United States District Court, D. Hawaii
KATHY RYAN, INDIVIDUALLY, AND IN HER CAPACITY AS TRUSTEE OF THE BRODY FAMILY TRUST; Plaintiff,
CHRISTOPHER S. SALISBURY; C. SALISBURY, LLC; CLARAPHI ADVISORY NETWORK, LLC; NATIONAL ASSET MANAGEMENT, INC.; MICHAEL DIYANNI; LAKE FOREST BANK & TRUST COMPANY, N.A.; WINTRUST LIFE FINANCE; AURORA CAPITAL ALLIANCE; SECURITY LIFE OF DENVER INSURANCE COMPANY; and ALEJANDRO ALBERTO BELLINI, Defendants.
ORDER GRANTING IN PART AND STAYING IN PART DEFENDANT
CLARAPHI'S MOTION TO DISMISS AND COMPEL
C. Kay Sr. United States District Judge.
reasons set forth below, the Court GRANTS IN PART and STAYS
IN PART Defendant Claraphi Advisory Network, LLC's Motion
to Dismiss and Compel Arbitration, ECF No. 82. The parties
are ORDERED to proceed to arbitration in accordance with the
terms of the Agreement. The portion of the Motion that seeks
dismissal of the claims against Defendant Claraphi is STAYED
pending the arbitrator's disposition of the issue of
Court sets forth herein only those facts pertinent to the
disposition of the instant Motion.
Brody Family Trust (“the Trust”) was created on
February 9, 1993, with Plaintiff Kathy Ryan (then Kathy
Brody) (“Plaintiff”) serving as its trustee.
Compl. ¶ 23. The Trust was organized under the laws of
California. Id. Sometime in 2002 or thereafter, the
estate planning company that first established the Trust
referred Plaintiff to Defendant Christopher S. Salisbury
(“Defendant Salisbury”) for her investment and
financial planning needs. Id. ¶ 24. Defendant
Claraphi Advisory Network, LLC (“Defendant
Claraphi”) is a Washington limited liability company
with a principal place of business in California that
provides investment advisory services through independent
investment advisor representatives. Declaration of Mark Roth
(“Roth Decl.”), ECF No. 82-3 ¶ 2-3.
Defendant Salisbury is currently a resident of Michigan.
Compl., ECF No. 1 ¶ 10; Defendant Christopher S.
Salisbury and C. Salisbury, LLC's Answer
(“Salisbury Defs.' Ans.”), ECF No. 47 ¶
12. At some point in the past, Defendant Salisbury could be
served at an address in Laguna Hills, California. Compl.
¶ 11; see Salisbury Defs.' Ans. ¶ 13.
April 2013, Defendant Salisbury entered into a relationship
with Defendant Claraphi. Roth Decl. ¶¶ 4-6;
Declaration of Melinda Weaver (“Weaver Decl.”),
ECF No. 114-2 ¶ 2; Investment Adviser Representative
Public Disclosure Report (“IAR Report”),
Pl.'s Ex. 2 at 1275, 1279. The parties dispute the nature of
this relationship-whether Defendant Salisbury was employed by
Defendant Claraphi, Opp., ECF No. 114 at 4-5; IAR Report at
1275, 1279; Compl. ¶ 13, or was instead an independent
contractor, MTD at 3; Roth Decl. ¶¶ 4-6. The IAR
Report indicates that Defendant Salisbury's relationship
with Defendant Claraphi lasted until April 1, 2019. IAR
Report at 1279. Defendant Claraphi represents that, pursuant
to the Independent Advisor Agreement that existed between
itself and Defendant Salisbury, Defendant Salisbury agreed to
conduct investment advisory activities solely through
Defendant Claraphi. Roth Decl. ¶ 5.
April 16, 2013, Defendant Salisbury sent an email to
Plaintiff requesting her initials and signature on, inter
alia, two pages of a document entitled “Claraphi
Advisory Network, LLC Investment Advisory Agreement
Representative as Manager Program” (henceforth
“the Agreement”). Declaration of Kathy Ryan
(“Pl. Decl.”), ECF No. 114-1 ¶ 4; Email and
Attachments from Defendant Salisbury to Plaintiff
(“Email”), Pl.'s Ex. 1 at 1266, 1268; see
also Roth Decl. ¶ 7; Full Claraphi Advisory
Network, LLC Investment Advisory Agreement Representative as
Manager Program (“Full Agreement”), Def.'s
Ex. B, ECF No. 82-5 at 905-10. The pages of the Agreement
contained in the Email were numbered 6 and 11, respectively.
