Snead et al v. Wright et al

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
MONIQUE R. SNEAD, Individually and)
as Personal Representative of the )
Estate of John H. Snead; JOHN G. )
SNEAD, Individually and as Trustee )
of the Snead Irrevocable Trust; )
MONIQUE R. SNEAD and JOHN G. )
SNEAD, both individually and as )
beneficiaries of the John H. Snead )
Revocable Trust and the Snead )
Irrevocable Trust, )
)
Plaintiffs, ) 3:19-CV-00092 JWS
)
vs. ) ORDER AND OPINION
)
) [Re: Motion at Doc. 37]
GUADALUPE C. WRIGHT; and )
MERRILL LYNCH, PIERCE, FENNER )
& SMITH INCORPORATED, )
)
Defendants. )
)
I. MOTION PRESENTED
At docket 37 Defendant Merrill Lynch, Pierce, Fenner & Smith (Merrill Lynch)
moves the court to reconsider its order at docket 34 that denied its request to compel
arbitration. The court directed that the parties file a response and reply. Plaintiffs
Monique R. Snead and John G. Snead, in their various capacities (collectively Plaintiffs
or the Sneads), filed their response at docket 44. Merrill Lynch's reply is filed at
docket 47.
Case 3:19-cv-00092-SLG Document 48 Filed 10/17/19 Page 1 of 7

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II. BACKGROUND
This federal action involves a dispute about two Merrill Lynch accounts opened
by John H. Snead, the father of Plaintiffs, who died in August of 2017. Plaintiffs allege
that Defendant Guadalupe Wright, who had been in a long-term relationship with John
H. Snead up through his death and an employee of Merrill Lynch at that time, unlawfully
transferred funds from John H. Snead's Merrill Lynch trust accounts—the John H.
Snead Revocable Trust (Revocable Trust) and the Snead Irrevocable Trust (Irrevocable
Trust). The Sneads allege that Merrill Lynch breached its fiduciary duty and was
negligent regarding the trusts, that it is vicariously liable for Defendant Wright's actions,
and that it was negligent in hiring, training, and supervising Wright. They also allege
that Merrill Lynch violated AS 45.50.471, Alaska's Consumer Protection Act.
Merrill Lynch moved to compel arbitration, relying on two account forms John H.
Snead signed wherein he agreed that any controversies between himself and Merrill
Lynch would be arbitrated. Plaintiffs opposed the request for arbitration, arguing that
they are not bound to arbitrate under agreements to which they were not a party. The
court denied Merrill Lynch's request to compel arbitration. In doing so, the court
stressed that the parties had cited a variety of different federal and state cases in
support of their positions without conducting the requisite choice-of-law analysis. The
court concluded that Alaska law would apply under the Restatement (Second) of
Conflict of Laws despite the presence of a choice-of-law provision in the forms naming
New York as the governing law because the record did not show any substantial
connection between the parties or the transaction and New York. The court noted that
there was no Alaska case addressing the issue of wether equitable estopped or some
other contract principle could bind a non-signatory beneficiary to an arbitration
agreement. Ultimately, however, the choice of law and its effect on whether Plaintiffs
could be bound by the arbitration provisions was not determinative, as the court
concluded that Merrill Lynch had not met its burden to show an agreement to arbitrate
disputes related to the two accounts. The court found that the forms relied on by Merrill
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Lynch did not provide enough information to demonstrate that they were linked to the
two Snead trust accounts and that the accompanying declaration did not provide the
needed clarification.
Merrill Lynch now moves for reconsideration, arguing that the court erroneously
concluded that Alaska substantive law would apply to the issue of whether Plaintiffs are
bound to arbitrate based on the forms John H. Snead signed. Merrill Lynch also
attempts to fix the ambiguities surrounding the forms in order to adequately prove they
are in fact related to the trust accounts at issue and therefore require arbitration of
claims related to those accounts.
III. STANDARD OF REVIEW
Under the law of the case doctrine, a court is generally precluded from
reconsidering an issue that has already been decided by the same court or a higher
court in the same case.1 However, as long as a district court retains jurisdiction over a
case, it has inherent power to reconsider and modify an interlocutory order for sufficient
cause.2 That inherent power is not unfettered: “the court may reconsider previously
decided questions in cases in which there has been an intervening change of controlling
authority, new evidence has surfaced, or the previous disposition was clearly erroneous
and would work a manifest injustice.”3
IV. DISCUSSION
Merrill Lynch argues that reconsideration is proper because the court made a
manifest error in determining that Alaska state law would apply to the issue of whether
Plaintiffs, as nonsignatories, could be bound by John H. Snead's agreement to arbitrate.
1Thomas v. Bible, 983 F.2d 152,154 (9th Cir. 1993).
2City of Los Angeles v. Santa Monica, 254 F.3d 882, 885 (9th Cir. 2001).
3Leslie Salt Co. v. United States, 55 F.3d 1388, 1393 (9th Cir. 1995); see also Sch. Dist.
No. 1J, Multnomah Cnty. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); LRCiv 7.3(h) (“A
court will ordinarily deny a motion for reconsideration absent a showing of . . . (A) manifest error
of the law or fact; (B) discovery of new material facts no previously available; or (C) intervening
change in the law.").
