Coleman v. Prudential Bache Securities, Inc.

802 F.2d 1350

United States Court of Appeals, Eleventh Circuit.

Barbara COLEMAN, Plaintiff-Appellee,
v.
PRUDENTIAL BACHE SECURITIES, INC., James P. McCormick, Defendants-Appellants.
Barbara COLEMAN, Plaintiff-Appellant,
v.
PRUDENTIAL BACHE SECURITIES, INC., and James P. McCormick, Defendants-Appellees.

Nos. 85-5787, 85-5916
Non-Argument Calendar.

Oct. 23, 1986.

Appeals were taken from order of the United States District Court for the Southern District of Florida, No. 85-868-CIV-LCN, Lenore Carrero Nesbitt, J., which ordered arbitration of state law claims but denied motion to compel arbitration of claims under § 10(b) of the Securities Exchange Act. The Court of Appeals held that: (1) securities claims were not subject to arbitration; (2) state law claims were subject to arbitration; (3) claim of coercion with respect to the entirety of the agreement was subject to arbitration; and (4) customer consents were not shown to be adhesion contracts.
Affirmed.

West Headnotes


[1] Headnote Citing References KeyCite Citing References for this Headnote

Key Number Symbol 25T Alternative Dispute Resolution
Key Number Symbol 25TII Arbitration
Key Number Symbol 25TII(B) Agreements to Arbitrate
Key Number Symbol 25Tk131 Requisites and Validity
Key Number Symbol 25Tk134 Validity
Key Number Symbol 25Tk134(1) k. In General. Most Cited Cases
(Formerly 33k6.2, 33k6 Arbitration)

Arbitration agreements between two parties with respect to state law claims are enforceable.
[2] Headnote Citing References KeyCite Citing References for this Headnote

Key Number Symbol 25T Alternative Dispute Resolution
Key Number Symbol 25TII Arbitration
Key Number Symbol 25TII(I) Exchanges and Dealer Associations
Key Number Symbol 25Tk411 Relations Between Customer-Investors and Broker-Dealers
Key Number Symbol 25Tk413 k. Agreements to Arbitrate. Most Cited Cases
(Formerly 33k91 Arbitration, 160k11(11.1), 160k11(11))

In the absence of evidence that arbitration clause itself, standing apart from entirety of agreement between customer and securities firm, was induced by fraud, claim of fraudulent inducement was subject to arbitration.
[3] Headnote Citing References KeyCite Citing References for this Headnote

Key Number Symbol 25T Alternative Dispute Resolution
Key Number Symbol 25TII Arbitration
Key Number Symbol 25TII(D) Performance, Breach, Enforcement, and Contest
Key Number Symbol 25Tk197 Matters to Be Determined by Court
Key Number Symbol 25Tk199 k. Existence and Validity of Agreement. Most Cited Cases
(Formerly 33k23.13 Arbitration)

Claims alleging unconscionability, coercion, or confusion in signing of agreement containing arbitration clause generally should be determined by arbitrator as those issues go to formation of entire contract rather than to issue of misrepresentation in signing of arbitration agreement.
[4] Headnote Citing References KeyCite Citing References for this Headnote

Key Number Symbol 25T Alternative Dispute Resolution
Key Number Symbol 25TII Arbitration
Key Number Symbol 25TII(I) Exchanges and Dealer Associations
Key Number Symbol 25Tk411 Relations Between Customer-Investors and Broker-Dealers
Key Number Symbol 25Tk413 k. Agreements to Arbitrate. Most Cited Cases
(Formerly 33k91 Arbitration, 160k11(11.1), 160k11(11))

Evidence did not show that agreements between securities firm and customer were adhesion contracts or were unfair or oppressive so as to preclude enforcement of arbitration provisions.
[5] Headnote Citing References KeyCite Citing References for this Headnote

Key Number Symbol 95 Contracts
Key Number Symbol 95I Requisites and Validity
Key Number Symbol 95I(E) Validity of Assent
Key Number Symbol 95k93 Mistake
Key Number Symbol 95k93(2) k. Signing in Ignorance of Contents in General. Most Cited Cases

Absent showing of fraud or mental incompetence, person who signs contract cannot avoid obligations under it by showing that she did not read what she signed.
*1351 Kathy M. Klock, Fowler, White, Burnett, Hurley, Banick & Strickroot, P.A., Miami, Fla., for defendants-appellants.

