Appellate court confirms trial court’s denial of a motion to compel arbitration from a broker and his separate investment advisory business, determining they were not entitled to invoke the arbitration agreement of the clearing company.
Antis vs. Pravlik, No. 19 WDA 2019 (Pa. Super. Ct., 8/30/19).
James & Christine Antis (“Mr. & Mrs. Antis”) were financial advisory clients of Andrew James Pravlik (“Pravlik”) and his company Pittsburgh Wealth Management (“PWM”). Mr. & Mrs. Antis sued Pravlik and PWM in the Court of Common Pleas of Allegheny County for “investment-related losses that they suffered regarding an Individual Retirement Account (‘IRA’) held by James.” During the time in question, Pravlik was a FINRA registered representative of Prospera Financial Services, Inc. (“Prospera”), who cleared through First Clearing, LLC (“FCC”). The IRA was custodied at FCC during the time in question and all trades were cleared through FCC.
Upon opening the IRA, James Antis signed an account agreement with FCC that contained an arbitration clause. However, neither Pravlik nor PWM were signatories to that agreement. Nevertheless, Pravlik and PWM attempted to invoke the FCC arbitration agreement to compel arbitration of Mr. & Mrs. Antis’ claims.
The FCC arbitration agreement provided for arbitration with “FCC, Introducing Firm, Clearing Agent and any Sub-Advisor (and/or any other agent)….” Pravlik and PWM argued “they were ‘agents’ or ‘Sub-Advisors’ of FCC, and/or agents of an ‘Introducing Firm’ per the language of the Arbitration Agreement.” However, the agreement did not define the terms “Introducing Firm”, “Clearing Agent”, “Sub-Advisor” or “agent.” As a result, the parties conducted discovery on the arbitrability issue.
At the trial court, Pravlik and PWM argued that they were agents of Prospera, who was the Introducing Firm. During discovery, Pravlik and PWM could not produce any agreements between Prospera and FCC, although Pravlik testified “that he was told that ‘documents between FCC and Prospera [sic] exist ….’” Pravlik then argued that, while the term “agent” was not defined in the agreement, “by the very definition of FINRA regulations,” Pravlik was an agent of Prospera (whom he argued was the Introducing Firm). However, in testimony, “Pravlik went on to concede that he was an independent contractor for Prospera”, he was “not an employee of Prospera” and he had “no authority to bind Prospera ….” Based on that evidence, “the trial court denied Defendants’ Motion to Compel.”
On appeal, Pravlik and PWM again asserted that they were “agents” or “Sub-Advisors” of an “Introducing Firm” and, even if not agents strictly under the definition of those terms, entitled to compel arbitration under the general rule allowing non-parties to an arbitration agreement to compel arbitration “where the interests of such parties are directly related to, if not congruent with, those of a signatory.” The Appellate Court reviewed the decision to deny the motion to compel arbitration under an “abuse of discretion” standard.
The Appellate Court agrees with the analysis of the trial court that “there was not any evidence to establish that Defendants were agents of an [I]ntroducing [F]irm …” and, even if Prospera was an Introducing Firm, “Pravlik, himself, admitted in his deposition that he was an independent contractor and was not an agent.” According to the Court, those facts mean, “Defendants did not establish that they were entitled to arbitration in this case.”
(S. Edwards: It does not appear that the appellate court separately evaluated whether Pravlik and PWM would be entitled to invoke the arbitration agreement as non-signatories with interests “directly related to, if not congruent with, those of a signatory.” Rather, that issue was largely ignored because of the lack of evidence that the arbitration agreement was meant to apply to Defendants.)
(SOLA Ref. No. 2019-39-02)
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