2013-00141377-CU-CO
Warren S. Combs vs. Ellwood Jones
Nature of Proceeding:
Filed By:
Petition to Compel Arbitration (Ellwood Jones)
Sullivan, Richard A.

Defendants Ellwood Jones and Capital Region Financial Group, LLC’s Petition to
Compel Plaintiffs to Arbitration is GRANTED. The action is ordered STAYED.

Plaintiffs Warren S. Combs, Linda M. Combs, the Combs Family 2003 Trust UAD 3/4/03 (the “Combs Family Trust”), and L.M. Combs Construction, Inc.’s Complaint,
filed March 12, 2013 sets forth eight causes of action against defendants: the 1st for
breach of fiduciary duty; the 2nd for violation of Corp. Code, sec., §§25400, et seq. and
2550, et seq.; the 3rd for professional negligence; the 4th for constructive fraud; the 5th
for negligent misrepresentation; the 6th for unlawful deceptive and unfair business
practices; the 7th for unjust enrichment; and the 8th for damages under Civil Code, sec.
3372.

Plaintiffs allege that Defendants Ellwood Jones, Capital Region Financial Group, LLC
and NFP Securities, Inc., improperly advised them to invest retirement funds in an IRS
419(e) Welfare Benefit Plan through Maven Life Assurance, Ltd. Between December
2003 and 2008, Plaintiffs invested approximately $360,000 into the plan, all of which
was lost because the 419(e) plan was allegedly a Ponzi scheme.

Written Arbitration Agreements

Code Civ. Proc. § 1281 provides that “A written agreement to submit to arbitration an
existing controversy or a controversy thereafter arising is valid, enforceable and
irrevocable, save upon such grounds as exist for the revocation of any contract.”
Through the detailed statutory scheme enacted at C.C.P., sec. 1280, et seq., the
Legislature has expressed a strong public policy in favor of arbitration as a speedy and
relatively inexpensive means of dispute resolution. Courts will indulge every
intendment to give effect to such proceedings. Moncharsh v. Heily & Blasé (1992) 3
Cal. 4th 1, 9.

Further, it bears noting that the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16,
applies to any contract “evidencing a transaction involving commerce.” 9 U.S.C. § 2;
Basura v. U.S. Home Corp. (2002) 98 Cal. App. 4th 1205, 1208. Account agreements
between securities brokerage firms and their clients are contracts that “involve
interstate commerce.” See Rosenthal v. Great W. Fin. Sec. Corp. (1996) 14 Cal. 4th
394, 402- 403, 405; see also Dean Witter Reynolds Inc, v. Byrd (1985), 470 U.S. 213;
Lewis v. Prudential-Bache Sec, Inc. (1986) 179 Cal. App. 3d 935, 939-940.
Moving Defendants have produced evidence that Plaintiffs Warren S. Combs and
Linda M. Combs, individually and on behalf of the Combs Family Trust, signed two
written Arbitration Agreements with NFP; one in November 2000, and a second dated
November 2003, requiring arbitration through the Financial Industry Regulatory
Authority (“FINRA”).

The Arbitration Agreements provide:

“To the extent permitted by law, all controversies which may arise between the
undersigned and NFP Securities, Inc. (NFP SECURITIES) or any of their affiliated
companies concerning any transaction arising out of or relating to any account
maintained by the undersigned, or the construction, performance, or breach of this or
any other agreement between us whether entered into prior to, on, or subsequent to
the date hereof, shall be submitted to arbitration conducted under the Code of
Arbitration Procedure of the National Association of Securities Dealers, Inc. or the
arbitration panel of any other National Securities Exchange on which a transaction
giving rise to the claim took place, as I may elect.” The law allows a non-party to enforce an arbitration agreement provided the non-party
has “a sufficient identity of interest” with a party to the agreement. (DMS Services Inc.
v. Superior Court (2012) 205 Cal.App.4th 1346, 1353.) “In many cases, non-parties to
arbitration agreements are allowed to enforce those agreements where there is
sufficient identity of parties. For example, defendants who are not signatories to an
arbitration agreement, but who are acting agents for the party to the arbitration
provision, may be allowed to enforce the arbitration clause. (See, Valley Casework,
Inc. v. Comfort Construction, Inc. (1989) 76 Cal.App.4″‘ 1013, 1021.)
As defendants here have a sufficient identity of interest, and are also third party
beneficiaries, the Arbitration Agreement may be enforced by them. Plaintiffs do not
oppose the petition, unless their petition heard concurrently herewith is denied. No
opposition has been filed by co-defendant NFP.

The Court finds no waiver of the right to arbitrate by the moving parties.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.