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Trustee Authority to Arbitrate

September 13, 2016

Trustee Authority to Arbitrate

CaseAlexis Breanna Gladden v. Cumberland Trust and Investment Company et al.

Issue:  Does the signature of a trustee on an investment account agreeing to arbitration bind a minor beneficiary?

Facts:  A trust agreement created for a disabled minor provided that the trustee can settle any claims by arbitration. The trustee opened an account with a brokerage firm and agreed to a binding compulsory arbitration agreement. A guardian sued the trustee and the firm for mismanagement of funds. The trial court granted the defendants’ motion to compel arbitration based on the agreement and the trustee’s right to “settle . . . any and all claims” by arbitration.

Appellate Decision:  The intermediate court held that the trustee lacked the authority to enter into a binding arbitration clause. The court reasoned that the authority to arbitrate claims only applies to existing claims, not potential future claims.

Review Granted:  August 18, 2016.

Prediction:  Ben thinks the supreme court will reverse the intermediate decision. While the intermediate court raises good questions as to why anyone would ever agree to binding arbitration, Ben thinks the authority to enter into an arbitration agreement is encompassed in the authority to arbitrate in any particular case.