1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF ALASKA 6 7 8 MONIQUE R. SNEAD, Individually and) as Personal Representative of the ) 9 Estate of John H. Snead; JOHN G. ) SNEAD, Individually and as Trustee ) 10 of the Snead Irrevocable Trust; ) MONIQUE R. SNEAD and JOHN G. ) 11 SNEAD, both individually and as ) beneficiaries of the John H. Snead ) 12 Revocable Trust and the Snead ) Irrevocable Trust, ) 13 ) Plaintiffs, ) 3:19-CV-00092 JWS 14 ) vs. ) ORDER AND OPINION 15 ) ) [Re: Motion at Doc. 37] 16 GUADALUPE C. WRIGHT; and ) MERRILL LYNCH, PIERCE, FENNER ) 17 & SMITH INCORPORATED, ) ) 18 Defendants. ) ) 19 20 I. MOTION PRESENTED 21 At docket 37 Defendant Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch) 22 moves the court to reconsider its order at docket 34 that denied its request to compel 23 arbitration. The court directed that the parties file a response and reply. Plaintiffs 24 Monique R. Snead and John G. Snead, in their various capacities (collectively Plaintiffs 25 or the Sneads), filed their response at docket 44. Merrill Lynch's reply is filed at 26 docket 47. 27 28 1 II. BACKGROUND 2 This federal action involves a dispute about two Merrill Lynch accounts opened 3 by John H. Snead, the father of Plaintiffs, who died in August of 2017. Plaintiffs allege 4 that Defendant Guadalupe Wright, who had been in a long-term relationship with John 5 H. Snead up through his death and an employee of Merrill Lynch at that time, unlawfully 6 transferred funds from John H. Snead's Merrill Lynch trust accounts—the John H. 7 Snead Revocable Trust (Revocable Trust) and the Snead Irrevocable Trust (Irrevocable 8 Trust). The Sneads allege that Merrill Lynch breached its fiduciary duty and was 9 negligent regarding the trusts, that it is vicariously liable for Defendant Wright's actions, 10 and that it was negligent in hiring, training, and supervising Wright. They also allege 11 that Merrill Lynch violated AS 45.50.471, Alaska's Consumer Protection Act. 12 Merrill Lynch moved to compel arbitration, relying on two account forms John H. 13 Snead signed wherein he agreed that any controversies between himself and Merrill 14 Lynch would be arbitrated. Plaintiffs opposed the request for arbitration, arguing that 15 they are not bound to arbitrate under agreements to which they were not a party. The 16 court denied Merrill Lynch's request to compel arbitration. In doing so, the court 17 stressed that the parties had cited a variety of different federal and state cases in 18 support of their positions without conducting the requisite choice-of-law analysis. The 19 court concluded that Alaska law would apply under the Restatement (Second) of 20 Conflict of Laws despite the presence of a choice-of-law provision in the forms naming 21 New York as the governing law because the record did not show any substantial 22 connection between the parties or the transaction and New York. The court noted that 23 there was no Alaska case addressing the issue of wether equitable estopped or some 24 other contract principle could bind a non-signatory beneficiary to an arbitration 25 agreement. Ultimately, however, the choice of law and its effect on whether Plaintiffs 26 could be bound by the arbitration provisions was not determinative, as the court 27 concluded that Merrill Lynch had not met its burden to show an agreement to arbitrate 28 disputes related to the two accounts. The court found that the forms relied on by Merrill -2- 1 Lynch did not provide enough information to demonstrate that they were linked to the 2 two Snead trust accounts and that the accompanying declaration did not provide the 3 needed clarification. 4 Merrill Lynch now moves for reconsideration, arguing that the court erroneously 5 concluded that Alaska substantive law would apply to the issue of whether Plaintiffs are 6 bound to arbitrate based on the forms John H. Snead signed. Merrill Lynch also 7 attempts to fix the ambiguities surrounding the forms in order to adequately prove they 8 are in fact related to the trust accounts at issue and therefore require arbitration of 9 claims related to those accounts. 10 III. STANDARD OF REVIEW 11 Under the law of the case doctrine, a court is generally precluded from 12 reconsidering an issue that has already been decided by the same court or a higher 13 court in the same case.1 However, as long as a district court retains jurisdiction over a 14 case, it has inherent power to reconsider and modify an interlocutory order for sufficient 15 cause.2 That inherent power is not unfettered: “the court may reconsider previously 16 decided questions in cases in which there has been an intervening change of controlling 17 authority, new evidence has surfaced, or the previous disposition was clearly erroneous 18 and would work a manifest injustice.”3 19 IV. DISCUSSION 20 Merrill Lynch argues that reconsideration is proper because the court made a 21 manifest error in determining that Alaska state law would apply to the issue of whether 22 Plaintiffs, as nonsignatories, could be bound by John H. Snead's agreement to arbitrate. 