Webb v. Fidelity Brokerage Services

MOSES WEBB, Plaintiff-Appellant, v. FIDELITY BROKERAGE SERVICES d/b/a FIDELITY INVESTMENTS, Defendant-Appellee.

No. 354691

Court of Appeals of Michigan

July 29, 2021

UNPUBLISHED

Genesee Circuit Court LC No. 18-111894-CZ

Before: Hood, P.J., and Markey and Gleicher, JJ.

Per Curiam

Plaintiff Moses Webb appeals by right the trial court's order granting summary disposition in favor of defendant Fidelity Brokerage Services under MCR 2.116(C)(7). The trial court agreed with Fidelity's contention that the parties' brokerage contract contained a valid and enforceable agreement to arbitrate. We affirm.

I. THE COMPLAINT

On November 13, 2018, Webb filed a civil suit against Fidelity. Webb alleged that he retired from General Motors (GM) after a 44-year career with GM. He stated that his retirement funds consisted of 18, 330 shares of GM common stock which had been and were entrusted with Fidelity. Webb asserted that he "relied on the asset protection offered by Fidelity and [its] prudent investment advice." He claimed that he had attempted to communicate with Fidelity regarding the status of his shares in light of GM's June 2009 bankruptcy, but he received "no clear, acceptable answers to his questions[.]" Webb alleged that he had invested $79, 404 of his hard-earned income in the GM common stock, that the value of his shares was $7, 905 in mid-2010 and that Fidelity sent him a statement in March 2011 indicating that his stock was valued at $768. According to Webb, Fidelity subsequently sent him "a statement reflecting less than a $500 balance in the account." Webb maintained that Fidelity mailed him a gross distribution retirement check in the amount of $.36 in June 2018. He contended that GM had offered stock buybacks, but Fidelity failed to provide him with any information with regard to the possibility of a buyback of his GM stock. Webb alleged that he made numerous demands-all ignored- seeking information regarding steps that Fidelity could take to preserve his interest in the GM stock or to recoup his investment. Webb also received no response when he asked Fidelity whether there was any action that he could personally take to protect against loss.

In a single count, Webb alleged that Fidelity breached its fiduciary duty and responsibility to protect invested assets that Fidelity fraudulently withheld investment funds and earnings, and that Fidelity failed to pursue recoupment of losses through a common stock buyback program offered by GM. Webb contended that Fidelity owed a duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC 1001 et seq., specifically 29 USC 1104(a)(1), obligating Fidelity to regularly monitor Webb's shares of GM stock for changed circumstances, such as GM's bankruptcy, in order to protect against or recoup investment losses, including participation in the buyback program. Webb set forth allegations regarding GM's bankruptcy, the associated bailout or loan by the federal government, which resulted in the government's majority ownership of GM stock, partial repayment by GM to the government, and GM's handout of stock to GM executives valued at $1.3 million despite the bankruptcy.

Webb alleged that "[b]reach of fiduciary duty can be a continuing violation that extends the limitations period for filing suit" and that "[e]ven though the investments were purchased more than six years earlier, a trustee generally has a continuing duty to monitor investments after the initial purchase." Webb again asserted that Fidelity had a duty to take prudent action to preserve or recoup his investment. In his prayer for relief, Webb sought compensatory damages in the amount of $79, 404, which represented the purchase price for the stock, plus interest, any punitive damages for fraudulent conduct, attorney fees, costs, and any other relief that the court deemed fair and just.

II. PROCEDURAL HISTORY

On January 11, 2019, in lieu of filing an answer, Fidelity moved for summary disposition pursuant to MCR 2.116(C)(7), arguing that Webb's "claims are undeniably untimely and should be dismissed." Fidelity contended that all of the relevant acts and events at issue took place well over six years ago and that a six-year period was the longest possible limitations period available to Webb. According to Fidelity, because the alleged wrongful conduct occurred more than six years before Webb's complaint was filed, the action was time-barred, and summary dismissal was required. Alternatively, Fidelity argued that Webb's lawsuit should be dismissed because he agreed to arbitrate any disputes with Fidelity in the Fidelity Brokerage Retirement Customer Account Agreement (the brokerage contract). The brokerage contract, dated July 24, 2008, contained the following arbitration clause:

(Image Omitted)

Fidelity did not submit the entire brokerage contract, and there was no signature page.

