Metlife Sec., Inc. v. Holt

215 F.Supp.3d 599

METLIFE SECURITIES, INC., MetLife Insurance Company USA, MetLife Investors Distribution Company, Metropolitan Life Insurance Company and MetLife, Inc., Petitioners,

v.Patsy A. HOLT, Respondent.

No. 2:16–CV–32

United States District Court, E.D. Tennessee, Greeneville Division.

Filed October 19, 2016

Lee E. Bains, Jr., Prim F. Escalona, Edward M. Holt, Maynard, Cooper & Gale, PC, Birmingham, AL, Jimmie C. Miller, Hunter, Smith & Davis, Kingsport, TN, for Petitioners.

Ronald W. Woods, Elijah Thomas Settlemyre, Thomas L. Kilday, Milligan & Coleman, Greeneville, TN, for Respondent.

MEMORANDUM OPINION

Leon Jordan, United States District Judge

This matter is before the Court on Petitioner's Motion to Strike Respondent's Jury Demand [doc. 32], Petitioner's Brief in Support of the Motion [doc. 33], and Respondent's Response in Opposition [doc. 36]. For the reasons herein, the Court will grant the motion.

I. BACKGROUND

Respondent Patsy A. Holt ("Ms. Holt") opened several Individual Retirement Accounts with Petitioners ("MetLife") in Greeneville, Tennessee, four of which are at issue in this action. [Pet. to Compel Arbitration, doc. 1, ¶¶ 1, 52; Holt Dep., doc. 1–9, at 8:4–8, 21–23, 9:17–20, 10:15–25, 11:1–3, 14:4–14; Woods Decl., doc. 4–1, ¶ 5].¹ Ms. Holt personally signed the account application for one of the four accounts—account number XXXXX9324. [Holt Dep. at 14:4–17]. At the suggestion of MetLife's authorized representative in charge of the accounts, Mark Salyer ("Mr. Salyer"), Ms. Holt instructed her daughter, Lydia Salyer ("Ms. Salyer"), to sign the account applications for the three other accounts—account numbers XXXXX3828, XXXXX9931, and XXXXX8578—on her behalf. [Id. at 5:23–25, 6:1, 7:22–25, 8:1–25, 9:1–16, 10:15–25, 11:1–13].² Ms. Holt's name, Patsy A. Holt, appears in cursive in the signature block on those three account applications, [see Account Application 3828, doc. 1–2, at 2; Account Application 9931, doc. 1–3, at 2; Account Application 8578, doc. 1–4, at 2], but Ms. Holt did not view or read them, [Holt Dep. at 11:14–18]. In total, Ms. Holt claims to have invested more than $1,900,000 in the accounts. [Second Am. Compl., doc. 1–8, ¶ 19].

According to Ms. Holt, Mr. Salyer went on to misappropriate her funds, which are now almost entirely gone. [Id. ¶¶ 28, 30]. As a result, she sued Mr. Salyer and MetLife in the Circuit Court of Sullivan County, Tennessee, for breach of contract, conversion, failure to supervise, fraud, and negligence, alleging that MetLife is responsible for Mr. Salyer's misconduct. [Id. ¶¶ 25–35]. In response, MetLife filed in the state court a motion to compel arbitration, arguing that Ms. Holt has to arbitrate her claims because the four account applications contain arbitration provisions. [See Pet. to Compel Arbitration ¶ 9; State Court Order, doc. 7–2, ¶ 2]. In each account application, the arbitration provision reads:

MetLife ... and the purchaser of the shares, who is the signatory below ... agree that any controversy ... arising out of or relating to any transactions between [them] shall be determined by arbitration.... This agreement and any arbitration hereunder shall be governed and construed in accordance with the laws of the State of New York....

[Account Applications, doc. nos. 1–1, 1–2, 1–3, 1–4, at 3]. The court ruled that Ms. Holt's claims related to account number XXXXX9324 are subject to arbitration but reserved ruling on the arbitrability of the other claims until it could decide whether to allow discovery. [Woods Decl. ¶ 5]. Mr. Salyer, however, then filed for bankruptcy, and the court stayed the case for roughly three years. [Pet. to Compel Arbitration ¶ 9]. When the case resumed after the bankruptcy proceedings, the court permitted Ms. Holt to file a revised second amended complaint so she could allege that the arbitration provisions are unenforceable contracts of adhesion. [Woods Decl. ¶ 8; see Second Am. Compl. ¶ 22].

Around this same time, Ms. Holt claims that she and MetLife agreed to "a methodology" to resolve the case. [Woods Decl. ¶ 9]. According to Ms. Holt, the parties decided, in a series of e-mails, "to pursue a ruling from the state court judge on the issue of arbitration and then irrespective of who prevailed, they would mediate the underlying suit within sixty (60) days for the ruling." [Id. ]. In pertinent part, the e-mails between the parties read:

• Ms. Holt's counsel: "[We] would propose ... mediat[ion] within 90 days so as to allow for mutual discovery in the Holt matter pursuant to an agreed scheduling Order." [E-mail 1, doc. 7–1, at 1].

