text:
    Adam BUCY, Plaintiff and Appellee, v. EDWARD JONES & COMPANY, L.P.; Jeremy Kientz; Dominick Ferranto, and Does 1-5, Defendants and Appellants.
    DA 18-0493
    Supreme Court of Montana.
    Submitted on Briefs: March 20, 2019 Decided: July 30, 2019
    For Appellants: Charles E. Hansberry, Jenny M. Jourdonnais, Hansberry & Jourdonnais, PLLC, Missoula, Montana, Simon M. Levy, Julie L. Taylor, Keesal, Young & Logan, San Francisco, California
    For Appellee: Terance P. Perry, Nathan G. Wagner, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana
   Justice Dirk M. Sandefur delivered the Opinion of the Court.

¶1 Edward Jones & Company, L.P., Jeremy Kientz, and Nick Ferranto, et al. (collectively Edward Jones), appeal the portion of a judgment of the Montana Fourth Judicial District Court, Missoula County, denying their motion to compel arbitration of post-termination claims asserted against them by former Edward Jones employee Adam Bucy.

¶2 We address the following restated issues on appeal:

1. Whether Bucy waived his challenge to the enforceability of the 1998 NASD Form U4 and 2003 arbitration agreements by failing to cross-appeal?
2. Whether the 2003 arbitration agreement was illusory or lacking in mutuality due to Edward Jones' retention of a limited right to seek injunctive relief?
3. Whether the 1998 and 2003 arbitration agreements had an illegal or void object absent an explicit explanation and waiver of Montana constitutional rights?
4. Whether the 1998 and 2003 arbitration agreements were unenforceable in equity as unconscionable?
5. Whether Bucy's post-termination claims were arbitrable within the express scope of the 1998 and 2003 arbitration agreements?

¶3 We reverse and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

¶4 Adam Bucy worked for Edward Jones for approximately 19 years between 1996 and 2015, primarily as a financial advisor in the Edward Jones branch office in Missoula, Montana. As pertinent, Edward Jones is a Missouri-based investment brokerage engaged in the business of providing securities investment and related financial management and planning services. Edward Jones is a federally registered broker and a registered member of the Financial Industry Regulatory Authority, Inc. (FINRA).

¶5 FINRA is a private organization of "investment bankers, dealers, and brokers" with "congressionally delegated self-regulatory authority" to enforce member compliance with federal securities laws and to promulgate and enforce supplemental regulations under the regulatory oversight of the Securities and Exchange Commission (SEC). Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Nat'l Ass'n of Sec. Dealers, Inc. , 616 F.2d 1363, 1365-67 (5th Cir. 1980) (citing 15 U.S.C. § 78o ). See also Nat'l Ass'n of Sec. Dealers, Inc. v. SEC , 431 F.3d 803, 804 (D.C. Cir. 2005). FINRA is the SEC-approved corporate and legal successor of the National Association of Securities Dealers, Inc. (NASD), under the 1934 Securities and Exchange Act, as amended (1934 Act). NASD formed in 1939 as a "self-regulatory organization" (SRO) under the 1934 Act, as amended in 1938. See 15 U.S.C. §§ 78a, 78o. FINRA formed in 2007 upon the SEC-approved merger of the member regulatory and arbitration functions of the NASD, New York Stock Exchange (NYSE), and NYSE Regulation, Inc. See NASD and NYSE Member Regulation Combine to Form the Financial Industry Regulatory Authority - FINRA , FINRA (July 30, 2007), https://perma.cc/DY33-6EFP. As pertinent here, applicable NASD and FINRA Rules were approved by the SEC pursuant to its regulatory authority under § 19(b)(1) of the 1934 Act, as amended. See 15 U.S.C. § 78s(b)(1), (c) ; Credit Suisse First Boston Corp. v. Grunwald , 400 F.3d 1119, 1130-32 (9th Cir. 2005).

¶6 In 1996, after obtaining a bachelor's degree in finance from the University of Montana, Bucy applied for and obtained employment with Edward Jones as a financial advisor in St. Louis, Missouri. At all times pertinent, Edward Jones was and is a securities broker or brokerage registered with the SEC under the 1934 Act ( 15 U.S.C. § 78o(a)(1) ). As a means of similarly subjecting them to federal securities laws and regulations, the SEC and NASD/FINRA require approved registration (licensing) of broker principals and representatives as a condition of employment with employing member-brokers. See FINRA Rules 0140, 1210; NASD Rules 0115, 1021, and 1031.

¶7 In 1998, Bucy applied for NASD registration as a representative of Edward Jones. He submitted a signed NASD Form U4 (Uniform Application for Securities Industry Registration) for registration in association with Edward Jones. See NASD Rule 1013(a)(1)-(2). At the time, NASD Rules applied to all NASD broker-members and associated persons and imposed on associated persons the "same duties and obligations" under the Rules as members. NASD Rule 0115. In pertinent part, NASD regulations prescribed a comprehensive Code of Arbitration Procedure "for the arbitration of any dispute, claim, or controversy arising out of or in connection with the business of any [NASD] member or arising out of the employment or termination of employment of associated person(s) with any member ... between or among members and associated persons." NASD Rule 10101(b). In pertinent part, the Rules then generally required arbitration of any:

dispute [or] claim ... between or among members and/or associated persons ... arising in connection with the business of such member(s) or in connection with the activities of such associated person(s), or arising out of the employment or termination of employment of such associated person(s)....

NASD Rule 10201(a). In accordance with NASD Rules 0115, 10101(b), and 10201(a)(2), Bucy's Form U4 included the following standard arbitration agreement:

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm ... that is required to be arbitrated under the rules, constitutions, or by-laws of [NYSE and NASD] as may be amended from time to time and that any arbitration award rendered against me may be entered as a [judgment] in any court of competent jurisdiction.

See also NASD Rule 1013(a)(1)-(2).

¶8 In 2003, Bucy relocated to work in the newly opened Edward Jones branch office in Missoula. Incident to the transfer, Bucy voluntarily executed a new employment agreement with Edward Jones to work as a registered "investment representative." Bucy expressly agreed:

that any dispute, claim or controversy arising under this Agreement or as a result of [his] employment with Edward Jones between [he] and Edward Jones or any present or former employee, agent, officer, director ... of Edward Jones shall be resolved by arbitration and without resort to litigation in court. Any arbitration proceedings shall be conducted in accordance with the rules then in effect of the Boards of Directors of the [NYSE] or the [NASD]. This agreement to arbitrate disputes shall survive the termination of your employment with Edward Jones.
...
You agree to ... strictly adhere to the rules and regulations of the SEC, NASD, NYSE and state securities regulators, and all other applicable rules and regulations.

Directly above the signature line, the agreement further prominently stated in bold script:

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

¶9 In the spring of 2015, after twelve years as a successful financial advisor in Missoula, Bucy became "disaffected by" the "culture" at Edward Jones and "began looking for new employment." Between April and June 2015, he was negotiating with LPL Financial (LPL), a "Boston-based financial planning" firm, to work as a registered LPL representative and financial advisor in the Missoula area. Bucy alleges that, at some point, Edward Jones "intercepted [his] emails or phone calls and learned" of his intent to leave for new employment with a "competing financial planning business." He further asserts, and Edward Jones denies, that Edward Jones then had developed a "corporate pattern and practice of blackballing 'breakaway' brokers" to prevent them from working for competitors. On or about May 28, 2015, one of Bucy's Edward Jones clients filed a complaint with FINRA alleging that Bucy conducted an unauthorized transaction on the client's account. Bucy alleges that Edward Jones encouraged the client to file the complaint upon learning of his intent to leave the firm.

¶10 The client complaint immediately triggered an internal review by Edward Jones and a separate licensing investigation by FINRA. Incident to its internal review, Edward Jones contacted and communicated with several of Bucy's existing Edward Jones clients, some of whom later testified that Edward Jones personnel told them that Bucy had given them bad advice and mishandled their accounts. While the Edward Jones review and FINRA investigation were pending, Bucy's negotiations with LPL Financial came to a successful conclusion in late June, resulting in his execution of a written contract, on July 19, 2015, for prospective employment with LPL. Bucy subsequently informed Edward Jones of his intent to resign, effective July 31, 2015.

¶11 On July 30, 2015, the day before the effective date of Bucy's resignation, a second Edward Jones client filed a FINRA complaint against him. As with the first client complaint, Bucy alleges that Edward Jones encouraged the client to file the complaint. On July 31, 2015, Bucy resigned from Edward Jones to take new employment with LPL Financial. Edward Jones subsequently circulated an internal memo notifying staff of Bucy's "voluntary" termination and that he had accepted a job at another financial services firm.

¶12 Upon the termination of employment of a registered representative, FINRA regulations require former employers to file an electronic FINRA Form U5 terminating the representative's FINRA registration with that member-broker. See FINRA Bylaws, Article V, Section 3(a). The web-based electronic Form U5 prompts the reporting member to report the manner of termination, whether "Deceased," "Discharged," "Permitted to Resign," "Voluntary," or "Other." If the member-broker reports the manner of termination as "Permitted to Resign," "Discharged," or "Other," the form requires the member to "provide" further "explanation" of the reason for termination. Form U5 filings are publicly available by query on FINRA's internet website.

¶13 On August 4, 2015, Edward Jones filed a FINRA Form U5 reporting the termination of Bucy's employment. Contrary to its earlier staff memorandum stating that the termination was "voluntary," Edward Jones' U5 filing reported that Bucy was "permitted to resign" under the following circumstances:

MR. BUCY RESIGNED WHILE UNDER AN INTERNAL REVIEW THAT STARTED AFTER THE FIRM RECEIVED A CLIENT COMPLAINT ALLEGING UNSUITABLE RECOMMENDATIONS AND DISCRETIONARY TRADING.

Three weeks later, on August 26, 2015, Bucy's new firm (LPL) rescinded its new employment contract with him.

¶14 In the immediate wake of Bucy's departure from Edward Jones, his successor at Edward Jones contacted and consulted with a number of Edward Jones clients formerly served by Bucy. Six of them later filed FINRA complaints alleging that Bucy mishandled their accounts while at Edward Jones. Several of the new complainants subsequently testified that Edward Jones personnel encouraged them to file FINRA complaints against Bucy based on Edward Jones' assertions that he gave them bad financial advice and mishandled their accounts in violation of FINRA Rules.

