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The Central Trust Bank v. Graves

Court of Appeals of Missouri, Western District, Second Division

August 2, 2016

THE CENTRAL TRUST BANK, Respondent,
v.
WILLIAM GRAVES, Appellant.

         Appeal from the Circuit Court of Cole County, Missouri The Honorable Patricia S. Joyce, Judge.

          Before Karen King Mitchell, Presiding Judge, and Cynthia L. Martin and Gary D. Witt, Judges

          Karen King Mitchell, Presiding Judge.

         William Graves appeals from the trial court's denial of his motion to dismiss or stay the litigation and compel arbitration with Central Trust Bank (Central), his former employer. Graves argues that Central is bound by the mandatory arbitration provision of Graves's employment contract with IFC Holdings, Inc. (INVEST), either as a third-party beneficiary of that contract or by the doctrine of equitable estoppel. We affirm.

         Background[1]

         Graves was employed by Central "to engage in marketing and sale of . . . Investment Products, " which Central apparently acquired from INVEST. Graves was also employed by INVEST; he had separate employment contracts with each entity. After nearly ten years of working for Central, Graves abruptly departed one day for lunch and never returned. Central discovered later that day that Graves had begun working for Wells Fargo Advisors. Within days, Central began receiving requests from Wells Fargo Advisors to transfer brokerage and related bank accounts from customers that had been served by Graves while he was employed with Central and INVEST.

         Central filed suit against Graves, alleging promissory estoppel (based upon representations Graves had made to Central regarding his impending retirement and actions taken by Central in reliance on those representations) and breach of contract (based upon Graves's solicitation of brokerage business from Central/INVEST customers for the benefit of himself in his new position at Wells Fargo Advisors).[2] Graves filed a Motion to Dismiss, or in the Alternative, Motion to Stay Proceedings and Compel Arbitration. Graves argued that Central's claims were governed by the mandatory arbitration rules of the Financial Industry Regulatory Authority (FINRA).[3] Central opposed the motion, arguing that there was no agreement to arbitrate between Central and Graves. Central argued: (1) that it was not subject to FINRA's mandatory arbitration rule because it was neither a member nor an "associated person" under FINRA's definitions governing the scope of its mandatory arbitration rule; (2) Graves's agreement to arbitrate disputes found in FINRA form U-4 did not apply to Central; and (3) nothing in the contract between Graves and Central mandated arbitration. Graves responded by arguing that: (1) his employment contract (with Central) mandated his compliance with all applicable securities laws and regulations (including the FINRA arbitration rule); and (2) Central was a third-party beneficiary of Graves's U-4 form, which authorized him to sell securities and mandated arbitration. The trial court denied Graves's motions without explanation. Graves appeals.

         Analysis

         Graves raises a single point on appeal. He argues that the trial court erred in denying his motion to compel arbitration because Central was bound by FINRA's mandatory arbitration rule insofar as: (1) Central was a third-party beneficiary of the employment contract between Graves and INVEST, thus binding Central to INVEST's obligation to arbitrate; and (2) Central was estopped from denying its obligation to arbitrate because it accepted the benefits of Graves's employment with INVEST.[4] We disagree.

         A. Standard of Review

         "'The trial court's judgment will be affirmed unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.'" Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 431 (Mo. banc 2015) (quoting Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 510 (Mo. banc 2012)). "'Missouri contract law applies to determine whether the parties have entered a valid agreement to arbitrate.'" Id. (quoting State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 856 (Mo. banc 2006)). "Whether the trial court should have granted a motion to compel arbitration is a question of law that [we] review[] de novo." Id.

         Though Central does not challenge the preservation of Graves's point on appeal, we question whether his claim before us is properly preserved. Though the crux of his claim has always been that arbitration is required by FINRA rules, his method of seeking to apply those rules to Central has varied. Below, he argued that Central's claims were governed by the mandatory arbitration rule of FINRA because his employment contract (with Central) mandated his compliance with all applicable securities laws and regulations (including the FINRA arbitration rule) and that Central was a third-party beneficiary of Graves's U-4 form, which authorized him to sell securities and mandated arbitration. On appeal (in his point relied on), however, he argues that Central's claims are governed by the FINRA mandatory arbitration rule because Central is a third-party beneficiary of his contract with INVEST, rather than his U-4 form, and that Central is estopped from denying arbitration, again by accepting benefits of his contract with INVEST.

         "[A]n appellant must properly preserve their allegations of error in order to secure review on appeal." Blanks v. Fluor Corp., 450 S.W.3d 308, 383 (Mo. App. E.D. 2014). "We generally will not convict the trial court of error on an issue that was not put before it to decide." Id. "A point is preserved for appeal only if it is based on the same theory presented at trial." Id. at 384. "A party may not advance a new [theory] on appeal." Id. "Nor may the party alter or broaden the scope of the [theory] voiced at trial." Id. "Rather, an appellant must maintain a consistent theory of [error]." Id. Here, it appears that Graves's theory has morphed from that presented below. But as Central raises no complaint, we will review Graves's claim on the merits.

         B. FINRA's Mandatory Arbitration Rule

         FINRA has published a manual containing all of its operating rules. In the manual is FINRA's Code of Arbitration Procedure for Industry Disputes. In that code, Rule 13200(a) provides: "Except as otherwise provided in the Code, a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among: Members; Members and Associated Persons; or Associated Persons." FINRA Rule 13100(a) defines "associated person" as "a person associated with a member, ...


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