Originally from:
Journal of American Arbitration (JAA) - Vol. 4, No. 1
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ARTICLES
The Wyoming Supreme Court Holds that the
Court, Rather than the Arbitrator, Should
Decide Whether there has been Fraud in the
Inducement of a Contract in Fox v. Tanner
By Gregory M. Alvarez
I. OVERVIEW
The Tanners sued Jeffrey Barber, Dorian Fox, and The Investment
Center (TIC) alleging fraud, breach of contact, and negligence. The
Tanners contended that they gave money to Barber for investment
purposes while Barber was employed as a stockbroker at TIC’s Casper,
Wyoming office where Fox was a supervisor. The Tanners reported that
Barber took their money and converted it for his own purposes. While
“Fox and TIC denied they had any relationship with the Tanners,” Barber
ultimately pled guilty to four counts of fraud, including unlawfully
obtaining property from the Tanners. The Wyoming Secretary of State
examined TIC’s business practices and found “that TIC had failed to
reasonably supervise Barber in its Casper office.” Additionally, TIC
entered into an offer of settlement, admitting that it had failed to
reasonably supervise Barber in its Caper Officer; however, it “neither
admitted nor denied any liability for Barber’s actions.”
Fox and TIC filed a motion to compel arbitration, arguing that,
based on the arbitration language contained within the Cash Account
Agreement forms that the Tanners signed, the claims should be
dismissed. The Tanners asserted that dismissal was not a proper remedy
because Fox and TIC had previously denied the existence of any
contracts between the parties and, under Wyoming law, “any contract
that may exist between the parties may be revoked on the basis of fraud.”
In response, Fox and TIC “asserted that the Tanners had failed to raise a
claim that they were fraudulently induced to agree to the arbitration
process.” The district court found that, after substantial review and
analysis, it could not decide in the absence of a hearing whether the
Gregory M. Alvarez, J.D. candidate, Penn State The Dickinson School of Law (2006); M.F.A.,
Chapman University; B.A., University of California, Irvine. Mr. Alvarez is a
contributing member of The Journal of American Arbitration.
