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Keywords

plaintiffarbitrationappealtrialmotionfiduciaryarbitration clause

plaintiffdefendantarbitrationtrialmotionwillarbitration clause

Related Cases

Brown v. Wells Fargo Bank, N.A., 168 Cal.App.4th 938, 85 Cal.Rptr.3d 817, 08 Cal. Daily Op. Serv. 14,617, 2008 Daily Journal D.A.R. 17,491

Facts

The plaintiffs, elderly customers of Wells Fargo, were induced by their relationship manager to open a brokerage account, which included an arbitration clause. The plaintiffs, Ronnie and Ira Brown, were not fully aware of the implications of the agreement they signed, as they were not given adequate opportunity to read the documents, and Ira Brown had significant limitations due to his age and health. The trial court found that Wells Fargo had established a fiduciary relationship with the Browns, which raised questions about the validity of the arbitration clause in light of potential fraud.

The defendants are various Wells Fargo entities; the plaintiffs are elderly Wells Fargo customers with substantial assets.

Issue

Did the trial court err in denying Wells Fargo's motion to compel arbitration based on the claims of unconscionability and potential fraud in the execution of the brokerage account agreement?

The dispositive issue is whether there was fraud in the execution of the entire brokerage account agreement, of which the arbitration clause was only a part.

Rule

An arbitration agreement must be both procedurally and substantively unconscionable to be unenforceable. Additionally, fraud in the execution can invalidate an agreement.

An agreement must also be substantively unconscionable in order for it to be unenforceable for unconscionability.

Analysis

The Court of Appeal determined that the arbitration clause was not substantively unconscionable, as it complied with industry standards and was not overly one-sided. The court noted that the trial court failed to address whether there was fraud in the execution of the brokerage account agreement, which is a critical factor in determining the enforceability of the arbitration clause. The court emphasized that the existence of a fiduciary relationship imposed a duty on Wells Fargo to ensure that the Browns understood the terms of the agreement.

The trial court, however, failed to consider and rule upon the consequences of this conclusion.

Conclusion

The Court of Appeal reversed the trial court's order denying the motion to compel arbitration and remanded the case for further proceedings to determine if there was fraud in the execution of the agreement.

We will therefore reverse the trial court's order and remand for further proceedings.

Who won?

Wells Fargo Bank prevailed in the appeal because the Court of Appeal found that the arbitration clause was enforceable and that the trial court had erred in its ruling.

Defendants contend that the trial court erred by denying the motion to compel arbitration.

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