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Snead v. Wright

United States District Court, D. Alaska

October 17, 2019

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,




         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.


         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.


         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]


         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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