]. Each of the
[plaintiffs’] individual claims . . . are dependent upon their
allegation that [the third party] breached a duty created “solely
by [the securities contract], for without the alleged breach,
[they] would have no cause to complain.” Id. at 630. Accordingly,
the court held “it would be inequitable to allow the [plaintiffs]
to seek recovery on their individual claims and at the same time
deny that [the third party] was a party to the Subscription
Agreement’s arbitration clause.” Id. at 630.
We find the district court did not abuse its discretion
in determining Kirsh’s claims, like the claims raised in Long, were
based on a breach of a duty created solely by the terms of the
Notes, and that, consequently, Kirsh was required to pursue
arbitration. Kirsh’s arguments attempting to distinguish Long and
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asserting changed circumstances since that decision are
unpersuasive.
Accordingly, we affirm the order of the district court
granting Finova Group’s motion to compel arbitration and dismissing
Kirsh’s complaint. Furthermore, we deny Finova Group’s motion to
dismiss the appeal or to stay proceedings pending arbitration. We
dispense with oral argument because the facts and legal contentions
are adequately presented in the materials before the court and
argument would not aid the decisional process.
AFFIRMED
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