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Bank of America, N.A. v. District of Columbia

Court of Appeals of Columbia District

November 27, 2013

BANK OF AMERICA, N.A., et al., Appellants,

Argued Oct. 19, 2011.

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Appeal from the Superior Court of the District of Columbia, (CAB-7763-08) (Hon. Joan Zeldon, Motions Judge) [*] (Hon. Frank Burgess, Motions Judge) [**].

Ava E. Lias-Booker, Baltimore, MD, with whom Samantha Thompson, Washington, DC, Brian A. Kahn, Charlotte, NC, Adrienne J. Lawrence, Washington, DC, and Michelle N. Lipkowitz, Baltimore, MD, were on the brief, for appellants.

Stacy L. Anderson, Assistant Attorney General, with whom Irvin B. Nathan, Acting

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Attorney General for the District of Columbia at the time the brief was filed, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General, were on the brief, for appellee.

Before BLACKBURNE-RIGSBY and THOMPSON, Associate Judges, and WAGNER, Senior Judge.

WAGNER, Senior Judge:

Appellants, Bank of America, N.A. and Bank of America Corporation (hereinafter collectively referred to as Bank of America or the Bank), appeal from an order of the trial court denying the Bank's motion to compel arbitration under the Federal Arbitration Act (FAA) of the District of Columbia's claims for damages for losses incurred as the result of a protracted fraudulent scheme perpetrated by the District's employees and allegedly facilitated by Bank of America. Bank of America argues that the trial court erred in its ruling because all of the District's claims are within the scope of a contractual agreement that requires arbitration in the state of North Carolina. The District's position is that there was no valid arbitration agreement, or alternatively, its claims do not fall within the scope of any agreement between the parties. We affirm the decision of the trial court holding that the parties had no valid agreement to arbitrate their dispute in North Carolina or elsewhere and retaining jurisdiction of the District's claim under the Fraud Claims Act. We remand the case to the trial court for further proceedings consistent with this opinion as it relates to the remaining counts of the District's amended complaint.

I. Procedural Background

This action arises out of a fraudulent scheme by a former manager in the District's Real Property Tax Administration Adjustment Unit in its Office of Tax and Revenue. The District filed a complaint against Bank of America, Walter R. Jones, Jr., Harriette Walters, Jayrece Elaine Turnbull, and unknown Jane and John Does alleging that they participated in a conspiracy that utilized a Controlled Disbursement Account (CDA or CD Account) that the District maintained with Bank of America to process fraudulent tax refund checks. Specifically, the District alleged that Walters, a former District employee, used her knowledge of the District's property tax refund process to prepare and ensure approval of the fraudulent checks which were given to co-conspirators to deposit or cash through the Bank. According to the complaint, Jones, an assistant branch manager for the Bank, and other unknown bank personnel facilitated the negotiation of the fraudulent checks. As theories of liability, the District asserted: (1) violation of the Uniform Commercial Code (UCC) (D.C.Code § 28:3-404 (2001)); (2) violation of UCC § 28:3-405; (3) negligence; (4) fraud; (5) breach of fiduciary duty; (6) conversion; (7) violation of the D.C. False Claims Act (FCA) (D.C.Code § 2-308.14 (2006 Repl.)); [1] and (8) negligence in training, hiring and supervising bank personnel. As relief, the District sought repayment of all funds lost totaling $39,212,815.24. Under the False Claims Act, it sought treble damages of $117,212,815.24, penalties of $10,000 plus costs and attorney's fees.

