David Chadwick Carrick and Stifel, Nicolaus & Company, Incorporated v. Bettye M. Turner, by and through Sally Jo Turner Walley, Sherra Turner and Nancy Turner Gordon, POA

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2019-CA-00617-SCT
DAVID CHADWICK CARRICK AND STIFEL,
NICOLAUS & COMPANY, INCORPORATED
v.
BETTYE M. TURNER, BY AND THROUGH
SALLY JO TURNER WALLEY, SHERRA TURNER
AND NANCY TURNER GORDON, POA
DATE OF JUDGMENT: 03/11/2019
TRIAL JUDGE: HON. ROBERT P. KREBS
TRIAL COURT ATTORNEYS: WILLIAM HARVEY BARTON
CLAIRE W. KETNER
JOHN ERNEST WADE, JR.
COURT FROM WHICH APPEALED: GREENE COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS: JOHN ERNEST WADE, JR.
CLAIRE W. KETNER
ATTORNEY FOR APPELLEES: WILLIAM HARVEY BARTON
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: REVERSED AND REMANDED - 07/30/2020
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE KING, P.J., COLEMAN AND CHAMBERLIN, JJ.
KING, PRESIDING JUSTICE, FOR THE COURT:
¶1. Bettye Turner invested approximately $2 million into a securities brokerage account
that was created and managed by David Carrick, an investment broker then employed with
Morgan Stanley Smith Barney (Morgan Stanley). Carrick later became employed with Stern,
Agee & Leach, Inc. (Stern Agee). Turner and Carrick signed an Account Application in order
to transfer Turner’s funds to a Stern Agee account. The Account Application incorporated
by reference a Client Account Agreement that contained an arbitration provision. Eventually,
Stifel, Nicolaus & Company, Inc. (Stifel), acquired and merged with Stern Agee. Turner filed
a lawsuit against Carrick and Stifel alleging negligent management and supervision of her
investment account. Carrick and Stifel moved to compel arbitration. The trial court denied
their motion to compel arbitration, and Carrick and Stifel appealed. Because the trial court
erred by failing to compel arbitration, this Court reverses the trial court’s judgment and
remands the case to the trial court for further proceedings consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
¶2. In 2007, Turner hired Carrick, an investment broker, to invest and manage
approximately $2 million. At that time, Carrick was employed with Morgan Stanley.
Carrick’s employment with Morgan Stanley ended in 2009.1
¶3. Carrick secured new employment with the brokerage firm Stern Agee. On September
15, 2009, Carrick met with Turner in order to transfer her funds into a Stern Agee account
that Carrick would continue to manage. To execute the transfer, Stern Agee required Turner
to open a new account with it. Accordingly, Turner completed and signed a Stern Agee
Account Application2 that incorporated by reference a Client Account Agreement. Paragraph
F of the Account Application stated, “I have received a copy of the CLIENT ACCOUNT
1
Turner alleged in the complaint that Carrick was terminated for professional
misconduct.
2
Carrick cosigned the Account Application on the signature line designated for the
registered representative.
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AGREEMENT and agree to the terms and conditions thereof. By signing below, the
customer acknowledges receiving a copy of this agreement.” The Account Agreement did
not contain signature lines.
¶4. The Account Application and the Account Agreement each included predispute
arbitration provisions. Paragraph H of the Account Application provided,
H. I/WE UNDERSTAND THAT THE CLIENT ACCOUNT
AGREEMENT PROVIDED TO ME/US CONTAINS IN
NUMBERED PARAGRAPH 22, A PRE-DISPUTE
ARBITRATION CLAUSE REQUIRING ALL DISPUTES UNDER
THIS AGREEMENT TO BE SETTLED BY BINDING
ARBITRATION. BY SIGNING BELOW, I/WE
ACKNOWLEDGE THAT I/WE HAVE RECEIVED A COPY OF
THIS AGREEMENT.
¶5. During litigation, Stifel produced two separate Account Agreements and an affidavit
attesting that the two Account Agreements were the only two Account Agreements in use
during the time Turner was a client. The first Account Agreement Stifel produced was dated
2012, despite Turner having signed her Account Application in 2009.3 Stifel later produced
an earlier Account Agreement, without information regarding the time period when Stern
Agee/Stifel used that Account Agreement. Neither party has identified which version of the
Account Agreement Turner received,4 although both appear to concede that she received one
3
Stifel did not produce the exact Account Agreement received by Turner because that
Account Agreement would have been in Turner’s possession. Stifel produced a copy of the
Account Agreement it believed Turner had received and it believed had been in use in 2009;
that produced Account Agreeement, however, was dated 2012.
