Citigroup Global Markets, Inc. v. Braswell
| Docket Number: | 2009-CA-01275-COA | |
| Court of Appeals: |
Opinion Link Opinion Date: 02-15-2011 Opinion Author: Griffis, J. Holding: Reversed, rendered and remanded. |
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| Additional Case Information: |
Topic: Contract - Arbitration - Successor organization - Substantive unconscionability - Lack of choice of forum - Oppressive arbitration fees Judge(s) Concurring: Lee and Myers, P.JJ., Barnes, Ishee, Roberts, Carlton and Maxwell, JJ. Dissenting Author : Irving, J. Dissent Joined By : King, C.J. Procedural History: Motion to Compel Arbitration Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 06-24-2009 Appealed from: PIKE COUNTY CIRCUIT COURT Judge: HON. DAVID H. STRONG JR. Disposition: DEFENDANTS’ MOTION TO COMPEL ARBITRATION DENIED Case Number: CV08-195-PCS |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Citigroup Global Markets, Inc. and Scott Jones |
MELINDA LUCAS PEEVY |
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| Appellee: | Randy Braswell | WAYNE DOWDY, ANGELA YLONA COCKERHAM | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Arbitration - Successor organization - Substantive unconscionability - Lack of choice of forum - Oppressive arbitration fees |
| Summary of the Facts: | Citigroup is an investment company headquartered in New York with offices in Mississippi. Smith Barney, Inc. is a division of Citigroup. Randy Braswell opened two accounts at Smith Barney in 1996. Braswell executed a client agreement containing a pre-dispute arbitration clause. In 2008, Braswell filed a complaint alleging that Citigroup failed to follow his instructions regarding his investment accounts, negligently handled his investments, and breached its fiduciary duty. Braswell and Citigroup then filed a joint motion to stay the proceedings pending arbitration. Two months later, Braswell filed a motion to withdraw the joint motion to stay the proceedings. Citigroup responded with a motion to compel arbitration. Braswell then filed an amended complaint to add as a defendant Scott Jones, a financial advisor at Smith Barney. Citigroup and Jones responded with another motion to compel arbitration. The circuit court granted Braswell’s motion to withdraw the joint motion to stay pending arbitration and denied Citigroup’s motion to compel arbitration. Citigroup appeals. |
| Summary of Opinion Analysis: | The circuit court held that the client agreement between Braswell and Smith Barney created an ambiguity as to whether claims against Citigroup, as a successor to Smith Barney, are subject to the arbitration clause contained within the client agreement. Citigroup argues that the client agreement clearly and expressly encompasses Citigroup as Smith Barney’s successor; therefore, Citigroup is entitled to enforce the arbitration agreement. The contract unambiguously applies to the successors of Smith Barney; therefore, the circuit court’s application of the rules of contract construction was in error. It is clear from the agreement that the parties intended for the term “SB” to refer not only to Smith Barney but also to Smith Barney’s direct or indirect subsidiaries and affiliates or their successors or assigns. By its use of the term “SB” the arbitration agreement encompasses successors of Smith Barney in its statement that “all claims or controversies . . . between [Braswell] and SB . . . shall be determined by arbitration . . . .” Clause seven further expresses this intent of the parties by stating: “The provisions of the Agreement shall . . . inure to the benefit of SB’s present organization or any successor organization or assigns.” The contract as a whole unambiguously binds any successor of Smith Barney. Both parties concede that Citigroup is a successor of Smith Barney; thus, Citigroup is a party to the agreement, and Braswell’s claims against Citigroup are encompassed by the arbitration agreement. Thus, the circuit court denied the motion to compel arbitration as to all defendants, including Jones, an employee of Smith Barney. Alternatively, the circuit court held that the arbitration agreement was unconscionable. Unconscionability is defined as an absence of meaningful choice on the part of one of the parties, together with contract terms which are unreasonably favorable to the other party. Substantive unconscionability may be proven by showing the terms of the arbitration agreement to be oppressive which is what the circuit court found. Braswell claims that his lack of choice of a forum for the arbitration is unfair. Citigroup admitted that, since the signing of the agreement, all of the qualifying organizations have merged into FINRA leaving Braswell no other choice of forum other than FINRA. However, that alone does not render the arbitration agreement unconscionable. The arbitration agreement here provides a proper arbitration forum. Braswell has shown no evidence that FINRA arbitration would be biased toward Citigroup or unfair in any other way. The formation of FINRA may have eliminated Braswell’s choice of a forum, but it did not limit his damages or legal rights. Nor did it affect the liability of Citigroup. The legal rights of the parties were not significantly altered; therefore, the agreement is not per se substantively unconscionable because of the formation of FINRA. Braswell asserts that FINRA’s costly arbitration fees are so oppressive as to prevent or deter him from bringing his claims to arbitration. However, the arbitration agreement does not mention fees much less require Braswell to bear the entire cost of the arbitration fees. Furthermore, as Citigroup argues, Braswell has made no showing that his fees for arbitration would be more costly than pursuing his claim in the court system. Thus, the case is remanded with directions for the circuit court to compel arbitration. |
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