IN THE SUPREME COURT OF MISSISSIPPI NO.2012-CA WELLS FARGO ADVISORS, LLC. Appellant

Transcription

1 IN THE SUPREME COURT OF MISSISSIPPI NO.2012-CA WELLS FARGO ADVISORS, LLC Appellant v. :[;0 If T JANELLE PRITCHARD, ROBERT A. PRITCHARD MARITAL TRUST, & HICKORY STREET, LLC Appellees APPEALED FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSISSIPPI BRIEF AND ARGUMENT OF APPELLANT WELLS FARGO ADVISORS, LLC ORAL ARGUMENT NOT REQUESTED John N. Bolus (MSB Melinda, I":A (MSB MAYNARD, COu)l"'PIl!EIIIIIR~&~G ALE, P.C Sixth Avenue North 2400 RegionslHarbert Plaza Birmingham, Alabama Telephone: (205) Counsel for Wells Fargo Advisors, LLC

2 IN THE SUPREME COURT OF MISSISSIPPI NO CA WELLS FARGO ADVISORS, LLC Appellant v. JANELLE PRITCHARD, ROBERT A. PRITCHARD MARITAL TRUST, & HICKORY STREET, LLC Appellees CERTIFICATE OF INTERESTED PERSONS Pursuant to M.R.A.P. 28(a)(I), the undersigned counsel of record certifies that the following listed persons have an interest in the outcome of this case. These representations are made in order that the justices of the Supreme Court and the judges of the Court of Appeals may evaluate possible disqualifications or recusal: 1. Janelle Pritchard, Appellee 2. Robert A. Pritchard, originator of Appellee Robert A. Pritchard Marital Trust i 3. Joseph Q. White, Jr., Co-trustee of Appellee Robert A. Pritchard Marital Trust 4. Edward Gibson, Counsel for Appellees 5. Jon Reynolds, Defendant in the underlying matter 6. Ryan Frederic, Counsel for Jon Reynolds 7. Andrew Park, Counsel for Jon Reynolds 8. Wells Fargo Advisors, LLC, Appellant 9. Honorable Robert P. Krebs, Circuit Court of Jackson County, Judge i

3 Counsel for Appellant Wells Fargo, LLC OF COUNSEL: MAYNARD, COOPER & GALE, P.C Sixth Avenue North 2400 Regions/Harbert Plaza Binningham, Alabama Telephone: (205) ii

4 TABLE OF CONTENTS PAGE CERTIFICATE OF INTERESTED PERSONS...i-ii TABLE OF CONTENTS... iii TABLE OF AUTHORITIES...iv STATEMENT OF THE ISSUES... 1 STATEMENT OF THE CASE STATEMENT OF THE FACTS SUMMARY OF THE ARGUMENT ARGUMENT CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF FILING iii

5 TABLE OF AUTHORITIES CASES PAGE Adrian v. Smith Barney, Harris, Upham & Co., 841 F.2d 1059 (1IthCir. 1988) Becker Autoradio v. Becker Autoradiowerk Gnbh, 585 F.2d 39, 44 (3d Cir. 1978) Beneficial National Bank, US.A. v. Payton, 214 F.Supp.2d 679 (S.D. Miss. 2001) Dean Witter Reynolds v. Byrd, 470 U.S. 213, 218 (1985) East Ford, Inc. v. Taylor, 826 So. 2d 709 (Miss. 2002) IP Timberlands Operating Co., Ltd v. Denmiss Corp., 726 So. 2d 96 (Miss. 1998)... '" ShearsoniAmerican Exp., Inc. v. McMahon, 482 U.S. 220 (1987) Smith Barney, Inc. v. Henry, 775 So. 2d 722, 724 (Miss. 2001) Wick v. Atlantic Marine, Inc., 605 F.2d 39, 44 (3d CiT. 1978) STATUTES 9 U.S.C. Sections I, et seq OTHER AUTHORITIES FINRA Code of Arbitration Rule 12206(a) M.R.A.P. 28(a)(I)... i iv

