Originally from ADR and the Law - 20th Edition

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The New York Appellate Division reversed a trial court decision compelling arbitration of claims by a nonsignatory against a signatory to an agreement containing an arbitration clause. World Business Center Inc. v. Euro American Lodging Corp., 309 A.D.2d 166 (N.Y. App. Div. 2003).
The dispute arose out of a complex transaction involving several offshore entities owned by the same French businessman. World Business Center (WBC) leased several unfinished floors in a Manhattan hotel pursuant to a 30-year lease commencing June 1, 1998. The lease was governed by New York law and provided that if WBC exercised its right to buy the leased premises and there was a disagreement about purchase price, that dispute would be arbitrated in New York.
The parties agreed to sell the hotel for $40 million less liabilities. As part of the transaction, the lease was amended to provide that its cancellation or continuance was contingent upon Euro-American’s payment, by October 15, 2001, of funds withheld at closing to the seller’s attorney’s trust account. While all other documents were signed at closing, the lease amendment remained unsigned so that it could be examined for compliance with French law and the Paris Commercial Court.