Groleau v. American Express et al. CV-10-190-JL 10/11/11 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Lucien H. Groleau

v. Civil No. lO-cv-190-JL Opinion No.

American Express Financial Advisors, Inc. (n/k/a Ameriprise Financial Services, Inc.), Smith, Sweeney & Associates, Inc., Peter H. Smith, and Jeremy Sweeney

BENCH TRIAL DECISION: FINDINGS OF FACT AND RULINGS OF LAW

The plaintiff, Lucien H. Groleau, sued the defendants for

specific performance, seeking an order compelling them to engage

in arbitration pursuant to a November 2004 agreement between the

parties. The defendants, American Express Financial Advisors,

Inc., Smith, Sweeney & Associates, Inc., Peter H. Smith, and

Jeremy Sweeney, admit that they agreed to submit the dispute to

arbitration, but assert that Groleau failed to take steps to

schedule an arbitration before 2010 and that as a result of this

delay, his claims are barred by the doctrines of waiver and

laches. After the court denied the defendants' motion for

judgment on the pleadings, the court and the parties agreed that

the triable issues in the case were limited and discrete, and the

court ordered an expedited discovery and trial schedule. The court, which has jurisdiction under

(a)(1) (diversity), conducted a bench trial. Each of the

parties submitted a set of proposed findings and rulings before

trial; the parties also jointly submitted a pre-trial statement

of agreed facts and timeline of events. At the court's reguest,

the parties also submitted post-trial memoranda addressing

specific guestions pertaining to the doctrine of waiver:

specifically, the guestion of whether rights can be waived

through inaction, as opposed to affirmative conduct. With the

assistance of these materials, the court makes the following

findings of fact and rulings of law, see Fed. R. Civ. P. 52(a),

resulting in judgment for the defendants.

The doctrine of laches does not apply to bar Groleau's

claim. While his assertion of the right to arbitrate was

unreasonably delayed, defendants presented no evidence that the

delay "resulted in unfair prejudice," as is necessary for

application of laches. Miner v. A & C Tire Co., Inc.,

(2001). The doctrine of waiver, however, bars Groleau's

claim. In the face of a court order that he submit his claims to

arbitration no later than August 24, 2006, and despite his

repeated assurances that he would promptly arbitrate, Groleau

made no effort to actually schedule an arbitration for a period

of nearly four-and-a-half years. Groleau's "conduct under the

2 circumstances justif[ies] an inference" that he relinquished the

right to arbitrate his claims against defendants, resulting in a

waiver of that right. S. Willow Props., LLC v. Burlington Coat

Factory of N.H., LLC,

(2009).

Findings of Fact

1. Plaintiff Lucien Groleau was employed as director of

productdevelopment for Nortel Networks, Inc. in Nashville,

Tennessee, before retiring in early 2000. Defendant Smith,

Sweeney & Associates, Inc. is a franchise of defendant American

Express Financial Advisors, Inc. In late 1999, while Groleau was

still employed at Nortel, defendants Jeremy Sweeney and Peter

Smith, financial advisors and employees of the Smith-Sweeney

firm, attempted to secure Groleau as a client. Over the next

several months, Groleau met with Sweeney and Smith at least five

times to discuss his finances and his retirement plans.

2.In March 2000, Sweeney and Smith provided Groleau and

his wife Paula with a written "Financial Advisory Proposal" that

presented recommendations as to how they could best achieve their

financial goals. Groleau maintains that in addition to this

written proposal, Sweeney and Smith made oral representations

regarding how he could expect his finances to develop if he

invested according to their financial advice. Based upon the

3 written Financial Advisory Proposal and these oral

representations, Groleau retained Sweeney and Smith and followed

their investment advice.

3. Within a year of investing with Sweeney and Smith,

Groleau became concerned that his investments were not performing

as well as expected. Groleau nonetheless continued to follow

Sweeney's and Smith's financial advice. In 2004, due to mounting

concerns about his investments, Groleau sought the advice of

another financial advisor, Ellen Molnar. Molnar advised Groleau

that the defendants' financial advice was inappropriate for a

person in his situation and with his retirement-related financial

goals, and advised him to seek legal counsel.

