Opinion
D058164 Super. Ct. No. 37-2008-00058449-CU-FR-CTL
11-29-2011
CHARLES E. JONES et al., Plaintiffs and Respondents, v. LYXOR ASSET MANAGEMENT, S.A., et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from an order of the Superior Court of San Diego County, Luis R. Vargas, Judge. Affirmed.
INTRODUCTION
Lyxor Asset Management, SA (Lyxor), and SG Hambros Trust Company (Channel Islands), Ltd. (SG Hambros), (together, Lyxor appellants) appeal from the trial court's order denying their petition to compel arbitration of all claims asserted against them in the civil action of Charles E. Jones and Judith W. Jones (the Joneses).
This is the second appeal arising out of the underlying civil action, and like its predecessor, Jones v. Jacobson (2011) 195 Cal.App.4th 1 (Jones), the instant case involves enforcement of an arbitration provision by nonsignatories. The Lyxor appellants' arguments in the instant case mirror those previously made on appeal by defendants Societe Generale (SG) and SG Structured Products, Inc. (together, SG defendants), as joined by defendants Ivor J. Jacobson, Santa Fe Investment Advisors Ltd., Anglo African Shipping Company of New York and Anglo African Holding Co. Ltd. (together, Jacobson defendants).
The SG defendants and the Lyxor appellants are represented by the same legal counsel.
In light of our decision in Jones affirming the trial court's order denying the motion of the SG defendants to compel arbitration, we sought and received from the parties in the instant appeal additional briefing on the effect of Jones on the resolution of this case. We have considered the parties' additional briefs and now affirm the order denying the Lyxor appellants' motion to compel arbitration.
As we pointed out in Jones, because the Jacobson defendants in their joinder motion adopted all arguments of the SG defendants, our discussion of the SG defendants in Jones (and thus here) necessarily included (includes) the Jacobson defendants.
DISCUSSION
We incorporate the facts from Jones into the instant appeal.
As the Lyxor appellants recognize in their supplemental brief to this court, our decision in Jones resolved all arguments in the instant appeal except, according to the Lyxor appellants, the argument they were in an agency relationship with SGAS. Before reaching agency, we first review Jones and discuss its impact on the instant case.
A. Jones
In Jones, we concluded the SG defendants failed to satisfy their burden as nonsignatories to establish either or both of them were a party to the arbitration provision in the "Account Agreement" between the Joneses and SG America Securities, LLC (SGAS).
The arbitration provision is found in paragraph 9 of the account agreement and provides as follows:
" * Arbitration is final and binding on the parties.
" * The parties are waiving their right to seek remedies in court, including the right to jury trial.
" * Prearbitration discovery is generally more limited than and different from court proceedings.
" * The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of ruling by the arbitrators is strictly limited.
" * The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
" * No person shall bring a putative or certified class action to arbitration, nor seek to enforce any predispute arbitration agreement against any person who has initiated in court a putative class action; or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; or (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein.
"Any controversy arising out of or relating to any of my accounts, to transactions with you for me, or to this or any other agreement or the construction, performance or breach thereof, shall be settled by arbitration before an arbitration panel appointed by the NASD or the New York Stock Exchange, Inc. or the American Stock Exchange, Inc. (and only before such a panel) as I may elect. If I do not make such election by registered mail addressed to you at your main office (Attn: Legal Dept.) within five (5) days after demand by you that I make such an election, then you may make such election. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The provisions of this paragraph shall also apply to any such controversy involving any agent or employee of yours."
Initially, we rejected the argument of the SG defendants that they were entitled to enforce the arbitration provision in the account agreement merely because that provision was "broadly worded" and "require[d] arbitration of '[a]ny controversy arising out of or relating to any of my [(the Joneses')] accounts, to transactions with you [(SGAS)] for me [(the Joneses)], or to this or any other agreement or the construction, performance or breach thereof . . . .' " (Jones, supra, 195 Cal.App.4th at p. 18.)
Next, we concluded the language in the arbitration provision that required the Joneses to arbitrate any controversy " 'involving any agent or employee of yours [(SGAS)]' " did not apply to the SG defendants. As relevant in the instant appeal, we noted in Jones that even if Debreu and Auvray were treated as employees of SGAS, the "agent and employee" language in the arbitration provision applied only when enforcement of arbitration was by (or against, as the case may be) a nonsignatory agent or employee of SGAS, which was not the case in Jones. (Jones, supra, 195 Cal.App.4th at pp. 18-19, fn. 9.)