6 STATEMENT OF THE ISSUE Whether the trial court erred in refusing to enforce the arbitration agreements set forth in various securities brokerage account agreements, on the grounds that one of the agreements, which contains retroactive time-specific language, is not enforceable because it was not signed until after the events giving rise to the claim took place and it contains contradictory and inconsistent statements that negate the arbitration clause. I

7 STATEMENT OF THE CASE The underlying case was filed against Wells Fargo Advisors, LLC ("Wells Fargo"), as successor in interest of Wachovia Securities and A.G. Edwards, Inc., and Jon Reynolds ("Mr. Reynolds") on May 22, 2009 by AppelleeslPlaintiffs Janelle Pritchard ("Ms. Pritchard"), the Robert A. Pritchard Marital Trust (''the Trust"), and Hickory Street, LLC (and together, "Plaintiffs" or "Appellees") in the Circuit Court of Jackson County. (R.15-23). Plaintiffs alleged that Wells Fargo and one of its financial advisors, Mr. Reynolds, negligently managed and converted some assets in accounts belonging to Ms. Pritchard, her deceased husband, Robert A. Pritchard ("Mr. Pritchard"), and Mr. Pritchard's trusts. (R.18-19). On September 17, 2009, Wells Fargo filed a Motion to Compel Arbitration and for Stay Pending Arbitration. (R.35-39). In its Motion, Wells Fargo represented to the trial court that "[a]ll of the claims asserted against A.G. Edwards in this action are subject to the arbitration clause contained in Plaintiff's Client Agreement." (R.37) Wells Fargo cited specifically to the Client Agreement for the Trust Account. (R.35-37). On January 29, 2010, Mr. Reynolds filed a Motion to Compel Arbitration and for Stay Pending Arbitration, wherein he adopted Wells Fargo's Motion to Compel Arbitration. (R.69). On April 5,2010, Plaintiffs filed their Brief and Response in Opposition to Wells Fargo and Jon Reynolds' Motion to Compel Arbitration and for Stay Pending Arbitration. (R ). In their Response, Plaintiffs asserted three arguments: (a) that there was no contract between the Trust and A.G. Edwards; (b) that even if the contract had been properly executed, its terms do not extend to Wells Fargo as a successor in interest to A.G. Edwards and Wachovia Securities; and (c) that even if the contract contemplated Wells Fargo, its terms are unconscionable and, -therefore, unenforceable. (R.I02-209); Plaintiffs pointed out in their-9pposition that Wells 2

8 Fargo and Jon Reynolds incorrectly stated in their Motions to Compel Arbitration that Mr. Robert Pritchard was a signatory to the Client Agreement, as he was deceased when the Agreement was signed. (R.104). On May 3, 2010, Mr. Reynolds filed his Reply Brief and Response in Opposition to Wells Fargo Advisors, LLC's and Jon Reynolds' Motion to Compel Arbitration and for Stay Pending Arbitration, wherein he demonstrated through Mr. Reynolds' Affidavit that the illegible signature on the Client Agreement was, indeed, not Mr. Pritchard's; rather, it was the signature of Joe White, the co-trustee of the Trust. (R ). On May 5, 2010, Wells Fargo submitted its Response to Plaintiffs' Opposition to Wells Fargo's Motion to Compel Arbitration, wherein it demonstrated that a valid contract between Plaintiffs and Wells Fargo exists because Ms. Pritchard and Joe White, as co-trustees of the Trust, signed the Client Agreement for the Trust Account. (R ). Wells Fargo further demonstrated that the terms of the Client Agreement extend to Wells Fargo because the Agreement states that it "[i]s for the benefit of Edwards, its successors and its assigns." (R ). Wells Fargo also argued that Plaintiffs failed to assert allegations that satisfied the burden of establishing that the arbitration agreement was substantively unconscionable. (R ). On May 6, 2010, the trial court conducted a hearing on the pending Motions to Compel Arbitration. During this hearing, Plaintiffs submitted the Affidavit of Joe White wherein he stated he could neither confirm nor deny that the signature on the Client Agreement was his. (R.401). At the conclusion of the hearing, the trial court requested that the parties submit supplemental briefs addressing the Mississippi Supreme Court's recent decisions about. unconscionability and arbitration contracts. The parties submitted their respective briefs on May 20, Wells Fargo discussed in its brief how none of the four provisions within the Client 3