The Bank filed a " Motion to Dismiss, or in the Alternative, Stay Based on Forum Selection and Arbitration Clauses," which the trial court treated as a Motion to Compel Arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. In its motion, the Bank asserted that the District's

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claims are subject to arbitration pursuant to a clause in its Treasury Service Booklet (TSB) requiring arbitration of disputes related to the account or bank services and a forum selection clause in its Deposit Agreement (DA) requiring any proceeding regarding the CD Account to be brought in North Carolina. Concluding that the parties' voluminous filings did not make clear what documents controlled the dispute, the trial court held an evidentiary hearing in order to ascertain whether they had an agreement to arbitrate in North Carolina. Following completion of the hearing proceedings, the trial court denied the Bank's motion by written order in which it found that the parties' 2005 contract provisions superseded any dispute resolution or forum selection clauses previously agreed upon and that the signatories to any documents executed subsequently lacked authority to bind the District to arbitration in North Carolina. The court retained jurisdiction of the False Claims Act count explaining that the FCA is a part of the Procurement Practices Act of 1985(PPA), which the parties incorporated into their 2005 agreement, and that actions thereunder are within the Superior Court's exclusive jurisdiction under D.C.Code § 2-301 et seq. [2] The court dismissed the District's remaining claims, holding that they are within the exclusive jurisdiction of the District's own contracting officer and the Contract Appeals Board (CAB).

The Bank filed a motion to alter or amend the trial court's order and to certify certain rulings to this court for review. The Bank noted this appeal before the trial court (J. Zeldon) denied the motion to alter or amend. The trial court (J. Burgess) granted the Bank's motion to stay the proceedings on the FCA claim and stayed the dismissal of the District's remaining counts. However, the order permitted the District to pursue its contract claims before the District's Contracting Officer.

The Bank filed in this court a Motion to Stay Proceedings, or in the Alternative Enjoin the District Pending Appeal, in which it requested a stay or injunction to prevent the District from initiating proceedings before a contracting officer during the pendency of this appeal. This court denied that motion and ordered the Bank to show cause why the appeal should not be dismissed for lack of jurisdiction as having been taken from a non-final order, citing In re Calomiris, 894 A.2d 408, 408 (D.C.2006), Hercules & Co. v. Beltway Carpet Serv., Inc., 592 A.2d 1069, 1071 n. 6 (D.C.1991), and D.C.Code § 11-721(d) (2001). Without resolving the jurisdictional question, this court issued an order vacating the Show Cause order, stating that " [t]he Supreme Court's decision in Andersen LLP v. Carlisle, 556 U.S. 624, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) may [a]ffect the applicability of Calomiris, 894 A.2d at 410." In that order, this court set a briefing schedule and requested the parties to discuss the opinion in Carlisle in their briefs. For the reasons set forth in part III A., infra, we conclude that this court has jurisdiction of the appeal.

II. Factual Background and Trial Court's Decision

A. Factual Summary

Before addressing the issues, we outline in some detail the factual background essential to an understanding of the parties' arguments and our disposition. At least since the 1990s, the District has maintained

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a Controlled Disbursement Account with Bank of America or its predecessors.[3] In July 1999, after Bank of America merged with its most recent predecessor, Nations Bank, the account was maintained in North Carolina. On January 6, 2000, Valerie Holt, then Chief Financial Officer (CFO) for the District, executed a " Certified Copy of Corporate Resolutions— Opening and Maintaining Deposit Accounts and Services," which designated the CFO, the Deputy CFO/Treasurer, and the Associate Treasurer as persons authorized " to execute and sign any application, deposit agreement, signature card and any other documentation required by the Bank to open said accounts." [4] That same day, CFO Holt signed a signature card for the CDA and verified the signatures of three others to act under the Corporate Resolution.[5] The signature card states that by signing, the signatory agrees that the account is to be governed by the terms and conditions set forth in the Bank's Deposit and Disclosures Agreement (Deposit Agreement), including any amendments. The trial court found that all relevant Deposit Agreements specify North Carolina as the location for resolution of disputes and give the Bank the right unilaterally to amend its own Deposit Agreement. According to evidence at the hearing, completion of a signature card was required to add signatories to the account. Between 2000 and November 13, 2005, a number of District officials signed signature cards to add or remove names from the account. These included CFO Dr. Natwar Gandhi, successor to CFO Holt, Associate Treasurer Lasana Mack, and Interim Associate Treasurer Alcindor Rosier. One of the signature cards signed by Dr. Gandhi stated that by signing, he " agree[d] ... [t]o be governed by the terms and conditions" set forth in the Deposit Agreement. Dr. Gandhi, Mr. Mack, and Mr. Rosier testified that they signed signature cards only to open an account or to add or remove signatories.