23 1Thomas v. Bible, 983 F.2d 152,154 (9th Cir. 1993). 24 25 2City of Los Angeles v. Santa Monica, 254 F.3d 882, 885 (9th Cir. 2001). 26 3Leslie Salt Co. v. United States, 55 F.3d 1388, 1393 (9th Cir. 1995); see also Sch. Dist. No. 1J, Multnomah Cnty. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); LRCiv 7.3(h) (“A 27 court will ordinarily deny a motion for reconsideration absent a showing of . . . (A) manifest error of the law or fact; (B) discovery of new material facts no previously available; or (C) intervening 28 change in the law."). -3- 1 After failing to conduct the necessary and obvious choice-of-law analysis in its initial 2 briefing, Merrill Lynch now argues that it does in fact have a substantial connection to 3 New York, and New York law should have been applied pursuant to Restatement 4 (Second) Conflict of Law § 187.4 While this argument is at first glance persuasive given 5 that Merrill Lynch has identified an adequate connection to New York, it misses the 6 basis for the court's rejection of arbitration. The court's ultimate conclusion was that 7 regardless of the applicable substantive state law, Merrill Lynch failed to prove that the 8 two forms John H. Snead signed were in fact connected to the two trust accounts at 9 issue in Plaintiffs' complaint.5 10 The first form Merrill Lynch relied upon is a Cash Management Account 11 Application and Agreement Form (CMA Form) signed in 1998 when the decedent 12 opened a cash management account with Merrill Lynch. Merrill Lynch asserted that the 13 account was opened for the Revocable Trust. The court noted that while the CMA Form 14 directs the applicant to indicate whether the account was to be a trust account, John H. 15 Snead did not fill out that section of the form. Moreover, he did not sign as a trustee or 16 otherwise indicate on the form that he was opening the account for trust assets. The 17 declaration provided in conjunction with the form did not adequately explain this 18 ambiguity. 6 19 20 21 4Section 187 applies in a contract action when the contract at issue includes a choice-of- law provision. It directs a court to apply the law of the state chosen by the parties unless "the 22 chosen state has no substantial relationship to the parties or the transaction. . . ." Restatement (Second) of Conflict of Laws § 187 (1971).
Free access — add to your briefcase to read the full text and ask questions with AI
1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF ALASKA 6 7 8 MONIQUE R. SNEAD, Individually and) as Personal Representative of the ) 9 Estate of John H. Snead; JOHN G. ) SNEAD, Individually and as Trustee ) 10 of the Snead Irrevocable Trust; ) MONIQUE R. SNEAD and JOHN G. ) 11 SNEAD, both individually and as ) beneficiaries of the John H. Snead ) 12 Revocable Trust and the Snead ) Irrevocable Trust, ) 13 ) Plaintiffs, ) 3:19-CV-00092 JWS 14 ) vs. ) ORDER AND OPINION 15 ) ) [Re: Motion at Doc. 37] 16 GUADALUPE C. WRIGHT; and ) MERRILL LYNCH, PIERCE, FENNER ) 17 & SMITH INCORPORATED, ) ) 18 Defendants. ) ) 19 20 I. MOTION PRESENTED 21 At docket 37 Defendant Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch) 22 moves the court to reconsider its order at docket 34 that denied its request to compel 23 arbitration. The court directed that the parties file a response and reply. Plaintiffs 24 Monique R. Snead and John G. Snead, in their various capacities (collectively Plaintiffs 25 or the Sneads), filed their response at docket 44. Merrill Lynch's reply is filed at 26 docket 47. 27 28 1 II. BACKGROUND 2 This federal action involves a dispute about two Merrill Lynch accounts opened 3 by John H. Snead, the father of Plaintiffs, who died in August of 2017. Plaintiffs allege 4 that Defendant Guadalupe Wright, who had been in a long-term relationship with John 5 H. Snead up through his death and an employee of Merrill Lynch at that time, unlawfully 6 transferred funds from John H. Snead's Merrill Lynch trust accounts—the John H. 7 Snead Revocable Trust (Revocable Trust) and the Snead Irrevocable Trust (Irrevocable 8 Trust). The Sneads allege that Merrill Lynch breached its fiduciary duty and was 9 negligent regarding the trusts, that it is vicariously liable for Defendant Wright's actions, 10 and that it was negligent in hiring, training, and supervising Wright. They also allege 11 that Merrill Lynch violated AS 45.50.471, Alaska's Consumer Protection Act. 12 Merrill Lynch moved to compel arbitration, relying on two account forms John H. 13 Snead signed wherein he agreed that any controversies between himself and Merrill 14 Lynch would be arbitrated. Plaintiffs opposed the request for arbitration, arguing that 15 they are not bound to arbitrate under agreements to which they were not a party. The 16 court denied Merrill Lynch's request to compel arbitration. In doing so, the court 17 stressed that the parties had cited a variety of different federal and state cases in 18 support of their positions without conducting the requisite choice-of-law analysis. The 19 court concluded that Alaska law would apply under the Restatement (Second) of 20 Conflict of Laws despite the presence of a choice-of-law provision in the forms naming 21 New York as the governing law because the record did not show any substantial 22 connection between the parties or the transaction and New York. The court noted that 23 there was no Alaska case addressing the issue of wether equitable estopped or some 24 other contract principle could bind a non-signatory beneficiary to an arbitration 25 agreement. Ultimately, however, the choice of law and its effect on whether Plaintiffs 26 could be bound by the arbitration provisions was not determinative, as the court 27 concluded that Merrill Lynch had not met its burden to show an agreement to arbitrate 28 disputes related to the two accounts. The court found that the forms relied on by Merrill -2- 1 Lynch did not provide enough information to demonstrate that they were linked to the 2 two Snead trust accounts and that the accompanying declaration did not provide the 3 needed clarification. 4 Merrill Lynch now moves for reconsideration, arguing that the court erroneously 5 concluded that Alaska substantive law would apply to the issue of whether Plaintiffs are 6 bound to arbitrate based on the forms John H. Snead signed. Merrill Lynch also 7 attempts to fix the ambiguities surrounding the forms in order to adequately prove they 8 are in fact related to the trust accounts at issue and therefore require arbitration of 9 claims related to those accounts. 10 III. STANDARD OF REVIEW 11 Under the law of the case doctrine, a court is generally precluded from 12 reconsidering an issue that has already been decided by the same court or a higher 13 court in the same case.1 However, as long as a district court retains jurisdiction over a 14 case, it has inherent power to reconsider and modify an interlocutory order for sufficient 15 cause.2 That inherent power is not unfettered: “the court may reconsider previously 16 decided questions in cases in which there has been an intervening change of controlling 17 authority, new evidence has surfaced, or the previous disposition was clearly erroneous 18 and would work a manifest injustice.”3 19 IV. DISCUSSION 20 Merrill Lynch argues that reconsideration is proper because the court made a 21 manifest error in determining that Alaska state law would apply to the issue of whether 22 Plaintiffs, as nonsignatories, could be bound by John H. Snead's agreement to arbitrate. 23 1Thomas v. Bible, 983 F.2d 152,154 (9th Cir. 1993). 24 25 2City of Los Angeles v. Santa Monica, 254 F.3d 882, 885 (9th Cir. 2001). 26 3Leslie Salt Co. v. United States, 55 F.3d 1388, 1393 (9th Cir. 1995); see also Sch. Dist. No. 1J, Multnomah Cnty. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); LRCiv 7.3(h) (“A 27 court will ordinarily deny a motion for reconsideration absent a showing of . . . (A) manifest error of the law or fact; (B) discovery of new material facts no previously available; or (C) intervening 28 change in the law."). -3- 1 After failing to conduct the necessary and obvious choice-of-law analysis in its initial 2 briefing, Merrill Lynch now argues that it does in fact have a substantial connection to 3 New York, and New York law should have been applied pursuant to Restatement 4 (Second) Conflict of Law § 187.4 While this argument is at first glance persuasive given 5 that Merrill Lynch has identified an adequate connection to New York, it misses the 6 basis for the court's rejection of arbitration. The court's ultimate conclusion was that 7 regardless of the applicable substantive state law, Merrill Lynch failed to prove that the 8 two forms John H. Snead signed were in fact connected to the two trust accounts at 9 issue in Plaintiffs' complaint.5 10 The first form Merrill Lynch relied upon is a Cash Management Account 11 Application and Agreement Form (CMA Form) signed in 1998 when the decedent 12 opened a cash management account with Merrill Lynch. Merrill Lynch asserted that the 13 account was opened for the Revocable Trust. The court noted that while the CMA Form 14 directs the applicant to indicate whether the account was to be a trust account, John H. 15 Snead did not fill out that section of the form. Moreover, he did not sign as a trustee or 16 otherwise indicate on the form that he was opening the account for trust assets. The 17 declaration provided in conjunction with the form did not adequately explain this 18 ambiguity. 6 19 20 21 4Section 187 applies in a contract action when the contract at issue includes a choice-of- law provision. It directs a court to apply the law of the state chosen by the parties unless "the 22 chosen state has no substantial relationship to the parties or the transaction. . . ." Restatement (Second) of Conflict of Laws § 187 (1971). 23 5The court stated that there was no "case law from the Alaska Supreme Court directly on 24 point," and it declined to make a prediction on whether the Alaska Supreme Court would follow 25 Comer because "[e]ven if the applicable state law obligated beneficiaries or trustees to arbitrate under the circumstances the court cannot conclude that arbitration is warranted here based on 26 the record provided." Doc. 34 at p. 8. 