Section 21 Nonsignator to Arbitration Agreement

• Library: Arbitration and Mediation 2011

Arbitration requires an express agreement in writing signed by two or more parties. Thus, a nonsignator to a contract containing an arbitration provision generally is not bound to arbitrate. But there are exceptions, as noted by Missouri’s appellate courts and the Eighth Circuit. For example, a nonsignatory party to an arbitration agreement can be bound to the arbitration provision if that person is an agent of one of the signing parties or is a third-party beneficiary to the contract. Greenpoint Credit, L.L.C. v. Reynolds, 151 S.W.3d 868 (Mo. App. S.D. 2004). A third-party beneficiary to a contract is someone who did not expressly execute the agreement but benefits from one or more of its terms. Azbill v. UMB Scout Brokerage Servs., Inc., 129 S.W.3d 480 (Mo. App. W.D. 2004). By contrast, the Southern District held that a daughter who was a nonparty to a contract for nursing home services was not bound by the contract’s arbitration agreement. Finney v. Nat’l Healthcare Corp., 193 S.W.3d 393 (Mo. App. S.D. 2006).

The Supreme Court has held that a litigant who is not a party to an arbitration agreement may nevertheless invoke 9 U.S.C. § 3 of the FAA to seek a stay of a lawsuit if the relevant state contract law allows that litigant to enforce the agreement. Arthur Andersen LLP v. Carlisle, 129 S. Ct. 1896, 1898 (2009). The Supreme Court determined that the Sixth Circuit had jurisdiction to review the denial of a petitioner’s request for a § 3 stay and that a litigant who was a nonsignator to the relevant arbitration agreement could invoke § 3 if allowed under the applicable contract law for that state.

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A nonsignatory can enforce an arbitration clause against a signatory in several circumstances. One is when “the relationship between [them] is sufficiently close that only by permitting the nonsignatory to invoke arbitration may...