Chastain v. Robinson-Humphrey Co. - 957 F.2d 851 (11th Cir. 1992)

Rule:

When it is undisputed that the party seeking to avoid arbitration has not signed any contract requiring arbitration, that party is challenging the very existence of any agreement, including the existence of an agreement to arbitrate. Under these circumstances, there is no presumptively valid general contract which would trigger the district court's duty to compel arbitration pursuant to the Act. If a party has not signed an agreement containing arbitration language, such a party may not have agreed to submit grievances to arbitration at all. Therefore, before sending any such grievances to arbitration, the district court itself must first decide whether or not the non-signing party can nonetheless be bound by the contractual language.

Facts:

Appellee Brenda Chastain's father, Dr. J.B. Chastain, opened a securities trading account with Appellant Robinson-Humphrey, allegedly on behalf of his daughter. Although customer agreements bore the name of Brenda, she never personally signed the agreements, which contained arbitration clauses broadly binding the parties to arbitrate any disputes in connection with the account. Brenda then brought an action against Appellant alleging securities fraud. Appellant filed a motion to compel arbitration of the allegations, pursuant to the arbitration clauses in the customer agreements. The district court denied Appellant’s motion. Appellant challenged the decision. 

Issue:

Under the circumstances, could arbitration be compelled? 

Answer:

No.

Conclusion:

On appeal, the court affirmed the district court's order denying appellant's motion to compel arbitration, holding that the making of the arbitration agreement was in issue because of appellee's denial of the existence of any agreement. The court determined that the district court was required to determine the validity of the customer agreements before compelling appellee to submit her securities fraud claim to arbitration.