Email at 1266, 1268. Page 6 of the Agreement contains the
following provisions, among others:
The undersigned (“Client”) hereby retains
Claraphi Advisory Network, LLC, a Washington limited
liability company (“Claraphi”), to perform
investment advisory servies through the independent
investment advisor representative listed on the signature
page (“IAR”) under the terms of this Investment
Advisory Agreement (“Agreement”) as set forth
below. . . .
Client acknowledges that (a) Client completed or reviewed the
Client Profile and that it accurately reflects his or her
investment objectives and circumstances, (b) Client has
received a copy of this Agreement and agrees to be bound by
its terms and conditions, and (c) this Agreement is covered
by a pre-dispute arbitration clause located in Section IV of
at 1266; Full Agreement at 905. Section IV of the Agreement
appears on page 9, Full Agreement at 908, which was not
attached to the Email, see generally Email. Entitled
“Arbitration, ” Section IV reads:
Any controversy or claim arising out of or relating to this
Agreement or the breach thereof, or any other matter relating
to Claraphi's, IAR's or Client's obligations,
shall be settled by arbitration in accordance with the Rules
then in effect of Judicial Arbitration and Mediation
Services, Inc. (“JAMS”), and judgment upon the
award rendered by the arbitrator(s) may be entered in any
court having competent jurisdiction. Any hearing in
connection with the arbitration shall be held in Seattle,
Washington. Client understands that this provision does not
constitute a waiver of any right the Client may have under
the Investment Advisers Act.
Full Agreement at 908.
Agreement also contains a choice-of-law provision on page 10,
Full Agreement at 909, which was not attached to the email,
see generally Email:
This Agreement shall be construed under the laws of the State
of Washington without regard to its choice of law provisions
in a manner consistent with the Investment Advisors Act of
1940 (“Advisors Act”) and the rules and
regulations of the Securities and Exchange Commission
Full Agreement at 909.
initialed the Agreement's page 6 and signed its page 11,
the latter of which reflects that it was signed on April 24,
2013. Full Agreement at 905, 910. Also on April 24, 2013,
Defendant Salisbury signed the Agreement's page 11 on the
line labeled “Advisor, ” and the CEO of Defendant
Claraphi signed as well. Id. at 910.
October 23, 2018, Plaintiff-proceeding both individually and
in her capacity as trustee of the Brody Family Trust-filed a
Complaint naming as defendants, inter alia,
Defendant Claraphi and Defendant Salisbury. Compl., ECF No.
1. The Complaint asserts twelve causes of action against
eleven defendants; Defendants Claraphi is named in each cause
of action. Id. The Complaint alleges that
Defendant Salisbury engaged in, and Defendant Claraphi
authorized, a wrongful course of conduct that included,
inter alia, annuity churning, the procurement of an
unsuitable life insurance policy and commensurate financing
arrangement, and violation of fiduciary duties. See,
e.g., Compl. ¶¶ 25-63. The Complaint also charges
Defendant Claraphi itself with wrongdoing in its dealings
with Plaintiff, charging, inter alia, that Defendant
Claraphi breached its fiduciary duties to Plaintiff. See,
e.g., id. ¶ 63.
February 4, 2019, Defendant Claraphi, citing Federal Rule of
Civil Procedure (“Rule) 12(b)(1), filed the instant
Motion to Dismiss and Compel Arbitration
(“Motion”), ECF No. 82, together with a
memorandum in support (“MTD”), ECF No. 82-1.
Plaintiff filed her Opposition on April 9, 2019. Opp.
Defendant Claraphi filed a Reply on April 16, 2019. ECF No.
122. Defendant NAM filed a joinder of simple agreement to the
Motion on April 9, 2019, ECF No. 112, and Defendant ACA filed
a statement of no ...