Custodial trustee company

June 26, 2012

Representation of a custodial trustee company in a matter brought by over 100 plaintiffs against more than a dozen defendants relating to an alleged $52 million Ponzi scheme where the persons engaged in the alleged fraud were criminally convicted. Our client acted as a custodial trustee to certain self-directed IRA accounts and the plaintiffs alleged, among other things, that our client failed to adequately investigate and warn the plaintiffs regarding the fraudulent scheme and failed to fulfill its duties as custodial trustee in ensuring the proper direction of the investments. The client moved to compel arbitration to extricate itself from the lawsuit and had to establish the existence of an arbitration agreement for all relevant plaintiffs whose accounts spanned many years and account agreements changed over time and consisted of multiple documents incorporated by reference. The court rejected plaintiffs’ arguments that the account agreements did not validly incorporate the arbitration clause and were unconscionable, and compelled arbitration and dismissed rather than stayed all claims against client. 
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