Originally from World Arbitration And Mediation Review (WAMR)

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AGREEMENTSMAY BE ENFORCEABLE AGAINST NON-SIGNATORIES IN FIFTH CIRCUIT

In J.P. Morgan Chase & Co. v. Conegie,1 the United States Court of
Appeals for the Fifth Circuit held that an arbitration clause may be
enforceable against a non-signatory party under federal law when it is clear
that the non-signatory was an intended beneficiary of the agreement. The
Fifth Circuit also held that an arbitration clause may be enforceable against
a non-signatory party under Mississippi law when that party is incapacitated
and a designated surrogate signs an agreement regarding health-care
decisions on her behalf.
The plaintiff suffered from a disease that caused severe physical and
neurological problems, including dementia psychosis, and was admitted to a
nursing home in Greenville, Mississippi. The nursing home admission
agreement contained an arbitration clause and the plaintiff’s mother signed
the agreement on behalf of the plaintiff. The issue in this case arises from
the enforceability of the arbitration clause in the admission agreement
against the plaintiff as a non-signatory.
The United States District Court for the Northern District of Mississippi
denied the defendant-appellant’s motion to compel arbitration pursuant to
the admission agreement. The district court found that no agency
relationship existed between the plaintiff and her mother, and that the
plaintiff’s mother did not have the authority to sign the nursing home
admission agreement on the plaintiff’s behalf. The defendant appealed the
district court’s denial of the motion to compel arbitration. The main issue
presented to the Fifth Circuit on appeal was whether the arbitration clause is
enforceable against the plaintiff as a non-signatory.