9 Agreement with Wells Fargo that Plaintiffs identified as one-sided were unconscionable under the standards set forth by the Mississippi Supreme Court and explained why use of the words "action" and "arbitration" in the Client Agreement for the Trust was necessary. (R ). On June 15, 2010, the trial court entered an Order denying Wells Fargo's Motion to Compel Arbitration based upon the lack of sufficient proof that Mr. White signed the Client Agreement on behalf of the Trust. (RA25-426). On July 8, 2010, Wells Fargo and Mr. Reynolds filed a Motion to Reconsider and for Leave to Submit Additional Evidence In Support of their Motions to Compel Arbitration. (RA55). In support of their Motion, Wells Fargo and Mr. Reynolds submitted the opinion of a handwriting expert who, after reviewing numerous samples, determined that it was "highly probable" that the signature on the Client Agreement was that of Mr. White. (RA58). Plaintiffs submitted an Opposition to the Motion to Reconsider. (R. 548). At a hearing on August 26, 2010, the trial court granted the Motion to Reconsider and for Leave to Submit Additional Evidence, permitting the parties to conduct limited discovery for the purpose of resolving the issue of signatory confusion (R.606) On August 31,2010, Plaintiffs sought reconsideration of that decision. (R.568). The trial court denied Plaintiffs' request on September 9, 2010, noting that it initially denied Wells Fargo's Motion to Compel Arbitration "based on confusion of the identity of the signatory and lack of evidence authenticating the signature on the marital trust agreement." (R.599). On September 21,2010, Plaintiffs filed their Notice of Appeal regarding the denial oftheir Motion to Reconsider (R.607), which was ultimately unsuccessful (R.832). On September 24, 2010, Wells Fargo and Jon Reynolds submitted their Supplemental Brief in Further Support of their Motion to Compel Arbitration. (R.618). Among other evidence, Wells Fargo and Jon Reynolds presented the trial court with Mr. White's sworn testimony 4

10 confirming that he was co-trustee of the Trust in February 2008 when the Agreement was signed and that the signature on the Agreement was his. (R.622). Plaintiffs submitted an Opposition to this Supplemental Brief. (R ). On July 21, 2011, the trial court heard oral arguments on the Motions to Compel Arbitration. During the hearing, the court posed a question that Plaintiffs had never raised regarding whether Plaintiffs' arbitration agreements were in effect during the relevant time period alleged in the Complaint. In response to the trial court's inquiry, on July 26, 2011, Wells Fargo and Jon Reynolds submitted a Motion to Supplement The Record In Response To Inquiry By The Court (R ). In it, Wells Fargo and Mr. Reynolds demonstrated for the trial court that at all relevant times, the accounts referenced in the Complaint were subject to mandatory arbitration provisions. (R ). On October 7,2011, the trial court granted the Motion to Supplement the Record (R.890). On the same date, the trial court entered an Order denying Wells Fargo and Mr. Reynolds' Motion to Compel Arbitration. (R.887). The trial court found that Mr. White's signature on the Client Agreement was valid and that the arbitration provision contained in the Client Agreement extended to Wells Fargo. (R.887). The trial court denied the Motion to Compel Arbitration, however, on the grounds that the incidents giving rise to the Complaint arose before the Client Agreement for the Trust was signed and because the arbitration provision contained "contradictory and inconsistent statements that negated" it. (R.888). The Order did not address any of Plaintiffs' other arbitration agreements that were detailed in the Motion to Supplement the Record. (R ). Due to a clerical error in the trial court clerk's office, counsel for Wells Fargo did not receive a copy of the order denying its Motion to Compel in a timely manner, which effectively 5

