A federal district court in West Virginia has ordered a non-signatory company to arbitrate a dealership's territorial dispute, finding the non-signatory a guarantor and alter ego of the signatory dealership.

In James C. Justice Companies, Inc. v. Deere & Co., Civ. A. No. 5:06-cv-00287, 2008 WL 828923 (S.D. W.Va. Mar. 27, 2008), Deere sought to compel arbitration of a dealership dispute with James C. Justice Companies (JCJC), alleging that JCJC was the guarantor of dealership Bluefield and therefore subject to the arbitration agreement between Deere and Bluefield.

JCJC conceded that it was bound to the arbitration agreement to the extent that Bluefield was bound, but contended that Deere's dispute with JCJC regarding its purchase of the unrelated Johnson dealership was not within the scope of the agreement.

The Court held that JCJC's purchase of the Johnson dealership would indirectly add to JCJC's territory as a dealer when the Johnson territory was combined with the territory JCJC held through Bluefield. To the Court, this constituted an expansion of territory that required Deere's approval under the purchase restriction clause of the Bluefield-Deere agreement. Therefore, the Court held that the dispute regarding the purchase of the Johnson dealership by JCJC was within the scope of the Bluefield-Deere agreement and bound JCJC to arbitrate as Bluefield's guarantor.

Alternatively, the Court also held that JCJC was bound to arbitrate the Johnson purchase dispute because JCJC qualified as an alter ego of Bluefield under West Virginia law. It found that Bluefield had the identical management as JCJC and did not act independently of JCJC in JCJC's plan to purchase the Johnson dealership and operate the resulting combination as one entity.

While the Court did order arbitration of the purchase restriction dispute, it also held that the limitation on the award of treble damages was not effective, since the right to such damages was not waivable under federal law. However, the Bluefield-Deere agreement contained a severability clause, allowing the Court to strike the limitation and enforce the rest of the agreement.