Appeal from the 80th District Court Harris County, Texas
Trial Court Case No. 2016-11913
consists of Chief Justice Radack and Justices Keyes and
V. Keyes Justice.
interlocutory appeal, Margaret Denson, in her individual
capacity and as executor of the estate of her late husband,
John David Denson, sued Steer Wealth Management, LLC, for
causes of action including breach of contract and fraud
arising out of the alleged improper transfer of assets from
several of the Densons' brokerage accounts. Steer Wealth
moved to compel arbitration and stay all trial court
proceedings, and the trial court denied the motion. In one
issue, Steer Wealth contends that the trial court erred in
denying its motion because it can compel arbitration as a
third-party beneficiary to an arbitration agreement the
Densons had signed with another entity and it can compel
arbitration under the doctrine of direct-benefits estoppel.
early 2000s, Jack Varcados, who was employed by Morgan
Stanley at the time, became the financial advisor for John
and Margaret Denson and opened numerous brokerage accounts
for them, including joint accounts, trust accounts, accounts
in John Denson's name, and accounts in Margaret
Denson's name. Varcados was later employed by Merrill
Lynch and then by LPL Financial, LLC, and each time he
switched employers the Densons transferred their brokerage
accounts to his new firm. Varcados began opening brokerage
accounts for the Densons with LPL Financial in 2009, and the
Densons continued applying for new brokerage accounts with
LPL Financial through January 2013.
account application contained a provision directly above the
signature lines that stated: "This account is governed by
and I acknowledge receipt of the predispute arbitration
clause that is located in the last numbered section of the
Account Agreement . . . which is incorporated by reference
into the Account Application." The account applications
were signed by the Densons and Varcados, on behalf of LPL
Financial. The "LPL Master Account Agreement"
included the following arbitration provision:
signing this Arbitration Agreement the parties agree as
(A) 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.
(F) The rules of some arbitration forums may impose time
limits for bringing a claim in arbitration. In some cases, a
claim that is ineligible for arbitration may be brought in
(G) The rules of the arbitration forum in which the claim is
filed, and any amendments thereto, shall be incorporated into
In consideration of opening one or more accounts for you, you
agree that any controversy between you and LPL and/or your
Representative(s) (whether or not a signatory(ies) to this
Master Account Agreement or Arbitration Agreement), arising
out of or relating to your account, transactions with or for
you, or the construction, performance, or breach of this
agreement whether entered into prior, on or subsequent to the
date hereof, shall be settled by arbitration in accordance
with the rules, then in effect of the Financial Industry
Regulatory Authority. Any arbitration award hereunder shall
be final, and judgment upon the award rendered may be entered
in any court, state or federal, having jurisdiction. You
understand that you cannot be required to arbitrate any
dispute or controversy nonarbitrable under federal law.
Master Account Agreement defined "Representative"
as the customer's "registered representative."
2011, Varcados, with the assistance of Tan Tang, the initial
organizer, formed Steer Wealth, a domestic limited liability
company, and he is the sole manager of this entity.
Varcados's "BrokerCheck" Report with the
Financial Industry Regulatory Agency ("FINRA")
lists Steer Wealth as a "DBA for LPL business (entity
for LPL business)." Steer Wealth presented evidence
indicating that LPL Financial had approved Varcados's use
of Steer Wealth as an "outside business." The
record does not contain any contracts between the Densons and
Steer Wealth, and it is undisputed that Steer Wealth is not a
signatory to any contracts between the Densons and LPL
Denson died in November 2013. After his death, Margaret
Denson discovered that John Denson had allegedly transferred
millions of dollars' worth of assets from their joint
brokerage accounts at LPL Financial into accounts in either
his name or in the name of companies that he owned. John
Denson designated Tan Tang, his law partner and alleged
mistress, as the beneficiary of those accounts. Margaret
Denson filed suit against Tang in December 2013, seeking
damages for breach of fiduciary duty, conversion, and fraud
on the community. In this lawsuit, Denson also sought a
temporary restraining order and temporary injunction
prohibiting Tang and LPL Financial, among other entities,
from transferring any assets held in an account on which John
Denson was a signatory. Steer Wealth was not a party to this
lawsuit. Ultimately, Denson nonsuited her claims against LPL
Financial after that entity moved to compel arbitration.
Denson, Tang, and LPL Financial reached a settlement,
pursuant to which the beneficiary designations in favor of
Tang on seven brokerage accounts held with LPL Financial were
set aside and the accounts were transferred to Denson at a
different financial institution.
February 2016, Denson sued Steer Wealth in the underlying
suit. Denson alleged that Steer Wealth and Varcados, who is
not a defendant in the underlying suit, were financial
advisors to John Denson, Tang, and their law firm. Denson
alleged that she, her husband, Tang, and Tang and John
Denson's law firm were all clients of Steer Wealth.
Denson further alleged that Steer Wealth assisted Tang
"in improperly depleting the Denson community estate of
its financial assets, and concealing these actions from Mrs.
asserted a cause of action against Steer Wealth for breach of
The Densons entered into one or more oral and/or written
agreements with Mr. Varcados, through his company, [Steer
Wealth], under which [Steer Wealth] would act as the
Densons' financial and investment advisor and provide the
Densons other financial services. [Steer Wealth] therefore
owed Mrs. Denson, as its client, numerous contractual (as
well as legal, equitable, and ethical) duties. These
included, but were not limited to, the contractual obligation
to act for Mrs. Denson's financial ...