¶15 On June 27, 2016, Bucy filed a complaint against Edward Jones, et al., in the Montana Fourth Judicial District Court asserting claims for statutory blacklisting ( § 39-2-803, MCA ), statutory defamation ( § 27-1-801, MCA ), and common law tortious interference with his prospective business relationship with LPL. On August 31, 2016, FINRA notified Bucy that it had completed its investigation and was closing his file without further action. On September 26, 2016, Edward Jones moved the District Court to dismiss and compel arbitration of Bucy's claims on the asserted basis that they were subject to arbitration under NASD/FINRA regulations, the arbitration agreement in his 1998 Form U4 application, and his 2003 employment contract with Edward Jones. In response, Bucy asserted that his claims were "post-termination" claims beyond the scope of the 1998 and 2003 arbitration agreements and that, even if not, they were in any event unenforceable as a threshold matter of law. ¶16 In January 2017, in a somewhat imprecise manner, the District Court compelled arbitration "as to transactions occurring during [Bucy's] employment," but denied arbitration of "post-employment claims" without prejudice pending further discovery regarding the threshold arbitrability of those claims. In July 2017, following limited discovery, Edward Jones renewed its motion to compel arbitration of Bucy's post-termination claims. On August 9, 2018, the court denied the renewed motion on the asserted ground that Edward Jones had failed to develop any additional facts indicating that Bucy's post-termination claims were arbitrable within the scope of his 1998 and 2003 arbitration agreements. Edward Jones timely appealed. Bucy responded in opposition but did not cross-appeal.

STANDARD OF REVIEW

¶17 We review district court rulings on motions to compel arbitration de novo for correctness under the governing standards of the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., or Montana Uniform Arbitration Act (MUAA), § 27 -5-111, MCA, et seq., as applicable. Lenz v. FSC Sec. Corp. , 2018 MT 67, ¶ 12, 391 Mont. 84, 414 P.3d 1262. Upon a district court grant or denial of a motion to compel arbitration in response to a motion to dismiss or for summary judgment, we review the order for correctness under the applicable standards of M. R. Civ. P. 12(b) or 56. Lenz , ¶ 12. If the court granted or denied the motion upon an evidentiary hearing, we review the court's findings of fact for clear error and its conclusions of law de novo for correctness. Lenz , ¶ 12.

DISCUSSION

¶18 Congress enacted the FAA in 1925 to offset "widespread judicial hostility to arbitration agreements" and place them "on equal footing with all other contracts." Thompson v. Lithia Chrysler Jeep Dodge of Great Falls , 2008 MT 175, ¶ 12, 343 Mont. 392, 185 P.3d 332 ; AT&T Mobility, LLC v. Concepcion , 563 U.S. 333, 339, 131 S. Ct. 1740, 1745-46, 179 L.Ed.2d 742 (2011) ; Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443-44, 126 S. Ct. 1204, 1207-08, 163 L.Ed.2d 1038 (2006). "The FAA encompasses a discrete body of substantive federal law mandating enforcement of arbitration agreements within its scope regardless of any contrary substantive or procedural state law." Peeler v. Rocky Mt. Log Homes Can., Inc. , 2018 MT 297, ¶ 12, 393 Mont. 396, 431 P.3d 911 (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L.Ed.2d 765 (1983) ). The FAA governs agreements to arbitrate disputes "arising out of" contracts or transactions "involving" interstate "commerce." 9 U.S.C. § 2 ; Southland Corp. v. Keating , 465 U.S. 1, 10-17, 104 S. Ct. 852, 858-61, 79 L.Ed.2d 1 (1984) ; Zigrang v. U.S. Bancorp Piper Jaffray, Inc. , 2005 MT 282, ¶ 10, 329 Mont. 239, 123 P.3d 237. The FAA thus governs arbitration agreements required by or regarding matters governed by the 1934 Act or the related Security Act of 1933. See 9 U.S.C. § 2 ; 15 U.S.C. § 78b (necessity of 1934 Act regulation of national securities markets and nationally traded securities in interstate commerce); Davis v. Birr, Wilson & Co. , 839 F.2d 1369, 1375 (9th Cir. 1988) (recognizing Commerce Clause as source of federal regulatory authority under the 1934 Act); U.S. v. Wolfson , 405 F.2d 779, 783 (2d Cir. 1968) (recognizing Commerce Clause as source of federal authority for Security Act of 1933). A party may assert the right to compel arbitration either by affirmative claim for relief or as an affirmative defense to an adverse claim. See 9 U.S.C. §§ 3 - 4, 6, 204 ; Am. Sugar Refining Co. v. Anaconda , 138 F.2d 765, 766-67 (5th Cir. 1943). ¶19 Arbitration agreements governed by the FAA are "valid, irrevocable, and enforceable" except "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Arbitration agreements are thus subject to all "generally applicable contract defenses," including without limitation lack of mutual assent or consideration, fraud, duress, or unconscionability, but not "defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." Concepcion , 563 U.S. at 339, 131 S. Ct. at 1746 (quoting Doctor's Assocs., Inc. v. Casarotto , 517 U.S. 681, 687, 116 S. Ct. 1652, 1656, 134 L.Ed.2d 902 (1996) ). State law may not defeat arbitration agreements based on "special rules which apply only to arbitration" agreements. Iwen v. U.S. W. Direct , 1999 MT 63, ¶ 26, 293 Mont. 512, 977 P.2d 989 (citing Casarotto , 517 U.S. at 687, 116 S. Ct. at 1656 ). Accord Kortum-Managhan v. Herbergers NBGL , 2009 MT 79, ¶ 17, 349 Mont. 475, 204 P.3d 693. Upon a contested petition or motion to compel arbitration, the court must consider, as properly placed at issue in a particular case, whether the arbitration agreement is enforceable under generally applicable principles of contract law and, if so, whether the terms of the agreement require arbitration of the particular matter or type of matter at issue. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 84, 123 S. Ct. 588, 592, 154 L.Ed.2d 491 (2002) ; Mont. Pub. Emps. Ass'n v. City of Bozeman , 2015 MT 69, ¶ 7, 378 Mont. 337, 343 P.3d 1233 ( MPEA ). Except as clearly and unambiguously otherwise provided by contract, the question of whether an issue is substantively arbitrable is a threshold question for judicial determination. Howsam , 537 U.S. at 83-84, 123 S. Ct. at 591-92 ; AT&T Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 649, 106 S. Ct. 1415, 1418, 89 L.Ed.2d 648 (1986) ; MPEA , ¶¶ 7, 14 ; Greater Missoula Area Fed'n of Early Childhood Educators v. Child Start, Inc. , 2009 MT 362, ¶ 26, 353 Mont. 201, 219 P.3d 881.

¶20 Under generally applicable contract law, the essential elements of a valid and enforceable contract are: (1) "identifiable parties capable of contracting"; (2) mutual consent of the parties; (3) "a lawful object"; and (4) mutual consideration. Section 28-2-102, MCA ; Kortum , ¶ 18. Consent must be "free, mutual, and communicated by each" party to the other. Franks v. Kindsfather , 2005 MT 51, ¶ 31, 326 Mont. 192, 108 P.3d 487 ; §§ 28-2-102, -301, MCA. A valid contract requires the mutual assent of the parties on all essential terms. Lenz , ¶ 18 (quoting Keesun Partners v. Ferdig Oil Co. , 249 Mont. 331, 337, 816 P.2d 417, 421 (1991) (internal citations omitted)). Contract terms to which the parties did not mutually assent are not valid and enforceable against a party who did not assent. See Kortum , ¶ 18 ;

Keesun Partners , 249 Mont. at 337, 816 P.2d at 421. See also §§ 28-2-102(2), -301, -303, -401, MCA. "The threshold validity and enforceability of an arbitration agreement is a question of law but the limited role of the court is to enforce and give effect to the lawful agreement of the parties." Lenz , ¶ 17.

¶21 1. Whether Bucy waived his challenge to the enforceability of the 1998 NASD Form U4 and 2003 arbitration agreements by failing to cross-appeal?

¶22 In accordance with our general contract analysis in Lenz , ¶¶ 16-23, Bucy asserts on various grounds that the arbitration agreements in his 1998 Form U4 application and 2003 employment agreement are unenforceable as a threshold matter of law. Edward Jones asserts that Bucy waived his threshold enforceability challenge by failing to raise it by cross-appeal. Bucy counters that he sufficiently raised his unenforceability assertions below and that cross-appeal was not necessary to preserve them for appellate review in response to the related issue raised on appeal by Edward Jones. We agree with Bucy.

¶23 A party aggrieved by any aspect of an appealable judgment waives appellate review absent timely appeal in accordance with the Montana Rules of Appellate Procedure.

Cadena v. Fries , 2015 MT 90, ¶ 25, 378 Mont. 409, 346 P.3d 347 ; City of Missoula v. Robertson , 2000 MT 52, ¶ 19, 298 Mont. 419, 998 P.2d 144 (citing Fed. Energy Admin. v. Algonquin SNG, Inc. , 426 U.S. 548, 560, 96 S. Ct. 2295, 2302, 49 L.Ed.2d 49 (1976) ). Similarly, a party aggrieved by any issue "separate and distinct" from the issue(s) raised by an opposing party on appeal must generally cross-appeal to preserve the issue for appellate review. Walker v. State , 2003 MT 134, ¶¶ 48-49, 316 Mont. 103, 68 P.3d 872 (citing Billings Firefighters Local 521 v. City of Billings , 1999 MT 6, ¶ 31, 293 Mont. 41, 973 P.2d 222 ) (internal citations omitted); Hughes v. Lynch , 2007 MT 177, ¶ 5, n.1, 338 Mont. 214, 164 P.3d 913 ; Johnson v. Tindall , 195 Mont. 165, 169, 635 P.2d 266, 268 (1981) ; Mittelstadt v. Buckingham , 156 Mont. 407, 414, 480 P.2d 831, 835 (1971) ; Francisco v. Francisco , 120 Mont. 468, 470, 191 P.2d 317, 319 (1947). A responding "party seek[ing] to change any part of the judgment below" must raise the issue by cross-appeal. Robertson , ¶ 19. Failure to timely file and perfect a cross-appeal on an appealable issue generally constitutes a waiver of the issue and precludes appellate jurisdiction to review the issue. See Walker , ¶¶ 48-49.

