Arbitration clause in agreement between investment advisor and trustees bars trust beneficiary’s suit against investment advisor.

In 2003 Mary Lou Campana created a trust for the benefit of her sister, Virginia Campana. Mary Lou served as the initial trustee of the trust during her lifetime. Mary Lou retained UBS Financial Services to provide investment management services on behalf of the trust. After Mary Lou’s death, Comerica Bank & Trust, N.A., served as successor trustee and the bank also retained UBS to provide financial services to the trust. Each of the contracts with UBS contained a broad arbitration clause. After Virginia’s death, the executors of her estate filed suit in the U.S. District Court for the Northern District of West Virginia alleging that UBS improperly managed the trust assets. UBS filed a motion to compel arbitration.

Contractual arbitration clauses are governed by the Federal Arbitration Act. The arbitration clauses in question provided that the trustee agrees that “any and all controversies which may arise between UBS” and the trustee concerning any account, dispute, or breach of the agreement or any other agreement shall be determined by arbitration. The executors argued that because Virginia did not sign the contracts herself, and the arbitration clause does not expressly bind third-party beneficiaries, Virginia and her estate could not be bound by the arbitration clause. UBS argued that the arbitration clause was broadly drafted and should include all controversies regarding the performance of UBS on behalf of the trust.

Citing the Fourth Circuit’s liberal policy favoring arbitration clauses and the broad enforcement of arbitration clauses under the Federal Arbitration Act, the court granted the motion to compel arbitration. In the Fourth Circuit, “ambiguities as to the scope of the arbitration clause itself are resolved in favor of arbitration.” The court held that the dispute falls under the “any and all controversies” language and that even if the application of the clause to trust beneficiaries was ambiguous, this ambiguity would be resolved in favor of arbitration.