United States District Court, D. Alaska
MONIQUE R. SNEAD, Individually and as Personal Representative of the Estate of John H. Snead; JOHN G. SNEAD, Individually and as Trustee of the Snead Irrevocable Trust; MONIQUE R. SNEAD and JOHN G. SNEAD, both individually and as beneficiaries of the John H. Snead Revocable Trust and the Snead Irrevocable Trust, Plaintiffs,
v.
GUADALUPE C. WRIGHT; and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, Defendants.
ORDER AND OPINION [RE: MOTION AT DOC. 37]
JOHN
W. SEDWICK SENIOR UNITED STATES DISTRICT JUDGE.
I.
MOTION PRESENTED
At
docket 37 Defendant Merrill Lynch, Pierce, Fenner & Smith
(Merrill Lynch) moves the court to reconsider its order at
docket 34 that denied its request to compel arbitration. The
court directed that the parties file a response and reply.
Plaintiffs Monique R. Snead and John G. Snead, in their
various capacities (collectively Plaintiffs or the Sneads),
filed their response at docket 44. Merrill Lynch's reply
is filed at docket 47.
II.
BACKGROUND
This
federal action involves a dispute about two Merrill Lynch
accounts opened by John H. Snead, the father of Plaintiffs,
who died in August of 2017. Plaintiffs allege that Defendant
Guadalupe Wright, who had been in a long-term relationship
with John H. Snead up through his death and an employee of
Merrill Lynch at that time, unlawfully transferred funds from
John H. Snead's Merrill Lynch trust accounts-the John H.
Snead Revocable Trust (Revocable Trust) and the Snead
Irrevocable Trust (Irrevocable Trust). The Sneads allege that
Merrill Lynch breached its fiduciary duty and was negligent
regarding the trusts, that it is vicariously liable for
Defendant Wright's actions, and that it was negligent in
hiring, training, and supervising Wright. They also allege
that Merrill Lynch violated AS 45.50.471, Alaska's
Consumer Protection Act.
Merrill
Lynch moved to compel arbitration, relying on two account
forms John H. Snead signed wherein he agreed that any
controversies between himself and Merrill Lynch would be
arbitrated. Plaintiffs opposed the request for arbitration,
arguing that they are not bound to arbitrate under agreements
to which they were not a party. The court denied Merrill
Lynch's request to compel arbitration. In doing so, the
court stressed that the parties had cited a variety of
different federal and state cases in support of their
positions without conducting the requisite choice-of-law
analysis. The court concluded that Alaska law would apply
under the Restatement (Second) of Conflict of Laws despite
the presence of a choice-of-law provision in the forms naming
New York as the governing law because the record did not show
any substantial connection between the parties or the
transaction and New York. The court noted that there was no
Alaska case addressing the issue of wether equitable estopped
or some other contract principle could bind a non-signatory
beneficiary to an arbitration agreement. Ultimately, however,
the choice of law and its effect on whether Plaintiffs could
be bound by the arbitration provisions was not determinative,
as the court concluded that Merrill Lynch had not met its
burden to show an agreement to arbitrate disputes related to
the two accounts. The court found that the forms relied on by
Merrill Lynch did not provide enough information to
demonstrate that they were linked to the two Snead trust
accounts and that the accompanying declaration did not
provide the needed clarification.
Merrill
Lynch now moves for reconsideration, arguing that the court
erroneously concluded that Alaska substantive law would apply
to the issue of whether Plaintiffs are bound to arbitrate
based on the forms John H. Snead signed. Merrill Lynch also
attempts to fix the ambiguities surrounding the forms in
order to adequately prove they are in fact related to the
trust accounts at issue and therefore require arbitration of
claims related to those accounts.
III.
STANDARD OF REVIEW
Under
the law of the case doctrine, a court is generally precluded
from reconsidering an issue that has already been decided by
the same court or a higher court in the same
case.[1] However, as long as a district court
retains jurisdiction over a case, it has inherent power to
reconsider and modify an interlocutory order for sufficient
cause.[2] That inherent power is not unfettered:
“the court may reconsider previously decided questions
in cases in which there has been an intervening change of
controlling authority, new evidence has surfaced, or the
previous disposition was clearly erroneous and would work a
manifest injustice.”[3]
IV.
DISCUSSION
Merrill
Lynch argues that reconsideration is proper because the court
made a manifest error in determining that Alaska state law
would apply to the issue of whether Plaintiffs, as
nonsignatories, could be bound by John H. Snead's
agreement to arbitrate. After failing to conduct the
necessary and obvious choice-of-law analysis in its initial
briefing, Merrill Lynch now argues that it does in fact have
a substantial connection to New York, and New York law should
have been applied pursuant to Restatement (Second) Conflict
of Law § 187.[4] While this argument is at first glance
persuasive given that Merrill Lynch has identified an
adequate connection to New York, it misses the basis for the
court's rejection of arbitration. The court's
ultimate conclusion was that regardless of the applicable
substantive state law, Merrill Lynch failed
to prove that the two forms John H. Snead signed were in fact
connected to the two trust accounts at issue in
Plaintiffs' complaint.[5]
The
first form Merrill Lynch relied upon is a Cash Management
Account Application and Agreement Form (CMA Form) signed in
1998 when the decedent opened a cash management account with
Merrill Lynch. Merrill Lynch asserted that the account was
opened for the Revocable Trust. The court noted that while
the CMA Form directs the applicant to indicate whether the
account was to be a trust account, John H. Snead did not fill
out that section of the form. Moreover, he did not sign as a
trustee or otherwise indicate on the form that he was opening
the account for trust assets. The declaration provided in
conjunction with the form did not adequately explain this
ambiguity.[6]
The
second form it relied upon is a Client Relationship Agreement
(Client Agreement Form) that decedent signed in 2016. Merrill
Lynch asserted that this agreement was signed when John H.
Snead opened an account for the Irrevocable Trust. The court
noticed, however, that while John H. Snead signed the form as
a "trustee," he was signing as the trustee of the
Revocable Trust, not the Irrevocable Trust.
In
light of the court's order, Merrill Lynch now submits a
new declaration that it believes clarifies any confusion
about the accounts. The declaration affirms that the account
associated with the CMA Form was not a trust account when
established, but explains that it was converted to one in the
name of the Revocable Trust about a year later. As for the
Client Agreement Form, the new declaration states that the
form was signed in connection with Account No. XXX-X5343 but
that its prior declaration "inaccurately . . . referred
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