Party Seeking To Arbitrate Has Burden of Proving Existence of Arbitration Agreement
Trustee and beneficiaries sued Merrill Lynch, Pierce, Fenner & Smith for freezing an investment account and wrongfully precluding trustee from distributing funds to the beneficiaries. Merrill Lynch moved to compel arbitration, based on a Client Relationship Agreement (CRA) signed by the original trustees of the trust, who were now deceased. The trial court denied the motion, because Merrill Lynch failed to include a declaration authenticating the CRA – and Plaintiff filed a declaration stating he was “unable to determine in any definitive sense whether the signatures appearing on the CRA are the signatures of my parents.” Merrill Lynch appealed. The Fine Living Trust v. Merrill Lynch, Pierce, Fenner & Smith, B240869 (2nd Dist. Div. 7 May 20, 2013) (Jackson, J. author 3:0) (unpublished).
Merrill Lynch relied on Condee v. Longwood Management Corp., 88 Cal.App.4th 215 (2001), holding that once the petitioner alleged the existence of an arbitration agreement, the burden shifts to the respondent to prove the falsity of the agreement. However, another case, Toal v. Tardif, 178 Cal.App.4th 1208 (2009), holds that to the extent Condee conflicts with Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394 (1996), which places the burden of proving the existence of the arbitration agreement by a preponderance of the evidence upon petitioner, then Rosenthal, a Supreme Court case, controls.
The Court of Appeal agreed that Condee had been called into doubt by Toal, and determined that Merrill Lynch, by failing to authenticate the CRA, “failed to meet its burden of proving by a preponderance of the evidence the existence of an arbitration agreement. . . . “