"Inextricably intertwined" claims against both a signatory and non-signatory arising out of a contract without an arbitration agreement are nevertheless arbitrable when those claims are "related to" another contract containing an arbitration agreement, according to the Alabama Supreme Court.

In Kenworth of Mobile, Inc. v. Dolphin Line, Inc., Nos. 1051643, 1051724, 2008 WL 204446 (Ala. Jan. 25, 2008), Dolphin purchased Volvo trucks from the Kenworth dealership. Kenworth and Dolphin executed contracts for the truck purchases, which included a broad arbitration agreement encompassing any controversy or claim arising from the contract or otherwise relating to the purchase or sale of the trucks. The parties also executed trade-back contracts, requiring Kenworth to periodically repurchase the trucks previously purchased by Dolphin.

Dolphin filed a complaint against Kenworth and Volvo, alleging breach of the trade-back contracts and related claims. Kenworth, a signatory, and Volvo, a non-signatory, moved to compel arbitration of Dolphin's claims under the arbitration agreement within the purchase contracts. The trial court denied the motions, finding the claims arose out of the trade-back contracts, which did not include an arbitration agreement.

On appeal, the Court found that Dolphin's complaint clearly demonstrated that the trade-back contracts were "inextricably intertwined" with the purchase contracts by alleging Kenworth's inducement in offering the trade-back contracts. To the Court, any dispute regarding a breach of the trade-back contracts was "related to" the subject of the purchase contracts and was therefore within the scope of the broadly-worded arbitration agreement.

The Court also decided that the language of the trade-back contracts did not exclude the application of other contracts not concerned with the details of any trade-back transaction, nor did it preclude the enforcement of the arbitration agreement through a merger clause.

Dolphin's claims against Volvo were also within the scope of the purchase contracts' arbitration agreement, according to the Court. It found Dolphin was equitably estopped from resisting Volvo's demand for arbitration, even though Volvo was not a signatory to the purchase contracts.

According to the Court, in order for a non-signatory to compel arbitration under the equitable estoppel exception, "the language of the arbitration agreement must be so broad that the nonparty could assert that in reliance on that language he believed he had the right to have the claims against him submitted to arbitration."

Volvo satisfied that standard, according to the Court, because Dolphin's claims against Volvo arose from the same set of facts and were therefore "intertwined" with the claims against Kenworth. Also, the Court found the language of the agreement did not contemplate limiting its scope solely to claims between Kenworth and Dolphin. According to the Court, separate enumeration of claims relating in any fashion to the purchase or sale of the trucks would not have been necessary if the parties intended to exclude claims against third parties from the scope of the agreement.