Hollingshead v. A.G. Edwards & Sons, Inc.

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State: Illinois

Court: 5th District Appellate

Docket No: 5-09-0067 Rel

Case Date: 12/22/2009

Preview:NO. 5-09-0067
N O T IC E Decision filed 12/22/09. The text of this dec ision m ay b e changed or corrected prior to the P e t i ti o n for filing of a or the

IN THE APPELLATE COURT OF ILLINOIS

Re hea ring

FIFTH DISTRICT ________________________________________________________________________ CAROL HOLLINGSHEAD, as Independent Administrator of the Estate of Selma Elliott, ) Appeal from the ) Circuit Court of ) Madison County. Plaintiff-Appellee, ) ) v. ) No. 08-L-858 ) A.G. EDWARDS & SONS, INC., and LEONARD ) SUESS, ) Honorable ) Daniel J. Stack, Defendants-Appellants. ) Judge, presiding. ________________________________________________________________________ JUSTICE SPOMER delivered the opinion of the court: The defendants, A.G. Edwards & Sons, Inc., and Leonard Suess, appeal the order of the circuit court of Madison County that denied their motion to dismiss and to compel the arbitration of the claims raised in a complaint filed by the plaintiff, Carol Hollingshead, as the independent administrator of the estate of Selma Elliott. For the reasons that follow, we reverse and remand for further proceedings not inconsistent with this opinion, including an evidentiary hearing should the plaintiff so desire. FACTS The plaintiff filed a complaint in the circuit court of Madison County alleging the following facts. The decedent, Selma Elliott, passed away on November 3, 2003, at the age of 101 years. During the decedent's lifetime, she created an investment account with the defendant, A.G. Edwards & Sons, Inc. (Edwards), which was managed by a financial consultant, Leonard Suess. During her later years, the decedent granted a power of attorney to her daughter, Judy Suess, who is the spouse of Leonard Suess, to manage the decedent's

disposition of the same.

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assets, property, and health care needs on her behalf. During her years, the decedent accumulated a large block of Merck Company (Merck) stock. In February 2001, the decedent's 11,000 shares of Merck stock had a value of approximately $985,000. Utilizing the value in the decedent's Merck stock, the defendants opened a margin account for the decedent after she had turned 90 years old and acquired numerous stocks such as Ariel Corp., Digital Island, Eageltech, Qualcom, and Vaxgen. Thereafter, the stock values in the

decedent's portfolio, including the value of the Merck stock, began to drop significantly. Consequently, the defendants began selling the decedent's Merck stock to cover margin calls. According to the complaint, these sales created substantial tax liability on the sale of the decedent's stock that could have easily been avoided if the Merck stock had been held until the decedent's death. Count I of the complaint alleges a cause of action for a breach of fiduciary duty based on the defendants' relationship to the decedent as her financial advisors. Count I alleges that, as the decedent's financial advisors, the defendants were in a fiduciary position to the decedent and breached their fiduciary duty to invest her assets in a manner consistent with her financial status, tax status, and investment objectives. Count II alleges a cause of action for a breach of contract on the basis that the contracts between the defendants and the decedent required that the defendants invest the decedent's assets in a manner consistent with her investment objectives and her age, as well as in accordance with the rules and regulations governing their industry. Count III alleges a cause of action for negligence on the basis that the defendants, who held themselves out as having superior knowledge and skill to the decedent, breached their duty of care in the investment of the decedent's funds. The defendants filed a motion to dismiss the plaintiff's complaint and to compel arbitration on the basis that the decedent's investment account was covered by numerous contracts, all of which include an arbitration provision that provides that all controversies

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between the parties are to be determined by arbitration. In support of the motion, the defendants attached the affidavit of Trish Unterberg, who provides a foundation for the attached "Asset Account Agreement," "Transfer on Death Agreement," "Options Agreement," and "Margin Agreement" relating to the decedent's investment account. All four contracts state in paragraph 1, "This agreement covers all accounts that I have with Edwards at any time." In addition, all four contracts contain an arbitration provision, which provides, inter alia , as follows: "I agree, and by carrying my account, Edwards agrees[,] that all controversies between me and Edwards or any of its present or former officers, directors, agents[,] or employees will be determined by arbitration." The "Transfer on Death Agreement," "Options Agreement," and "Margin Agreement" are signed "Selma Elliott" and are dated January 10, 2001. The "Asset Account Agreement" is signed "Judy Suess POA" and is dated February 1, 2001. The record contains no response to the motion to dismiss and to compel arbitration. After hearing oral argument, which is not of record, the circuit court entered an order denying the motion to dismiss and compel arbitration. The order contained no findings of fact or conclusions of law. The defendants filed a timely notice of interlocutory appeal pursuant to Illinois Supreme Court Rule 307(a) (188 Ill. 2d R. 307(a)). ANALYSIS "An order [granting or denying a motion] to compel arbitration is injunctive in nature and is appealable under Supreme Court Rule 307(a)(1) (188 Ill. 2d R. 307(a)(1))." Carter v. SSC Odin Operating Co., LLC , 381 Ill. App. 3d 717, 719-20 (2008). "In an interlocutory appeal pursuant to Rule 307(a)(1), the only question *** is whether there was a sufficient showing made to the trial court to sustain its order granting or denying the interlocutory relief sought." Mohanty v. St. John Heart Clinic, S.C., 358 Ill. App. 3d 902, 905 (2005), aff'd , 225

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Ill. 2d 52 (2006). "In an appeal from a denial of a motion to compel arbitration without an evidentiary hearing, the standard of review is de novo ." Ragan v. AT&T Corp., 355 Ill. App. 3d 1143, 1147 (2005). It is clear that the arbitration provisions at issue are governed by the Federal Arbitration Act (9 U.S.C.

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