Arbitration & Mediation

Five Ways to Bind a Non-Signatory -- But Not The CEO of a Party

By Christopher B. Hopkins, Esq.

The Fourth District handed down a denial of arbitration in Mark J. Johnson v. Carl Pires, Everett Pires, Marc Miller and All Top Granite, Inc. This case is interesting as the court held that the CEO (Johnson) who signed the contract on behalf of his company was not individually bound to arbitrate.

Earlier this year, in Alterra Healthcare Corp. v. Estate of Linton, the First DCA held that an administrator of a nursing home could seek the benefits of the arbitration clause in the contract between nursing home and its resident/patient. In sum, someone in management at the defendant company could invoke arbitration in the face of claims made by a party to the contract (although that party -- the resident -- was trying to avoid arbitration).

The Johnson case, however, is different. As the Fourth DCA wrote, "....in Alterra, it was the party bound by the arbitration provision who was attempting to avoid arbitration of its claim against a non-party. This case presents the reverse situation, in which a party who agreed to arbitrate wants to force a non-party to arbitrate." So, in an interesting twist, the non-party could have enforced the arbitration clause against the parties to the contract but the parties to the contract could not force him to arbitrate. [we suspect that was a difficult conversation explaining that ruling to the client]

Those five theories under which a non-signatory could be bound to an arbitration agreement: incorporation by reference, assumption, agency, veil-piercing/alter ego, and estoppel.

NB: this appeal arose because Johnson moved to dismiss in arbitration, lost, and then he filed suit to halt arbitration against him. All Top agreed that the circuit court could then make the decision (which the arbitrator already made). We are unclear as to the precise facts, motivations, or strategies, but it would seem to us that All Top might have simply claimed that it was res judicata and that Johnson submitted to the arbitrator when he filed a motion to dismiss.

Full post as published by Florida Arbitration Law on December 20, 2007 (boomark / email).