On September 25, 2000, Acting Deputy CFO/Treasurer, John Robinson, and Interim Associate Treasurer and Bank Manager, Alcindor Rosier, executed an " Authorization and Agreement for Treasury Services" (Authorization) agreeing to be bound by the Treasury Booklet. The trial court found that the 2000 Corporate Resolution authorized Rosier and Robinson to enter an agreement for treasury services. On September 25, 2000, Associate Treasurer Lasana Mack signed a certification attesting to the authenticity of the signatures of Rosier and Robinson and to his own authority to execute the certification.

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The certification form states that " [i]f the client is a governmental entity, the entity's counsel must sign this Certification." Mr. Mack was not the District's counsel or a lawyer. A clause in the referenced Treasury Booklet provides for services described therein to be arbitrated " in accordance with the United States Arbitration Act ... under the Commercial Arbitration Rules of the American Arbitration Association" (AAA Rules). The trial court found that although the Authorization states " in small print" that the Client received a copy of the Authorization and Agreement for Treasury Services, there was no evidence that the Booklet was provided to Robinson and Rosier when they signed signature cards.

In 2002, the Office of Contracting and Procurement for the Office of the Chief Financial Officer issued a request for proposals (RFP) for Controlled Disbursement Account Services. The RFP required bidders to include in their proposals Paragraph 8, " Dispute Resolution," which provides:

[i]f a dispute arises under or relates to the contract, a claim by the Contractor shall be made in writing and submitted to the Contracting Officer for a written decision. A claim by the District against the Contractor shall be subject to written decision by the Contracting Officer.[[6]]

The RFP stated that the Contracting Officer was " the only official authorized to contractually bind the District" and that the Contract Administrator had " the responsibility of ensuring that the work conforms to the requirements of the contract." The RFP also required that the Procurement Practices Act of 1985(PPA) (D.C.Code § 2-301.01 et seq. (2001)) (PPA) be incorporated by reference into the contract.

After a pre-bid conference attended by representatives from several banks, Bank of America submitted a Technical Proposal and Cost Proposal for the CDA contract. The Bank's Cost Proposal included the required clauses described in the RFP. The Bank's Technical Proposal included a Table of Contents that referenced an Agreements/Documentation section listing the following documents: (1) Terms and Conditions for Treasury Services; (2) Signature Card & Resolution; (3) Wire Transfer Form; (4) Automated Investment Service Agreement; (5) Bank of America Direct Profile; and (6) Electronic Pay Profile. It did not include a copy of the Treasury Services Terms and Conditions booklet. Following a page entitled " Agreements/Documentation," there were several blank forms, including Authorization and Agreement for Treasury Services, Authorization and Agreement Certification, Treasury Services Delegation of Authority, Business Signature Card, and a resolution for unincorporated associations, which, the Bank acknowledges, was included in error. A representative for the Bank testified that he intended that these documents become a part of the contract. The parties did not sign a contract at that time.