¶24 However, for purposes of cross-appeal, an issue is not "separate and distinct" from issues raised by the appellant if the respondent: (1) was the prevailing party below; (2) responsively raised the issue on appeal in defense of the judgment at issue; and (3) previously raised the issue below regardless of whether relied on, rejected, or considered in the lower court decision. Nasca v. Hull , 2004 MT 306, ¶¶ 17-18, 323 Mont. 484, 100 P.3d 997 (quoting Robertson , ¶ 20 ). In Nasca , in granting a motion to dismiss due to lack of personal jurisdiction, the District Court concluded that exercise of specific jurisdiction over the third-party defendants under M. R. Civ. P. 4(B)(1) would violate due process. Nasca , ¶¶ 10, 15. On appeal, the third-party defendants responsively defended the due process ruling, but further asserted that specific jurisdiction was in any event lacking under M. R. Civ. P. 4(B)(1) as a threshold matter. Nasca , ¶ 15. In response, the appellant asserted that the respondent-defendants waived any challenge to specific jurisdiction under Rule 4(B)(1) by failing to cross-appeal. Nasca , ¶ 16. Noting that they raised both issues below, were the prevailing parties on the due process ruling, and responsively raised it on appeal in defense of the lower court judgment, we held that the respondent-defendants' specific jurisdiction challenge was not an issue "separate and distinct" from the due process issue but, rather, an included "sub-part" of a larger multi-part "analysis required of the court" that, if successfully raised on appeal, would "moot" appellate review of the issue raised by the appellants. Nasca , ¶¶ 17-18.

¶25 Likewise here, Bucy was ultimately the prevailing party on whether his post-termination claims were arbitrable within the scope of the subject arbitration agreements. He timely challenged arbitrability below on that ground and on the additional ground that the arbitration agreements were themselves unenforceable as a threshold matter of law. Regardless of the District Court's disregard of the threshold enforceability issue, it was a necessary sub-part of the larger two-prong arbitrability analysis at issue below-whether the parties entered into a valid and enforceable agreement to arbitrate and whether the terms of the agreement required arbitration of the particular matter or type of matter at issue. See Howsam , 537 U.S. at 84, 123 S. Ct. at 592 ; MPEA , ¶ 7. We hold that Bucy did not waive his threshold enforceability challenge by failing to cross-appeal.

¶26 2. Whether the 2003 arbitration agreement was illusory or lacking in mutuality due to Edward Jones' retention of a limited right to seek injunctive relief?

¶27 Inter alia , valid contract formation requires mutuality of consideration-valuable consideration on or for both sides of the agreement. See § 28-2-102, MCA ; Kortum , ¶ 18. As pertinent, the essential reciprocal consideration on the face of the arbitration agreement in Bucy's 1998 FINRA Form U4 filing was his agreement to arbitrate a specified scope of disputes, and thereby implicitly waive available judicial remedies, in return for the necessary securities industry registration (licensing) required by federal law to work as a representative of a securities broker or brokerage. Similarly, as pertinent, the essential reciprocal consideration on the face of the arbitration agreement in the 2003 employment agreement was Bucy's agreement to arbitrate a specified scope of disputes, and thereby implicitly waive available judicial remedies, in return for employment on other specified terms and conditions with a broker-employer prohibited by federal law from employing unregistered representatives as financial advisors.

¶28 Whether as a consideration of unconscionability or a stand-alone formation defect, Bucy asserts that the 2003 arbitration agreement lacked mutuality because it required him to waive ordinarily available judicial remedies while unfairly preserving an injunctive relief remedy for Edward Jones. However, Bucy's assertion fails to recognize that FINRA Rule 13804, like NASD Rule 10335 before it, authorizes either or both parties to a pending arbitration to seek limited preliminary or permanent injunctive relief as an adjunct to arbitration. Bucy's assertion further fails to recognize that the FAA independently provides for limited injunctive relief, available to any party, to facilitate and enforce arbitration awards. See 9 U.S.C. § 13. Bucy's argument finally fails to recognize the expressly limited nature of Edward Jones' retained right to seek available injunctive relief-to protect against misappropriation of trade secrets and other proprietary information "pending ... arbitration" and thereby "preserve the status quo that existed prior to any alleged breach of this Agreement, pending the outcome of such arbitration." We must construe this express contract language in the context of the broad scope of matters mutually committed to arbitration by both parties under the arbitration agreement, the NASD and succeeding FINRA Rules that Bucy expressly acknowledged and agreed to adhere to, as well as the generally applicable post-arbitration judicial remedy available to all under 9 U.S.C. § 13. Against this backdrop, Bucy has made no factual or legal showing that the limited injunctive relief remedy preserved to Edward Jones in the parties' 2003 employment agreement renders the arbitration agreement either illusory or oppressive. Whether asserted as a consideration of unconscionability or a stand-alone formation defect, we hold that the 2003 arbitration agreement was not illusory, lacking in mutuality, or unreasonably one-sided or oppressive due to Edward Jones' retention of a limited right to seek injunctive relief.

¶29 3. Whether the 1998 and 2003 arbitration agreements had an illegal or void object absent an explicit explanation and waiver of Montana constitutional rights?

¶30 In addition to compliance with generally applicable statutory and common law contract principles, "arbitration agreements must also comply with [Montana] constitutional standards generally applicable to contracts." Lenz , ¶ 19 ; Kortum , ¶¶ 25-27. By nature, arbitration agreements generally effect a waiver of applicable state and federal "constitutional rights to full legal redress, jury trial, due process of law, and equal protection of law." Lenz , ¶ 19 ; Kortum , ¶ 26. A waiver of fundamental Montana constitutional rights is valid only if knowing, voluntary, and intelligent under the totality of circumstances. Lenz , ¶ 19 ; Kortum , ¶¶ 26-27 ; Park v. Mont. Sixth Jud. Dist. Ct. , 1998 MT 164, ¶ 36, 289 Mont. 367, 961 P.2d 1267. We have never required an explicit explanation or waiver of Montana constitutional rights in arbitration agreements but have previously identified those, inter alia , as considerations that may be relevant to whether a valid contract waiver occurred in a particular case. See Lenz , ¶ 19 (paraphrasing factors discussed in Kortum , ¶ 27 ). However, the Kortum factors are not rigid requirements-whether a valid contract waiver of Montana constitutional rights occurred is a question of fact under the totality of circumstances of each case. See Lenz , ¶ 19.

¶31 Here, Bucy correctly points out that neither of the arbitration agreements at issue were the product of arms-length negotiation. Then-governing NASD regulations dictated the terms of his 1998 Form U4 agreement and Edward Jones similarly dictated the terms of his 2003 employment agreement in accordance therewith. Bucy further correctly points out that he had no significant bargaining position in either case, he did not specifically initial the arbitration agreements in the larger contracts, and neither agreement included an explicit explanation or waiver of his Montana constitutional rights. Moreover, some significant degree of disparity in business experience and sophistication likely existed between Bucy and Edward Jones at the outset of his career in 1998 and, to a lesser degree, in 2003.

¶32 However, it is beyond genuine material dispute on the record that, in 1998, Bucy was a highly intelligent and educated person with a bachelors' degree in finance from the University of Montana who was knowingly seeking professional licensing and employment as a representative of a securities broker in the highly regulated securities industry. In 2003, after working for Edward Jones for four-plus years, he was at least similarly capable and knowledgeable, if not more, as he transitioned to Missoula to work as a licensed representative of a securities broker or brokerage. Bucy voluntarily signed the 1998 standard Form U4 licensing application and subsequent 2003 employment agreement and is thus presumed to have read and understood the meaning of their clear and unambiguous language. Lenz , ¶ 22 (internal citations omitted). The record is further devoid of any factual showing, or even allegation, of incapacity, mutual mistake, fraud, misrepresentation, or other tortious conduct affecting assent. "A party to a clear and unambiguous written contract [language] cannot avoid its legal consequences simply by later claiming that [he or] she did not understand the legal consequences of the plain language of the contract." Lenz , ¶ 22 (internal punctuation and citation omitted).

¶33 In pertinent part, the 1998 Form U4 clearly and unambiguously stated that Bucy:

agree[d] to arbitrate any dispute, claim or controversy that may arise between me and my firm ... [and] is required to be arbitrated under the rules, constitutions, or by-laws of [NYSE and NASD] as may be amended from time to time and that any arbitration award rendered against me may be entered as a [judgment ] in any court of competent jurisdiction.

(Emphasis added). The language of his 2003 employment agreement even more explicitly provided clearly and unambiguously that:

any dispute, claim or controversy arising under this Agreement or as a result of [his] employment with Edward Jones between [he] and Edward Jones or any present or former employee ... of Edward Jones shall be resolved by arbitration and without resort to litigation in court . Any arbitration proceedings shall be conducted in accordance with the rules then in effect of the Boards of Directors of the [NYSE] or [NASD]. This agreement to arbitrate disputes shall survive the termination of [Bucy's] employment with Edward Jones .

(Emphasis added). Directly above the signature line, the agreement prominently stated in bold script, "THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES." (Emphasis added). Bucy further expressly "agree[d] to ... strictly adhere to the rules and regulations of the SEC, NASD, NYSE and state securities regulators, and all other applicable rules and regulations." The language of the 1998 and 2003 arbitration agreements thus clearly and unambiguously indicated that Bucy agreed to resolve a broad scope of potential future disputes by arbitration rather than through the judicial legal system and process otherwise ordinarily available in the absence of such agreements.

¶34 There is no evidence or assertion that, if so inclined, Bucy did not have the opportunity or ability to consult with counsel prior to executing either of the arbitration agreements at issue. Nor is there any record indication that Bucy signed either of the arbitration agreements under extraordinary or undue economic, social or practical duress-the agreements were the requirement or function of SEC-approved NASD regulations rather than independently compelled by a private party in commerce. Further, there is no evidence or assertion that, at the time of execution, the NASD or Edward Jones "lulled" Bucy "into a belief" that the arbitration agreements "would not be enforced." See Kortum , ¶ 27.

¶35 Finally, the lack of explicit reference in either of the agreements to Montana constitutional rights is insignificant in this case. The 1998 agreement was part of a standard form agreement conforming to SEC-approved NASD regulations executed incident to his new employment with Edward Jones in Missouri . See 15 U.S.C. § 78s(b)(1), (c), as amended; NASD Rules 0115(a), 1013(a)(1)-(2), 10101(b), 10201(a)(2). The 2003 arbitration agreement similarly conformed to the same SEC-approved NASD regulations related to his anticipated employment in Montana. Bucy has provided no authority or analysis for his implied assertion that Montana constitutional waiver requirements can in any event override SEC-approved regulations, authorized and promulgated under the 1934 Act of Congress. Consequently, in the federally-regulated securities context, whether federal securities laws and regulations require arbitration in a particular context is a significant, if not dispositive, consideration of whether a valid waiver of Montana constitutional rights has occurred, or is even necessary, in an arbitration agreement governed by federal law under the 1934 Act. See also Credit Suisse , 400 F.3d at 1132 (SEC-approved SRO rules "preempt state law when the two are in conflict"). Under the totality of the circumstances of this case, we hold that the 1998 and 2003 arbitration agreements were not illegal, void, violative of public policy, or otherwise unenforceable due to lack of an explicit explanation and waiver of Montana constitutional rights.

¶36 4. Whether the 1998 and 2003 arbitration agreements were unenforceable in equity as unconscionable?

