Commercial Litigation and Arbitration

Arbitration Compelled against Non-Parties — Equitable Estoppel — Intertwining — Non-Parties Who Move to Compel Arbitration Ordered to Submit to It

From NS Holdings LLC v. Am. Int’l Group, 2010 U.S. Dist. LEXIS 125077 (C.D. Cal. Nov. 15, 2010):

Having found the arbitration provision to be enforceable, the Court must now address the provision's applicability to Defendants AIG and Chartis. The policy at issue in this case was entered into between Plaintiffs and Defendant AISLIC. Defendants AIG and Chartis are not signatories to the policy. However, in certain circumstances, "a non-signatory to a contract containing an arbitration provision can compel arbitration under an equitable estoppel theory." ValueSelling Associates, LLC v. Temple., 2009 WL 3736264 at *6 (S.D. Cal. 2009) (citing Long v. Silver, 248 F.3d 309, 320-21 (4th Cir. 2001). See also Allianz Global Risk U.S. Ins. Co. v. General Elec. Co., 2010 WL 749876 (C.D. Cal. 2010); Reddam v. KPMG LLP, 2004 WL 3761875, at *5 (C.D. Cal. 2004); Choctaw Generation Ltd. Partnership v. American Home Assur. Co., 271 F.3d 403, 407 (2nd Cir.2001). "Under this theory, a plaintiff cannot invoke an agreement and claim the benefit of his status under it while attempting to escape its consequences." Temple, 2009 WL 3736264 at *6. With respect to the specific issue of arbitration clauses, "a non-signatory can compel a signatory to arbitrate a dispute where 'the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed.'" Allianz Global Risk U.S. Ins. Co. v. General Elec. Co., 2010 WL 749876 at *3 (C.D. Cal. 2010) (quoting Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1046 (9th Cir. 2009)). In this case, Plaintiffs' claims, including those against AIG and Chartis, invoke the benefits of the insurance policy and involve issues that are intertwined with the policy agreement. Defendants AIG and Chartis thus may compel compliance with the policy's arbitration provision.

On the other hand, Plaintiffs correctly note that non-signatories AIG and Chartis cannot themselves be required to arbitrate. With the instant Motion, the Defendants AIG and Chartis seek to compel arbitration. Given this, it would be odd indeed to assume that these Defendants are not willing to engage in arbitration. In an abundance of caution, however, and to ensure the fairness of the proceedings, the Court conditions its grant of Defendants' Motion on Defendants AIG and Chartis agreeing to submit to the jurisdiction of the arbitrator.

Share this article:


Recent Posts