This action concerned a dispute between the plaintiffs, two individual investors, and the defendants, a financial planning adviser and her firm. After the plaintiffs’ investments did not work out as they had hoped, the plaintiffs filed suit against the defendants in the Western District of North Carolina for state law contract and fraud claims.

The defendants moved to compel arbitration under the asset management agreement that the plaintiffs executed when they hired the defendants to manage their investments, which required the parties to arbitrate any dispute that may arise between the parties concerning any transaction or the construction, performance, or breach of the agreement. The defendants also moved to dismiss for lack of personal jurisdiction, to transfer venue, and to dismiss for failure to state a claim, but all motions, including the arbitration motion, were denied by the district court. Notably, the district court denied the defendants’ motion to compel, as the parties submitted different versions of the asset management agreement and therefore had not formed an agreement to arbitrate.

The Fourth Circuit affirmed the district court’s order, holding that the parties did not form an agreement to arbitrate. Calling it a “very simple contract dispute,” the circuit court relied on general principles of contract formation and found there was no “meeting of the minds,” and therefore no contract, because both parties did not agree to the same terms. The circuit court noted that the two versions of the agreement submitted to the district court differed as to a number of terms, including one that added an extra account to be managed and designated how it was to be managed. The circuit court found there was no evidence in the record to establish that the plaintiffs were ever informed of, let alone reviewed, such changes.

Because the designation of which accounts were to be managed and how they were to be managed would be of paramount importance for any couple turning over its hard-earned savings to a financial firm for management, the circuit court found that the fact that the defendants did not bother to solicit this information from the plaintiffs after they submitted the signed form through DocuSign, a commonly used online platform for signing and transmitting documents, was fatal to the formation of the contract.

The circuit court noted that while the defendants (a sophisticated certified financial professional and her firm) changing the terms of an agreement after a customer signs it does not add to the impression of fairness that one hopes to get from a financial institution managing an individual investor’s portfolio, what happened here was at best “sloppy” on the part of the defendants and precluded formation of a contract.

Rowland v. Sandy Morris Financial & Estate Planning Services LLC, No. 20-1187 (4th Cir. Apr. 7, 2021)