¶37 In pertinent part, the 1998 Form U4 clearly and unambiguously stated that Bucy:

agree[d] to arbitrate any dispute, claim or controversy that may arise between me and my firm ... [and] is required to be arbitrated under the rules, constitutions, or by-laws of [NYSE and NASD] as may be amended from time to time and that any arbitration award rendered against me may be entered as a [judgment ] in any court of competent jurisdiction.

(Emphasis added). The language of his 2003 employment agreement even more explicitly provided clearly and unambiguously that:

any dispute, claim or controversy arising under this Agreement or as a result of [his] employment with Edward Jones between [he] and Edward Jones or any present or former employee ... of Edward Jones shall be resolved by arbitration and without resort to litigation in court . Any arbitration proceedings shall be conducted in accordance with the rules then in effect of the Boards of Directors of the [NYSE] or [NASD]. This agreement to arbitrate disputes shall survive the termination of [Bucy's] employment with Edward Jones .

(Emphasis added).

¶38 As a generally applicable principle of contract law, an otherwise validly formed contract, or included term, is unenforceable if the contract or term is equitably unconscionable. Lenz , ¶ 26 (internal citations omitted). A contract or included term is equitably unconscionable if (1) the contract or term is a contract or term of adhesion and (2) "unreasonably favors the stronger party or is unduly oppressive to the weaker party." Lenz , ¶ 26. A contract or term of adhesion is a contract or included term dictated by a "party in superior bargaining position" to a "weaker party on a take it or leave it basis without any reasonable opportunity for negotiation." Lenz , ¶ 26. "Preprinted, standard-form consumer contracts are typically contracts of adhesion." Lenz , ¶ 26 (citing Woodruff v. Bretz, Inc. , 2009 MT 329, ¶¶ 8-11, 353 Mont. 6, 218 P.3d 486 ).

¶39 Here, though not consumer contracts, the preprinted, standard-form 1998 NASD Form U4 and 2003 Edward Jones employment agreements were unquestionably contracts of adhesion respectively dictated by SEC-approved NASD regulations and by Edward Jones in conformance therewith. Whether a contract or term of adhesion "unreasonably favors the stronger party or is unduly oppressive to the weaker party, is a mixed question of fact and law under the totality of circumstances surrounding the execution of the contract." Lenz , ¶ 31. "In addition to the non-exclusive Kortum factors, other relevant considerations may include, inter alia , whether the disputed" contract terms were "common in prior dealings between the parties, whether the weaker party carefully reviewed the agreement, and whether the stronger party personally explained the nature and consequences of the disputed term." Lenz , ¶ 31 (internal citations omitted). However, we have previously recognized that, "absent a fiduciary relationship or other special relationship of trust and reliance, securities brokers and advisors have no duty to further explain the legal consequences of a clear, explicit, and conspicuous arbitration agreement" to clients. Lenz , ¶ 31 ; Chor , 261 Mont. at 149-53, 862 P.2d at 30-32. Likewise here, in hiring or employing registered representatives, federally-registered securities brokers and brokerages have no duty to further explain the legal consequences of a clear, explicit, conspicuous, and unambiguous arbitration agreement required by or conforming to SEC-approved regulations.

¶40 As in our foregoing analysis regarding Montana constitutional rights, neither the Kortum factors nor other relevant considerations in this case indicate that the terms and circumstances of the arbitration agreements in the 1998 Form U4 or 2003 employment agreements were either unreasonably favorable to NASD or Edward Jones or unduly oppressive to Bucy. Arbitration agreements in standard-form NASD/FINRA Form U4 applications and related broker-representative employment agreements conforming to SEC-approved regulations have been, and remain, standard requirements of federal law governing the employment of registered representatives by registered securities brokers and brokerages. See NASD Rules 0115, 1013(a)(1)-(2), 1031, 10101(b), 10201(a)(2); FINRA

Rules 0140, 1013(a)(1)-(2), 1210, 13101(a), 13200(a).

¶41 In 1998, Bucy was a highly intelligent and educated person with a bachelors' degree in finance who was knowingly seeking professional licensing and employment as a representative of a securities broker in the highly regulated securities industry. In 2003, he was even more knowledgeable after working in the industry for several years. While there is no evidence that he carefully studied the 1998 and 2003 arbitration agreements or consulted with counsel before signing, or that NASD or Edward Jones further explained their nature and consequences, there is also no evidence that he was incapable of understanding their clear and unambiguous language or the existence and pertinent requirements of the then-governing NASD regulations regarding arbitration.

¶42 "Agreements to arbitrate disputes in accordance with SEC-approved procedures are not unconscionable as a matter of law." Chor , 261 Mont. at 149-50, 862 P.2d at 30 (citing Cohen v. Wedbush, Noble, Cooke, Inc. , 841 F.2d 282, 286 (9th Cir. 1988) ). The express language of the arbitration agreements in Bucy's 1998 Form U4 application and 2003 employment agreement is clear and unambiguous. He has made no showing that the agreements did not conform to then-governing NASD regulations regarding arbitration. Under the totality of the circumstances of record, we hold that the subject 1998 and 2003 arbitration agreements were not unconscionable in equity.

¶43 5. Whether Bucy's post-termination claims were arbitrable within the express scope of the 1998 and 2003 arbitration agreements?

¶44 The construction and interpretation of contract language is a question of law. Krajacich v. Great Falls Clinic, LLP , 2012 MT 82, ¶ 13, 364 Mont. 455, 276 P.3d 922 (internal citations omitted); Mary J. Baker Revocable Tr. v. Cenex Harvest States, Coops. Inc. , 2007 MT 159, ¶ 19, 338 Mont. 41, 164 P.3d 851 (internal citations omitted). Courts must generally construe unambiguous contract language in accordance with the plain meaning of the language in ordinary usage.

Section 1-4-107, MCA.

¶45 In his 1998 Form U4 application Bucy expressly "agree[d] to arbitrate any dispute [or] claim ... that may arise between me and my firm ... [and] is required to be arbitrated under [NASD]" or succeeding Rules. In turn, NASD regulations required arbitration of any "dispute [or] claim ... between or among members and/or associated persons" either:

(1) "arising in connection with the business of such [NASD] member(s)";
(2) "in connection with the activities of such associated person(s)"; or
(3) "arising out of the employment or termination of employment of such associated person(s)...."

NASD Rule 10201(a). Superseding FINRA Rules now similarly require arbitration of any "dispute ... between or among ... Members and Associated Persons" and "aris[ing] out of the business activities of a member or an associated person. ..." FINRA Rule 13200(a). Bucy's 2003 employment agreement similarly requires arbitration of disputes or claims between them "arising under this [a]greement or as a result of [his] employment with Edward Jones. ..."

¶46 Edward Jones is unquestionably a "Member," as defined by and referenced in FINRA Rules 0160(b)(10), 13100(q), and 13200(a). At all times pertinent, Bucy was an "Associated Person" as defined by and referenced in FINRA Rules 1011(b), 13100(b), (u), and 13200(a). The currently governing FINRA Code of Arbitration Procedure for Industry Disputes does not define the terms "arising out of" or "business activities" as referenced in Rule 13200(a). See FINRA Rule 13100. However, the plain meaning of those terms in ordinary usage is clearly and unambiguously broad. In ordinary usage, the phrase disputes "arising out of the business activities" of a specified person or entity simply means a dispute regarding or related to the activities in which the specified person or entity is or was engaged. At all times pertinent, both before and after the termination of Bucy's employment, Edward Jones was and is engaged in the business of providing securities investment and related financial management and planning services to clients through its authorized employees and agents in accordance with governing federal securities laws and regulations, including FINRA and NASD regulations, and pertinent industry standards of care. While employed as a registered representative of Edward Jones, Bucy was engaged in the business of performing and carrying-on the business of Edward Jones in accordance with governing federal securities laws and regulations, including pertinent FINRA and NASD

regulations, under the direction of Edward Jones and the terms of his employment.

¶47 As stated in his District Court complaint, and subsequently prosecuted on the record in this case, the predicate factual allegations underlying Bucy's claims, and implicated legal duties and alleged breaches or violations, all directly regard and relate to the conduct of Edward Jones' business activities, both before and after the termination of Bucy's employment. They similarly directly relate to Bucy's business activities as an employee of Edward Jones. Thus, as referenced in FINRA Rule 13200(a), all of Bucy's claims "arise[ ] out of the business activities of a member or an associated person. ..." As referenced in his 2003 employment agreement, they are similarly disputes or claims "arising under this [a]greement or as a result of [his] employment with Edward Jones. ..." We hold that Bucy's claims were and are mandatorily arbitrable pursuant to FINRA Rule 13200(a), within the scope of his 1998 NASD Form U4 application, and within the scope of his 2003 employment agreement.

CONCLUSION

¶48 Bucy did not waive his threshold enforceability challenge by failing to cross-appeal. The arbitration agreement in Bucy's 2003 employment agreement was not illusory, lacking in mutuality, or unreasonably one-sided or oppressive due to Edward Jones' retention of a limited right to seek injunctive relief. The 1998 and 2003 arbitration agreements were not illegal, void, violative of public policy, or otherwise unenforceable due to lack of an explicit explanation and waiver of Montana constitutional rights. Nor were they equitably unenforceable as unconscionable. We hold that Bucy's claims were and are mandatorily arbitrable pursuant to FINRA Rule 13200(a) and within the scope of the arbitration agreements in his 1998 Form U4 application and 2003 employment agreement. The District Court's August 9, 2018 judgment denying Edward Jones' motion to compel arbitration of Bucy's post-termination claims is hereby reversed and this matter is remanded for entry of an order compelling arbitration of all of Bucy's claims and dismissing this action.

¶49 Reversed and remanded.

We concur:

MIKE McGRATH, C.J.

JAMES JEREMIAH SHEA, J.

LAURIE McKINNON, J.

BETH BAKER, J.

INGRID GUSTAFSON, J.

JIM RICE, J.

      " '[S]ecurities laws' means the Securities Act of 1933 (15 U.S.C. [§] 77a et seq. ), the Securities Exchange Act of 1934 (15 U.S.C. [§] 78a et seq. ), the Sarbanes-Oxley Act of 2002, the Trust Indenture Act of 1939 (15 U.S.C. [§] 77aaa et seq. ), the Investment Company Act of 1940 (15 U.S.C. [§] 80a-1 et seq. ), the Investment Advisers Act of 1940 (15 U.S.C. [§] 80b et seq.), and the Securities Investor Protection Act of 1970 (15 U.S.C. [§] 78aaa et seq. )." 15 U.S.C. § 78c(47).