Finally, after reviewing the causes of action asserted by the Joneses against the SG defendants, we concluded the judicially-created equitable estoppel doctrine did not provide an independent basis to enforce the arbitration provision in the account agreement because those causes of action were not dependent on or inextricably intertwined with the account agreement. (Jones, supra, 195 Cal.App.4th at pp. 20-21.)
At oral argument in Jones, the SG defendants alleged for the first time that they, as opposed to Debreu and Auvray, were in an agency relationship with SGAS, an argument they repeated in their petition for rehearing. We rejected that argument, however, because the SG defendants failed to make this argument below, in their motion and amended motion to compel in the trial court, and in their briefs on appeal. (Jones, supra, 195 Cal.App.4th at p. 19, fn. 12.)
B. The Instant Appeal
1. The Trial Court's Ruling
Our review of the record shows the Lyxor appellants filed their motion to compel arbitration about a month after the trial court denied the motion of the SG defendants. The court also denied the Lyxor appellants' motion, ruling as follows:
"Lyxor and SG Hambros have not met their burden of proving the existence of an agreement to arbitrate the current dispute between the parties.
" 'A written provision . . . to settle by arbitration a controversy thereafter arising . . . or . . . to submit to arbitration an existing controversy . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist [at] law or in equity for the revocation of any contract.' [Citation.] Arbitration can be compelled only if the parties have agreed to arbitrate the particular controversy involved. [Citation.]
"Here, there is no signed arbitration agreement covering the instant dispute between Plaintiffs [the Joneses] and Defendants Lyxor and SG Hambros. Plaintiffs entered into the Account Agreement with a third party, [SGAS], which contains an arbitration provision that states, in pertinent part: [¶] ['] Any controversy arising out of or relating to any of my accounts, to transactions with you for me, or to this or any other agreement or the construction, performance or breach thereof, shall be settled by arbitration . . . . The provisions of this paragraph shall also apply to any such controversy involving any agent or employee of yours.' [Citation.]
"SGAS is not a party to the instant litigation. Messrs. Auvray and Debreu are also not parties to the instant litigation. Lyxor and SG Hambros are not parties or signatories to the Account Agreement. Thus, there is no written agreement to arbitrate disputes among Plaintiffs, Lyxor, and SG Hambros.
"Lyxor and SG Hambros also have not shown Plaintiffs should be equitably estopped from refusing to arbitrate their disputes. Lyxor and SG Hambros have not shown Plaintiffs' claims against them in this litigation are founded in or intertwined with the provisions of the Account Agreement entered into between Plaintiffs and SGAS, so as to warrant arbitration with non-signatories to the Agreement."
2. Jones's Effect on the Instant Appeal
Before we decided Jones, the Lyxor appellants argued in their opening brief that this court's "[then] anticipated ruling in [Jones]will likely resolve this appeal as well." That position was consistent with the stipulation of the parties—including the Lyxor appellants—in connection with their joint motion to consolidate the appeals in Jones and in the instant case. As relevant here, the parties stipulated that "the same legal and factual issues are in dispute in each of the appeals." (Italics added.)
This court rejected the parties' proposed stipulation to consolidate in its October 5, 2010 order, noting it already had granted calendar preference in the Jones appeal on June 8, 2010.
After we decided Jones, as noted ante we requested supplemental briefing from the parties regarding the impact of our decision in Jones on the instant appeal. With the benefit of hindsight, the Lyxor appellants in their supplemental brief argue there are two "critical differences" between their appeal and Jones, which differences, they further argue, warrant a different result here than in Jones. We address those "critical differences" now.
3. Agency
Specifically, the Lyxor appellants in their supplemental briefing argue that their "core contention . . . in [the instant] appeal is that they are entitled to enforce[] . . . the arbitration provision in the Account Agreement between [the Joneses] and [SGAS] because at all relevant times in connection with [the Joneses'] warrant transactions, SGAS was acting as the agent" for appellants. They also argue they have fully briefed this issue on appeal, in contrast to the SG defendants in Jones.
