The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge
MEMORANDUM DECISION AND ORDER
The Court has before it a motion to compel arbitration filed by defendant Brookstone Securities, Inc. The motion is fully briefed and at issue. For the reasons explained below, the Court will grant the motion.
In this case, plaintiff Randy A. Bauscher has sued Brookstone, a stock-brokerage firm, and Jesse Krapf, an individual broker employed by Brookstone. For ease of reference, the Court will refer to the defendants collectively as Brookstone.
Bauscher alleges that Brookstone's misinformation and manipulation caused Bauscher to invest large sums on margin in a penny stock, resulting in a loss of more than $650,000. Bauscher initially filed suit in Idaho state court on December 6, 2011, alleging violations of Idaho state law and common law. Brookstone removed the case here on the basis of diversity. See 28 U.S.C. § 1332. The Court denied Bauscher's motion to remand on April 26, 2011.
Brookstone now moves to compel arbitration and stay proceedings. It relies on the terms of the contract created when Bauscher applied for an account with First Southwest Company, Brookstone's clearing broker.*fn1 The contract consists of two documents; an "Account Application" bearing Bauscher's signature, and a "Customer Agreement," which was not signed by the parties, but is referenced in the Account Application. See Exhibit A (Dkt. No. 14-5). On Bauscher's Account Application, the paragraph immediately above Bauscher's signature states:
BY SIGNING BELOW, YOU AGREE TO ALL TERMS OF THE CUSTOMER AGREEMENT INCLUDED WITH THIS ACCOUNT APPLICATION. YOU ACKNOWLEDGE RECEIPT OF A COPY OF THIS ACCOUNT APPLICATION AND THE CUSTOMER AGREEMENT. YOU UNDERSTAND YOU CAN REVIEW A COPY OF THE ENTIRE CUSTOMER AGREEMENT AT ANY TIME BY ACCESSING WWW.FIRSTSWCLEARING.COM. YOU CERTIFY THAT YOU HAVE READ, UNDERSTAND AND AGREE WITH ALL PROVISIONS OF THE CUSTOMER AGREEMENT. THE CUSTOMER AGREEMENT BENEFITS FIRST SOUTHWEST COMPANY, INTRODUCING BROKERS FOR WHICH IT CLEARS TRANSACTIONS AND PERSONS RELATED TO EACH OF THE FOREGOING. WITHIN THE CUSTOMER AGREEMENT, PAGE 10, PARAGRAPH 27 CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE.*fn2 Id. at 2 (block capitalization in original). The referenced Customer Agreement includes an arbitration agreement which states, in part,
ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.
Id. at 10 (block capitalization in original).
Under the Federal Arbitration Act, any "party aggrieved by the alleged failure . . . of another to arbitrate under a written agreement for arbitration may petition . . . for an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. The Court must stay proceedings and order arbitration if (1) there is a valid agreement to arbitrate between the parties, and (2) the agreement encompasses the dispute at issue. Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). In construing the arbitration agreement, the Court "must apply ordinary state-law principles that govern the formation of contracts." Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th Cir. 1998) (internal quotation marks omitted).
Bauscher resided in Idaho when he purportedly signed the Account Application, and the Court therefore evaluates the contract under Idaho law. See Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003). Under Idaho law, the party seeking to enforce the terms of a written contract bears "[t]he burden of proving the existence of a contract" by a preponderance of the evidence. Idaho Power Co. v. Cogeneration, Inc., 9 P.3d 1204, 1213 (Id.Sup.Ct. 2000). Once the existence of a contract is established, doubts about its scope "are to be 'resolved in favor of coverage.'" Int'l Ass'n of Firefighters, Local No. 672 v. City of Boise, 30 P.3d 940, 946 (Id.Sup.Ct. 2001) (quoting AT & T Tech., Inc. v. Commc'n Workers of America, 475 U.S. 643, 650 (1986)).
Bauscher argues that the documents submitted by Brookstone are inadequate to establish the existence of a valid arbitration agreement ...