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A signatory to a contract containing an arbitration clause may only compel a nonsignatory to arbitrate when the nonsignatory's claims reference or rely on the contract containing an arbitration clause, a federal court in Michigan held.
In D.C.D. Co., LLC v. Bank of America, N.A., No. 04-72944, 2007 WL 45935 (E.D. Mich. Jan. 5, 2007), Detroit City Dairy (Dairy) and Bank of America entered into an agreement regarding forward contract currency trades. This agreement contained an arbitration provision. Bank of America also allowed D.C.D., an entity distinct from Dairy, to conduct trades under the agreement.
When a dispute arose between Bank of America and D.C.D., Bank of America petitioned the court to compel arbitration. However, D.C.D. argued that it should not have to arbitrate because it was not a signatory to the Dairy-Bank of America contract containing the arbitration agreement and none of its claims arose out of the agreement.
The Court agreed with D.C.D. and refused to compel arbitration. D.C.D.'s claims were for breach of a bank's duty to its customer, conversion, and a violation of Michigan law that prohibits a bank from charging a customer's account for an item that is not properly payable. None of these claims arose out of the contract, and all three could be resolved without an interpretation of the agreement containing the arbitration clause.
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