A Person Is Not Party to an Arbitration Agreement Signed in Corporate Capacity

According to the Middle District of Florida, if a person signs an arbitration agreement exclusively in a corporate capacity, the agreement does not require the person to arbitrate in an individual capacity.

In Wasserman v. Triad Securities Corp., No. 8:05-CV-1898-T-24TBM, 2006 WL 1644029 (M.D. Fla. June 12, 2006), Wasserman opened an investment account with Triad in the name of The Phillip Roy Fund (“The Fund”). In opening and trading on the account, Wasserman signed four separate agreements (“the Agreements”), each containing an arbitration clause.

While trading on the account, Wasserman bought option contracts to acquire shares of Google and Sears. Exercising those options resulted in a loss of $1,236,723. The account did not have sufficient equity to cover those losses, and Wasserman refused to pay the difference

To recover the difference, Triad initiated arbitration against Wasserman and The Fund. Wasserman brought suit to enjoin arbitration, arguing that he signed each of the Agreements in his corporate capacity, not in an individual capacity.

A person signing a contract in a corporate capacity does not thereby become a party to the agreement. Accordingly, the question before the Court was whether Wasserman signed any of the Agreements in an individual capacity.

The Court found that two of the Agreements unambiguously showed that the parties intended to bind Wasserman only in his corporate capacity because he affixed the title of “G.P.” (i.e., general partner) to his signature on both Agreements.

Wasserman failed to designate his corporate capacity on the two other Agreements. However, the Court found it clear that Triad knew it was dealing with The Fund as an entity and not Wasserman as an individual because Wasserman, the individual, had never been a customer of Triad.

Thus concluding that Wasserman, in his individual capacity, never entered into an agreement to arbitrate the dispute with Triad, the Court ordered that Wasserman could not be compelled to arbitrate.