Russell L. Forkey, Ft. Lauderdale, Fla., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before RONEY, Chief Judge, KRAVITCH, Circuit Judge, and ATKINS FN* , Senior District Judge.

FN* Honorable C. Clyde Atkins, Senior United States District Judge for the Southern District of Florida, sitting by designation.

PER CURIAM:


The plaintiff, Barbara Coleman, brought suit against Prudential-Bache Securities, Inc. (Prudential-Bache), and one of its account executives, James P. McCormick (McCormick). Coleman alleged federal and state securities fraud claims arising out of the handling of her securities accounts by the defendants. Prudential-Bache and McCormick have appealed the district court's decision denying its motion to compel arbitration of Coleman's claim under Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C.A. § 78j(b). Coleman has filed a cross-appeal, arguing that the district court erred in referring to arbitration her state law claims and denying her motion for a jury trial on the issue of whether the arbitration provisions were procured by fraud. We affirm the district court's decision on all claims.
The district court's decision denying the motion to compel arbitration of the section 10(b) securities claims is due to be affirmed under this Court's recent en banc decision. Wolfe v. E.F. Hutton & Co., 800 F.2d 1032 (11th Cir.1986) .
[1] Headnote Citing References As to the state law fraud claims, the district court properly held as a matter of law that arbitration agreements between two parties with respect to state law claims are enforceable. *1352 Dean Witter, Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) . Coleman claims that the arbitration agreement here should not be enforced, however, because she was fraudulently induced to sign the Customer's Agreement and an Option Agreement. She argues that she signed the instruments without understanding the importance of the arbitration agreements contained therein, and that the agreements are contained in contracts of adhesion. Her consent to arbitration, she contends, was invalid.
[2] Headnote Citing References [3] Headnote Citing References The district court reviewed Coleman's affidavit and accompanying memorandum of law, and denied her motion for a jury trial on the issue of the validity of the arbitration agreement. A review of these materials supports the district court's decision that there was no genuine issue of fact regarding the execution of the arbitration agreement. There is no evidence to support the claim that the arbitration clause itself, standing apart from the whole agreement, was induced by fraud. Thus, the district court's decision is in accordance with the leading case, Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) .
[I]f the claim is fraud in the inducement of the arbitration clause itself-an issue which goes to the "making" of the agreement to arbitrate-the federal court may proceed to adjudicate it. [footnote omitted] But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally.

Id. at 403-04, 87 S.Ct. at 1805-06 . Claims alleging unconscionability, coercion, or confusion in signing the agreement generally should be determined by an arbitrator because those issues go to the formation of the entire contract rather than to the issue of misrepresentation in the signing of the arbitration agreement. Merrill Lynch, Pierce, Fenner, & Smith v. Haydu, 637 F.2d 391, 398 (5th Cir. Unit B 1981) FN1 ; Brener v. Becker Paribas, Inc., 628 F.Supp. 442, 446 (S.D.N.Y.1985) .

FN1. Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc), this court adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981. Id. at 1209.


[4] Headnote Citing References [5] Headnote Citing References Finally, Coleman asserts that the arbitration agreements should not be enforced because the customer consents are adhesion contracts and are therefore invalid. There is no evidence that the agreements were adhesion contracts. First, there is nothing inherently unfair or oppressive about arbitration clauses. See Surman v. Merrill Lynch, Pierce, Fenner & Smith, 733 F.2d 59, 61 n. 1 (8th Cir.1984) ; Brener, 628 F.Supp. at 446 n. 3 . Second, absent a showing of fraud or mental incompetence, a person who signs a contract cannot avoid her obligations under it by showing that she did not read what she signed. Comprehensive Accounting Corp. v. Rudell, 760 F.2d 138, 140 (7th Cir.1985) ; Donovan v. Mercer, 747 F.2d 304, 308 n. 4 (5th Cir.1984) . Because Coleman has not produced sufficient evidence showing unfairness or unconscionability, the district court properly ruled that the customer consents were not the product of adhesion contracts.
AFFIRMED.
C.A.11 (Fla.),1986.
Coleman v. Prudential Bache Securities, Inc.(Two Cases)
802 F.2d 1350