4. Groleau filed suit against defendants in the Belknap

County Superior Court on July 23, 2004, asserting claims for

fraudulent misrepresentation, negligent misrepresentation,

negligence, breach of fiduciary duty, and negligent supervision.

The defendants removed the action to this court. See Groleau v.

Am. Express Fin. Advisors, Inc., No. 04-cv-332 (D.N.H. Sept. 1,

2004) (the "2004 Action").

5. On November 19, 2004, before defendants had responded

to Groleau's complaint, the parties filed a "Joint Motion to Stay

Pending Arbitration" ("Motion to Stay") in the 2004 Action. The

Motion to Stay provided that the parties "agree and stipulate

4 that a pre-dispute arbitration clause governs all of the claims

raised by Plaintiff in [the 2004 Action]" and that "the parties

stipulate that Plaintiff shall arbitrate his claim and [the 2004

Action] shall be stayed pending arbitration." The court

(DiClerico, J.) granted the Motion to Stay on December 1, 2004.

6. Over the next year, neither of the parties filed

anything with the court in the 2004 Action. On December 20,

2005, the court ordered the parties to file a status report as to

the arbitration. Defendants' status report informed the court

that on October 4, 2005--nearly 11 months after the filing of the

Motion to Stay--defendants' counsel had received a reguest from

Groleau's counsel seeking to schedule the arbitration, and that

Groleau's counsel had not returned telephone calls in response.

Groleau's status report acknowledged that his counsel had failed

to return telephone calls from defendants' counsel but stated

that "the matter might be scheduled and heard within the next

three months."

7. On January 4, 2006, Judge DiClerico issued an order

noting that " [a]rbitration has yet to occur for reasons that are

not readily apparent" and ordering counsel "to take the steps

necessary to schedule the arbitration promptly." For the next

four months, Groleau's counsel took no steps toward scheduling

the arbitration. On May 2, 2006, having received no indication

5 from the parties as to the status of arbitration, the court

ordered Groleau to show cause on or before May 25, 2006, why the

2004 Action should not be dismissed for failure to prosecute.

8. In response, Groleau filed a status report

representing that his proposed expert witness was not available

to testify at the arbitration and that one of his attorneys had

been on medical leave for two months. Groleau requested "an

additional ninety (90) days to conclude the matter with the

condition that Plaintiff's counsel report case progress monthly

or sooner." Accordingly, on May 26, 2006, the court issued an

order providing that the matter "shall be concluded within 90

days" and that "Plaintiff's counsel shall file a monthly status

report."

9. On June 23, 2006, Groleau submitted a status report

indicating that he had retained a new expert and that "[e]fforts

to schedule arbitration for mid to late July will occur next

week." The court ordered that "Plaintiff shall file a status

report following arbitration."

10. Despite Groleau's representation that efforts to

schedule the arbitration would occur the following week, his

counsel did not schedule arbitration then; nor, for that matter,

were any efforts to schedule arbitration made at any point prior

to August 24, 2006--90 days from the court's May 26, 2006 order

6 that the matter "be concluded within 90 days." By order dated

August 24, 2006, the court administratively closed the 2004

Action based upon the "protracted stay."

11. Neither Groleau nor his counsel had any contact with

defendants or their counsel for the next three years, or took any

steps toward scheduling arbitration during that period.

12. The attorney who represented Groleau in the 2004

Action (and who continued to represent him with respect to his

claims against defendants for some time thereafter) testified

that the reason Groleau did not seek to schedule any arbitration

for this lengthy period of time was difficulty locating an expert

to testify as to the amount of his damages. While the court has

no reason to disbelieve this testimony, it does not find the

explanation persuasive to rebut the defendants' waiver defense.

If Groleau and his counsel believed they were sufficiently

prepared to put the matter into suit in this court, it is

difficult to understand why they felt insufficiently prepared to

initiate arbitration. The applicable burdens and standards of

proof are no less rigorous in U.S. District Court than in

arbitral tribunals.

13. In 2008, Groleau himself, concerned with the effect on

his case of the lengthy time passage, sought out another

attorney's advice regarding a potential legal malpractice claim

7 against his counsel in the 2004 Action. That attorney ultimately

sent a demand letter to counsel on Groleau's behalf in 2009.

