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Be sure arbitration-agreement signatures can be satisfactorily proved up

When a contract (i) involves a consumer or other sympathetic plaintiff, and (ii) that plaintiff is agreeing to arbitration, it behooves the other party to make sure a complete signed copy of the arbitration agreement is available in the record. Otherwise, the plaintiff might well deny having signed the arbitration agreement.

Exactly that happened in Ashburn v. AIG Financial Advisors, Inc., No. A138620 (Cal. App. Feb. 6, 2015). In that case, five early-retiree employees of Pacific Bell signed on with an investment-advisory firm to help them figure out what to do with their lump-sum payment. Unhappy with their investment results, the retirees sued the investment firm, which moved to compel arbitration.

The investment-advisory firm’s files for the retirees were, shall we say, streamlined; the account manager stated in a written declaration:

As part of my practice when working with a client to fill out new account forms and account worksheets, such as those signed by plaintiffs in this matter, I would typically place the client’s signature page in in the file, but I would not necessarily place all of the pages with the standard arbitration language in the file. This was because these pages were standard forms that could be reproduced by reprinting the applicable version of the form. [Emphasis added.]

The retirees, of course, denied having signed an arbitration agreement; for example, one of them stated in a declaration:

6. After Ms. Kearney had convinced me to take early retirement, elect the lump sum cash-out, and invest the cash-out with her, Ms. Kearney gave me numerous forms, and instructed me to sign them.

Ms. Kearney did not explain the forms to me.

Ms. Kearney did not tell me anything about arbitration.

Kearney did not tell me what arbitration meant.

Kearney did not tell me that, by signing the forms, I was giving up my right to a jury trial in the event of a dispute, and agreeing to binding arbitration with no right of appeal.

Ms. Kearney did not tell me that, not only was I losing my right to a jury trial, by signing the forms as instructed, but that I would also be forced to arbitrate in a forum where one of the arbitrators is affiliated with the securities industry.

7. I did not read the forms before signing them, because I trusted Ms. Kearney.

Ms. Kearney did not give me sufficient time to read the forms.

My meeting with Ms. Kearney was approximately 30-45 minutes. There were too many forms for me to read in that time.

I relied upon Ms. Kearney’s honesty, and signed the forms where she told me to sign.

8. I understand that Ms. Kearney claims that she gave me a Customer Agreement, with language describing arbitration. She did not. I kept all of the paperwork Ms. Kearney gave to me. I do not have a Customer Agreement.

9. I understand that Ms. Kearney claims that I signed an agreement containing an arbitration provision, March 17, 2004, in her presence. That would have been impossible. I did not meet with Ms. Kearney in 2004, let alone sign anything in her presence.

[Extra paragraphing added.]

The district court granted the investment firm’s motion to compel arbitration, without holding an evidentiary hearing.

The appellate court reversed and remanded, directing the district court to hold an evidentiary hearing and remarking that “[t]here certainly was abundant evidence that there was no enforceable agreement to arbitrate. Likewise abundant evidence that could support a fiduciary duty.” Id. at text accompanying n.4.

[EDIT:] A similar result occurred in Ruiz v. Moss Bros. Auto Group, Inc., No. E057529 (Cal. App. Dec. 23, 2014). There, an employee filed a putative class action complaint alleging that the employer failed to pay overtime (and related claims). The employer moved to compel arbitration; the trial court denied the motion.

The appeals court noted that state law allowed for electronic signature. Nevertheless, implied the appellate court, the employer’s litigation counsel simply blew it in attempting to show that the employee had electronically signed the arbitration agreement: “But Main [the employer’s business manager] never explained how Ruiz’s printed electronic signature, or the date and time printed next to the signature, came to be placed on the 2011 agreement. More specifically, Main did not explain how she ascertained that the electronic signature on the 2011 agreement was ‘the act of’ Ruiz.” Id., slip op. at 11 (citation omitted).

The appellate court then drew a road map for employers’ counsel to use in future cases:

Indeed, Main did not explain[:]

  • that an electronic signature in the name of “Ernesto Zamora Ruiz” could only have been placed on the 2011 agreement (i.e., on the Employee Acknowledgement form) by a person using Ruiz’s “unique login ID and password”;
  • that the date and time printed next to the electronic signature indicated the date and time the electronic signature was made;
  • that all Moss Bros. employees were required to use their unique login ID and password when they logged into the HR system and signed electronic forms and agreements;
  • and the electronic signature on the 2011 agreement was, therefore, apparently made by Ruiz on September 21, 2011, at 11:47 a.m.

Rather than offer this or any other explanation of how she inferred the electronic signature on the 2011 agreement was the act of Ruiz, Main only offered her unsupported assertion that Ruiz was the person who electronically signed the 2011 agreement.

In the face of Ruiz’s failure to recall electronically signing the 2011 agreement, the fact the 2011 agreement had an electronic signature on it in the name of Ruiz, and a date and time stamp for the signature, was insufficient to support a finding that the electronic signature was, in fact, “the act of” Ruiz.

For the same reason, the evidence was insufficient to support a finding that the electronic signature was what Moss Bros. claimed it was: the electronic signature of Ruiz.

This was not a difficult evidentiary burden to meet, but it was not met here.

Id., slip op. at 12 (citations omitted, extra paragraphing and bullets added).