NON-SIGNATORIES AND THE POWER TO COMPEL ARBITRATION
The District of Connecticut recently granted a motion to compel arbitration in a suit brought by Connecticut General Life Insurance Company (“CGLIC”) for a fraudulent overbilling scheme allegedly perpetrated by participating providers of outpatient medical imaging services. The court’s analysis hinged on (1) whether CGLIC’s claim fell within the scope of the arbitration clause at issue and (2) whether the defendants, neither of whom were signatories to the contracts containing the arbitration clause, may enforce the clause against CGLIC, who, though not a signatory either, conceded that it is an intended third-party beneficiary of the contracts.
With respect to scope, the court distinguished between “broad” and “narrow” clauses, relying on CardioNet, Inc. v. CIGNA Health Corp., Case No. 13-cv-191 (E.D. Pa. May 23, 2013), to conclude that the clause, which applied to “[d]isputes arising with respect to the performance or interpretation” of the contracts, was broad and thus deserving of a presumption of arbitrability. The court also invoked judicial estoppel, as a CGLIC affiliate had urged the broad construction in CardioNet, foreclosing CGLIC’s right to later argue for a narrow reading. With respect to the authority of non-signatories to enforce the clause, the court held that, because third-party beneficiaries are bound by the terms of the contracts that benefit them, CGLIC was bound to arbitration as if it were a signatory. The court also held that the non-signatory defendants could compel arbitration because (1) the factual issues of the dispute were intertwined with the contracts containing the arbitration clauses, (2) a parent-subsidiary-like relationship existed between the non-signatory defendants and the signatory imaging servicers, and (3) the conduct underlying the claim involved both signatory and non-signatory parties. Connecticut General Life Insurance Co. v. Houston Scheduling Services, Inc., Case No. 3:12-cv-01456 (D. Conn. Aug. 29, 2013).
This post written by Kyle Whitehead.
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