14. In March 2010, Groleau finally contacted defendants

seeking to schedule an arbitration. The defendants declined his

reguest.

15. On April 28, 2010, Groleau filed a petition against

defendants in the Belknap County Superior Court, seeking to

enforce the Motion to Stay, which he characterizes as "a binding

agreement [by the parties] to arbitrate their dispute." That

case was removed to this court on May 13, 2010, commencing the

present action.

16. To date, Groleau has not initiated an arbitration

proceeding against any of the defendants with any arbitral

tribunal.

Rulings of Law

17. The guestion presented in this action is whether

Groleau, by failing to contact defendants or otherwise take steps

toward scheduling an arbitration for a three-and-a-half-year

period from August 2006 to March 2010, forfeited the right to

arbitrate his claims against defendants. Groleau contends that

the November 19, 2004 Motion to Stay, in which the parties

stipulated that "Plaintiff shall arbitrate his claim,"

8 constituted an enforceable agreement by defendants to submit to

arbitration, and that it placed no time limitation on his right

to arbitrate. Defendants, on the other hand, contend that the

doctrines of waiver and laches do not permit a party to "sleep on

its rights," and that those doctrines apply here to bar Groleau's

suit to compel arbitration.

18. Both waiver and laches are affirmative defenses, see

Fed. R. Civ. P. 8(c)(1), and the burden of proving them is on

defendants. See Pennichuck Corp. v. City of Nashua,

(2005) (party asserting laches bears burden of proving

that defense); Forbes Farm Partnership v. Farm Family Mut. Ins.

C o .,

(2001) (proponent of waiver bears burden

of proof). The court will consider these doctrines in turn.

I. Waiver

19. "Waiver is the voluntary relinguishment of a known

right and may be found from action, inaction, or statements of

the [party] by its authorized representatives." U.S. Fid. &

Guar. Co. v. Kancer,

(1968) ^ "A finding of

1 Because Groleau's claim is premised on New Hampshire contract law. New Hampshire law also governs defendants' affirmative defenses to that claim. See, e.g., Arismendez v. Nightingale Home Health Care, Inc.,

(5th Cir. 2007) ("In a diversity action . . . , substantive state law determines what constitutes an affirmative defense."); cf. also

9 waiver must be based upon an intention expressed in explicit

language to forego a right, or upon conduct under the

circumstances justifying an inference of a relinguishment of it."

S. Willow Props., LLC v. Burlington Coat Factory of N.H., LLC,

(2009). "[PJroof of prejudice is not a

reguirement of waiver," Amer. Ins. Co. v. Nationwide Mut. Ins.

C o .,

(1970), and "[w]hether a party has waived

its right to arbitration is a guestion of fact for the trial

court to determine from the circumstances of each case," Logic

Assocs., Inc. v. Time Share Corp.,

(1984).

20. Groleau's entire course of conduct from November 2004,

when he agreed to arbitrate his underlying claims against

defendants, until March 2010, when he contacted defendants

seeking to schedule an arbitration, justifies an inference that

he intended to forego the right to arbitrate his claims against

defendants.

21. As an initial matter, Groleau has not argued that he

is not bound by his attorney's conduct from 2004 to 2010. In

Nat'l Pasteurized Eggs, LLC v. Davidson,

, 281 n.13 (D.N.H. 2001) (holding that state law governs laches defense to state law claim). Moreover, the parties agreed orally on the record at trial that New Hampshire law applies. See Moores v. Greenberg,

, 1107 n.2 (1st Cir. 1987) (where parties agree as to what substantive law applies, a federal court sitting in diversity jurisdiction should comply).

10 fact, Groleau expressly conceded at trial that his counsel in the

2004 Action was fully authorized to act on his behalf in all

matters respecting his claims against Defendants. Therefore, the

court need not deal with the issue of whether Groleau's counsel

lacked authority, or exceeded his authority, to bind Groleau as a

matter of agency law.