27 6The declaration merely labels the account associated with the CMA Form as the "Revocable Account," but nothing in the declaration or form itself provides verification that he 28 opened the account in the name of the Revocable Trust. -4- 1 The second form it relied upon is a Client Relationship Agreement (Client 2 Agreement Form) that decedent signed in 2016. Merrill Lynch asserted that this 3 agreement was signed when John H. Snead opened an account for the Irrevocable 4 Trust. The court noticed, however, that while John H. Snead signed the form as a 5 "trustee," he was signing as the trustee of the Revocable Trust, not the Irrevocable 6 Trust. 7 In light of the court's order, Merrill Lynch now submits a new declaration that it 8 believes clarifies any confusion about the accounts. The declaration affirms that the 9 account associated with the CMA Form was not a trust account when established, but 10 explains that it was converted to one in the name of the Revocable Trust about a year 11 later. As for the Client Agreement Form, the new declaration states that the form was 12 signed in connection with Account No. XXX-X5343 but that its prior declaration 13 "inaccurately . . . referred to this account as the Snead Irrevocable Trust."7 Instead, this 14 account was another one opened in the name of the Revocable Trust. 15 A motion for reconsideration cannot be based upon evidence that was available 16 at the time the original motion was filed.8 The correct information about these forms and 17 arguments as to how they bind the trusts should have been provided to the court at the 18 outset. Therefore, the court concludes there is no basis on which to reconsider its prior 19 ruling. 20 Moreover, this new material only further complicates the issue. In clarifying that 21 the Client Agreement Form was signed in conjunction with another account for the 22 Revocable Trust, and not the Irrevocable Trust, there is no basis provided for Merrill 23 Lynch's position that John H. Snead agreed to arbitrate disagreements related to the 24 25 26 7Doc. 38 at pp. 2-3. 27 8Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (stating that a motion for reconsideration "may not be used to raise arguments or present evidence for the first 28 time when they could reasonably have been raised earlier in the litigation"). -5- 1 Irrevocable Trust account. Therefore, arbitration cannot be required for Plaintiffs' claims 2 to the extent they allege misconduct related to the Irrevocable Trust. 3 As for the allegations related to the Revocable Trust, even if the newly submitted 4 information about the Revocable Trust could be considered after the fact, the outcome 5 on the issue of what law governs the issue remains the same. While the court may 6 have erred in asserting that the parties did not have a substantial connection to New 7 York to justify applying New York law as contemplated under the choice-of-law 8 provisions in the two forms, the ultimate error in the court's analysis was considering the 9 choice-of-law provision in the first instance. As argued by Plaintiffs in their response 10 brief, the choice-of law provision contained in the forms cannot govern the underlying 11 issue of whether they are bound to such forms in the first instance. 9 The choice-of-law 12 provision therefore is not applicable to this threshold issue, and it was an error to apply 13 §187 of the Restatement (Second) of Conflict of Laws. The choice-of-law rules for 14 Plaintiffs' tort claims and contract claims10 would conclude that Alaska's substantive law 15 governs, given that Alaska has the most significant relationship to the parties and 16 occurrence.11 17 18 19 20 21 9See Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012) (noting that the choice of law provision "does not determine the law that the Court should apply to determine 22 whether the arbitration clause was part of any agreement between the parties unless and until it is determined that the parties have agreed to and are bound by it");Trans-Tec Asia v. M/V 23 Harmony Container, 518 F.3d 1120, 1124 (9th Cir. 2008 ) ("[W]e cannot rely on the choice of law provision until we have decided, as a matter of law, that such a provision was a valid 24 contractual term and was legitimately incorporated into the parties' contract."); 25 10In addition to their Alaska consumer protection act claim, Plaintiffs raise negligence 26 claims against Merrill Lynch and breach of fiduciary duty claims, which can be considered contract, tort, or hybrid claims depending on the source of the duty. See Shields v. Cape Fox 27 Corp., 42 P.3d 1083, 1089-90 (Alaska 2002). 28 11See Restatement (Second) Conflict of Laws §§ 188, 145. -6- 1 V. CONCLUSION 2 Based on the preceding discussion, Defendant's motion for reconsideration at 3 docket 37 is DENIED. 4 DATED this 17th day of October 2019. 5 6 /s/ JOHN W. SEDWICK SENIOR JUDGE, UNITED STATES DISTRICT COURT 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7-