      Pursuant to M. R. Evid. 201(b)-(c) and 202(3), the Court takes judicial notice of the SEC-approved FINRA Rules, including FINRA bylaws, Rules, and predecessor NASD Rules. See FINRA Manual , FINRA, https://perma.cc/4JJ8-RCTT (last visited July 19, 2019).

      The requirements for registration of representatives of securities brokers include passage of an initial competency examination and satisfaction of continuing education requirements. See FINRA Rule 1210; NASD Rule 1031(a).

      Though FINRA Rules have succeeded and superseded the prior NASD Rules, both are cited here where relevant given the nature of Bucy's assertions of error on appeal.

      See now, FINRA Rule 1013(a)(1)-(2).

      See now, FINRA Rule 0140.

      See now, FINRA Rule 13101(a).

      See now, FINRA Rule 13200(a).

      It is undisputed that, during his tenure at Edward Jones, Bucy "rose through the ranks," "passed multiple financial planning and securities licensure tests," and at times managed "roughly $40,000,000.00" in client assets with only one customer complaint prior to 2015 and the events now at issue. In response to the 2012 complaint, Edward Jones placed Bucy under a six-month "Heightened Supervision" requiring him "to seek prior written approval from [his] supervisor before switching a client's investment from one long-term product to another. ..." Bucy thereafter "completed hundreds of transactions for [his] clients" between "October 10, 2013 and June 30, 2016" without seeking prior approval and without objection or exception from Edward Jones.

      If a motion to compel arbitration is not amenable to disposition under M. R. Civ. P. 12(b) or 56, a district court may conduct summary proceedings to resolve genuine issues of material fact where the court "sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion. ..." Engalla v. Permanente Med. Grp., Inc. , 15 Cal.4th 951, 64 Cal.Rptr.2d 843, 938 P.2d 903, 915-16 (1997). Accord § 27-5-115(1), MCA ; Lenz , ¶¶ 3-9 ; Kloss v. Edward D. Jones & Co. , 2002 MT 129, ¶¶ 12-16, 310 Mont. 123, 54 P.3d 1 ; Chor v. Piper, Jaffray & Hopwood, Inc. , 261 Mont. 143, 147-48, 862 P.2d 26, 29 (1993). See also 9 U.S.C. §§ 2 -4.

      The MUAA governs arbitration agreements subject to Montana law but not governed by the FAA. See § 27-5-111, MCA, et seq. The MUAA constitutes a discrete statutory overlay of general contract law mandating enforcement of arbitration agreements governed by Montana law. See § 27-5-114, MCA.

      It is unclear in Bucy's briefing whether he raises the injunctive relief issue as a threshold formation issue, as a consideration of equitable unconscionability, or both. We thus separately address this issue in isolation.

      See Mont. Const. art. II, §§ 4, 16 -17, 26 (right to equal protection of law, access to courts, due process of law, and jury trial); U.S. Const. amend. XIV (right to due process and equal protection of law).

      The agreement further expressly provided that "[t]his [a]greement shall be deemed to be a Missouri contract and governed by the laws" thereof.

      NASD/FINRA broker-member employers are expressly intended third-party beneficiaries of the arbitration agreements included in standard Form U4 NASD/FINRA applications for registration of representatives of registered brokers and brokerages. MONY Sec. Corp. v. Bornstein , 390 F.3d 1340, 1342 (11th Cir. 2004) ; In re Prudential Ins. Co. of Am. Sales Practice Litig. , 133 F.3d 225, 229-30 (3d Cir. 1998) ; O.N. Equity Sales Co. v. Venrick , 508 F. Supp. 2d 872, 874-75 (W.D. Wash. 2007). Accord Shen v. CMFG Life Ins. Co. , No. CV 15-11593-MLW, 2016 WL 1129308 at *2-3, 2016 LEXIS 37006 at *6-8 (D. Mass. Mar. 4, 2016), report and recommendation adopted , 2016 WL 1189125, 2016 LEXIS 37001 (D. Mass. Mar. 22, 2016) ; Marciano v. MONY Life Ins. Co. , 470 F. Supp. 2d 518, 523 (E.D. Pa. 2007).

      Accord Desiderio v. Nat'l Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 207 (2d Cir. 1999) ; Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 170 F.3d 1, 17 (1st Cir. 1999) ; Koveleskie v. SBC Capital Mkts., Inc. , 167 F.3d 361, 366-68 (7th Cir. 1999) ; Seus v. John Nuveen & Co. , 146 F.3d 175, 184 (3d Cir. 1998) ; Flowers v. Wells Fargo Advisors, LLC , No. 7:12-CV-00052-BR, 2013 WL 361106 at *3-4, 2013 LEXIS 21323 at *7-10 (E.D. N.C. Jan. 30, 2013) ; Simmons v. Morgan Stanley Smith Barney, LLC , 872 F. Supp. 2d 1002, 1017-18 (S.D. Cal. 2012) ; Richert v. Nat'l Arbitration Forum, LLC , Civil No. 09-763 ADM/JJK, 2009 WL 3297565 at *13, 2009 LEXIS 96160 at *5, 13 (D. Minn. Oct. 13, 2009) ; Millas v. Morgan Stanley & Co. , No. 08-cv-0573-MJR, 2008 WL 5095917 at *5, 2008 LEXIS 97154 at *7-14 (S. D. Ill. Dec. 1, 2008).

      See similarly Zolezzi v. Dean Witter Reynolds, Inc. , 789 F.2d 1447, 1450-51 (9th Cir. 1986) ; Aspero v. Shearson Am. Express, Inc. , 768 F.2d 106, 109 (6th Cir. 1985) ; Shen , 2016 WL 1129308 at *2-3, 2016 LEXIS 37006 at *29-30 ; Kost v. PNC Bank, Nat'l Ass'n , No. 4:15-cv-00056-RLY-WGH, 2015 WL 5521817, *1, 2015 LEXIS 124157, *9-10 (S.D. Ind. Sept. 17, 2015) ; Wells Fargo Advisors, LLC v. Quantum Fin. Partners , LLC , No. 15-9145-JAR-JPO, 2015 WL 5053631 *1, 2015 LEXIS 113038 *15-16 (D. Kan. Aug. 25, 2015) ; Kouromihelakis v. Hartford Fire Ins. Co. , 48 F. Supp. 3d 175, 185, (D. Conn. 2014) (quoting Genesco, Inc. v. T. Kakiuchi & Co. , 815 F.2d 840, 846 (2d Cir. 1987) ); Hawkins v. Questar Capital Corp. , No. 5:12-cv-000376, 2013 WL 5596897 *3-4, 2013 LEXIS 147130 *10-12 (E.D. Ky. Oct. 11, 2013) ; Lorbietzki v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , No. 2:10-cv-01585-RLH-PAL, 2011 WL 855354, *2, 2011 LEXIS 29601, *8-10 (D. Nev. Mar. 8, 2011) ; Johnson v. Charles Schwab & Co. , No. 09-81479-Civ-Ryskamp/Vitunac, 2010 LEXIS 16771, *6-11 (S.D. Fla. Jan. 26, 2010); and Millas , 2008 WL 5095917 at *4-5, 2008 LEXIS 97154 at *16-17.


source: Caselaw Access Project

license: Public Domain

text:
    Claimant: UNITED STATES of America (DEPARTMENT OF ARMY CORPS OF ENGINEERS); City of Fort Peck,
    Objectors: United States of America (Army Corp of Engineers); State of Montana Attorney General,
    Notice of Intent to Appear: United States of America (Department of Army Corps of Engineers).
    DA 18-0697
    Supreme Court of Montana.
    Submitted on Briefs: April 17, 2019 Decided: July 30, 2019
    For Appellant: Bina R. Peters, Dana Elias Pepper, River and Range Law, PLLC, Bozeman, Montana
    For Appellee: Timothy C. Fox, Montana Attorney General, Jeremiah D. Weiner, Melissa A. Schlichting, Assistant Attorneys General, Helena, Montana, James J. DuBois, US Department of Justice, ENRD Natural Resources Section, Denver, Colorado (Army Corps of Engineers)
   Justice Jim Rice delivered the Opinion of the Court.

¶1 Claimant City of Fort Peck (Fort Peck) appeals the order entered by the Montana Water Court determining the volume of water to which Fort Peck is entitled pursuant to its Claim 40E 182897-00 in Missouri River Basin (Basin 40E), between the Musselshell River and Fort Peck Dam. We affirm and address the following issue:

Did the Water Court err by entering conclusions in contradiction to the pretrial order and violate Fort Peck's due process rights?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Water Claim 40E 182897-00 is a municipal water right claimed by Fort Peck, which lies on the northeast end of Fort Peck Reservoir, southeast of Glasgow, and has a present population of 251 people. Fort Peck came into existence in 1934, during construction of the Fort Peck Dam, when the town was built to house workers on the dam project. Fort Peck and the surrounding area then reached a population of over 10,000 people, and local amenities included a hotel, theatre, hospital, school, stores, dormitories, bunkhouses, as well as homes. Fort Peck's population dropped dramatically after the dam was completed, and the town no longer boasts a school, hospital or grocery store. Although evidence varied, it appears Fort Peck's population has also suffered a gradual decline since 1990. The town's hotel and theatre continue to open seasonally.

¶3 Fort Peck originally claimed a volume of 1,500 acre-feet per year (AFY) based upon an assumed continuous, year-round diversion of 930 gallons per minute. During the claim examination process, the Department of Natural Resources and Conservation (DNRC) added an issue remark to the claim questioning the claimed volume. The Water Court ordered Fort Peck to meet with the DNRC to attempt resolution of the issue remark, and ordered the DNRC to file a memorandum with its recommendations for resolution. The parties were unable to resolve the remark, and the DNRC filed a recommendation that the volume on the claim be set at 206 AFY, based upon available evidence. The Water Court joined the State of Montana pursuant to § 85-2-248(7)(a), MCA. In its order joining the State, the Water Court stated that "[t]he prima facie status of Fort Peck's claimed volume has been overcome by evidence showing it has not used that volume for the last twenty-five years and has no plan to do so in the future," but reserved for trial a ruling on the presumption of nonabandonment for municipal water rights claims under § 85-2-227(4), MCA. At the request of the parties, the Water Court stayed the case pending a decision by this Court in City of Helena v. Cmty. of Rimini , 2017 MT 145, 388 Mont. 1, 397 P.3d 1, in which § 85-2-227(4), MCA, was at issue. After issuance of this Court's decision in City of Helena , the case proceeded on hearing track, W. R. Adj. R. 16(c), and the parties engaged in discovery.