4
Carrick and Stifel admit in footnote 3 of their brief that “[b]ecause the separate
Client Account Agreement does not bear Ms. Turner’s signature and the original was left in
her possession, Defendants were unable to provide an absolute guarantee that the exemplar
provided with their Motion to Compel was the version Ms. Turner received in September of
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of them, or, at least, that she acknowledged receiving one of them. Paragraph 195 of the 2012
Account Agreement provided,
19. ARBITRATION. THIS AGREEMENT CONTAINS A PREDISPUTE
ARBITRATION CLAUSE. BY SIGNING AN ARBITRATION
AGREEMENT THE PARTIES AGREE AS FOLLOWS:
(A) ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE
RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT
TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF
THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.
Stifel attested that the discrepancy between the Account Application paragraph number and
the 2012 Account Agreement paragraph number was a typographical error: the Account
Application had not been updated to reflect the change in the paragraph number in which the
arbitration provision was located.
¶6. Paragraph 22 of the older Account Agreement states,
22. ARBITRATION. THIS AGREEMENT CONTAINS A PREDISPUTE
ARBITRATION CLAUSE. BY SIGNING AN ARBITRATION
AGREEMENT THE PARTIES AGREE AS FOLLOWS:
(A) ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE
RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT
TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE
ARBITRATION FORUM IN WHICH A CLAIM IS FILED.
Both paragraph 19 of the 2012 Account Agreement and paragraph 22 of the older Account
2009.”
5
Paragraph 22 of the 2012 Account Agreement (the paragraph to which the Account
Application refers) contains a choice of law provision. That choice of law provision does
reference the arbitration provision contained in paragraph 19, stating, “[t]his agreement,
including the arbitration provisions contained herein, shall be governed by the laws of the
State of Alabama . . . .” The older Account Agreement likewise provides that the laws of
Alabama govern.
4
Agreement are fairly lengthy, and differ in some of the details.
¶7. The 2012 Account Agreement also included an “assignment of rights” provision that
stated,
26. ASSIGNMENT OF RIGHTS. I understand and agree that you may
assign your rights and duties under this Agreement to any subsidiary,
affiliate, or successor by merger or consolidation without notice to me, or
to any other entity after thirty day written notice to me. This Agreement
shall be binding on and benefit my and your heirs, executors,
administrator, successors, and assigns.
The older Account Agreement provided that the agreement shall “inure to the benefit of
[Stern Agee’s] assigns and successors, by merger, consolidation or otherwise.”
¶8. In 2015, Stern Agee assigned its rights and duties under its agreement with Turner to
Stifel.6 Stifel acquired and merged with Stern Agee. Once the acquisition and merger were
finalized, Carrick was then employed with Stifel.
¶9. On January 8, 2018, Turner, by and through her three daughters, pursuant to their
durable power of attorney,7 filed a lawsuit against Carrick and Stifel alleging negligent
management and supervision of Turner’s investment account.
¶10. The defendants filed a Motion to Compel Arbitration and Stay Litigation. They argued
that, pursuant to the Federal Arbitration Act (FAA), Turner’s Account Application and
Account Agreement mandated that the parties resolve the dispute in binding arbitration. In
6
Stifel, Nicolaus & Company, Inc., Carrick’s codefendant, is the principal subsidiary
of Stifel Financial Corporation, and it serves as the arm through which that corporation
conducts its wealth management business in the United States.
7
When Turner filed this lawsuit, she was elderly and suffering from dementia. She
later died on August 9, 2018.
5
response, Turner contended that she was not bound to arbitration because (1) Turner
contracted with Stern Agee and not Stifel, thus precluding Stifel from enforcing the contract;
(2) Turner did not receive notice of Stern Agee’s assignment of its rights to Stifel as a
consequence of the two entities’ merger; and (3) the contract was invalid because the Account
Application cited paragraph 19 of the Account Agreement and the arbitration clause was
found in paragraph 22 of the 2012 Account Agreement.
¶11. The trial court held two hearings on the motion to compel arbitration. At the first
hearing, the trial court ordered the parties to conduct limited discovery in order (1) to produce
the Account Agreement Turner originally received with her Account Application, (2) to
clarify the merger of and business relationship between Stern Agee and Stifel, and (3) to
produce information expounding on Stifel’s relationship to Stifel Financial Corporation.