• MetLife's counsel: "MetLife is agreeable to mediating Holt within 90 days of the court's ruling on the arbitration issue.... I don't know of any reason we couldn't have a hearing on the [arbitration] issue in the next 30–45 days and get a final decision from [the state court]. Please let me know if that is acceptable." [E-mail 2, doc. 7–1, at 1].

• Ms. Holt's counsel: "Holt will be okay if we shorten it up to 60 days." [E-mail 3, doc. 7, at 2].

• MetLife's counsel: "[Y]ou never directly responded to the shortening on Holt from 90 days to 60 days. You are agreeable to the sixty days, are you not?" [E-mail 4, doc. 7–1, at 2].

• Ms. Holt's counsel: "[W]e're ok with the 60 days." [E-mail 5, doc. 7–1, at 2].

After exchanging these e-mails, MetLife renewed its motion to compel arbitration, prompting the state court to allow discovery on whether all four arbitration provisions are unenforceable contracts of adhesion. [State Court Order at 2]. The state court reserved ruling on this issue until it could conduct an evidentiary hearing, [id. ], and the parties proceeded to conduct some discovery, which included depositions, interrogatories, and requests for production, [Woods Decl. ¶ 12].

MetLife then petitioned this Court to compel Ms. Holt to arbitrate her claims, seeking this recourse under the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 –14. [Pet. to Compel Arbitration at 5–16]. Ms. Holt filed a Response in Opposition to MetLife's Petition [doc. 6], which she titled as a "Motion to Dismiss, or in the Alternative, Motion for Summary Judgment." [Resp't's Resp. in Opposition at 1]. Construing Ms. Holt's response as a motion for summary judgment, the Court granted MetLife's Petition to Compel Arbitration in part, requiring Ms. Holt to arbitrate her claims under Account Application 9324. [See Mem. Op., doc. 8, at 26–29, 35]. The Court ordered an evidentiary hearing to determine whether the arbitration provisions in Account Applications 3828, 9931, and 8578 are enforceable. [Id. at 30–35]. About a week later, Ms. Holt filed a Second Response to MetLife's Petition [doc. 10]—essentially in the form of an answer based on Federal Rule of Civil Procedure 12(a)(4)(A) —and contemporaneously filed a Motion to Alter or Amend Judgment [doc. 11] under Federal Rule of Civil Procedure 59(e). Around this time, she also made a Jury Demand [doc. 18] under Federal Rule of Civil Procedure 38.³

To resolve Ms. Holt's Motion to Alter or Amend Judgment, the Court canceled the evidentiary hearing, [Order, doc. 22, at 1], which overlapped with the parties' Stipulated Briefing Schedule for the motion [doc. 20]. While the Court considered the motion, MetLife proceeded to file a Motion to Compel Arbitration of the Remaining Claims [doc. 26], which the Court denied. [Order on Renewed Mot., doc. 30, at 1–3].⁴ The Court also determined that Ms. Holt had not satisfied the criteria for an altered or amended judgment and denied her Motion to Alter or Amend Judgment. [Mem. Op., doc. 28, at 1–7]. The Court then rescheduled the evidentiary hearing, [Order, doc. 35, at 1], prompting MetLife to file its latest motion—its Motion to Strike Respondent's Jury Demand, which the parties have now fully briefed and is before the Court.

II. THE FEDERAL ARBITRATION ACT

Under the plain language of the FAA, a party opposing arbitration is entitled to a jury trial upon satisfying two conditions: (1) showing that an issue of material fact exists as to the validity of an arbitration agreement and (2) demanding a jury trial "on or before the return day of the notice of application":

If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to a jury in the manner specified by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose.

9 U.S.C. § 4 (emphasis added); see Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 961 F.2d 1148, 1154 (5th Cir. 1992) ("The party resisting arbitration bears ‘the burden of showing that he is entitled to a jury trial under § 4 of the Arbitration Act.’ " (quotation and footnote omitted)); see also Mazera v. Varsity Ford Mgmt. Servs., LLC , 565 F.3d 997, 1001–03 (6th Cir. 2009) (concluding that the party opposing arbitration did not show that the record contained a material issue of fact and therefore had no right to a jury trial under § 4 ); cf. Green Tree Fin. Corp.–Ala. v. Randolph , 531 U.S. 79, 91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (stating that the party challenging a petition to compel arbitration has the onus of proving that the claims at issue are not arbitrable). The FAA does not define the language "on or before the return day of the notice of application."

III. ANALYSIS

MetLife first argues that the Court should strike Ms. Holt's demand for a jury trial because Ms. Holt failed to make her demand "on or before the return day of the notice of...