¶4 The parties submitted a proposed joint pretrial order on June 29, 2018. Pertaining to the arguments here, the parties agreed to the following within the proposed order, including a reduction of Fort Peck's claim to 773 AFY:

AGREED FACTS
...
4. Fort Peck has historically beneficially used 223 AFY ... which includes 17 AFY for backwash of its water treatment plant.
5. The capacity of Fort Peck's water treatment and distribution system is 1500 AFY.
CONTENTIONS
1. Fort Peck is entitled to a decreed volume ... that reflects its actual historical beneficial use of water plus a volume for future use commensurate with its reasonably anticipated future needs.
Fort Peck further contends:
2. Fort Peck is entitled to a 773 AFY volume to meet its actual historical beneficial use of water and its reasonably anticipated future needs.
The State further contends:
3. Fort Peck has abandoned the portion of [its] Statement of Claim ... that exceeds the amount of its actual historical beneficial use of water plus reasonably anticipated future needs.
...
ISSUES OF LAW
1. Has the State met its burden of overcoming the presumption of nonabandonment pursuant to § 85-2-227(4), MCA, for any portion of Statement of Claim 40E 182897-00?
...
4. Has Fort Peck abandoned any portion of Statement of Claim 40E 182897-00?

The parties agreed that Fort Peck had satisfied two of the criteria in § 85-2-227(4), MCA, necessary to confer a presumption of nonabandonment of the entirety of Fort Peck's claim of 1,500 AFY, requiring the State to rebut the presumption in order to prove abandonment by Fort Peck of "any portion" of its claim.

¶5 The Water Court adopted the parties' proposed pretrial order, and in its adoption order provided the following explanation of the case for trial: "The City of Fort Peck claims that the correct volume for its right is 773 AFY. The State of Montana agrees it has the burden of proof to show that the City of Fort Peck's volume is something other than the 1,500 AFY claimed on the Statement of Claim."

¶6 The case proceeded to trial before the Water Court in July 2018, and the Court entered its Order Regarding Volume and Order Closing Case in October 2018. The Court therein summarized the parties' trial positions as follows:

Prior to trial, the parties filed a joint pretrial order. Although the parties disagree on the volume Fort Peck should receive, they agree Fort Peck is entitled to receive a volume equal to historical beneficial use plus reasonably anticipated future needs. In Fort Peck's view, 773 acre-feet per year fairly encompasses historical beneficial use plus reasonably anticipated future needs. In the State's view, the amount is 206 AFY or less.

¶7 The Court concluded that Fort Peck qualified for the presumption of nonabandonment, that the presumption was overcome by the State, and that Fort Peck was entitled to a volume of 171 AFY "for current use and reasonably foreseeable future use."

¶8 Fort Peck appeals.

STANDARD OF REVIEW

¶9 We apply the same standards of review to decisions of the Water Court as we do the district court. In re Crow Water Compact , 2015 MT 353, ¶ 14, 382 Mont. 46, 364 P.3d 584. We review the Water Court's findings of fact to determine whether they are clearly erroneous, and we review the Water Court's "conclusions of law de novo to determine whether they are correct." In re Crow Water Compact , ¶ 14.

DISCUSSION

¶10 Did the Water Court err by entering conclusions in contradiction to the pretrial order and violate Fort Peck's due process rights?

¶11 Fort Peck argues the Water Court erroneously contradicted the pretrial order without a valid basis to do so under M. R. Civ. P. 16. It emphasizes the parties' joint contention that Fort Peck was entitled to a volume reflecting its actual historical beneficial use plus a volume for reasonably anticipated future needs, the agreed fact that Fort Peck's historical beneficial use was 223 AFY, and the State's contention that Fort Peck had abandoned the portion of its claim that exceeded its historical beneficial use and anticipated future needs. Fort Peck offers, "[s]tated differently, the only issue at trial was how much additional water, over and above the 223 AFY volume, as agreed by the parties, is necessary for Fort Peck's reasonably anticipated future needs." Fort Peck argues the Water Court also erred by basing the volume determination of 171 AFY on the town's current use, instead of actual historical use, in addition to its anticipated future use, as stated in the pretrial order. As relief, Fort Peck asks that we simply order the volume of its claim to be 223 AFY based upon the measure of the town's historical use, and call it a day. Fort Peck's argument is well-articulated, but there are additional governing principles at work here that persuade us to reject it.

¶12 Under M. R. Civ. P. 16(d), the pretrial order "controls the course of the action unless the court modifies it." See also Byrum v. Andren , 2007 MT 107, ¶ 39, 337 Mont. 167, 159 P.3d 1062 ("the pretrial order controls the subsequent course of the action."). Under Rule 16(e), the court "may modify the order issued after a final pretrial conference only to prevent manifest injustice." Consequently, "parties may not assert issues or other matters which were not included in the pretrial order." Travelers Indem. Co. v. Andersen , 1999 MT 201, ¶ 34, 295 Mont. 438, 983 P.2d 999. "The purpose of pretrial orders is to simplify issues, prevent surprise and allow counsel to prepare their cases for trial based on the pretrial order. A legal theory or factual issue for trial must be at least implicitly included in the pretrial order[.]" Weimar v. Lyons , 2007 MT 182, ¶ 20, 338 Mont. 242, 164 P.3d 922 (internal quotations and citations omitted). However, we have also held that "a district court possesses wide discretion in deciding whether to allow a party to raise a factual issue or legal theory not explicitly raised in the pretrial order, but the court must be mindful not to prejudice the parties[,]" Byrum , ¶ 39, and that "pretrial orders should be liberally construed to permit any issues at trial that are embraced within [their] language." Weimer , ¶ 20; see also M. R. Civ. P. 15(b)(2) ("When an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings.... failure to amend does not affect the result of the trial of that issue."); Nw. Union Tr. Co. v. Worm , 204 Mont. 184, 189-90, 663 P.2d 325, 327-28 (1983) (stating under M. R. Civ. P. 15(b) that failure to raise an issue in the pretrial order will not preclude parties from raising it at trial where the issue is implicit); Pub. Serv. Co. v. Bd. of Water Works , 831 P.2d 470, 481-82 (Colo. 1992) (holding the Water Court did not err in granting a dismissal based on an issue that the pretrial order did not specify for determination at trial, where that issue was "within the scope of issues set forth in the pretrial order" and the issues set for trial clearly encompassed that issue).

¶13 In addition to the parts of the pretrial order emphasized by Fort Peck, there were also statements implicating a broader inquiry for trial. The stated issues of law included whether the State "met its burden of overcoming the presumption of nonabandonment pursuant to § 85-2-227(4), MCA, for any portion of" Fort Peck's claim, and, correspondingly, whether Fort Peck had "abandoned any portion of" its claim (emphasis added). Although Fort Peck may well have read these phrases as limited to the portion of its claim in excess of a baseline consisting of its historical and future uses, given the joint contention, the Water Court read the pretrial order more broadly. In its order adopting the pretrial order, the Water Court clarified that Fort Peck was claiming that "the correct volume for its right is 773 AFY," while the State had the burden to prove the volume was "something other than the 1,500 AFY claimed on the Statement of Claim." (Emphasis added). Thus, in setting "the subsequent course of the action," Byrum , ¶ 39, the Water Court clearly provided notice to the parties of a broader inquiry. Neither party raised concerns with the Water Court's order. In its final order, while issued after trial, the Water Court reaffirmed this view of the proceeding, explaining the parties' trial positions as follows: "In Fort Peck's view, 773 acre-feet per year fairly encompasses historical beneficial use plus reasonably anticipated future needs. In the State's view, the amount is 206 AFY or less ." (Emphasis added).

¶14 Importantly, § 85-2-227, MCA, the statute establishing presumptive nonabandonment of municipality water rights, which is at the core of this case, provides that "a water judge may determine all or part of an existing water right to be abandoned based on a consideration of all admissible evidence that is relevant, including, without limitation, evidence relating to acts or intent occurring in whole or in part after July 1, 1973." Section 85-2-227(3), MCA. This statute provides for a broader consideration in presumptive nonabandonment cases, gives notice of the contours of the issue before the Water Court, and is consistent with the interconnected nature of water rights on a common source and the general need to preserve the resource. Fundamentally, the Water Court cannot grant a volume that is greater than the beneficial use established by the evidence, McDonald v. State , 220 Mont. 519, 534-35, 722 P.2d 598, 608 (1986), subject to, of course, in cases such as this, application of the presumption of nonabandonment provided to municipalities under the statute. See § 85-2-227(3) - (4), MCA.

¶15 This discussion also illustrates the flaw in Fort Peck's argument that the Water Court erred in considering the town's current use despite the pretrial order's reliance on historical use. The statute uniquely requires the abandonment inquiry to include, "without limitation," consideration of uses that occurred after July 1, 1973, and necessarily requires consideration of current as well as future uses. As the Water Court explained:

Ordinarily, a water user faced with a long history of nonuse of part of its right would be faced with rebutting a presumption of abandonment. The statute changes the starting position of a municipal claimant that has not used its water right for a prolonged period. A municipality meeting the statute's criteria is entitled to a presumption of nonabandonment.... Abandonment can still be proven if a preponderance of evidence shows that the amount of water claimed is more than the amount needed to satisfy the current use plus normal increases in population over a reasonable period.... [T]he growing cities doctrine embodied in § 85-2-227(4), MCA was intended to allow towns like Fort Peck to protect existing uses plus a reasonable amount of water for foreseeable needs....

See also City of Helena , ¶ 37 (purpose of the Growing Cities Doctrine is to allow municipalities " 'to obtain appropriations of water that will satisfy the needs resulting from a normal increase in population within a reasonable period of time.' ") (quoting Denver v. Sheriff , 105 Colo. 193, 96 P.2d 836, 841 (1939) ). Thus, as the State correctly argues, the statute does not "make historical beneficial use the touchstone for municipalities," and historical use, standing alone, "does not insulate a claim from a finding of total or partial abandonment." As the Water Court noted, this will be advantageous to the typical, growing, municipal claimant, whose claim would not be limited to demonstrable historical use. The difficulty presented for Fort Peck is that its population has been declining and its water use has been declining from historical levels.

¶16 The Water Court held that Fort Peck qualified for the presumption of nonabandonment of its claim under § 85-2-227(4), MCA, by satisfying the statutory criteria, including obtaining a filtration waiver under the federal Safe Drinking Water Act, 42 U.S.C. 300(f), et seq. However, upon the State's evidentiary showing, the Water Court held that the statutory presumption of nonabandonment of some portion of Fort Peck's claim had been overcome. In determining the correct volume for the claim, the Water Court noted that the town's population had not increased since the filing of its water reservation application in 1991, and that the population of the surrounding areas, including the City of Glasgow, has also been in decline. The town's expert forecasted a population growth rate increase of 1.07% per year beginning in 2020, which would result in a population of 382 by 2055, but the Water Court found "no credible data indicating when the town's future population will exceed 1,200 people, if ever," which is the population that could live in a "full build-out of the town," including vacant platted lots and currently undeveloped space, predicating the town's claim to future needs of 550 AFY. The Water Court found the claim for future use was not credible, and that the town had never used more than one-third of its water treatment plant's capacity. Premised upon evidence it found to be credible of a growth in population to 384 people in forty years, and applying average per capital consumption rates, the Court determined that the claim required a volume of 154 AFY, plus 17 AFY for back-flushing filters of the treatment plant, for a total of 171 AFY.

