Donelson v. Ameriprise Fin. Servs., Inc.

999 F.3d 1080

Mark DONELSON, individually and on behalf of all others similarly situated, Plaintiff - Appellee

v.AMERIPRISE FINANCIAL SERVICES, INC., Defendant - Appellant

Mark J. Sachse, Defendant

James Cracchiolo; Kelli Hunter Petruzillo; Neal Maglaque; Patrick Hugh O'Connell, Defendants - Appellants

Mark Donelson, individually and on behalf of all others similarly situated, Plaintiff - Appellee

v.Ameriprise Financial Services, Inc., Defendant

Mark J. Sachse, Defendant - Appellant

James Cracchiolo; Kelli Hunter Petruzillo; Neal Maglaque; Patrick Hugh O'Connell, Defendants

No. 19-3691

No. 19-3693

United States Court of Appeals, Eighth Circuit.

Submitted: January 13, 2021

Filed: June 3, 2021

Rehearing and Rehearing En Banc Denied July 13, 2021

James F.B. Daniels, McDowell & Rice, Kansas City, MO, for Plaintiff-Appellee.

Carl Stanley Burkhalter, Thomas J. Butler, Julie Portera, Maynard & Cooper, Birmingham, AL, Barry L. Pickens, Spencer & Fane, Overland Park, KS, for Defendants-Appellants in 19-3691.

Michelle M. Arbitrio, Wood & Smith, New York, NY, Jason H. Klein, Wood & Smith, Highlands Ranch, CO, for Defendant-Appellant in 19-3693.

Before GRUENDER, BENTON, and STRAS, Circuit Judges.

GRUENDER, Circuit Judge.

Plaintiff Mark Donelson filed suit against Defendants Mark Sachse, Ameriprise Financial Services, Inc., and individual Ameriprise officers (collectively "Defendants"), alleging violations of federal securities law. He also sought to represent other Sachse and Ameriprise clients in a class action. Defendants moved to strike Donelson's class-action allegations and to compel arbitration. The district court denied these motions. Defendants appeal. We reverse and remand for entry of an order striking Donelson's class-action allegations and compelling arbitration.

I.

According to his first amended complaint,¹ Donelson is a high school graduate with no training in trading securities. Donelson had an investment account with Robert W. Baird & Co. in 2008. In 2008, Sachse, who worked for Baird, contacted Donelson and told him that Sachse had heard that Donelson was adept at trading options. Sachse told Donelson that he was a former attorney who had stopped practicing law because he no longer enjoyed it. Unbeknownst to Donelson, Sachse had been disbarred by the Kansas Supreme Court in 2007 after multiple former clients filed ethics complaints.

In 2010, Sachse stopped working at Baird and became a broker and investment advisor at Ameriprise. At Sachse's invitation, Donelson then moved his investment account from Baird to Ameriprise. In the process of doing so, Donelson and Sachse met at a restaurant so that Donelson could sign the papers needed to open his new Ameriprise account. At the restaurant, Sachse had a copy of the Account Application, which he filled out himself, checking each box that, according to him, required checking. Donelson instructed Sachse that under no circumstances was he to trade on margin any securities in or for the account. Nevertheless, Sachse checked a box in the Account Application that authorized margin borrowing. Sachse told Donelson he checked the box as a formality and assured Donelson that he would not trade any securities on margin. Donelson signed the Account Application as Sachse instructed, without reading it.

The Account Application included a recitation that stated:

You acknowledge that you have received and read the Agreement and agree to abide by the terms and conditions as currently in effect or as they may be amended from time to time. You hereby consent to all these terms and conditions with full knowledge and understanding of the information contained in the Agreement. This account is governed by a predispute arbitration clause which is found in Section 26, Page 3 of the Agreement. You acknowledge receipt of the predispute arbitration clause.

The Account Application defined "Agreement" as "the Ameriprise Brokerage Client Agreement for Non-Qualified Accounts" ("Client Agreement"), which included an arbitration clause. That arbitration clause provided for arbitration of "ALL CONTROVERSIES THAT MAY ARISE BETWEEN US ... , WHETHER ARISING BEFORE, ON OR AFTER THE DATE THIS ACCOUNT IS OPENED," except for "PUTATIVE OR CERTIFIED CLASS ACTION[S]."