11 deprived Wells Fargo of the opportunity to file a Notice of Appeal. Wells Fargo filed a Motion to Amend Order pursuant to Miss. R. Civ. P. 60(a} (R.S99-924) and a Supplement to Defendant's Motion to Amend Order pursuant to Miss. R. Civ. P. 60(a} (R ). On March 20, 2012, the trial court entered an Order granting Wells Fargo's Motion to Amend Order (R.IOS6). On the same day, the trial court entered an Amended Order Denying Motion to Compel Arbitration that was substantively identical to the one it entered on October 7, (R.1 OS9-1090). On April IS, 2012, Wells Fargo filed its Notice of Appeal (R.1091). 6

12 STATEMENT OF FACTS Wells Fargo is an investment and stock brokerage company with its headquarters in Richmond, Virginia and offices in Mississippi. (R.l5-16). Wells Fargo is the successor in interest to Wachovia Securities and A.G. Edwards, Inc. (R.35). The Complaint alleges that wrongdoing occurred with respect to four accounts beginning in February (R.l7-18). Paragraph 19 of the Complaint mentions accounts owned by Ms. Pritchard, the Robert A. Pritchard Marital Trust, and the Robert A. Pritchard Revocable Living Trust. (R.18). Paragraph 20 of the Complaint references Mr. Pritchard's and Ms. Pritchard's "joint accounts." (R.l8) Ms. Pritchard opened her individual account (XXX-1602) on or around February II, (R.851, 880). In so doing, on or around January 31, 2008, Ms. Pritchard signed a Nonprobate Transfer on Death Agreement, with a mandatory arbitration provision located in Paragraph 8 of the Agreement. (R.851, ). The Robert A. Pritchard Marital Trust (Account No. XXX-6029) was opened on or around December 3, (R.850, 869). In connection with opening this account, on November 30, 2007, Joseph White and Ms. Pritchard, as trustees, signed a Trustee Agreement and Certification of Trust Investment Powers form. (R.850, ). Paragraph 12 on page 3 of the agreement contains a mandatory arbitration provision. (R.850, ). The Robert A. Pritchard Revocable Living Trust (Account No. XXX-4535, fikia XXX- 3046) was established on or around February 10,2006. (R.850,855). Though Wells Fargo has not located in its archives the account agreement that Mr. Pritchard signed when he opened the account, it did locate the November 30, 2007 Trustee Agreement and Certification of Trust 7

13 Investment Powers form that Joseph White signed as trustee, wherein he agreed the account was subject to mandatory arbitration. (R.850, ). On or around November 8, 2005, Robert Pritchard and Janelle Pritchard opened a joint account (Account No. XXX-2486). (R , 875). In connection with opening this account, on November 4, 2005, they signed an account agreement containing a mandatory arbitration provision, located in paragraphs 13 and 14 of the agreement. (R.8SI, ). All of the agreements referenced above contain mandatory arbitration language that is identical or virtually identical and include arbitration disclosures, an arbitration agreement, and an acknowledgement of receipt of the arbitration agreement. Each account form includes an arbitration disclosure paragraph in bold type like the following: Arbitration Disclosure 11. 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. (B) Arbitration awards are generally final and binding; a party's ability to have a court reverse or modify an arbitration award is very limited. (C) The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings. (D) The arbitrators do not have to explain the reason(s) for their award. 8

14 (R ) (emphasis in original). (E) The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry. (F) The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court. (G) The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement. The arbitration provision contained in all ofthe agreements states in bold text: (R.873) (emphasis in original). I agree and, by carrying my account, Edwards l agrees that all controversies between me and Edwards or any of its present or former officers, directors, agents, or employees will be determined by arbitration. Any arbitration under this agreement will be before the National Association of Securities Dealers, Inc., the New York Stock Exchange, or an arbitration facility provided by any other securities exchange of which Edwards is a member... This arbitration provision applies to any controversy arising from events that occurred before, on or after I signed this agreement... Then, directly above the signature lines on the forms for each account, an acknowledgment like the following appears in bold type: "By signing this agreement, I acknowledge that: (A) I have received and reviewed a copy of this agreement... (C) This I Each agreement referenced above clarifies that it is for the benefit of and is binding on Edwards' successors and assigns. (R.858, 872, 877, 884). 9