¶17 Fort Peck also argues that its due process rights were violated because it was not provided notice or an opportunity to present evidence concerning current use or abandonment of historical volume. Procedural due process requires both notice and the "opportunity for a hearing appropriate to the nature of the case." Eldorado Coop Canal Co. v. Hoge , 2016 MT 145, ¶ 32, 383 Mont. 523, 373 P.3d 836. "These requirements are flexible and are adapted by the courts to meet the procedural protections demanded by the specific situation." Eldorado Coop Canal Co. , ¶ 32 (internal citations omitted). As discussed above, notice of the issue before the Water Court was provided throughout the proceeding, and as a matter of governing law. Fort Peck was able to participate in every step of the process that resulted in the Water Court's order, including presenting testimony, exhibits, and objecting at trial. Moreover, the record reflects that several exhibits introduced at trial, which both parties stipulated to, demonstrated Fort Peck's current use of water. In addition, three witnesses were questioned about Fort Peck's current use during the trial. Thus, Fort Peck had both notice that their current use might be considered, and the opportunity to present evidence of their use and nonabandonment. We conclude that Fort Peck had adequate notice and an opportunity to be heard before the Water Court entered its final order, both for purposes of the pretrial order and for due process, and that the Water Court's conclusions were correct.

¶18 Affirmed.

We concur:

MIKE McGRATH, C.J.

LAURIE McKINNON, J.

DIRK M. SANDEFUR, J.

JAMES JEREMIAH SHEA, J.

      This case also included claim 40E 165372-00 by the United States of America (Army Corps of Engineers), filed for a municipal right for the same 1500 AFY volume and the same November 23, 1934 priority date. On January 7, 2016, the Water Court consolidated claims 40E 182897-00 and 40E 165372-00. During case proceedings, the United States withdrew claim 40E 165372-00 as a duplicate of claim 40E 182897-00.

      "If an unresolved issue remark involves nonperfection or abandonment, the water court shall join the state of Montana through the attorney general as a necessary party to resolve the issue remark." Section 85-2-248(7)(a), MCA.

      Unrelated to the claim issues on appeal here, in 1991 Fort Peck filed an application for a water reservation, available to political subdivisions to reserve water for future uses, for which an additional 100 AFY was made available to Fort Peck. See § 85-2-316, MCA ; Admin. R. M. 36.16.101, et seq. While noting that the validity of Fort Peck's reservation was not at issue in this proceeding, the Water Court stated in its final order that the reservation "provides an additional cushion in case future growth" of the town exceeds that which the Court found from the evidence.

      Unless the context requires otherwise, the Montana Rules of Civil Procedure govern practice in the Water Court. W. R. Adj. R. 2(b).

      The State referenced the specific volume of 206 AFY at several points in the proceeding, which was also the volume recommended by the DNRC and the town's largest historical beneficial use. This amount, when added to the 17 AFY for back-flushing the town's water treatment plant, made up 223 AFY. Although not specifically stated in the pretrial order, the State, during the proceeding, argued that 206 AFY should be "the largest amount of water," and that there was evidence "that would justify and warrant a finding below that figure."

      As the State notes, this claim presented a unique scenario because Fort Peck was formerly owned by the Army Corp of Engineers, and there are no records reflecting pre-1973 use for purposes of assessing "existing water rights" defined in § 85-2-102(12), MCA, as rights existing prior to July 1, 1973. Therefore, the parties agreed to treat Fort Peck's 1990 use data as its historical beneficial use because it was the highest volume reflected by the available records.

      Added to its historical use of 223 AFY, this alleged future use brought the town's claim to a total volume of 773 AFY.


text:
    Daniel P. KNUDSEN, Rose E. Ayers, Eric Dennison, Lance French, Erik Farnham and Kaila Jacobson, Plaintiffs and Appellees, v. The UNIVERSITY OF MONTANA, a unit of the Montana University System, Defendant and Appellant.
    DA 18-0552
    Supreme Court of Montana.
    Submitted on Briefs: May 1, 2019 Decided: July 30, 2019
    For Appellant: Maxon R. Davis, Davis, Hatley, Haffeman & Tighe, P.C., Great Falls, Montana, Lucy T. France, University of Montana Office of Legal Counsel, Missoula, Montana, Christopher D. Abbott, Assistant Attorney General, Agency Legal Services Bureau, Helena, Montana
    For Appellees: John L. Amsden, Justin P. Stalpes, Michael G. Black, Beck, Amsden & Stalpes, Bozeman, Montana, Quentin M. Rhoades, Nicole L. Siefert, Rhoades, Siefert & Erickson, Missoula, Montana
   Justice Beth Baker delivered the Opinion of the Court.

¶1 The University of Montana (the "University") appeals orders from the Fourth Judicial District Court, Missoula County, certifying three classes to proceed in a lawsuit against the University. The suit alleges that the University breached its fiduciary duty to students by entering into a contract with Higher One, Inc., to process student loan refunds through non-competitive financial accounts and by providing students' personal information to Higher One. On appeal, we review whether the District Court abused its discretion when it certified three classes under M. R. Civ. P. 23(b) to pursue the claims. We reverse in part and affirm in part.

PROCEDURAL AND FACTUAL BACKGROUND

¶2 Prior to 2010, the University processed student loan disbursements by issuing paper checks to each student receiving a reimbursement. That year, the University entered into a service agreement with Higher One to process student loan disbursements to enrolled students. Under the contract, Higher One disbursed the student loan funds. Students receiving student loan reimbursements were given the option to have the funds directly deposited into an account with Higher One or electronically transferred into a third-party bank account of the student's choosing. If a student did not select one of those two options, Higher One issued the student a paper check by default. The contract expired on June 30, 2015, and was not renewed.

¶3 The University transferred to Higher One the following personal information regarding more than 38,000 students: the student's name, address, e-mail address, University ID number, birthdate, gender, telephone number, and the last four digits of the student's social security number. Higher One sent each student a debit card branded with the University's logo, along with information directing the students to a Higher One website to select the method for their loan disbursement. If students selected the "Easy Refund" method, Higher One opened an account-called a OneAccount-for the student with its partner bank and activated the debit card. Students also could select to have the funds electronically transferred to a bank account of their choosing, but a student who selected this option was directed to fill out a separate paper form and send it to Higher One to complete the transfer. Students who did not select an option on the website were sent a paper check to the mailing address on file.

¶4 The fee schedule that would be charged to students selecting to open OneAccounts was attached as Exhibit B to the University's contract with Higher One. Fees included a $0.50 fee for each debit card transaction, fees for use of Non-Higher One ATMs, fees for insufficient funds, and abandoned account fees. The fee schedule was available to students through Higher One's website.

¶5 Current and former students Daniel P. Knudsen, Rose E. Ayers, Eric Dennison, Lance French, Erik Farnham, and Kaila Jacobson (collectively, "Students") filed this lawsuit against the University in November 2016 as a class action complaint. The Students alleged that the University's agreement with Higher One subjected them to excessive bank fees and that the University disclosed personal information to Higher One without their consent. The Students alleged breach of the University's fiduciary duty, negligent entrustment, statutory and constitutional privacy right violations, and unjust enrichment. The complaint sought compensatory damages, as well as declaratory and injunctive relief. In two orders, the District Court certified three classes to proceed in the lawsuit:

Class 1: Past or present students of Defendant University who paid fees to Higher One Holdings, as a consequence of opening an account with Higher One to receive student loan refunds.
Class 2: Past or present students of Defendant University whose personal information was transmitted to Higher One Holdings.
Class 3: Past or present students of Defendant University whose personal information has been or may be transmitted to a third-party vendor or third-party contractor without prior written consent in circumstances other than where transmission is necessary for completion of a task having a legitimate educational interest.

The University appeals the Order Granting Motion for Certification of Classes and the Supplemental Order Granting Motion for Certification of Classes.

STANDARD OF REVIEW

¶6 We review a district court's decision on a motion for class certification for an abuse of discretion. Sangwin v. State , 2013 MT 373, ¶ 10, 373 Mont. 131, 315 P.3d 279.

DISCUSSION

¶7 A "class action is 'an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.' " Mattson v. Mont. Power Co. , 2012 MT 318, ¶ 18, 368 Mont. 1, 291 P.3d 1209 (quoting Califano v. Yamasaki , 442 U.S. 682, 700-01, 99 S. Ct. 2545, 2557, 61 L.Ed.2d 176 (1979) ). "A class action allows the representative party to conserve the judiciary's and the similarly-situated parties' resources by permitting the single litigation of common issues of fact and law." Roose v. Lincoln Cty. Emp. Grp. Health Plan , 2015 MT 324, ¶ 14, 381 Mont. 409, 362 P.3d 40. In order for a class action to proceed, it must meet the four requirements of Rule 23(a) and it must satisfy at least one of the three subsections of Rule 23(b). Roose , ¶ 14. The University does not dispute that the Students meet the four requirements of Rule 23(a). It challenges only whether the District Court abused its discretion in determining that the classes satisfied the standards for a class action under Rule 23(b)(1), (2), or (3).

¶8 Rule 23(b) describes three avenues under which a class action may proceed:

A class action may be maintained if Rule 23(a) is satisfied and if:
(1) Prosecuting separate actions by or against individual class members would create a risk of:
(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or
(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;
(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or
(3) the court finds that the questions of law or fact common to the class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to the findings include:
(A) the class members' interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.

¶9 The District Court's initial order, certifying two classes, provided no analysis under Rule 23(b). It provided the bare statement, "The court believes that classes described by Rule 23(b)(1) and (3) apply." In its supplemental order, certifying a third class, the District Court provided brief analysis of Rule 23(b), without clearly specifying under what subsection it certified each of the three classes. On appeal, the University argues that the District Court erred in certifying the three classes under any subsection of Rule 23(b). Students respond that Class 3 is properly certified under Rule 23(b)(2) and that Class 1 and Class 2 are properly certified under Rule 23(b)(3).

