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In affirming an order denying a financial advisor's motion to compel arbitration, the California Court of Appeal explained that an arbitration agreement entered into between the investor and the investment firm did not apply where the financial advisor was acting as the agent of a separate investment firm.
In Mishal v. Venus Capital Management, Inc., No. B194492, 2007 WL 2110488, (Cal. Ct. App. July 24, 2007), Mishal sued Venus Capital Management (VCM) and its CEO, Mehrotra, alleging that they gave him fraudulent investment advice.
VCM and Mehrotra filed a motion to compel arbitration. The motion was based on arbitration agreements entered into when Mehrotra was providing investment advice as an employee of Lombard Securities (Lombard) and WEI. In opposing the motion, Mishal argued that he had no arbitration agreement with VCM or Mehrotra. The trial court denied the motion.
On appeal, Mehrotra argued that Mishal's arbitration agreements with Lombard and WEI covered the dispute because those agreements expressly provided that they were binding on the parties' "agents or employees." In rejecting that argument, the Court explained that the claims were not against Lombard or WEI but against VCM and Mehrotra. Moreover, the dispute arose solely from VCM's investment advice. Accordingly, the Court affirmed the order denying arbitration.
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