A. Forfeiture
We note from the record that the Lyxor appellants—like the SG defendants before them—chose (perhaps for tactical reasons) not to argue below in their motion to compel they were in an agency relationship with SGAS. As we noted in Jones, arguments raised for the first time on appeal are deem forfeited. (Jones, supra, 195 Cal.App.4th at p. 19, fn. 12; see also JRS Products, Inc. v. Matsushita Electric Corp. of America (2004) 115 Cal.App.4th 168, 178 [the policy behind the rule that an appellate court generally will not review an argument raised for the first time on appeal is based on fairness, as "[a]ppellate courts are loath to reverse a judgment on grounds that the opposing party did not have an opportunity to argue and the trial court did not have an opportunity to consider."].)
The Lyxor appellants allege in their supplemental brief that unlike the SG defendants in Jones, the Lyxor appellants in fact raised in the trial court agency as a basis to enforce arbitration. We disagree. First, we note their motion to compel was completely silent on this issue. Second, the record shows the first time they raised their own agency relationship with SGAS was during argument in the trial court and was, in any event, a minor point made in the context of their claim that they were entitled to enforce arbitration because Debreu and Auvray were employees of SGAS (who figured prominently in the Joneses' amended complaint).
Indeed, the record shows that, in connection with the "agent or employee" language of the arbitration provision, the Lyxor appellants in their motion to compel argued only that the myriad allegations involving Debreu and Auvray in the Joneses' amended complaint entitled the Lyxor appellants to enforce arbitration as nonsignatories because: (1) Debreu and Auvray were in fact employees of SGAS and (2) the arbitration provision required the Jones to arbitrate " 'any controversy involving any . . . employee of yours [SGAS].' " Thus, by failing to raise it below the Lyxor appellants forfeited on appeal the argument they were in an agency relationship with SGAS.
It should be noted that this quote, including the emphasis, is exactly as it appears in the motion to compel of the Lyxor appellants, with the word "agent" deleted from paragraph 9 of the account agreement ostensibly because agency was not germane to that discussion. Regardless, we rejected this identical argument in Jones when we assumed Debreu and Auvray were SGAS employees but concluded the "agent and employee" language in paragraph 9 applies only when enforcement of the arbitration provision is by or against a nonsignatory agent or employee of SGAS. (See Jones, supra, 195 Cal.App.4th at p. 19.)
B. Agency Analysis on Appeal
The Lyxor appellants argue that even if they did not raise agency below, on this record "the question of whether SGAS's status as the agent of the Lyxor Appellants compels arbitration is purely one of law, and may be resolved on the factual record presented to the trial court." We turn to this argument next.
1. Agency is a Question of Fact
"The existence of an agency relationship is a factual question for the trier of fact, whose determination must be affirmed on appeal if supported by substantial evidence. [Citations.]" (Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp. (2007) 148 Cal.App.4th 937, 965.) "Civil Code section 2295 defines an agent as 'one who represents another, called the principal, in dealings with third persons.' An agent acts on behalf of the principal and subject to the principal's control. [Citation.] ' "In the absence of the essential characteristic of the right of control, there is no true agency . . . ." ' [Citation.]" (Korean Air Lines Co., Ltd. v. County of Los Angeles (2008) 162 Cal.App.4th 552, 562.)
Here, the Lyxor appellants attempt to skirt this law by arguing in their supplemental brief that the Joneses do not dispute that SGAS was acting as the Lyxor appellants' agent. In support of this contention, the Lyxor appellants generally refer to five pages in the Joneses' brief. Our review of those specific pages and of the Joneses' brief overall shows otherwise: the Joneses vigorously opposed any contention that SGAS and the Lyxor appellants were in an agency relationship. (See e.g., p. 21 of the Joneses' brief ["Respondents [the Joneses] do have allegations concerning agency, however Respondents' agency allegations do not include any alleged agency between [the] Lyxor Appellants and any signatory to an arbitration agreement" (italics added)]; and p. 22 ["The necessary agency relationship between [the] Lyxor Appellants and a party that is a signatory [to the account agreement] is not alleged and does not exist." (Italics added.)]) We thus reject the argument of the Lyxor appellants that agency is a question of law in this appeal.