On March 31, 2005, the Office of Contract Procurement issued an amendment to the original 2002 RFP and requested that the banks that had responded previously

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provide their Best and Final Offers for the CDA. A Bank of America representative, Mr. Bianchi, testified that he was told to update only the Bank's portion of the response; therefore, he updated the price proposal and included the same Agreements/Documentation section the Bank submitted previously. He also testified that he provided a copy of the Treasury Service Booklet in a separate packet with the intention that it would constitute additional terms of the contract. Mr. Bianchi signed the contract on behalf of the Bank, and on November 13, 2005, Ms. Angela Long Jiggets-Bazzi, a Contract Specialist, who worked in the Office of the Chief Financial Office, signed the contract. The 2005 contract includes the following language: " [t]he intent of this contract is for a contractor to manage the disbursement account in accordance with the published Request for Proposal." This contract also contains a merger clause which reads: " [t]his contract, including specifically incorporated documents, constitutes the total and entire agreement of the parties. All previous discussions, writings and agreements are merged herein."

After execution of the 2005 contract, District employees signed a number of signature cards and authorizations to remove and add new signatories to the CDA. On March 6, 2006, after becoming the District's OFT Treasurer, Mr. Mack signed an Authorization and Agreement for Treasury Services that states, in part, that the signer has received the Treasury Services Booklet and agrees to adhere to its terms. Mr. Mack testified, however, that he thought he was simply opening two bank accounts and that he did not intend to modify the 2005 contract between the Bank and the District. That same day, the Chief of Staff for the Office of Finance and Treasury, Ulysses Glen, Jr., signed a form certifying that Mr. Mack's signature was the " true signature of a person authorized to execute the form on behalf of the Client." This certification form also states that for a governmental entity, its " counsel, or any other individual as permitted by the entity's organizational documents" should sign. The trial court found that Mr. Glen was not a lawyer and that no evidence was introduced to demonstrate his authority to sign the document on behalf of the District.

On April 17, 2006, Mr. Mack signed a signature card naming himself and two others as authorized signatories for various accounts with the Bank, including the CDA. This signature card stated that the signer was accepting the " Authorization" in the first part of the document that stated " [t]he deposit agreement we give you is part of your agreement with us regarding use of your account and tells you the current terms of our deposit accounts." Mr. Mack also testified that he did not intend to modify the parties' contract by signing the signature cards. The District exercised its option to extend the 2005 contract for one-year periods in October 2006, November 2007, and November 2008.

B. The Trial Court's Ruling

The trial court found that the parties' 2005 written contract governing dispute resolution and authority to modify the contract superseded " (1) any dispute resolution or forum selection clauses the Bank claims was previously agreed upon and (2) and any provision ... which would allow other District officials to agree to arbitration in North Carolina (or elsewhere)." [7]

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Thus, the court could not find, as the Bank urged, that the 2006 Authorization and Agreement for Treasury Service signed by the Deputy CFO/Treasurer was validly executed or that any signature cards signed after the 2005 contract bound the District to the forum selection provision in the 2008 Deposit Agreement. The trial court declined to dismiss the claim asserted under the False Claims Act, reasoning that the PPA, which is incorporated into the 2005 contract, makes the Superior Court the appropriate forum for claims under that Act. As an additional legal basis for concluding that the parties had no agreement to arbitrate in North Carolina, the trial court held that the PPA withheld from District officials the authority to agree to the arbitration and forum selection clauses in the documents relied upon by the Bank.

III. Preliminary Issues

A. Jurisdiction

The question of this court's jurisdiction was raised initially in an order to show cause why the appeal should not be dismissed as having been taken from a non-final order, which cited Calomiris, supra, 894 A.2d at 408, and Hercules & Co., supra, 592 A.2d at 1069. Subsequently, the court vacated the order to show cause, stating that " the Supreme court's decision in Andersen LLP, supra, 129 S.Ct. at 1896 may [a]ffect the applicability of Calomiris, 894 A.2d at 410," setting a briefing schedule, and directing the parties to discuss Andersen in their briefs. Appellant argues that Calomiris is not applicable to the present case and that Andersen and our case law support immediate appellate jurisdiction over appeals from denials of motions to compel arbitration. The District does not contend otherwise. Nevertheless, this court must be satisfied that it has jurisdiction. Therefore, we consider the jurisdictional questions raised by the motions panel.

