Agency, Alter Ego and Other Identity Issues: Nonsignatories and Arbitration - Chapter 3 - AAA Handbook on Commercial Arbitration, Third Edition
John M. Townsend
John M. Townsend is a Partner in the Washington, D.C., office of Hughes Hubbard & Reed LLP, and chairs the firm’s Arbitration and ADR Group. Townsend was Chair of the Board of Directors of the American Arbitration Association from 2007 to 2010. He is the author of Revised Code of Ethics for Commercial Arbitrators (with Bruce Meyerson) DISPUTE RESOLUTION JOURNAL (FEB.-APRIL 2004) and Commentary on the July 2003 Revisions to the AAA Commercial Arbitration Rules (with Paul D. Friedland) DISPUTE RESOLUTION JOURNAL (November 2003/January 2004).
AGENCY, ALTER EGO AND OTHER IDENTITY ISSUES: NONSIGNATORIES AND ARBITRATION
John M. Townsend
While an arbitration agreement may require the parties to arbitrate disputes within the reach of the agreement, it is not always apparent who those parties are. Periodically an entity that is not a signatory to an arbitration agreement, such as a corporate affiliate, shareholder, or employee of a signatory, seeks to take advantage of the agreement to arbitrate, either offensively (to commence an arbitration against a signatory) or defensively (to trump a court proceeding commenced by a signatory). Alternatively, a signatory to an arbitration agreement may attempt to bring a nonsignatory within the agreement’s reach, again either offensively or defensively.
Under U.S. law, courts decide whether a party may be required to arbitrate unless there is “‘clear and unmistakable’ evidence” that the parties intended for an arbitrator to decide the question. In deciding whether a particular nonsignatory should be brought within the reach of an arbitration clause, the courts must be mindful that “[a]rbitration is contractual by nature—‘a party cannot be required to submit to