Bass, Berry & Sims attorney Chris Lazarini provided insight on a case in which a widow and one-time named beneficiary of her husband's IRA account acquired the account assets after her husband's death, although she was not the named beneficiary of the account at the time of her husband's death. The named beneficiary sued the widow and the broker/dealer firm. After the trial court directed the parties to arbitration, the widow appealed, claiming she did not have to arbitrate since she was a non-signatory to the agreement. The Appellate Court affirmed, saying the widow was an "heir" and bound by her husband's arbitration agreement.
Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Javorsky vs. Javorsky and TD Ameritrade, No. 103896 (Ohio App., 8Dist., 1/26/17)
*Whether an arbitration agreement applies to a non-signatory is a question of law.
**Non-signatories may be estopped from denying arbitration where they knowingly accept the benefits of the agreement or claim to be a third-party beneficiary of the agreement.
In 2004, Andrew Javorsky opened an IRA account with TD Ameritrade. In the following years, he changed the beneficiary designation three times, alternating between his son Thomas and his wife Joan (Thomas' stepmother). The last designation form, signed before his death, named his son as beneficiary. Acting on Joan's request, TD Ameritrade took the unfortunate step of transferring the entirety of Andrew's IRA account to her account, which she subsequently liquidated.
Thomas sued Joan and TD Ameritrade, claiming to be the proper beneficiary of the account. Joan cross-claimed against TD Ameritrade, asserting causes of action for negligence and promissory estoppel. TD Ameritrade moved to compel the entire dispute to arbitration, relying on the arbitration clause in the account agreement. The trial court granted the motion, and Joan appealed, arguing that she did not have to arbitrate because she was a non-signatory to the agreement.
The Court affirms, noting that the arbitration agreement requires arbitration of all controversies "arising out of and relating to" the IRA account and binds Andrew's "heirs, executors, administrators, successors, and assigns." Because Joan is an "heir," she is bound by the agreement. Specifically addressing the non-signatory issue, the Court finds that Joan is estopped from denying arbitration because she accepted a benefit conferred by the agreement – receipt of the funds – and because she claims to be a third-party beneficiary of the agreement.