¶12. The parties conducted the specific, limited discovery. The defendants filed a
supplemental affidavit in support of their initial motion that explained, “Stifel Nicolaus and
its parent company, Stifel Financial, are both successors by merger to Stern Agee Group and
its subsidiary Stern Agee & Leach.” As an exhibit to their supplemental affidavit, the
defendants provided a prior, virtually identical version of the Account Agreement, which was,
according to the defendants, “the only other version in existence at the time.” In response to
the defendants’ supplemental affidavit, Turner filed a supplemental brief in which she, for the
first time, asserted that the arbitration clause was not enforceable because she did not sign the
Account Agreement.
¶13. After the second hearing, the trial court found that “there was no genuine contract
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between the parties” and that “the arbitration clause fails.” The trial court consequently denied
the defendants’ motion and ordered that the case be set for trial.
¶14. The defendants appeal and argue the trial court erred by refusing to compel arbitration
because (1) it subjected arbitration to a higher level of scrutiny than is required by the FAA,
(2) the Account Application and the Account Agreement are not “conflicting and confusing”
and thus do not negate the arbitration provision, and (3) a valid agreement to arbitrate exists
between the parties.
STANDARD OF REVIEW
¶15. “This Court reviews questions of law de novo.” Fradella v. Seaberry, 952 So. 2d 165,
170 (Miss. 2007) (internal quotation marks omitted) (quoting Pre-Paid Legal Servs., Inc. v.
Battle, 873 So. 2d 79, 82 (Miss. 2004)). Accordingly, this Court “review[s] the grant or denial
of a motion to compel arbitration under the de novo standard of review.” Id. (internal
quotation mark omitted) (quoting Battle, 873 So. 2d at 82).
DISCUSSION
I. FAA
¶16. Under the FAA, Congress established “a national policy favoring arbitration and
withdrew the power of the states to require a judicial forum for the resolution of claims which
the contracting parties agreed to resolve by arbitration.” Covenant Health & Rehab. of
Picayune, LP v. Estate of Moulds ex rel. Braddock, 14 So. 3d 695, 698 (Miss. 2009) (internal
quotation mark omitted) (quoting IP Timberlands Operating Co. v. Denmiss Corp., 726 So.
2d 96, 107 (Miss. 1998)). “The FAA requires courts to place arbitration agreements ‘on equal
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footing with all other contracts[.]’” Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct.
1421, 1424, 197 L. Ed. 2d 806 (2017) (quoting DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463,
465, 193 L. Ed. 2d 365 (2015)). It precludes courts from applying state law “in a fashion that
disfavors or interferes with arbitration.” Id. (quoting AT&T Mobility, LLC v. Concepcion,
563 U.S. 333, 342, 131 S. Ct. 1740, 1747, 179 L. Ed. 2d 742 (2011)).
¶17. The FAA provides that
A written provision in . . . a contract evidencing a transaction involving
[interstate] commerce to settle by arbitration a controversy thereafter arising out
of such contract or transaction . . . shall be valid, irrevocable, enforceable, save
upon such grounds as exist at law or in equity for the revocation of any
contract.
9 U.S.C. § 2 (2012). Relying on Congress’s authority under the Commerce Clause, the FAA
“creates a body of federal and substantive law that is applicable in both state and federal
courts.” IP Timberlands Operating Co., 726 So. 2d at 107 (citing Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983)).
¶18. This Court “will respect the right of an individual or an entity to agree in advance of
a dispute to arbitration or other alternative dispute resolution.” Id. at 104. “Articles of
agreement to arbitrate, and awards thereon are to be liberally construed so as to encourage the
settlement of disputes and the prevention of litigation, and every reasonable presumption will
be indulged in favor of the validity of arbitration proceedings.” Id. at 106 (internal quotation
marks omitted) (quoting Hutto v. Jordan, 36 So. 2d 809, 812 (Miss. 1948)).
¶19. “In determining the validity of a motion to compel arbitration under the [FAA], courts
generally conduct a two-prong inquiry.” E. Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss.
8
2002). The first prong determines “whether the parties intended to arbitrate the dispute.”
Harrison Cty. Commercial Lot, LLC v. H. Gordon Myrick, Inc., 107 So. 3d 943, 949 (Miss.
2013) (internal quotation marks omitted) (quoting Scruggs v. Wyatt, 60 So. 3d 758, 766
(Miss. 2011)). “The first prong has two considerations: (1) whether there is a valid arbitration
agreement and (2) whether the parties’ dispute is within the scope of the arbitration
agreement.” Taylor, 826 So. 2d at 713. “Under the second prong, the United States Supreme
Court has stated the question is ‘whether legal constraints external to the parties’ agreement
foreclosed arbitration of those claims.’” Id. (quoting Mitsubishi Motors Corp. v. Soler
Chrysler–Plymouth, Inc., 473 U.S. 614, 626, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985)).
