Non-Signatories Succeed In Compelling Arbitration In State Courts
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The high courts of two states have allowed non-signatories to compel arbitration in recent weeks. The cases show courts are addressing non-signatory issues using different standards and raise important drafting issues for joint ventures and business affiliates.
In Locklear Automotive Group, Inc. v. Hubbard, 2017 WL 4324852 (Alabama Sept. 29, 2017), the Supreme Court of Alabama found most of the claims against the non-signatory must be arbitrated. [But before we get into the merits, I have to ask: what the heck is going on in Alabama? Is some plaintiffs’ lawyer trolling for cases against dealerships? This is the third arbitration case involving claims against dealerships coming out of that state’s high court in the last two months!] Seven plaintiffs brought separate actions alleging that personal financial information they provided the dealership was not safeguarded. All seven plaintiffs were the victims of identity theft. They sued the dealership’s LLC, as well as the corporate entity which is the sole member of that LLC (the non-signatory).
West Virginia reached a similar result, albeit through a different analysis, in Bluestem Brands, Inc. v. Shade, 2017 WL 4507090 (W. Va. October 6, 2017). In that case, Bluestem (aka Fingerhut) had teamed up with banks to offer credit to its customers for Fingerhut purchases. The credit agreements between the banks and consumers called for arbitration of any disputes. In response to a credit collection case, Ms. Shade (such a great name for a plaintiff alleging bad deeds) claimed that Bluestem violated West Virginia law with its credit program. Ms. Shade did not assert claims against the banks. When Bluestem moved to compel arbitration under the “alternative estoppel” theory, the court held that it could compel arbitration if “the signatory’s claims make reference to, presume the existence of, or otherwise rely on the written agreement.” (Note that W. Va. did not require the language of the arbitration agreement to encompass more than the signing parties, like Alabama above.) The court found that Ms. Shade’s claims all were “predicated upon the existence of the credit” agreement, so it was appropriate to compel arbitration of the claims.
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