22. By filing suit in 2004, Groleau indicated that he was

prepared to litigate his claims at that time. Although he agreed

to arbitrate those claims in November 2004, and stipulated in

this court that "Plaintiff shall arbitrate his claim" (emphasis

added), the only action Groleau took in furtherance of

arbitration prior to March 2010 was an October 4, 2005 reguest to

defendants' counsel to schedule an arbitration. For the

intervening four-and-a-half years, Groleau made no effort to

schedule or otherwise initiate the arbitration. None of this

delay was attributable to defendants.

23. Despite his virtually nonexistent efforts to schedule

or otherwise initiate an arbitration, Groleau repeatedly

represented to defendants and to the court in the 2004 Action

that arbitration would occur in a timely manner. In his status

report of January 4, 2006, Groleau claimed that "the matter might

be scheduled and heard within the next three months." In another

status report on May 25, 2006, Groleau asserted that he needed

11 only "an additional ninety (90) days to conclude the matter."

And, on June 23, 2006, Groleau indicated that he would commence

"[e]fforts to schedule arbitration for mid to late July" the

following week. If nothing else, these repeated representations

--though unaccompanied by any action--demonstrate Groleau's

understanding that he needed to act swiftly to pursue his claims.

24. Indeed, Groleau was on notice that he needed to act

swiftly to pursue his claims. On January 4, 2006, Judge

DiClerico, in no uncertain terms, ordered Groleau "to take the

steps necessary to schedule the arbitration promptly" (emphasis

added). When he failed to do so, the court ordered him to show

cause why the 2004 Action should not be dismissed for failure to

prosecute. After Groleau reassured the court that he would

"conclude the matter" within ninety days. Judge DiClerico ordered

that the matter "be concluded within 90 days," i.e., by August

24, 2006.

25. By failing to take any steps to schedule the

arbitration prior to March 2010, Groleau at best failed to comply

with, and at worst disregarded or violated both the January 4,

2006 and May 26, 2006 court orders. Groleau's failure to comply

with the court's order that the 2004 Action "be concluded" by

August 24, 2006--not only by failing to schedule and complete

arbitration, but by failing to contact defendants' counsel to do

12 so--justifies the inference that Groleau had, by that date,

decided not to pursue arbitration against defendants.

26. Groleau's conduct up to and including August 24, 2006,

is alone sufficient for the court to conclude that he had

implicitly waived his right to arbitrate his claims against

defendants. But if there were any doubt about his intention to

forego arbitration as of that date, it was erased during the

ensuing three-and-a-half years, when neither Groleau nor his

counsel had any contact whatsoever with defendants or their

counsel.

27. Groleau's reliance upon Gianola v. Continental

Casualty C o .,

(2003), for the proposition that his

omission to take any action in furtherance of the arbitration

cannot constitute a waiver, is misplaced. Waiver results from a

party's "conduct under the circumstances." Renovest Co. v.

Hodges Development Corp.,

(1991) . "Conduct" is

more than just action. It includes the entirety of a party's

behavior vis-a-vis the other party and the court, and encompasses

inaction as well as action, as the New Hampshire Supreme Court

has expressly held. See Kancer,

.

28. Gianola, moreover, is readily distinguishable. In

that case, after notifying the defendant insurer of a claim under

his policy by letters in April and May 2000, the plaintiff filed

13 suit for declaratory judgment in June 2000 contending that the

defendant had waived any right to contest coverage by failing to

respond to either letter. Gianola,

. The

two-month period of inaction between claim notification and

filing suit in that case differs from Groleau's four-and-a-half-

year period of inaction in this case--inactivity interrupted only

by Groleau's repeated assurances that he would take action within

a certain period of time--by orders of magnitude.

29. Groleau's contention that his March 2010 reguest to

defendants to schedule an arbitration operated as a "retraction"

of his waiver is unpersuasive. Groleau has identified Oregon and

Delaware law supporting the proposition that a waiver may be

retracted. But he has cited, and this court has found, no New

Hampshire law suggesting that, even if New Hampshire law

recognizes the "retraction" of a waiver, it would apply to these

facts. In this situation, the court must predict what the New

Hampshire Supreme Court would do. Brodeur v. Claremont Sch.