15 agreement contains a binding and enforceable predispute arbitration clause in Paragraph 12 on page 3." (R.873) (emphasis in original). There is no dispute about the execution of the agreements referenced above. Thus, Mr. Pritchard and Ms. Pritchard were subject to a binding arbitration provision with Wells Fargo as early as November 8, 2005, three months before the occurrence of any of the events alleged in the Complaint. (R. 851, ). 10

16 SUMMARY OF ARGUMENT The trial court erred when it denied Wells Fargo's Motion to Compel Arbitration. Contrary to the trial court's March 20, 2012 Amended Order, the parties should be compelled to arbitrate their dispute because (I) the parties had clearly submitted to a binding arbitration provision before the events giving rise to the Complaint took place and were subject to multiple binding arbitration provisions throughout the entire relevant time period and (2) the arbitration provisions are not negated by contradictions and inconsistencies. First, in asking "whether Plaintiffs' arbitration agreements were in effect during the relevant time period alleged in the Complaint," the trial court acknowledged that multiple accounts, each containing an arbitration provision, were at issue. (R. 1090). Nevertheless, despite having been provided with information and documentation relating to all of Plaintiffs' accounts identified in the Complaint, the trial court erroneously considered only the Client Agreement for the Trust, which was signed on February I, (R.I090). As a result, the trial court found that Plaintiffs were not subject to a binding arbitration provision at the time the events giving rise to the Complaint occurred. (R.I090). In fact, Mr. Pritchard and Ms. Pritchard were subject to a binding arbitration provision with Wells Fargo as early as November 4, 2005 when they opened their joint account and signed an account agreement which contained a mandatory arbitration provision. (R. 851, ). That arbitration provision specifically stated that "all controversies between me and Edwards... will be determined by arbitration" and further clarified that the agreement to arbitrate applied ''to any controversy arising from events that occurred before, on or after" the agreement was signed. (R.878) (emphasis 1l.dded). Even if the trial court believed it should only consider the Client Agreement for the Trust, its decision to deny the Motion to Compel Arbitration on the grounds that the agreement was not 11

17 in effect at the time of the events alleged in the Complaint is flawed because the Client Agreement for the Trust includes the same language quoted above: (R.873). This arbitration provision applies to any controversy arising from events that occurred before, on or after I signed this agreement... Second, the trial court's finding that the arbitration agreement contained in the agreement for the Trust was negated by "contradictory and inconsistent statements" is in error. (R.l 090). At the May 6, 20 I 0 hearing, the trial court inquired about references in paragraph 13 of the Client Agreement to legal action pursued in court rather than arbitration. (R.873). These references do not negate the mandatory arbitration provision. As the arbitration provision makes clear, there are limited circumstances when claims that may be initiated in court are ineligible for arbitration, either because of rules of the arbitration forum or, in the instance of class actions, because they are excluded from arbitration by the agreement. Thus, any references to court proceedings in the agreement very clearly relate to those few instances in which arbitration is simply not available to the customer. These references to court action are not inconsistent with and do not contradict the terms of the arbitration agreement. To the contrary, they simply advise customers that to the extent arbitration is not available to them, they may have a remedy in court. Thus, the trial court's decision that this language negated the mandatory arbitration provision was in error. Because the trial court erred in denying Wells Fargo's Motion to Compel Arbitration, Wells Fargo respectfully requests that this Honorable Court reverse the trial court's March 20, 2012 Amended Order Denying Motion to Compel Arbitration and instruct the trial court to compel the arbitration of Plaintiffs' claims and to require reimbursement of the costs incurred by Wells Fargo in compelling arbitration in this matter. 12

