The Fifth District Appeals Court in Dallas has refused to compel arbitration using the doctrine of equitable estoppel.  In VSR Fin. Servs., Inc. v. McLendon, No. 05–12–01016–CV, (Tex. App. – Dallas, Aug. 14, 2013), McLendon received investment advice from Chapman Hext & Co. (“Chapman”) regarding a number of business ventures.  After receiving the investment advice, McLendon purchased notes using VSR Financial Services (“VSR”) as a broker.  Later, McLendon opened an individual brokerage account with VSR.  When the account was opened, McLendon signed a form that outlined the parties’ relationship but did not contain an agreement to arbitrate.  He did, however, sign an application form for an “Advantage Account SM Agreement” that contained an arbitration provision.  Neither that form nor another form incorporated by reference was countersigned by another party or mentioned VSR.  About one month later, McLendon purchased a number of notes for DBSI through VSR.

Six months later, McLendon opened another investment account with VSR as managing partner of Tri–State Theatres (“Tri–State”).  He signed a new account form that was countersigned by a representative for Chapman.  The form did not contain an agreement to arbitrate and no contract that outlined the parties’ relationship was signed by either VSR or Tri-State.  In addition, McLendon signed an application form for an“Advantage Account SM Agreement” on behalf of Tri-State that contained an arbitration provision and incorporated additional terms and conditions by reference.  After the Tri-States account was opened, McLendon transferred the notes from his individual investment account to that of Tri-States.  Later, DBSI filed for bankruptcy protection.

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Tags: Dallas Appeals Court, McLendon