What Arbitration Agreement? Compelling Non-Signatories to Arbitrate - Chapter 4 - AAA Handbook on Commercial Arbitration, Third Edition
Charles Lee Eisen
Charles Lee Eisen is a Senior Counsel and trial lawyer with K&L Gates LLP in its Washington, D.C. office. He is a member of the National Panel of Arbitrators of the American Arbitration Association and is a Fellow of the American College of Trial Lawyers. Mr. Eisen holds a magna cum laude B.A. from Princeton University and an LL.B. from Yale Law School.
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