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In a case with a non-signatory on each side of the fence, the Eleventh Circuit Court of Appeals has held: (1) that a non-signatory claimant was bound by an arbitration agreement to the extent that her claims relied on the terms of the underlying contract; and (2) that non-signatory respondents could enforce the arbitration agreement because the claimant was alleging "substantially interdependent and concerted misconduct" by the signatories and non-signatories.
In Becker v. Davis, No. 06-12654, 2007 WL 1988551 (11th Cir. July 11, 2007), Becker inherited $9 million and moved to Florida, where she met Davis, who was the owner and agent of multiple entities engaged in financial planning. On Davis' advice, Becker created a trust (the Trust), which subsequently entered into an arbitration agreement with one of Davis' financial planning entities.
Several years later, Becker sued Davis and the financial planning entities, both as an individual and on behalf of the Trust. Davis and the entities filed a motion to compel arbitration. The district court found that some of the claims were subject to the arbitration agreement but ruled: (1) that Becker, in her individual capacity, was not bound by the arbitration agreement because only the Trust was a signatory to the agreement; and (2) that two of the financial planning entities could not enforce the arbitration agreement because they were not signatories to the agreement.
On appeal, the Court found that the district court erred in "categorically refusing" to order arbitration of Becker's individual claims. More specifically, the Court relied on the doctrine of equitable estoppel in holding that even though Becker was a non-signatory, her individual claims were subject to the arbitration agreement to the extent that her claims relied on the terms of the underlying contract.
Similarly, the Court relied on the doctrine of equitable estoppel in holding that even though some of the financial planning entities were non-signatories, the claims against though entities were still subject to the arbitration agreement because Becker and the Trust were alleging "substantially interdependent and concerted misconduct" by the signatories and non-signatories.
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