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Kirkwood v. Financial West Investment Group, Inc.

United States District Court, D. Maryland

October 3, 2019




         Pending before the court is defendant Financial West Investment Group, Inc.'s ("FWG") renewed motion to compel arbitration. For the reasons stated below, the court will grant the motion.


         Plaintiff David Kirkwood is a Maryland resident and former client of defendant Financial West Investment Group, Inc. ("FWG"). FWG is a broker-dealer agency licensed by the Financial Industry Regulatory Authority ("FINRA"). Through its regional offices, FWG solicited clients to invest funds in various financial instruments, including annuities. (Am. Compl. ¶ 6, ECF No. 3). Gary Steciuk was the registered representative for FWG's Hampstead, Maryland branch office from 2002 until December 2011. (Id. ¶¶ 5, 7).

         On April 5, 2004, FWG opened an annuity account for Kirkwood. (Def's Renewed Mot. to Compel Arbitration ("Def.'s Renewed Mot.") Ex. 3, ECF No. 68-4). The New Account Form for the annuity listed Steciuk as Kirkwood's FWG broker. (Id. at 2). Kirkwood denies signing the New Account Form and suggests that Stecuik forged Kirkwood's signature. (PL's Opp. to Def.'s Mot. to Compel Arbitration at 3, ECF No. 58). Steciuk oversaw and managed Kirkwood's annuity account until 2014.[1] In July 2014, Kirkwood first became aware that Steciuk was engaged in fraudulent activity related to the annuity account. From 2006 until July 2014, Steciuk defrauded Kirkwood by soliciting him to invest more than $400, 000 in illegitimate annuities. (Am. Compl. ¶ 11). Rather than investing Kirkwood's funds into legitimate financial instruments, Steciuk instead invested them into his own accounts and used the funds to his benefit, causing Kirkwood ultimately to lose more than $350, 000. (Id. at ¶¶ 12, 16). On March 27, 2015, Steciuk pleaded guilty in this district to one count of mail fraud, after having been charged with several federal offenses in connection with Kirkwood's and other defrauded investors' accounts. (Steciuk Criminal Docs., ECF No. 3 at 19, 56). Steciuk remains incarcerated at a federal facility.

         On July 18, 2017, Kirkwood initiated this suit, alleging breach of fiduciary duty through fraud and constructive fraud, breach of contract, and negligent supervision. (Am. Compl. ¶¶ 17-36). FWG filed its first motion to compel arbitration on June 6, 2018, requesting that the court dismiss the case so that the parties may resolve their dispute in arbitration. FWG argued that the basis for Kirkwood's relationship with FWG was the New Account Form, which includes a broad arbitration clause and ostensibly bears Kirkwood's signature.[2] The court denied the motion without prejudice, noting that Kirkwood's forgery allegation goes to the arbitrability of the dispute, but that Kirkwood may be equitably estopped from making this claim if Kirkwood relies on the New Account Form to establish his contractual relationship with FWG. (Jan. 30, 2019 Memo, at 4-6, ECF No. 63).

         Now pending before the court is FWG's renewed motion to compel arbitration. The motion has been fully briefed and no oral argument is necessary. See Local Rule 105.6 (D. Md. 2018).


         The United States Supreme Court has identified arbitration agreements as "a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute." Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974). "[A] motion to dismiss based on a forum-selection clause should be properly treated under Rule 12(b)(3) as a motion to dismiss on the basis of improper venue." Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006); see also Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 365-66 & n. 9 (4th Cir. 2012) (analyzing a dismissal in favor of arbitration under Rule 12(b)(3)). Thus, motions to compel arbitration may properly be treated as motions to dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3).

         "On a motion to dismiss under Rule 12(b)(3), the court is permitted to consider evidence outside the pleadings." Aggarao, 675 F.3d at 365-66 (citing Sucampo, 471 F.3d at 550). Facts should be viewed in the light most favorable to the plaintiff, and the plaintiff is obligated "to make only a prima facie showing of proper venue in order to survive a motion to dismiss." Id. at 366 (internal citations omitted).


         Federal policy favors the resolution of disputes through arbitration. New Prime, Inc. v. Oliveira, 139 S.Ct. 532, 543 (2019) (quoting Moses H. ConeMem'lHosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Under the Federal Arbitration Act ("FAA"), arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Generally, however, courts may not compel parties to submit to arbitration any dispute they did not agree to arbitrate. Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416 (4th Cir. 2000) (internal citation omitted). Whether the parties have agreed to arbitrate a particular dispute is a question of "arbitrability." Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)

         Pursuant to the FAA and related case law, "the question of who decides arbitrability is itself a question of contract." Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 527 (2019). Jurisdiction to resolve the arbitrability of an agreement generally resides with the district court unless the arbitration agreement specifically assigns the issue of arbitrability to the arbitrator. Simply Wireless, Inc. v. T-Mobile US, Inc., 877 F.3d 522, 526 (4th Cir. 2017) (holding that courts should resolve questions of arbitrability absent clear and unmistakable evidence, beyond the mere presence of an expansive arbitration clause, that the parties intended for an arbitrator to determine arbitrability) (quoting Hayes v. Delbert Servx. Corp., 811 F.3d 666, 671 n. 1 (4th Cir. 2016) and Peabody Holding Co. v. United Mine Workers of Am., Int'l Union, 665 F.3d 96, 102 (4th Cir. 2012)) (internal quotation marks and further internal citations omitted), abrogated on other grounds by Schein, 139 S.Ct. at 529. Courts must consider any challenge to the validity of an agreement to arbitrate before ordering a case to arbitration. See Rent-A-Center, 561 U.S. at 70-71. An allegation of forgery constitutes a challenge to the validity of an agreement to arbitrate. See Gregory v. Interstate/Johnson Lane Corp., 188 F.3d 501, 1999 WL 674765, at * 7 (4th Cir. Aug. 31, 1999) (per curiam);[3] Roach v. Navient Solutions, Inc., 165 F.Supp.3d 343, 349 (D. Md. 2015); Monk v. Perdue Farms Inc., 12 F.Supp.2d 508, 509 (D. Md. 1998).

         FWG argues that the court cannot consider Kirkwood's challenge to the arbitration agreement because Kirkwood is equitably estopped from claiming his signature is a forgery. The doctrine of equitable estoppel recognizes that "it is unfair for a party to rely on a contract when it works to its advantage, and repudiate it when it works to its disadvantage." Am. Bankers bis. Grp., Inc. v. Long,453 F.3d 623, 627 (4th Cir. 2006). Pursuant to this principle, a plaintiff cannot deny that he is bound by an arbitration agreement when his claims against the defendant "arise from the contract containing the arbitration clause." Id. at 628 ...

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