SIGNATORY TO AGREEMENT CONTAINING ARBITRATION PROVISION MAY NOT EVADE ARBITRATION BY SUING NON-SIGNATORIES
A corporate signatory to a written partnership agreement that requires international arbitration of their commercial disputes may not escape arbitration of such disputes by naming as defendants two non-signatories, on the basis that there was no written agreement to arbitrate with those defendants, according to the First Circuit.
The plaintiff in this case, Sourcing Unlimited, entered into a partnership agreement with Asimco Technologies, Inc. (“ATL”) that contained an agreement to arbitrate. When the business relationship soured, Sourcing Unlimited filed suit in a Massachusetts court naming only one of ATL’s subsidiaries and corporate officer of ATL, but not ATL itself. The defendants argued that, under the doctrine of equitable estoppel, the plaintiff should not be permitted to evade its obligation to arbitrate under the contract by suing two non-signatories for matters that clearly arose from the agreement. The First Circuit agreed, stating “[t]he present dispute is sufficiently intertwined with the…Agreement for application of estoppel to be appropriate” and concluded that “[t]he fact that the defendants are not signatories is not a basis on which arbitration may be denied.” Sourcing Unlimited v. Asimco International, No. 07-2754 (1st Cir. May 22, 2008).
This post written by Lynn Hawkins.
