Andersen v. Equity Trust Company

Background

Gene Andersen invested approximately $150,000 in an investment fund administered by Sterling Trust Company, which Equity Trust Company later succeeded. Andersen alleged that Equity’s account statements continued to list the investment at approximately $150,000 even though the fund was illiquid and had no cash value, at least as of 2010. He further alleged that Equity charged fees based on the stated value and that he did not learn the investment had no cash value until he requested a distribution in 2017. He claimed that the resulting distributions caused him to pay substantial state and local taxes.

Andersen asserted two claims: breach of contract and unjust enrichment. Equity moved to transfer the case to Ohio based on a forum-selection clause, moved to dismiss the amended complaint for failure to state a claim, and opposed Andersen’s request to compel arbitration under the 2004 agreement.

Motion to Transfer Venue

Equity relied on a forum-selection clause in an updated custodial agreement. Andersen denied signing that agreement. The court also noted that the language Equity relied on was boilerplate disclaimer language attached to a quarterly account statement rather than a signed agreement. At that preliminary stage, the court could not determine as a matter of law that the parties had executed a binding forum-selection clause.

The court’s discussion states that Equity’s motion to transfer venue was denied without prejudice. The formal order lists the motion as “DENIED.”

Motion to Dismiss

The court applied the standard for a motion to dismiss for failure to state a claim, under which the court assumes the complaint’s factual allegations are true and asks whether they plausibly support relief.

For the breach-of-contract claim, the court concluded that Andersen plausibly alleged that the 2004 agreement and the later agreement required Equity or its predecessor to obtain the investment’s market value when possible, and that Equity failed to do so even though it could have. The court therefore denied Equity’s motion to dismiss that claim.

For unjust enrichment, Andersen alleged that he paid fees that he otherwise would not have paid and that Equity kept those fees without performing its obligations. The court held that Minnesota law allows unjust enrichment to be pleaded as an alternative to a contract claim, particularly where there are substantial questions about which contracts apply. The court therefore denied Equity’s motion to dismiss the unjust-enrichment claim.

Motion to Compel Arbitration

The 2004 agreement that Andersen signed contained a broad arbitration clause requiring “all claims and disputes of every type and matter” between Andersen and Equity to be resolved by binding arbitration. It also stated that disputes about the scope of the arbitration agreement would be decided by the arbitrator.

Equity argued that later agreements superseded the 2004 agreement and that Andersen waived arbitration by filing the lawsuit. The court rejected both arguments. It found that Andersen disputed consenting to the later changes, had not signed the documents Equity relied on, and moved to compel arbitration less than a month after Equity removed the case to federal court. The court also noted that the parties had not engaged in discovery and that much of their motion practice concerned arbitration.

The court concluded that the arbitration clause applied to the dispute and granted Andersen’s motion to compel arbitration. It stayed the case pending the outcome of the arbitration.

Disposition

The court denied Equity’s motion to transfer venue, denied Equity’s motion to dismiss, granted Andersen’s motion to compel arbitration, and stayed the matter pending arbitration. The formal order was signed by United States District Judge Donovan W. Frank on September 26, 2018.