Traders' Mart, Inc. v. AOS, Inc.

268 So. 3d 420
CourtLouisiana Court of Appeal
DecidedApril 10, 2019
DocketNo. 52,592-CA
StatusPublished
Cited by7 cases

This text of 268 So. 3d 420 (Traders' Mart, Inc. v. AOS, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Traders' Mart, Inc. v. AOS, Inc., 268 So. 3d 420 (La. Ct. App. 2019).

Opinion

GARRETT, J.

The plaintiff, Traders' Mart, Inc. ("Traders' Mart"), appeals from a trial court judgment sustaining an exception of prematurity filed by the defendant, AOS, Inc., d/b/a/ MoneyBlock ("AOS"), based on a finding that the plaintiff's claims alleging unfair trade practices were subject to arbitration. For the following reasons, we affirm the trial court judgment.

FACTS

Traders' Mart is a stock brokerage business trading in commodities and securities for customers and is owned by E. Lee Carter. In order to buy and sell commodities and securities on behalf of clients of Traders' Mart, Carter personally entered into an "Independent Representative Agreement" with AOS, Inc., a broker/dealer, to act as an independent contractor to make trades for the purchase and sale of various securities. The agreement was executed in September 2012. The contract contained an arbitration agreement, which stated:

Any controversy between Company and Contractor arising out of or relating to this Agreement [or] the breach thereof shall be settled in arbitration in accordance with the rules of the FINRA.[1 ] Any arbitration hereunder and the award of the arbitrators, or of a majority of them, shall be final, and the judgment upon the award rendered may be entered in any court (state or federal) having jurisdiction.

Carter devoted a large part of his time to trading commodities and Tammy Recoulley, a registered representative working for Traders' Mart, handled most of the stock brokerage business. Traders' Mart asserted that AOS assisted Recoulley in listing herself as the representative for all Traders' Mart clients, regardless of which representative established the business relationship.

*424Recoulley left her job at Traders' Mart in early 2016, and opened a brokerage business, taking Traders' Mart clients with her. Traders' Mart claimed that Recoulley was not authorized to trade mutual funds or represent clients not living in Louisiana. Traders' Mart maintained that, in the second quarter of 2016, AOS reassigned to Carter out-of-state clients and inactive accounts. According to Traders' Mart, when Carter was reviewing information about the transferred accounts, he had trouble with his computer. He emailed a few pages of customer information to a different computer in the office with a different email address in order to print information for record-keeping purposes. AOS contended that this constituted a breach of confidence regarding the information of those customers. AOS terminated Carter's contract, sent notices to all customers stating that Carter was no longer associated with AOS, and, if customers inquired, they were encouraged to transfer their accounts to Recoulley.

Traders' Mart filed this suit in February 2017, alleging that AOS and Recoulley were guilty of unfair and deceptive trade practices, in violation of La. R.S. 51:1401, et seq. , the Louisiana Unfair Trade Practices Act ("LUTPA"). Traders' Mart referenced the contract between AOS and Carter and stated that the termination of Carter's contract "is part and parcel of the scheme through which the defendants have undertaken to steal the business of Traders' Mart." Traders' Mart also claimed that Recoulley embezzled funds from the company by making unauthorized withdrawals from the general account and by getting funds for the payment of expenses and then paying the expenses out of the Traders' Mart business account.

In June 2017, AOS filed a peremptory exception of no cause of action and a dilatory exception of prematurity, along with a motion to stay the litigation pending arbitration.2 AOS asserted that the suit was premature because the claim arose from the contract between AOS and Carter which must first be submitted to arbitration. AOS urged that the arbitration clause applied to Traders' Mart because, even though Traders' Mart was a nonsignatory to the agreement, it benefited from the contract and is now asserting a LUTPA claim based upon the existence and alleged breach of the contract. AOS argued that Traders' Mart is bound by the arbitration clause through the theory of direct benefits estoppel.3

An evidentiary hearing was held on the exception of prematurity. Carter testified that he owns and operates Traders' Mart. Carter stated that the purpose of the contract with AOS was to allow him to make transactions on behalf of the clients of Traders' Mart. The company could not trade on its own because it is not a broker/dealer. Someone in the company had to be associated with a brokerage house in order to do trades. Carter testified that the cancellation of the contract was wrongful *425and was part of a scheme to deprive Traders' Mart of business and to unfairly compete with it. Carter stated that the termination of the contract damaged the ability of Traders' Mart to be able to sustain itself. Carter acknowledged that he was aware of the arbitration clause, but he signed the contract as an individual and not on behalf of Traders' Mart.

AOS agreed that Traders' Mart was not a party to the contract containing the arbitration requirement. However, it urged that, under the circumstances presented, Traders' Mart could be bound by the arbitration requirement even though it was a nonsignatory. According to AOS, the claims asserted by Traders' Mart are intertwined and dependent upon the contract. AOS argued that the cancellation of the contract with Carter was the basis of the LUTPA suit by Traders' Mart, which was suing for the loss of money that resulted from moving accounts to Recoulley. AOS maintained that the arbitration requirement applied to Traders' Mart, even though it was a nonsignatory, because, throughout the life of the contract, the company embraced it.

Traders' Mart countered that this was not a suit on a contract, it was not complaining of a violation of the contract, and it was not seeking to enforce the contract. Traders' Mart urged that this was a suit on a tort claim which did not arise out of the contract. Therefore, Traders' Mart asserted that the arbitration clause in the contract between AOS and Carter was not applicable to it.

After hearing all the evidence and the arguments presented by the parties, the trial court determined that Traders' Mart was bound by the arbitration agreement, even though it did not sign the contract. The court found that the evidence established that Traders' Mart derived benefits from the contract and was attempting to enforce it. The trial court granted the exception of prematurity, stayed the proceedings pending arbitration, found that a motion to compel discovery was premature, and held that the exception of no cause of action was moot. A motion for sanctions was denied.4

Traders' Mart filed a writ application objecting to the trial court judgment. This court granted the writ and remanded to the trial court for perfection of an appeal.5

ARBITRATION AGREEMENT

On appeal, Traders' Mart argues that the trial court erred in granting the exception of prematurity, based upon its finding that, even though Traders' Mart was a nonsignatory to the contract between AOS and Carter, it was still bound by the arbitration requirement. Under the facts presented *426

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Bluebook (online)
268 So. 3d 420, Counsel Stack Legal Research, https://law.counselstack.com/opinion/traders-mart-inc-v-aos-inc-lactapp-2019.