Equitable Estoppel Circumstances to Allow Non-Signatory to Compel Arbitration
Arbitration is a creature of contract, meaning if you want your disputes to be resolved by arbitration through an arbitrator (as opposed to litigation with a judge and/or jury), you need to include an arbitration provision in your contract. A trial court granting or denying a party’s motion to compel arbitration is a non-final order that is immediately appealable. See Fla.R.App.P. 9.130(a)(3)(C)(iv).
There are times that a non-signatory to a contract with an arbitration provision wants to compel arbitration. For example, a signatory to a contract (with an arbitration provision) files suit against a non-party and the non-party moves to compel arbitration based on the contract. A dispute arises because the non-party is not a party to that contract, and thus, it needs a legal basis to compel arbitration under that contract. That legal basis to allow a non-party to a contract to compel arbitration against a signatory to the contract is equitable estoppel:
Courts have recognized that this [compelling arbitration] can be appropriate (1) when the signatory’s claims [against the non-party to the contract] allege “substantially interdependent and concerted misconduct” by the signatory and the non-signatory or (2) when the claims relate directly to the contract and the signatory is relying on the contract to assert its claims against the non-signatory.
Beck Auto Sales, Inc. v. Asbury Jax Ford, LLC, 43 Fla.L.Weekly D1380a (Fla. 1st DCA 2018).
However, “even when a non-signatory can rely on equitable estoppel ‘to access [the arbitration] clause,’ the non-signatory can compel arbitration only if the dispute at issue ‘falls within the scope of the arbitration clause.’” Beck Auto Sales, Inc., supra (citation omitted). Even if one of the above equitable estoppel circumstances apply, the non-signatory still will not be able to compel arbitration if the scope of its dispute falls outside of the arbitration provision.
An example of the first circumstance was raised in Beck Auto Sales where a car dealership sued its former employee and the former employee’s new dealership/employer for a number of theories relating to their concerted effort to prevent the car dealership from winning a contract with a public entity.
The former employee had an employment agreement with the car dealership that included an arbitration provision. The trial court granted arbitration between the car dealership and former employee. The new employer/dealership, a non-signatory to the employment contract, moved to compel the car dealership’s claims against it to arbitration under the employment contract. It argued that the car dealership’s claims against it and the former employee (a signatory to the contract) allege substantially interdependent and concerted misconduct by the former employee (signatory) and it (non-signatory). The problem for the new dealership/employer, however, was that the arbitration provision in the employment contract was limited to disputes between the parties to the arbitration agreement. The scope of the arbitration provision would not cover disputes involving the new dealership/employer; hence, it was unable to take advantage of an equitable estoppel argument to compel arbitration as a non-signatory to the employment contract.
Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.
