Afsaneh S. Kleinman and Dr. Elliot Kleinman v. Fifth Third Securities, Inc. (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Dec 12 2016, 7:37 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEE
Ronald A. Wright Thomas M. Connor
Marsha L. Hackenberg Dinsmore & Shohl LLP
Wright & Associates, PC Cincinnati, Ohio
Carmel, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Afsaneh S. Kleinman and Dr. December 12, 2016
Elliot Kleinman, Court of Appeals Case No.
Appellants-Plaintiffs, 49A02-1603-CC-624
Appeal from the Marion Superior
v. Court
The Honorable John F. Hanley,
Fifth Third Securities, Inc., Judge
Appellee-Defendant. Trial Court Cause No.
49D11-1412-CC-41876
Vaidik, Chief Judge.
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Case Summary
[1] Afsaneh and Elliot Kleinman sued Fifth Third Securities, Inc., alleging that
they had received bad investment advice. Fifth Third Securities responded with
a motion to dismiss the case and to compel arbitration, claiming that the
Kleinmans had agreed that any disputes would be arbitrated. The trial court
granted the motion, and the Kleinmans appeal. Finding no error, we affirm.
Facts and Procedural History
[2] On December 17, 2012, the Kleinmans deposited $500,000 into an account
with Fifth Third Securities. Appellants’ App. p. 47. On December 19, Afsaneh
met with Gregory Lutterman, a financial advisor with Fifth Third Securities, to
discuss how to invest the money. Lutterman recommended that the Kleinmans
put the funds into Unit Investment Trusts (“UITs”). He also gave Afsaneh a
Brokerage Account Application (“Account Application”) form and a UIT
Explanation of Investments form to discuss with Elliot. The parties dispute
whether the Kleinmans agreed to the UIT investments on December 19, but
two days later, Fifth Third Securities used the $500,000 to purchase units in
four UITs, and it sent the Kleinmans a notice confirming the transactions. Six
weeks later, in February 2013, the Kleinmans met with Lutterman and signed
an Account Application and a UIT Explanation of Investments relating to the
investments.
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[3] In December 2014, the Kleinmans filed suit against Fifth Third Securities.
They did not provide us with a copy of their complaint, but they apparently
alleged that Lutterman had given them bad investment advice and that they had
lost money as a result. In response, Fifth Third Securities filed a motion to
have the case dismissed and to compel arbitration on the ground that the
Kleinmans had agreed that any dispute would be resolved via arbitration. It
relied on two documents: the Account Application that the Kleinmans had
signed and a document called Brokerage Account Customer Agreement
(“Customer Agreement”). The Account Application included the following
provision, in a box and bold letters just above the parties’ initials and signatures:
Pre-Dispute Arbitration
This account is governed by a pre-dispute arbitration clause,
which appears on the last page of the Client Agreement, and
you acknowledge that you have received a copy of this clause.
Id. at 19. The last page of the Customer Agreement began with the heading
“Resolving Disputes – Arbitration” and provided, in part:
This agreement contains a pre-dispute arbitration clause. Under
this clause, which becomes binding on all parties when you sign
your account application, you, we, and NFS [National Financial
Services LLC] agree as follows:
[introductory provisions omitted]
All controversies that may arise between me, You and NFS
concerning any subject matter, issue or circumstances whatsoever
(including, but not limited to, controversies concerning any
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account, order or transaction, or the continuation, performance,
interpretation or breach of this or any other agreement between
me, You and NFS whether entered into or arising before, on or
after the date this account is opened) shall be determined by
arbitration in accordance with the rules then prevailing of the
Financial Industry Regulatory Authority (FINRA) or any United
States securities self-regulatory organization or United States
securities exchange of which the person, entity or entities against
whom the claim is made is a member, as I may designate.
Id. at 25.
[4] While the motion to dismiss was pending, the Kleinmans deposed Lutterman.
Lutterman testified that while he could not specifically recall giving the
Kleinmans a copy of the Customer Agreement along with the Account
Application, it was “standard practice” to do so. Lutterman Depo. p. 14, 25
(included in Volume of Exhibits). The next month, the Kleinmans moved to
publish the deposition. On November 13, 2015, the trial court granted that
motion and also issued an order granting Fifth Third Securities’ motion to
dismiss and to compel arbitration.
[5] The Kleinmans now appeal.
Discussion and Decision
[6] The Kleinmans contend that the trial court erred by granting Fifth Third
Securities’ motion to dismiss and to compel arbitration. We review such
matters de novo. Brumley v. Commonwealth Bus. Coll. Educ. Corp., 945 N.E.2d
770, 774-75 (Ind. Ct. App. 2011).