¶10 " '[W]hen a district court's decision is not supported by findings as to the applicability of Rule 23 criteria, it is not entitled to the traditional deference' given to determinations of class status." Mattson , ¶ 17 (quoting Local Joint Exec. Bd. of Culinary/Bartender Tr. Fund v. Las Vegas Sands, Inc. , 244 F.3d 1152, 1161 (9th Cir. 2001) ). When "the factual record is sufficiently well developed that we may evaluate for ourselves whether the provisions of Rule 23 have been satisfied," however, we can do such an evaluation and "do not need to remand for a determination of class action status." Local Joint Exec. Bd. of Culinary/Bartender Tr. Fund , 244 F.3d at 1161. Notwithstanding the District Court's minimal analysis certifying the three classes, we conclude that the factual record is sufficiently well-developed for us to conduct our own evaluation. We discuss each subsection of Rule 23(b) in turn.

Rule 23(b)(1)

¶11 Rule 23(b)(1) is a narrow basis for class actions that applies only when individual adjudications threaten to create "incompatible standards" for the opposing party's conduct or when there are limited funds available for recovery. See M. R. Civ. P. 23(b)(1)(A)-(B) ; see also 2 William B. Rubenstein, Newberg on Class Actions § 4:2 (5th ed. 2012). Although the District Court stated in its first order certifying Classes 1 and 2 that it "believes the classes described by Rule 23(b)(1) and (3) apply," it provided no analysis regarding classification under Rule 23(b)(1) in either the original order or in its supplemental order. Students provide no argument in support of classification under Rule 23(b)(1) for any of the certified classes and thus concede the University's argument that certification under Rule 23(b)(1) for any of the classes was an abuse of discretion. We hold that the District Court abused its discretion to the extent that it certified any classes under Rule 23(b)(1).

Rule 23(b)(2)

¶12 The Students argue that the District Court properly certified Class 3 under Rule 23(b)(2). Because the Students provide no argument that Class 1 or 2 properly was certified under Rule 23(b)(2), we discuss only Class 3 in analyzing Rule 23(b)(2).

¶13 Rule 23(b)(2) has two requirements: (1) "the party opposing the class has acted or refused to act on grounds that apply generally to the class," and (2) "final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." The first requirement "focuses on the defendant and questions whether the defendant has a policy that affects everyone in the proposed class in a similar fashion." 2 Rubenstein, Newberg on Class Actions § 4:28, 104. Under the second requirement, "[t]he key to the [Rule 23](b)(2) class is[ the indivisible nature of the injunctive or declaratory remedy warranted-the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them." Jacobsen v. Allstate Ins. Co. , 2013 MT 244, ¶ 61, 371 Mont. 393, 310 P.3d 452 (quoting Wal-Mart Stores, Inc. v. Dukes , 564 U.S. 338, 360, 131 S. Ct. 2541, 2557, 180 L.Ed.2d 374 (2011) ). Class 3 fails to meet these requirements.

¶14 Students have failed to identify an ongoing-or threatened-policy or action of the University that pertains to Class 3 as a whole. Plaintiffs allege that the University maintains that its transmittal of personal information to Higher One was lawful and that the University therefore may repeat the actions in the future. Students have not alleged or provided evidence that the University is currently party to a contract with the same allegedly objectionable features as the University's long-expired contract with Higher One or that the University is contemplating entering into such a contract. The class includes past and present students "whose personal information has been or may be transmitted to a third-party vendor or third-party contractor without prior written consent in circumstances other than where transmission is necessary for completion of a task having a legitimate educational interest." No common policy or action of the University has been identified that affects this entire broadly defined class.

¶15 More, the certified class is far too broad for a court to provide any declaratory or injunctive relief to all class members. The University's contract with Higher One expired in 2015, and Higher One itself no longer exists. Again, Students do not allege that the University has entered into or is planning to enter into a similar contract with another company. There is no ongoing conduct to enjoin or to declare unlawful. The nature of the injunctive or declaratory relief the Students seek for Class 3 is not "indivisible." The broad wording of the class certification includes any number of situations in which the University has contracted or could in the future contract with third-party vendors-including situations that are entirely unlike the contract the University had with Higher One. Each such contract would require separate analysis and injunction. Rather than a single injunction, the court would need to fashion separate injunctions based on different allegedly offending contract terms from different contracts with different companies-contracts that at this point have not been identified, might not yet exist, and thus are entirely speculative.

¶16 The District Court's certification of Class 3 under Rule 23(b)(2) was an abuse of discretion. The Students provide no argument that the District Court properly could have certified Class 3 under any other section of Rule 23(b). Thus, we hold that the District Court abused its discretion in certifying Class 3.

Rule 23(b)(3)

¶17 Rule 23(b)(3) allows the recovery of money damages. To certify a class under Rule 23(b)(3), a court must determine that a class satisfies two requirements: (1) common questions of law or fact must "predominate over any questions affecting only individual members"; and (2) resolution as a class action must be "superior to other available methods for fairly and efficiently adjudicating the controversy." M. R. Civ. P. 23(b)(3) ; see also Worledge v. Riverstone Residential Grp., LLC , 2015 MT 142, ¶ 41, 379 Mont. 265, 350 P.3d 39. "[C]lass determination is appropriate [under Rule 23(b)(3) ] when the class members' claims depend on a common contention that is capable of classwide resolution." Worledge , ¶ 42 (internal quotations omitted). Factors pertinent to Rule 23(b)(3) include (1) class members' interests in individually controlling the prosecution of separate actions; (2) the extent and nature of litigation regarding the issue already begun by class members; (3) the desirability of concentrating the litigation in a particular forum; and (4) the likely difficulties in managing a class action. M. R. Civ. P. 23(b)(3)(A)-(D).

¶18 The University argues on appeal that the District Court improperly certified Class 1 and Class 2 under Rule 23(b)(3) because common issues of law or fact do not predominate. The University maintains that the monetary damages Students seek for excessive bank charges for Class 1 and invasion of privacy rights for Class 2 both require individual determinations. It adds that for Class 1 myriad individual issues will have to be determined, including which students paid fees to Higher One, which of the fees paid to Higher One were "excessive," and whether the students who incurred fees carry some responsibility for incurring those fees, such as by failing to balance their checkbooks. For Class 2, the University maintains that violations of privacy are fact-specific inquiries that would need to be conducted individually for each member of the class. Students counter that the District Court properly certified Class 1 and Class 2 under Rule 23(b)(3) because the University engaged in standardized conduct with all class members, and its liability for these actions will be the same for all members of Class 1 and Class 2.

¶19 Regarding superiority, the University challenges only whether there is a risk of multiplicity of individual lawsuits, arguing that it is not aware of any other claim arising from its contract with Higher One. Given the relatively small recoveries any individual plaintiff would recover if successful, the prospective costs of litigating such claims, and the large number of potential plaintiffs, we hold that a class action suit is the superior method to adjudicate these claims, despite the lack of other suits challenging the University's contract with Higher One.

¶20 Before turning to predominance, we examine the District Court's class definitions. The District Court certified Class 1 as "Past or present students of Defendant University who paid fees to Higher One Holdings, as a consequence of opening an account with Higher One to receive student loan refunds ." (Emphasis added). Class 2 comprises "Past or present students of Defendant University whose personal information was transmitted to Higher One Holdings." The District Court properly tailored these classes to the class-wide harm alleged, and we read them narrowly. Members of Class 1, for instance, will include only students who paid allegedly unauthorized fees as a consequence of opening an account with Higher One to receive student loan refunds. Students charged overdraft fees for their own careless banking practices are not encompassed within the class definition. In contrast, students charged overdraft fees because "inactivity" fees put their accounts below zero may qualify for the class, if the court determines that such fees are in violation of federal law. Students who never opened OneAccounts but instead elected to have funds transferred to third-party bank accounts or defaulted to the paper check payment method also are excluded from the class. Class 2 includes each student whose personal information the University transferred to Higher One.

¶21 In its supplemental order, the District Court identified common issues of law and fact in discussing the commonality requirement of Rule 23(a)(2). It did not identify which questions were capable of class-wide resolution for each class. It is clear, however, that for both Class 1 and Class 2 at least one of the common questions the District Court identified is capable of class-wide resolution and will move the litigation forward. For Class 1, the University's liability, if any, for subjecting students to service fees for accessing their student loan refunds via the Higher One accounts will be the same for all students in the class. For Class 2, whether the information the University provided to Higher One is protected personal information and whether the University is liable for transmitting such protected personal information of its students to Higher One will be uniform for all members of that class. These questions are thus capable of class-wide resolution. See Worledge , ¶ 42.

¶22 The University's argument that individual questions regarding damage calculations predominate over these common issues falls flat. We have explained that when individualized questions in the lawsuit relate to damages, such questions will "not negate class certification as to liability ." Worledge , ¶ 46 (quoting Mattson , ¶ 41 ) (emphasis in original); see also McDonald v. Washington , 261 Mont. 392, 403-04, 862 P.2d 1150, 1157 (1993) ("[I]t has been commonly recognized that the necessity for calculation of damages on an individual basis should not preclude class determination when the common issues which determine liability predominate." (quoting Bogosian v. Gulf Oil Corp. , 561 F.2d 434, 456 (3d Cir. 1977) )) (emphasis omitted).

¶23 In McDonald , the plaintiffs sought class certification for claims that the water company failed to provide adequate service and quality water to water users in Butte. We held that "individual issues of causation and damages should not preclude certification as a class action," because "the primary issue of liability here stems from [the water company's] failure to provide adequate water and service to its customers." McDonald , 261 Mont. at 404, 862 P.2d at 1157. If the water company was found liable, resolution of the case would require individual determinations whether the water company caused each person's particular injuries and the amount of each person's damages. We nonetheless upheld certification of the class action because the question whether the water company was liable for failing to provide adequate water and service predominated.

¶24 It is similar here. If the University is found liable either for allowing excessive fees or for transmitting personal information, individual determinations of damages will need to be made. This does not overcome predominance of the class-wide liability determination. Whether the University is liable to Class 1 for excessive fees charged by Higher One or to Class 2 for the release of personal information to Higher One will move the litigation forward and be answered the same for all class members. The University will be liable to all members of Class 1 or to no members of Class 1 and liable to all members of Class 2 or to no members of Class 2. Whether individual class members have any recoverable damages is a separate question that does not defeat class certification to answer the predominant questions regarding the University's liability to the two classes. The District Court properly certified Class 1 and Class 2 under Rule 23(b)(3).

CONCLUSION

¶25 The District Court's certification of Class 3 is reversed and vacated. We reverse the District Court's certification of Class 1 and Class 2 under Rule 23(b)(1) and (b)(2) and affirm its certification of Class 1 and Class 2 under Rule 23(b)(3). The case is remanded for further proceedings.

We Concur:

JAMES JEREMIAH SHEA, J.

INGRID GUSTAFSON, J.

LAURIE McKINNON, J.

JIM RICE, J.