Dist.,

(D.N.H. 2009). This task

"demands considerable caution and respect for the well-marked

boundaries of New Hampshire law," and the court must be mindful

of "open[ing] new state-law frontiers." Franchi v. New Hampton

Sch.,

(D.N.H. 2009) . The majority rule

is that "a waiver once made cannot be recalled, revived,

14 expunged, or revoked." 31 C.J.S. Estoppel and Waiver § 93.

Absent some indication that the New Hampshire Supreme Court would

follow the minority position advocated by Groleau, rather than

the majority rule, this court will not do so here.

30. The court rules that Groleau has waived his right to

demand that the defendants submit to arbitration pursuant to the

November 19, 2004 stipulation between the parties.

II . Laches

31. "Laches is an eguitable doctrine that bars litigation

when a potential plaintiff has slept on his rights." Premier

Capital, LLC v. Skaltsis,

(2007) (guoting In re

Estate of Laura,

(1997)). "Laches is not

triggered by the mere passage of time, but may be appropriate

where a suit has been unreasonably delayed and the delay has

resulted in unfair prejudice." Miner v. A & C Tire Co., Inc.,

(2001). Whether those two elements have been

proven "is a guestion of fact for the trial court" that "hinges

upon the particular facts of each case." Healey v. Town of New

Durham Zoning Bd. of Appeals,

(1995).

32. For the reasons already noted in its discussion on

waiver, the court finds that Groleau's delay in seeking to

arbitrate his claims against defendants was unreasonable under

15 the circumstances. Groleau was under court order to "schedule

the arbitration promptly" and to conclude the matter by August

24, 2006, but chose not to do so. At the same time, he

repeatedly indicated to the court and to defendants that he

intended to arbitrate the matter forthwith. He nonetheless

neglected to take any of the measures necessary to schedule the

arbitration for over three years following the administrative

closure of the 2004 Action. The unreasonableness of this delay

is underscored by the fact that Groleau, even before reguesting

arbitration dates from defendants in March 2010, began pursuing a

malpractice claim against the attorney who represented him in the

2004 Action. The malpractice claim was based in part upon that

attorney's delay in pursuing arbitration, and suggests an

awareness on Groleau's part of this unreasonableness.

33. Notwithstanding Groleau's delay in seeking

arbitration, defendants presented no evidence that the delay

resulted in unfair prejudice. While Groleau testified that his

memory of his initial meetings with defendants in 2000 was not as

good as it had been in 2006, defendants did not demonstrate that

Groleau's memory of those events was so poor that their defense

would be adversely impacted. Groleau was able to recall details

of prior discussions with Sweeney and Smith, and testified that

he kept meticulous paper records regarding his communications

16 with them, some of which were introduced into evidence. By

contrast, defendants presented no evidence from Sweeney and Smith

indicating that their memories had faded in any way, or any other

evidence of prejudice.

34. The court does not agree with defendants that

prejudice may be inferred from the passage of time alone. As

noted, under New Hampshire law "[1]aches is not triggered by the

mere passage of time . . . ." Miner,

; see also

Skaltsis,

(noting that laches "is not a mere

matter of time"). Thus, in Miner, the New Hampshire Supreme

Court affirmed the trial court's conclusion that laches did not

apply even where the plaintiff unreasonably delayed bringing

suit, because the defendants failed to show that any actual

prejudice resulted from the delay. 146 N.H. at 633-34. While

the passage of time may be sufficient to create a presumption of

prejudice under the federal authorities cited by defendants (and

this court takes no position on that issue), those authorities do

not reflect New Hampshire law on this topic.

35. Because defendants have presented no evidence

establishing unfair prejudice, as is their burden under the

laches defense, Pennichuck Corp. v. City of Nashua,

(2005), that defense is rejected.

17 Conclusion

Based on the foregoing, the court rules in the defendants'

favor on plaintiff's claims. The clerk shall enter judgment

accordingly and close the case.

SO ORDERED.

lante .ited States District Judge

Dated: October 11, 2011

cc: James C. Wheat, Esq. David Viens, Esq. Louis M. Ciavarra, Esq James M. Callahan, Esq

18