Pages 21 and 22 of the Joneses' brief are two of the five pages cited by the Lyxor appellants when (disingenuously) arguing that the Joneses allegedly did not dispute there was an agency relationship between SGAS and the Lyxor appellants.
2. Lack of Evidence of Agency between SGAS and the Lyxor Appellants
In support of their argument that an agency relationship existed between SGAS and the Lyxor appellants, the Lyxor appellants rely on paragraph 16 of the Joneses' amended complaint, which provides in part as follows:
"16. On information and belief, at all times mentioned herein, each of [SG], SGSP, Lyxor, and SG Hambros . . . and DOES 1-20, was the agent, co-conspirator, and/or alter ego of the other, and in acting as alleged herein, was acting within the course and scope of such agency, conspiracy, and/or relationship."
We disagree paragraph 16 of the amended complaint establishes that SGAS was an agent of the Lyxor appellants. First, this paragraph is based on information and belief. Second, a glaring omission from this paragraph is SGAS, who was not a party to the lawsuit. Thus, even if we accepted this general allegation as evidence of an agency relationship, it would not include SGAS.
Third, the Lyxor appellants have taken the position that generic allegations by the Joneses in their amended complaint, including their allegation that Debreu and Auvray were employees of the "SG Defendants" (as that term is defined in the amended complaint) are not evidence because their complaint is unverified. Clearly, by the same reasoning, the Lyxor appellants should not be able to rely on a boilerplate agency allegation in the amended complaint as a means to prove agency and invoke arbitration.
We also disagree that paragraph 42 of the amended complaint establishes an agency relationship between the Lyxor appellants and SGAS, as the Lyxor appellants argue in their opening brief. Paragraph 42 of the amended complaint alleges that the Joneses were led to believe that they could redeem (e.g., withdraw) their investment in the warrants (discussed at length in Jones) at any time; that the offering circular governed redemption of the warrants; that the "[r]edemption date" for the warrants was determined by SG; and that "[SG] represented that its agent, SGAS, would exercise 'best efforts' to create a secondary market in the Warrants, enabling investors to redeem their Warrants prior to the expiration date." (Italics added.)
Paragraph 42 is at best ambiguous as to who represented what, and can be plausibly read to mean that SG represented to the Joneses (perhaps in the circular) that SGAS was its agent.
What's more, it is the Lyxor appellants, not SG, that are claiming in the instant appeal they were in an agency relationship with SGAS. To the extent the Lyxor appellants are arguing they are entitled to enforce arbitration because they are agents of SG (as generally alleged by the Joneses in paragraph 16 of the amended complaint) and because SGAS also is an agent of SG (again, as ambiguously alleged by the Joneses in paragraph 42), we note these "agency relationships," as described by the Lyxor appellants, do not in any event entitle them to enforce arbitration because SG is not a party to the arbitration agreement, but instead is itself a nonsignatory. (See Jones, supra, 195 Cal.App.4th at p. 19 [the " 'agent and employee' language in paragraph 9 applies only when enforcement of the arbitration provision is by or against a nonsignatory agent or employee of SGAS"].)
The Lyxor appellants in passing also contend for this first time on appeal that agency was established between them and SGAS because the "doe defendant" identified in paragraph 16 of the amended complaint was "presumably SGAS." Not only is this contention devoid of any legal authority, it is entirely speculative. What's more, on this record the Joneses likely would have been unable to add SGAS as a doe defendant in light of the requirement they be truly "ignorant of the name of a defendant" when they filed their complaint. (Code Civ. Proc., § 474.)
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In conclusion, the Lyxor appellants chose not to raise the existence of an agency relationship between themselves and SGAS below and proffer any evidence to establish that relationship. Instead, perhaps for tactical reasons the Lyxor appellants sought to establish that relationship on appeal solely by relying on a few general allegations in the Joneses' amended complaint. We conclude these allegations are wholly inadequate to support a finding of agency between SGAS and the Lyxor appellants, even if that issue was preserved on appeal.
DISPOSITION
The order denying the motion to compel arbitration of the Lyxor appellants is affirmed. The Joneses to recover their costs on appeal.
BENKE, Acting P. J.
WE CONCUR:
NARES, J.
O'ROURKE, J.