“Under the second prong, applicable contract defenses available under state contract law such
as fraud, duress, and unconscionability may be asserted to invalidate the arbitration agreement
without offending the Federal Arbitration Act.” Id. (citing Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681, 686, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996)).
II. Whether a valid arbitration agreement exists between the parties.8
¶20. The trial court found that no contract, thus no agreement to arbitrate, existed between
the parties, pronouncing that the Account Agreement was “on its face, . . . confusing and
conflicting.” This Court employs ordinary principals of contract law to determine whether a
valid arbitration agreement exists. H. Gordon Myrick, Inc., 107 So. 3d at 950. If a contract
8
Turner does not assert any state law contract defenses, thus whether a valid
arbitration agreement exists is the sole issue before this Court. Further, given our ruling that
the trial court should be reversed because a valid arbitration agreement exists, we decline
to address Carrick and Stifel’s argument that the trial court erred by applying a” heightened
standard” by characterizing the arbitration agreement as a waiver of the right to a jury trial.
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is unambiguous, a court must apply the plain meaning. Id. If a contract is ambiguous, those
ambiguities are typically construed against the contract’s drafter. Id. However, in the case
of arbitration, ambiguities regarding arbitration should be construed in favor of arbitration.
Id.
¶21. First, the trial court faulted the discrepancy between paragraph H of the Account
Application and the 2012 Account Agreement. Paragraph H of the Account Application
stated that the arbitration clause was contained in paragraph 22 of the Account Agreement.
But paragraph 19, not paragraph 22, contained the arbitration provision in the 2012 Account
Agreement. Yet, without regard to the paragraph reference, the Account Application provides
in capital letters that the parties are agreeing to “a pre-dispute arbitration clause requiring all
disputes under this agreement to be settled by binding arbitration.” The Account Application
alone is sufficient to indicate the unambiguous intent of the parties to arbitrate. “If no
ambiguity exists, this Court will accept the plain meaning of the instrument as the intent of
the parties.” Fradella, 952 So. 2d at 171 (quoting IP Timberlands Operating Co., 726 So. 2d
at 106). It is clear that a valid arbitration agreement exists and that the trial court should have
compelled arbitration.
¶22. What is not clear from the record is which Account Agreement, and therefore which
arbitration provision, governs arbitration. The trial court did not appear to make a clear
determination regarding which Account Agreement Turner received. It may also be that Stifel
is unable to meet its burden of showing which specific arbitration provision applies. If neither
applies, the FAA may provide for how to determine the method of arbitration. See NC
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Leasing, LLC v. Junker, 172 So. 3d 155, 158-59 (Miss. 2015); 9 U.S.C.A. § 5 (West) (If no
method of arbitration is provided by the arbitration provision, “then upon the application of
either party to the controversy the court shall designate and appoint an arbitrator or arbitrators
or umpire, as the case may require, who shall act under the said agreement with the same force
and effect as if he or they had been specifically named therein[.]”). Thus, this Court remands
the case for a determination regarding which Account Agreement’s arbitration provision, if
either, applies.
¶23. Turner asserts that Stifel is not entitled to enforce the arbitration agreement between
Turner and Stern Agee because Stifel was not a signatory to the contract at issue. Turner’s own
complaint alleged that Stifel is a successor in interest to Stern Agee. Therefore, the agreement
encompasses Stifel as a party that may contractually compel Plaintiffs to arbitration. The
Plaintiffs cannot now deny Stifel the benefit of the arbitration provision within the Account
Agreement that it relied on to “delineate [its] duties and responsibilities with regard to the
transaction.” Fradella, 952 So. 2d at 175.
CONCLUSION
¶24. The parties entered into a valid and enforceable arbitration agreement in the Account
Application. Accordingly, this Court reverses the trial court’s judgment denying Carrick and
Stifel’s motion to compel arbitration. We remand this case with directions to compel the
parties to submit to arbitration and to determine which version of the Account Agreement, if
either, applies to that arbitration; if neither applies, the trial court should look to the FAA for
guidance regarding the specifics of arbitration.
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¶25. REVERSED AND REMANDED.
KITCHENS, P.J., COLEMAN, MAXWELL, BEAM, CHAMBERLIN AND
ISHEE, JJ., CONCUR. RANDOLPH, C.J., AND GRIFFIS, J., NOT PARTICIPATING.
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