In response to Fidelity's motion for summary disposition, Webb argued that breach of fiduciary duty can constitute a continuing violation that extends the limitations period for filing suit and that even though his purchase of stock occurred more than six years earlier, there was a continuing duty to monitor the investment after the initial purchases that carried forward to this day. With respect to the arbitration argument posed by Fidelity, Webb claimed "that he never received, signed, nor agreed to waive his right to a jury trial on his claims . . . and that the asserted arbitration provision is not supported by any admissible proof or verification, affidavit, or otherwise, and should be disregarded."

In a reply brief, Fidelity argued that Webb's contention that Fidelity had to continually monitor the status of his GM shares was legally unsupportable and that Webb's action was barred by ERISA's six-year statute of repose, which was triggered not later than March 2011 when Webb admitted that he knew of his losses. In cursory fashion, Fidelity again asserted that, in the alternative, the suit should be dismissed in light of the arbitration clause in the brokerage contract.

On March 4, 2019, a hearing was conducted on Fidelity's motion for summary disposition. The primary focus of the hearing was on the issue concerning the statute of limitations.^[1] During one stage of the hearing, the trial court asked Fidelity whether it had a signed copy of the brokerage contract containing the arbitration clause. Counsel for Fidelity indicated that the application for the brokerage account was signed by Webb, which acknowledged and incorporated the arbitration clause, and that it was somewhere in a "stack of documents." Webb's attorney observed that she did not have a signed document by her client agreeing to arbitration and that, regardless, an arbitration clause cannot preempt or usurp a statutory right to a judicial remedy under ERISA. At the end of the hearing, the trial court indicated that it was taking the matter under advisement. The court noted that it was going to look at a couple of cases and think about Webb's motion for a stay.

A few days after the summary disposition hearing, Fidelity submitted a supplemental filing in connection with its motion for summary disposition. Fidelity presented the trial court with a customer account application signed by Webb in November 2008, and in the application there is a provision indicating acknowledgement by the signor, Webb, that he received the brokerage contract and that he had read, understood, and agreed "to be bound by its terms and conditions as they are currently in effect and as they may be amended in the future." There is an even more specific provision immediately preceding the signature line in the application, stating as follows:

The IRA established with this application is governed by a predispute arbitration clause, which is located on the last page of the . . . [brokerage contract]. I acknowledge receipt of the predispute arbitration clause.

On March 25, 2019, at which point the court had yet to rule on the motion for summary disposition, Webb filed a response to Fidelity's supplemental brief. Webb accurately noted that the customer account application ostensibly executed by Webb also provides that the "agreement shall be construed, administered, and enforced according to the laws of the Commonwealth of Massachusetts, except as superseded by federal law or statute." Webb also accurately indicated that the arbitration clause in the brokerage contract states that "[i]n some cases, a claim that is ineligible for arbitration may be brought in court." Webb argued that the arbitration clause was superseded by federal law and statute-ERISA-and that his claims were ineligible for arbitration and could thus be pursued in a court of law. He maintained that ERISA expressly preempts state regulation of employee benefit plans and specifically provides for civil actions in 29 USC 1132. Webb asserted that Congress, by enacting ERISA, intended to allow participants of employee benefit plans to file civil lawsuits in order to enforce substantive rights. He also contended that the customer account application and the brokerage contract were executed in 2008 and would only apply, if at all, to those shares of GM stock that Webb rolled over into the IRA after the effective dates of those documents. Webb stated that his 18, 300 shares of GM stock were purchased over his 44 years with GM and that he only purchased 2, 000 of those shares after GM filed for bankruptcy in 2009.

On April 1, 2019, the trial court held a hearing to rule on the motion for summary disposition and the motion for stay. The trial court summarized the principles applicable to a (C)(7) motion and contract interpretation, noted the nature of Webb's complaint, including the claim of breach of...