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An Indiana federal court held that a non-signatory could not intervene in an action to enforce an arbitration agreement where the Court had already ruled on the signatory's right to demand arbitration, and the non-signatory's right to demand arbitration raised distinct legal issues.
In Twist v. Arbusto, No. 4:05-cv-0187-JDT-WGH, 2007 WL 30556 (S.D. Ind. Jan. 3, 2007), Arbusto and several other investors (the Investors) sued Twist in a California state court, alleging that Twist had sold them fraudulent oil and gas investments. The Investors also sued the Pedley, Twist's attorney, for his alleged role in the fraudulent scheme.
Twist subsequently filed this action in Indiana federal court, seeking to enforce an arbitration clause in the investment agreements. The federal court in Indiana (the Court) ordered the parties to arbitrate the investment dispute. On the heels of that order, Pedley filed a motion to intervene.
As an initial matter, the Court observed that it had no authority under the Federal Arbitration Act to order Pedley's inclusion in the arbitration between Twist and the Investors. Accordingly, the issue before the Court was whether Pedley could intervene in the court action.
The Court found that Pedley could not intervene as a matter of right because the motion to intervene was untimely insofar as the Court had already ruled on Twist's right to demand arbitration. Moreover, as the Court noted, Pedley's right to demand arbitration raised distinct legal issues because Pedley was a non-signatory to the investment agreements.
The Court also found that Pedley could not intervene as a permissive matter because it was unclear whether there was a common issue of fact or law. The Court also rejected permissive intervention on the ground that the benefit to Pedley would not outweigh the burden that intervention would impose on the Investors. Finally, the Court questioned whether Pedley could invoke the arbitration agreement under the doctrine of equitable estoppel since Pedley had represented in the California action that he was not involved in Twist's dealings.
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