After Donelson signed the Account Application, Sachse badly mishandled Donelson's investment account by, among other things, misrepresenting the account value, trading on margin when expressly instructed not to, and misrepresenting reparations Ameriprise would make for problems with Donelson's account. In response, Donelson filed suit against Defendants, bringing three counts against them. In Count I, Donelson asserted violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and related Securities and Exchange Commission Rules 10b-5(a) and (c), see 17 C.F.R. § 240.10b-5. In Count II, he asserted violations of § 20(a) of the Securities Exchange Act. See 15 U.S.C. § 78t(a). And in Count III, he asserted breach of fiduciary duty under § 206 of the Investment Advisors Act. See 15 U.S.C. § 80b-6. Alleging that other Sachse clients experienced similar improprieties, Donelson sought to represent them in a class action.

Defendants moved to strike Donelson's class-action allegations and to compel arbitration. The district court denied these motions. Defendants appeal, challenging the district court's denials. In Section II, we consider whether we have jurisdiction. In Section III, we determine whether Defendants waived their right to arbitrate. In Section IV, we address whether the district court or the arbitrator should have decided arbitrability. And in Section V, we address whether a valid arbitration clause exists and whether it encompasses the dispute between the parties. Ultimately, we reverse the district court's denial of Defendants’ motions to strike the class-action allegations and to compel arbitration, and we remand for entry of an order striking the class-action allegations and compelling arbitration.

II.

First, we address Donelson's arguments that either we do not have jurisdiction to hear this appeal or, alternatively, at a minimum, we lack jurisdiction over the denial of the motions to strike the class-action allegations. See, e.g. , Anderson ex rel. Anderson v. City of Minneapolis , 934 F.3d 876, 880 (8th Cir. 2019) ("Before reaching the merits of the dispute, we begin with jurisdiction, which is always our first and fundamental question." (brackets and internal quotation marks omitted)). Neither argument has merit.

First, the Federal Arbitration Act ("FAA") gives us jurisdiction to review the denial of the motions to compel arbitration. Section 16 of the FAA provides that "[a]n appeal may be taken from ... an order ... denying a petition under section 4 of [the FAA] to order arbitration to proceed." 9 U.S.C. § 16(a)(1)(B). Here, Defendants invoked § 4 of the FAA in their motions to strike the class-action allegations and to compel arbitration. See id . § 4 (permitting a "party aggrieved by the alleged failure ... of another to arbitrate under a written agreement for arbitration" to "petition any United States district court ... for an order directing that such arbitration proceed in the manner provided for in such agreement"). The district court denied these petitions in its order denying Defendants’ motions to strike and to compel arbitration. Therefore, we have jurisdiction to hear an appeal of this denial.

Donelson claims that the district court's order denying Defendants’ motions to strike class-action allegations and to compel arbitration was not an order denying a petition under § 4 because the district court did not hold the trial required by that section. Section 4 states: "If the making of the arbitration agreement ... be in issue, the court shall proceed summarily to the trial thereof." However, the fact that the district court did not hold a trial does not mean that the district court did not deny a petition under § 4 and does not preclude appellate jurisdiction.

Donelson also argues that even if we have jurisdiction to review the district court's denial of the motions to compel arbitration, we do not have jurisdiction to review the district court's denial of the motions to strike the class-action allegations. We disagree. Under § 4, which permits an appeal to be taken from an "order," we have jurisdiction to review the entire order. See Yamaha Motor Corp., U.S.A. v. Calhoun , 516 U.S. 199, 205, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996) (holding that 28 U.S.C. § 1292(b) ’s grant of appellate jurisdiction over certain interlocutory orders permitted the appellate court to review "any issue fairly included within the certified order because it is the order that is appealable" (internal quotation marks omitted)). Here, § 16 of the FAA provides for the appeal of "order[s]." 9 U.S.C. § 16(a)(1). Thus, we have appellate jurisdiction to review the district court's denial of Defendants’ motions to strike class-action allegations because this denial was contained in an order reviewable under 9 U.S.C. § 16(a)(1)(B).

III.

Next, we consider Donelson's claim that Defendants waived their right to arbitrate by moving to strike his class-action allegations at the same time they moved to compel arbitration. "The issue of waiver of arbitration is one of law and subject to de novo review." Dumont v. Saskatchewan Gov't Ins. , 258 F.3d 880, 886 (8th Cir. 2001). "A party may be found to have waived its right to arbitration if it: (1) knew of an existing right to arbitration; (2) acted inconsistently with that right; and (3) prejudiced the other party by these inconsistent acts." Lewallen v. Green Tree Servicing, L.L.C. , 487 F.3d 1085, 1090 (8th Cir. 2007) (internal quotation marks omitted). But "[i]n light of the strong federal policy in favor of arbitration, any doubts concerning waiver of arbitrability should be resolved in favor of arbitration." Id . Here, there is no dispute that Defendants knew of an existing right to arbitration. Ther...