The Bank argues that this court has jurisdiction because the appeal is from an order denying its motion to compel arbitration based on a written agreement that it contends governs the parties' contractual relationship. Citing Andersen, supra, 129 S.Ct. at 1896, the Bank contends that such orders have been held to be final and immediately appealable under 9 U.S.C. § 16(a)(1)(A) of the Federal Arbitration Act and D.C.Code § 11-721(a). In Andersen, the Supreme Court considered " whether appellate courts have jurisdiction under § 16(a) [of the FAA] to review denials of stays by litigants who were not parties to the relevant arbitration agreement, and whether § 3 can ever mandate a stay in such circumstances." [8] Andersen, 129 S.Ct. at 1899. The District Court had denied petitioners' demand for arbitration and request for a stay, and the Sixth Circuit dismissed their interlocutory appeal for lack of jurisdiction. Id. at 1900. The Supreme Court reversed, holding that the Sixth Circuit had jurisdiction to review the denial of the § 3 stay and that a non-party to the arbitration agreement may invoke § 3 if the relevant state contract law permits him to enforce it. Id. at 1903. Pertinent

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to our jurisdictional question, the Supreme Court stated in Andersen:

Ordinarily, courts of appeals have jurisdiction only over " final decisions" of district courts. 28 U.S.C. § 1291. The FAA, however, makes an exception to that finality requirement, providing that " an appeal may be taken from ... an order ... refusing a stay of any action under section 3 of this title." 9 U.S.C. § 16(a)(1)(A). By that provision's clear and unambiguous terms, any litigant who asks for a stay under § 3 is entitled to an immediate appeal from denial of that motion— regardless of whether the litigant is in fact eligible for a stay....
... Jurisdiction over the appeal, ... " must be determined by focusing upon the category of order appealed from, rather than upon the strength of the grounds for reversing the order." Behrens v. Pelletier, 516 U.S. 299, 311, 116 S.Ct. 834, 133 L.Ed.2d 773 (1996). The jurisdictional statute here unambiguously makes the underlying merits irrelevant for even utter frivolousness of the underlying request for a § 3 stay cannot turn a denial into something other than " an order ... refusing a stay of any action under section 3. 9 U.S.C. § 16(a)."

In the present case, the Bank demanded arbitration of the District's claims under the FAA as provided for in written documents that it contends govern the parties' relationship. Treating the Bank's request as a motion to compel arbitration, the trial court denied the motion after an evidentiary hearing, concluding that the controlling contract did not provide for arbitration. The trial court concluded, inter alia, that a subsequent agreement superseded any prior agreement providing for arbitration and that later agreements were ineffectual because the signatories to them lacked authority to bind the District. With one exception, it also denied a stay of all claims, thereby allowing the unstayed claims to proceed in another forum ( i.e., before the Contracting Officer and the Contract Appeals Board.) [9]

The Bank argues that, under Andersen, it is entitled to appellate review from the denial of its motion to compel arbitration and for a stay. Andersen supports the Bank's argument. Here, the Bank relied upon a written agreement containing a provision for arbitration under the FAA, albeit one that the trial court found, after an evidentiary hearing, had been superseded by subsequent agreements. Whether the Bank can prevail ultimately on its argument that the agreement containing the arbitration provision controls goes to the merits of the controversy rather than the appellate court's jurisdiction to adjudicate it. As the Supreme Court stated in Andersen, jurisdiction over the appeal is determined by the category of the order appealed from rather than the strength of the grounds for overturning it. Andersen, supra, 129 S.Ct. at 1900. Thus, an appeal from the denial of the Bank's motion to compel arbitration and stay the court's denial of the motion would be immediately appealable under the FAA. See id. at 1900-01.

Moreover, case precedents from this court also support our jurisdiction to review the denial of the Bank's motion to compel arbitration. This court has exercised jurisdiction of an appeal from an order denying a motion to compel ...

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