Pickett v. U.S. Bancorp

2005 MT 159N

• Court: Montana Supreme Court
• Decided: June 28, 2005
• Docket: 04-533
• Status: Published

Opinion

No. 04-533

IN THE SUPREME COURT OF THE STATE OF MONTANA

2005 MT 159N

EVELYN PICKETT,

Plaintiff and Respondent,

v.

U.S. BANCORP PIPER JAFFRAY, INC., THOMAS J. O’NEILL, ROBERT ENGLISH and JOHN DOES I through X,

Defendants and Appellants.

APPEAL FROM: District Court of the Second Judicial District, In and for the County of Silver Bow, Cause No. DV 2002-242 The Honorable John W. Whelan, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Stanley T. Kaleczyc, Brand G. Boyar, Browning, Kaleczyc, Berry & Hoven, P.C., Helena, Montana; John S. Lutz, Fairfield and Woods, P.C., Denver, Colorado

For Respondent:

William P. Joyce, Joyce & Johnson, PLLP, Butte, Montana

Submitted on Briefs: May 3, 2005

Decided: June 28, 2005 Filed:

__________________________________________ Clerk Justice Patricia O. Cotter delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal

Operating Rules, the following decision shall not be cited as precedent. It shall be filed as

a public document with the Clerk of the Supreme Court and shall be reported by case title,

Supreme Court cause number and result to the State Reporter Publishing Company and to

West Group in the quarterly table of noncitable cases issued by this Court.

¶2 U.S. Bancorp Piper Jaffray, Inc., and Robert English (collectively “Piper”) appeal an

Order of the District Court for the Second Judicial District, Silver Bow County. Defendant

Thomas J. O’Neill is a former Piper employee and is not a party to this appeal. The District

Court denied Piper’s motion to compel arbitration of claims filed against Piper by Evelyn

Pickett (“Pickett”). We affirm.

¶3 This case is one of twenty-three different lawsuits filed by individual investors of

Piper involving the alleged mismanagement of the investors’ accounts in Piper’s branch

office in Butte. In Pickett’s case, the parties agreed to the filing of her deposition in lieu of

her testimony at the hearing. The District Court found that O’Neill was Pickett’s broker

before O’Neill came to Piper, and Pickett relied upon O’Neill to explain the significance of

any documents presented for her signature. Pickett opened an IRA with Piper in 1985, and

the IRA agreement did not contain an arbitration provision. In 1998, Pickett desired to

convert the IRA to a Roth IRA, and O’Neill presented paperwork for her to sign. He did not

inform her that the new agreement contained an arbitration provision, and Pickett did not

2 know what arbitration was. By signing the new agreement, Pickett believed that she was

simply converting her IRA to a Roth IRA.

¶4 Pickett also signed a “co-owner account agreement” in 1991, of which she never

received a copy. In 1994, Piper initiated a change to that agreement and had Pickett sign a

PAT Plus Account Agreement. O’Neill presented her with the PAT Plus Account Agreement

and Pickett signed it without reading it. In 1998, Pickett and her husband separated and they

separated their assets, including a joint Piper account. Pickett relied upon O’Neill to

effectuate that change for her, and she signed another PAT Plus Account Agreement at

O’Neill’s request. This document contained both an arbitration provision and a clause

granting Piper broad discretion to purchase and sell account assets without Pickett’s

approval. O’Neill never explained this provision, nor did he explain that by signing any of

the agreements Pickett was waiving her right to access the courts.

¶5 These facts and the issues arising from them are substantially identical to those

presented in Willems v. U.S. Bancorp Piper Jaffray, Inc., 2005 MT 37, ¶ 22, 326 Mont. 103,

¶ 22, 107 P.3d 465, ¶ 22, in which we held that a clause in a PAT Plus Account Agreement

granting Piper broad discretion over an investor’s holdings creates a fiduciary duty. Willems

further held that because of the fiduciary duty, Piper was obligated to advise the investor of

the consequences of the arbitration clause prior to the formation of the contract, and that

because Piper did not, the arbitration clause was unenforceable. Willems, ¶¶ 25, 28.

3 ¶6 We have determined to decide this case pursuant to our Order dated February 11,

2003, amending Section 1.3 of our 1996 Internal Operating Rules and providing for

memorandum opinions.

¶7 We conclude that, in light of Willems, this case is clearly controlled by settled

Montana law. Therefore, we affirm the District Court’s conclusion that Piper owed a

fiduciary duty to explain the arbitration provision to Pickett, that it breached that duty, and

therefore, the pre-dispute arbitration provisions are unenforceable.

/S/ PATRICIA O. COTTER

We Concur:

/S/ JOHN WARNER /S/ BRIAN MORRIS /S/ JAMES C. NELSON /S/ JIM RICE