Originally from:

AAA Handbook on Commercial Arbitration, Third Edition

CHAPTER 3

AGENCY, ALTER EGO AND OTHER IDENTITY ISSUES: NONSIGNATORIES AND ARBITRATION

John M. Townsend

I. Introduction

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