18 ARGUMENT Standard of Review "The grant or denial of a motion to compel arbitration is reviewed de novo." East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss. 2002). "In determining the validity of a motion to compel arbitration under the Federal Arbitration Act, courts generally conduct a two-pronged inquiry. 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." Id. "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. "Doubts as to the availability of arbitration must be resolved in favor of arbitration. Unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue, then a stay pending arbitration should be granted." IP Timberlands Operating Co., Ltd. v. Denmiss Corp., 726 So.2d 96, 107 (Miss. 1998) (internal citations omitted) (emphasis added). I. The Trial Court Erred When It Denied Wells Fargo's Motion to Compel Arbitration. The trial court's March 20, 2012 Amended Order erroneously concluded that Plaintiffs may not be compelled to arbitrate their claims against Wells Fargo. For the reasons discussed below, the record in this matter demonstrates that enforcement of the arbitration agreements signed by Plaintiffs is appropriate and required. The overall validity of the Client Agreements signed by Plaintiffs cannot be seriously disputed. Ms. Pritchard does not dispute that she and Mr. Pritchard signed the client agreement for their joint account in November 2005 and that the terms of that agreement, along with the 13

19 additional arbitration agreements Plaintiffs subsequently signed, govern their dealings with Wells Fargo. The trial court, sua sponte, expressed concern about the timing of Plaintiffs' various arbitration agreements and whether they were in place at the time the events alleged in the Complaint occurred. As an initial matter, the arbitration provision in the Client Agreement for the Trust Account makes clear that the provision "applies to any controversy arising from events that occurred before" the agreement was signed. (R.873). Moreover, Wells Fargo supplied the trial court with evidence that there was an arbitration agreement in place for the Pritchards' joint account - one of the relevant accounts - as early as November 8, 2005, which was three months earlier than the first event alleged in the Complaint. Plaintiffs' written submissions to the trial court make no argument that the arbitration agreement for the joint account is invalid, and the trial court made no such finding. Instead, the trial court simply ignored the existence of that account agreement and focused instead on the agreement for the Trust account, finding that since it was not signed until after the events alleged in the Complaint occurred, it was not enforceable. As an alternative basis for its ruling, the trial court held that the arbitration clause in the Trust account agreement was negated by inconsistent statements in the agreement. Both of the trial court's bases for denying Wells Fargo's Motion to Compel Arbitration are due to be reversed. A. Plaintiffs Were Bound By Mandatory Arbitration Provisions Throughout The Relevant Time Period. Plaintiffs allege in their Complaint that the events giving rise to their negligence and conversion claims began as early as February 16, (R.17). They identify four accounts that were allegedly potentially mishandled: Ms. Pritchard's individual account, the Robert A. 14

20 Pritchard Marital Trust account, the Robert A. Pritchard Revocable Living Trust account, and joint accounts owned by Mr. Pritchard and Ms. Pritchard. (R.18). The initial briefing for the trial court focused on the arbitration provision contained in the Client Agreement for the Trust, since the Trust is a Plaintiff. At the July 21, 2011 hearing, the trial court sua sponte raised questions about whether that arbitration agreement was due to be enforced since it was executed in November 2007, which was after some of the events giving rise to the Complaint allegedly occurred. The trial court ultimately concluded that due to this timing, the agreement was unenforceable. (R.887). In reaching that conclusion, however, the trial court ignored the plain language of the agreement, which states in bold type: This arbitration provision applies to any controversy arising from events that occurred before, on or after I signed this agreement... (R.873). Arbitration provisions like this one are routinely enforced. For instance, in Beneficial National Bank, U.S.A. v. Payton, 214 F.Supp.2d 679 (S.D. Miss. 2001), Payton argued that an arbitration provision that was added to his cardholder contract years after he entered into the contract could not be applied retroactively to cover his complaint, which was based on alleged wrongs that predated the agreement. Id at 685. The Court disagreed, noting, As numerous courts have recognized, if [an] arbitration provision contains retroactive time-specific language, e.g., a phrase reading 'this agreement applies to all transactions occurring before or after this agreement,' then [the court] may apply the arbitration provision to events relating to past events. Or, if the arbitration clause contains language stating that it applies to 'all transactions between us' or 'all business with us.' then [the court] may apply the arbitration clause retroactively. Id at (footnote citations omitted). As noted above, the arbitration agreement for the Trust contained both the time-specific language and the "all transactions" language. Thus, the 15

