Originally from:

AAA Handbook on Commercial Arbitration, Third Edition

CHAPTER 4

WHAT ARBITRATION AGREEMENT? COMPELLING NON-SIGNATORIES TO ARBITRATE

Charles Lee Eisen

The obligation to arbitrate a dispute is rooted in contract. However, this obligation is not limited to the parties who signed the contract. Sometimes such an obligation extends to others who are non-signatories, but are nevertheless linked to the dispute covered by the contract. The following chapter discusses the underlying legal principles and theories that explain why certain non-signatory parties may be bound to arbitration agreements. Caution: parties should be aware of possible situations which might lead to a backdoor obligation to arbitrate.

It frequently surprises those involved in business transactions to learn that they may be bound to arbitrate a dispute notwithstanding never having signed an arbitration agreement. There are a number of circumstances under which an unexpected arbitration obligation may arise. Some may be avoided (or caused) by artful drafting. Others may result as a matter of law from the facts of the case. Often, this is an issue that is off the radar screen of those charged with counseling their clients in response to the question: “do we arbitrate or do we litigate?”

This chapter will examine the context in which this issue arises. It will be seen that while courts strongly favor arbitration, the obligation is still rooted in contract. Consequently, a party cannot ordinarily be compelled against its will to arbitrate a dispute that it has not agreed to submit to arbitration. Nonetheless, an obligation to arbitrate does not attach only to one who has signed an arbitration agreement. On the