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After failing to conduct the necessary and obvious choice-of-law analysis in its initial
briefing, Merrill Lynch now argues that it does in fact have a substantial connection to
New York, and New York law should have been applied pursuant to Restatement
(Second) Conflict of Law § 187.4 While this argument is at first glance persuasive given
that Merrill Lynch has identified an adequate connection to New York, it misses the
basis for the court's rejection of arbitration. The court's ultimate conclusion was that
regardless of the applicable substantive state law, Merrill Lynch failed to prove that the
two forms John H. Snead signed were in fact connected to the two trust accounts at
issue in Plaintiffs' complaint.5
The first form Merrill Lynch relied upon is a Cash Management Account
Application and Agreement Form (CMA Form) signed in 1998 when the decedent
opened a cash management account with Merrill Lynch. Merrill Lynch asserted that the
account was opened for the Revocable Trust. The court noted that while the CMA Form
directs the applicant to indicate whether the account was to be a trust account, John H.
Snead did not fill out that section of the form. Moreover, he did not sign as a trustee or
otherwise indicate on the form that he was opening the account for trust assets. The
declaration provided in conjunction with the form did not adequately explain this
ambiguity. 6
4Section 187 applies in a contract action when the contract at issue includes a choice-of-
law provision. It directs a court to apply the law of the state chosen by the parties unless "the
chosen state has no substantial relationship to the parties or the transaction. . . ." Restatement
(Second) of Conflict of Laws § 187 (1971).
5The court stated that there was no "case law from the Alaska Supreme Court directly on
point," and it declined to make a prediction on whether the Alaska Supreme Court would follow
Comer because "[e]ven if the applicable state law obligated beneficiaries or trustees to arbitrate
under the circumstances the court cannot conclude that arbitration is warranted here based on
the record provided." Doc. 34 at p. 8.
6The declaration merely labels the account associated with the CMA Form as the
"Revocable Account," but nothing in the declaration or form itself provides verification that he
opened the account in the name of the Revocable Trust.
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The second form it relied upon is a Client Relationship Agreement (Client
Agreement Form) that decedent signed in 2016. Merrill Lynch asserted that this
agreement was signed when John H. Snead opened an account for the Irrevocable
Trust. The court noticed, however, that while John H. Snead signed the form as a
"trustee," he was signing as the trustee of the Revocable Trust, not the Irrevocable
Trust.
In light of the court's order, Merrill Lynch now submits a new declaration that it
believes clarifies any confusion about the accounts. The declaration affirms that the
account associated with the CMA Form was not a trust account when established, but
explains that it was converted to one in the name of the Revocable Trust about a year
later. As for the Client Agreement Form, the new declaration states that the form was
signed in connection with Account No. XXX-X5343 but that its prior declaration
"inaccurately . . . referred to this account as the Snead Irrevocable Trust."7 Instead, this
account was another one opened in the name of the Revocable Trust.
A motion for reconsideration cannot be based upon evidence that was available
at the time the original motion was filed.8 The correct information about these forms and
arguments as to how they bind the trusts should have been provided to the court at the
outset. Therefore, the court concludes there is no basis on which to reconsider its prior
ruling.
Moreover, this new material only further complicates the issue. In clarifying that
the Client Agreement Form was signed in conjunction with another account for the
Revocable Trust, and not the Irrevocable Trust, there is no basis provided for Merrill
Lynch's position that John H. Snead agreed to arbitrate disagreements related to the
7Doc. 38 at pp. 2-3.
8Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (stating that a
motion for reconsideration "may not be used to raise arguments or present evidence for the first
time when they could reasonably have been raised earlier in the litigation").
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Irrevocable Trust account. Therefore, arbitration cannot be required for Plaintiffs' claims
to the extent they allege misconduct related to the Irrevocable Trust.
As for the allegations related to the Revocable Trust, even if the newly submitted
information about the Revocable Trust could be considered after the fact, the outcome
on the issue of what law governs the issue remains the same. While the court may
have erred in asserting that the parties did not have a substantial connection to New
York to justify applying New York law as contemplated under the choice-of-law
provisions in the two forms, the ultimate error in the court's analysis was considering the
choice-of-law provision in the first instance. As argued by Plaintiffs in their response
brief, the choice-of law provision contained in the forms cannot govern the underlying
issue of whether they are bound to such forms in the first instance. 9 The choice-of-law
provision therefore is not applicable to this threshold issue, and it was an error to apply
§187 of the Restatement (Second) of Conflict of Laws. The choice-of-law rules for
Plaintiffs' tort claims and contract claims10 would conclude that Alaska's substantive law
governs, given that Alaska has the most significant relationship to the parties and
occurrence.11
9See Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012) (noting that the
choice of law provision "does not determine the law that the Court should apply to determine
whether the arbitration clause was part of any agreement between the parties unless and until it
is determined that the parties have agreed to and are bound by it");Trans-Tec Asia v. M/V
Harmony Container, 518 F.3d 1120, 1124 (9th Cir. 2008 ) ("[W]e cannot rely on the choice of
law provision until we have decided, as a matter of law, that such a provision was a valid
contractual term and was legitimately incorporated into the parties' contract.");
10In addition to their Alaska consumer protection act claim, Plaintiffs raise negligence
claims against Merrill Lynch and breach of fiduciary duty claims, which can be considered
contract, tort, or hybrid claims depending on the source of the duty. See Shields v. Cape Fox
Corp., 42 P.3d 1083, 1089-90 (Alaska 2002).
11See Restatement (Second) Conflict of Laws §§ 188, 145.
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V. CONCLUSION
Based on the preceding discussion, Defendant's motion for reconsideration at
docket 37 is DENIED.
DATED this 17th day of October 2019.
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT
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