21 trial court's denial of Wells Fargo's Motion to Compel Arbitration based on the date when it was executed was improper. Moreover, Wells Fargo's Motion to Compel Arbitration was due to be granted because Plaintiffs were bound by the terms of Wells Fargo's mandatory arbitration provision as early as November 2005 by virtue ofthe joint account agreement they had with the firm. That agreement went into effect on or around November 8, (R I, 875). In connection with opening that account, on November 4, 2005, Mr. Pritchard and Ms. Pritchard signed an account agreement containing a mandatory arbitration provision. (R.85I, ). Under the bold heading "About This Agreement," it states: I. This agreement: Covers all accounts that we have with Edwards at any time Is in addition to and in no way limits any rights Edwards has under any other agreements between us and Edwards Is for the benefit of Edwards, its Successors and its assigns. (R.877). Beneath the bold heading "Arbitration Disclosure," it states: 12. 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.. (R.878). Under the bold heading "Arbitration Provision," the agreement states: I agree and, by carrying my account, Edwards agrees that all controversies between me and Edwards or any of its present or former officers, directors, agents or employees will be determined by arbitration.. This arbitration provision applies to any controversy arising from events that occurred before, on or after I signed this agreement. 16

22 (R.878). Finally, immediately above the Pritchards' signatures, the agreement states in bold type: By signing this agreement, we acknowledge that: (A) We have received a duplicate of this agreement.... (C) This agreement contains a binding and enforceable predispute arbitration clause in paragraph 13 on page 2. After that, the Robert A. Pritchard Revocable Living Trust account (Account No. XXX- 4535, fikia XXX-3046) was established on or around February 10,2006. (R.850,855). Though Wells Fargo has been unable to locate the account agreement that Mr. Pritchard signed when he opened the account, it did locate the November 30, 2007 Trustee Agreement and Certification of Trust Investment Powers form that Joseph White signed as trustee, wherein he agreed the account was subject to mandatory arbitration. (R.850, ). Like the other agreements discussed herein, this one states in bold type that it "applies to any controversy arising from events that occurred before, on or after I signed this agreement." (R.859). Plaintiffs have not challenged these documents in any way. They have not disputed the documents' validity. They have not questioned the timing of the execution of the documents. They have not challenged the content of the agreements. They have not argued that these accounts are not at issue, nor can they since they are specifically identified in paragraphs 19 and 20 of their Complaint. In short, it is undisputed that as early as November 8, 2005 and throughout the entire relevant time period, Plaintiffs were bound by mandatory arbitration provisions with Wells Fargo, and neither Plaintiffs nor the trial court have offered any valid 17

23 reason why these agreements should not be enforced pursuant to the Federal Arbitration Act, 9 U.S.C. Sections I, et seq. B. The Arbitration Provision Is Not Negated by Inconsistent Statements. During oral argument on May 6, 2010, the trial court asked Wells Fargo's counsel about the use of the word "action" versus "arbitration" in the Client Agreement for the Trust. Though the Amended Order does not specify, these are presumably the "contradictory and inconsistent statements" that the trial court found negated the Agreement. Stated plainly, the trial court erred. As Wells Fargo explained to the trial court, the use of both terms in the Agreement is necessary because, as the Client Agreement makes clear, there are a few limited circumstances in which parties to the agreement would engage in a judicial action rather than an arbitration proceeding. For example, a judicial action might ensue if the customer's claims were ineligible for arbitration because of the forum's rules regarding the time limits for bringing a claim in arbitration. (R.B73). The Agreement explains that "[i]n some cases, a claim that is ineligible for arbitration may be brought in court." (R.B73). By way of example, FINRA Rule 12206(a) establishes a six-year eligibility period for initiating claims. Customers with claims that fall outside that time period but are still viable in court may pursue them in court. Another instance where a customer might engage in judicial action is as a participant in a class action suit, since the Client Agreement clarifies that class actions are not permitted in arbitration pursuant to the Agreement. (R.B73). Other instances include those in which the parties agree to forego arbitration (such as in the event there is a very small claim) and any requests for injunctive relief which would require judicial intervention. IB

