Agreement to Arbitrate Enforceable As To Claims Against Affilaites and Their Employees

Agreement to Arbitrate Enforceable as to Claims Against

Affiliates of Named Party and Their Employees

 

       In a recent decision of the Kentucky Court of Appeals, it was held that an agreement to arbitrate would extend to disputes with the affiliates of the named counterparty and as well its employees.  Palazzo v. Fifth Third Bank, 2012 WL 3552633 (Ky. App. Aug. 17, 2012) (Not To Be Published).

       Rhonda Palazzo appealed the dismissal of her complaint against “Fifth Third Bank” and Catherine Mitchell, a Fifth Third employee, in favor of an agreement to arbitrate.  Mitchell had, on behalf of Fifth Third Bank and/or Fifth Third Securities (the Plaintiff in her complaint, loosely referred to Fifth Third Bank and Fifth Third Securities as “Fifth Third,” a decision that would ultimately be much to her detriment) recruited Palazzo as a securities representative.  In that position, albeit on terms not clear the Court of Appeals, she was jointly employed by Fifth Third Securities and Fifth Third Bank.  In connection with joining the firm, Palazzo had signed a Form U-4, it containing an agreement to arbitrate disputes with her firm.  Palazzo filed suit against both Fifth Third Bank/Securities and Mitchell, alleging that certain promises made in the course of her recruitment were not satisfied, and as well that she was subjected to gender-based discrimination.  In response to the complaint, Fifth Third sought dismissal in favor of arbitration, that request being ultimately granted by the trial court.

       Acknowledging that she had, with Fifth Third Securities, signed the Form U-4 and the arbitration agreement, Palazzo sought to avoid arbitration of her dispute with Fifth Third Bank, noting that it was not a party to the agreement.

      Initially, the Court noted that Palazzo had treated Fifth Third Securities and Fifth Third Bank as one entity asserting, for example, that “Fifth Third ‘breached its contracts with’ her in that she had relied, to her detriment, on the agreements she had with Fifth Third.”  2012 WL 3552633, *2.  Relying upon North Fork Collieries, LLC v. Hall, 322 S.W.3d 989 (Ky. 2010), the Court held Palazzo to a consistent theory, noting that:

Palazzo cannot, on the one hand, seek the benefit of those alleged contracts between her and Fifth Third Securities and the Bank, and on the other hand, disavow the arbitration provision that is part of those alleged contracts.

      In addition, being persuaded by the decision of the Federal District Court in Kruse v. AFLAC Intern., Inc., 548 F.Supp.2d 375, 383 (E.D. Ky. 2006), the Court found that all of the related party entities stood “in the shoes of the entity that signed the agreement” who could therefore enforce it.  2012 WL 3552633, *3.

      Responding to the assertion that the claims against Mitchell as an individual, would not be subject to arbitration, the Court found, in reliance upon Arnold v. Arnold Corp.-Printed Communications for Business, 920 F.2d 1269 (6^th Cir. 1990), that the arbitration agreement embodied a intent to resolve all disputes in a single arbitration forum and that Palazzo’s claims against Mitchell should be there resolved.