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[7] As the party seeking to compel arbitration, Fifth Third Securities had the
burden of showing that the parties entered into an arbitration agreement and
that the dispute at issue is covered by the agreement. Id. at 775-76. The
Kleinmans maintain that Fifth Third Securities failed to make these two
showings. We disagree.1
I. Existence of Arbitration Agreement
[8] The parties entered into an arbitration agreement. The Kleinmans signed the
Account Application, and by doing so they acknowledged that (1) their account
would be “governed by a pre-dispute arbitration clause” and (2) they “have
received a copy of this clause.” Fifth Third Securities’ arbitration clause
appears on the last page of its Customer Agreement, and the Kleinmans’
acknowledgement that they received a copy of the clause is corroborated by
Lutterman’s deposition testimony that it was “standard practice” to provide a
copy of the Customer Agreement along with the Account Application.
[9] The Kleinmans make much of the fact that the arbitration acknowledgement in
the Account Application references a “Client Agreement,” whereas the
document relied upon by Fifth Third Securities is called “Customer
Agreement.” They note the lack of evidence that a document called “Client
Agreement” even exists. But if the Kleinmans were concerned about the
1
Fifth Third Securities correctly notes that “Indiana recognizes a strong policy favoring the enforcement of
arbitration agreements.” Koors v. Steffen, 916 N.E.2d 212, 215 (Ind. Ct. App. 2009), reh’g denied. This appeal,
however, primarily concerns whether an agreement to arbitrate the dispute at issue even exists.
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absence of a document called “Client Agreement,” the time to raise that
concern was before signing the Account Application. Had they done so, Fifth
Third Securities no doubt would have realized its imprecise drafting and
explained that the relevant document is called “Customer Agreement.”
Instead, the Kleinmans simply signed the Account Application, thereby
acknowledging their receipt of the arbitration clause. That acknowledgement—
regardless of the precise name of the document in which the arbitration clause
appears—is the key fact for our purposes. This fact strongly suggests that the
Kleinmans understood “Client Agreement” to be a reference to the “Customer
Agreement” in which the arbitration clause actually appears. The only other
possibility is that the Kleinmans signed the Account Application without
reading it. If that is the case, they did so at their own peril. See Clanton v. United
Skates of Am., 686 N.E.2d 896, 899-900 (Ind. Ct. App. 1997) (“Under Indiana
law, a person is presumed to understand the documents which he signs and
cannot be released from the terms of a contract due to his failure to read it.”).
[10] In support of their argument that they did not agree to arbitration, the
Kleinmans cite Webb v. First Tennessee Brokerage, Inc., No. E2012-00934-COA-
R3-CV, 2013 WL 3941782 (Tenn. Ct. App. June 18, 2013), in which the
Tennessee Court of Appeals affirmed a trial court’s denial of a motion to
compel arbitration. In that decision, the court addressed the law of Tennessee,
not Indiana. Furthermore, the publication status and precedential value of the
decision are unclear—the court apparently did not designate it for publication
in the Southwestern Reporter. In any event, the trial court decision that was
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affirmed in that case turned in part on the fact that nowhere in the documents at
issue did the customer “expressly say that she agrees to arbitrate.” 2013 WL
3941782 at *12. Here, on the other hand, the first line of the arbitration clause
states, “This agreement contains a pre-dispute arbitration clause. Under this
clause, which becomes binding on all parties when you sign your account
application, you, we, and NFS agree as follows . . . .” Appellants’ App. p. 25
(emphasis added). This fact distinguishes this case from Webb.
II. Scope of Arbitration Agreement
[11] The Kleinmans also assert that even if an arbitration agreement exists, it does
not cover the dispute at issue. They base this argument on the fact that they did
not sign the Account Application until February 2013, six weeks after Fifth
Third Securities put their money into the UITs. The Kleinmans contend that
the agreement “was not in place at the time the investment was made, therefore
it does not apply to the actions taken by the bank in December 2012.”
Appellants’ Br. p. 18. We cannot say that this delay rendered the arbitration
clause inapplicable to the parties’ dispute. The clause is written very broadly to
cover “[a]ll controversies . . . concerning any subject matter, issue or
circumstances,” including “controversies concerning any account, order or
transaction, or the continuation, performance, interpretation or breach of this or
any other agreement between me, You and NFS whether entered into or
arising before, on or after the date this account is opened[.]” Appellants’
App. p. 25 (emphasis added).
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[12] In a final attempt to avoid the arbitration clause, the Kleinmans suggest that
because they did not sign the Account Application until after Fifth Third
Securities had completed the UIT transactions, Fifth Third Securities’ actions
were taken “without authorization” and were “illegal” and therefore fall
outside the scope of the arbitration agreement. Appellants’ Br. p. 19. They do
not support this argument with cogent reasoning, so it is waived. See Ind.
Appellate Rule 46(A)(8)(a); City of Indianapolis v. Buschman, 988 N.E.2d 791,
795 (Ind. 2013). Waiver notwithstanding, the Kleinmans’ claim that the
transactions were not authorized is belied by the fact that when Fifth Third
Securities sent them a notice confirming the transactions, they did not question
the transactions or seek to have them reversed. Instead, the Kleinmans waited
six weeks and then signed the Account Application, thereby ratifying the earlier
investments. In short, the time for claiming that Fifth Third Securities’ initial
actions were “illegal” has long passed.
[13] Affirmed.
Baker, J., and Najam, J., concur.
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