24 Thus, the references to judicial action in the Agreement do not contradict, diminish, or undermine in any way the mandatory arbitration provision, and the trial court's ruling to the contrary is inconsistent with the FAA's strong federal policy favoring the arbitration of disputes, with which federal and state courts have consistently complied by enforcing arbitration agreements between brokerage firms and their customers. See, e.g., Dean Witter Reynolds v. Byrd, 470 U.S. 213, 218 (1985) (noting that the FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed"); see also ShearsoniAmerican Exp., Inc. v. McMahon, 482 U.S. 220 (1987); Adrian v. Smith Barney, Harris, Upham & Co., 841 F.2d 1059 (11th Cir. 1988). This Court has echoed the FAA's presumption in favor of arbitration by stating that "[ a]rticles of agreement to arbitration, 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." Smith Barney, Inc. v. Henry, 775 So.2d 722, 724 (Miss. 2001) (holding "the case law in Mississippi regarding arbitration and the Federal Arbitration Act are consistent with one another"). In fact, this Court has even held that "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue, then a stay pending arbitration should be granted." Id at 725 (quoting Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5 th Cir. 1979)); see also Becker Autoradio v. Becker Autoradiowerk Gnbh, 585 F.2d 39, 44 (3d Cir. 1978) (holding that "any doubts" regarding the propriety of arbitration "should be resolved in favor of arbitration unless a court can state with positive assurance that this dispute was not meant to be arbitrated.") 19

25 In sum, the trial court's finding that the arbitration agreement contained within the Client Agreement for the Trust was negated by contradictory statements is unfounded and is inconsistent with the policy favoring arbitration. 20

26 CONCLUSION Mississippi courts are required to liberally construe arbitration agreements with a presumption in favor of arbitration. However, the trial court in this case seemed to go out of its way - even advancing arguments that Plaintiffs never proffered - to demonstrate that the subject dispute should not be submitted to arbitration. Plaintiffs signed documents agreeing to arbitrate all of their claims against Wells Fargo. This Court should enforce the arbitration agreements and require Plaintiffs to do what they contracted to do. For the reasons discussed herein, Appellant Wells Fargo respectfully requests that this Honorable Court enter an Order reversing the trial court's March 20, 2012 Amended Order and instructing the trial court to compel Plaintiffs Janelle Pritchard, the Robert A. Pritchard Marital Trust, and Hickory Street, LLC to arbitrate their claims. Respectfully submitted, ~rt: em OF COUNSEL: MAYNARD, COOPER & GALE, P.c Sixth Avenue North 2400 AmSouthlHarbert Plaza Birmingham, Alabama Telephone: (205)

27 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Brief of Appellant Wells Fargo Advisors, LLC has been served upon: Edward Gibson, Esq. Hawkins Stracener & Gibson, PLLC 153 Main Street Bay St. Louis, Mississippi Tel: Fax: Ryan A. Frederic, Esq. Page, Mannino, Peresich & McDermott, PLLC 759 Howard Avenue P.O. Drawer 289 (39533) Biloxi, MS Tel: Fax: Andrew Park, Esq. PARKPALAIS 2310 West Main St. Richmond, Virginia Office Fax Direct The Honorable Robert P. Krebs Circuit Court of Jackson County 3104 Magnolia Street Pascagoula, MS by U.S. Mail, postage prepaid to the above addresses on this 5th day of November, ~da~ OF COUNSEL 22

28 CERTIFICATE OF FILING I, Melinda Lucas Peevy, certify that I have by U.S. Mail, postage prepaid, sent one original and three copies of the Brief of Appellant Wells Fargo Advisors, LLC and an electronic diskette containing same on the 5th day of November, 2012, addressed to Ms. Kathy Gillis, Clerk, Supreme Court of Mississippi, 450 High Street, P.O. Box 249, Jackson, Mississippi ~~a~ MELINDA LUCAS PEEV 23