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Earley v. Edward Jones & Co., LP

Court of Appeals of Indiana

June 25, 2018

David Earley and Rhonda Earley, Appellants-Plaintiffs,
v.
Edward Jones & Co., LP, Edward Jackson, and Adam Jackson, Appellees-Defendants.

          Appeal from the Jackson Superior Court The Honorable Bruce Markel III, Judge Trial Court Cause No. 36D01-1611-PL-44

          ATTORNEYS FOR APPELLANTS Jason M. Smith W. Brent Gill Smith Law Services, P.C. Seymour, Indiana.

          ATTORNEYS FOR APPELLEES Stacy Walton Long William J. Barkimer Krieg DeVault LLP Indianapolis, Indiana.

          BARNES, SENIOR JUDGE.

         Case Summary

         [¶1] David and Rhonda Earley ("the Earleys") appeal the trial court's stay and order compelling arbitration in their action against Edward D. Jones & Co., LP ("Edward Jones"), Edward Jackson, and Adam Jackson (collectively, "Defendants"). We affirm.

         Issues

         [¶2] The Earleys raise two issues, which we restate as:

I. whether the trial court properly found that the arbitration agreements between the parties were enforceable; and
II. whether the trial court properly found that the Federal Arbitration Act applied rather than Missouri law.

         Facts

         [¶3] Edward Jones is a national corporation based in Missouri and doing business in Jackson County, Indiana, and Edward Jackson and Adam Jackson were employees/agents of Edward Jones. In 1998, David Earley opened a Roth Individual Retirement Account ("IRA") with Edward Jones. The Adoption Agreement, which David signed, provided: "I appoint Edward Jones to serve as Custodian in accordance with the terms and conditions of the Edward Jones Self-Directed Individual Retirement Account Custodial Agreement, which contains a pre-dispute arbitration clause. I hereby acknowledge that I have received and read such Agreement and the Disclosure Statement and Schedule of Fees accompanying it." Appellants' App. Vol. II p. 31. The Custodial Agreement provided, in part:

Any controversy arising out of or relating to any of my accounts or transactions with you, your officers, directors, agents and/or employees for me, or to this agreement, or the breach thereof, or relating to transactions or accounts maintained by me with any of your predecessor or successor firms by merger, acquisition or other business combinations from the inception of such accounts shall be settled by arbitration in accordance with the rules then in effect of the Boards of Directors of the New York Stock Exchange, Inc., the American Stock Exchange, Inc., the Municipal Securities Rulemaking Board, or the National Association of Securities Dealers, Inc. as I may elect.

Id. at 44.

         [¶4] In 2005, the Earleys opened a joint account with Edward Jones. They signed an Account Authorization and Acknowledgement Form, which provided: "The Edward Jones Account Agreement and Disclosure Statement contains on page 20 a binding arbitration provision which may be enforced by the parties. By my/our signature below, I/we have received a copy of this document . . . and agree to its terms and conditions." Id. at 45. That agreement contained an arbitration clause similar to the earlier arbitration clause.

         [¶5] In 2009, David executed a revised Roth IRA agreement. David acknowledged that he had received and reviewed the Retirement Account Agreement, which contained a binding arbitration clause similar to the earlier arbitration clauses. The document also provided: "THESE CONTRACTS CONTAIN A BINDING ARBITRATION PROVISION . . . WHICH MAY BE ENFORCED BY THE PARTIES." Id. at 74. Also in 2009, the Earleys opened traditional IRAs with Edward Jones. They signed a document acknowledging that they had received and reviewed the Retirement Account Agreement, which contained a binding arbitration provision similar to the earlier provisions. The document also provided: "THESE CONTRACTS CONTAIN A BINDING ARBITRATION PROVISION . . . WHICH MAY BE ENFORCED BY THE PARTIES." Id. at 87, 89, 91. Finally, in 2014, Rhonda opened another IRA account with Edward Jones. She signed an Account Authorization and Agreement Form, in which she acknowledged receiving and reviewing the Account Agreement, which contained a binding arbitration provision similar to the earlier provisions. The document also provided: "THE EDWARD JONES ACCOUNT AGREEMENT CONTAINS . . . A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES." Appellants' App. Vol. III p. 31. All of the agreements also provided that the agreement was to be governed by the laws of the State of Missouri.

         [¶6] In November 2016, the Earleys filed a complaint against the Defendants regarding a significant decrease in funds that the Earleys invested with Edward Jones. The Earleys' complaint alleged breach of contract, negligence, constructive fraud, and conversion. Defendants filed a motion to dismiss or to compel arbitration and stay the proceedings. Defendants alleged that the Earleys' agreements with Edward Jones contained binding arbitration provisions, that the disputes fell within the scope of the arbitration provisions, and that Missouri law governed.

         [¶7] The Earleys responded and argued: (1) the provisions are not valid under Missouri law because they lack the language and format required by Missouri Revised Statutes Section 435.460; and (2) they "were never presented with the arbitration provisions in question and their signatures were obtained by misrepresentation as to the substance of the signed documents which contained the arbitration provisions." Id. at 48. The Earleys submitted affidavits in which they alleged that the forms were presented merely as forms to open an account, they trusted Jackson to advise them of relevant facts regarding the documents, they were not given the agreements containing the arbitration provisions, and Jackson never discussed the agreements or arbitration provisions with them.

         [¶8] The trial court held a hearing on Defendants' motion. At the hearing, Defendants argued that the Federal Arbitration Act ("FAA") preempted Missouri law and governed the parties' agreements. The trial court then allowed the parties to submit additional briefs. Defendants argued that the FAA applied because the contracts involve interstate commerce and that the Earleys acknowledged in writing that they received the agreements and that they contained arbitration provisions. The Earleys then filed another response arguing that the Defendants' misrepresentations voided any contracts and that FAA was not controlling. After a ...


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