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A signatory to an arbitration agreement may not utilize equitable estoppel to compel a nonsignatory to arbitrate a dispute, a federal court in Georgia held.
In Leevers v. Bilberry, No. 4:04-CV-34 (CDL), 2007 WL 315344 (M.D. Ga. Jan. 31, 2007), Leevers and Bilberry formed the Foxchase partnership. When a dispute arouse between the parties, it was submitted to arbitration pursuant to an arbitration clause in one of their agreements.
Leevers then sought to join Bilberry Golf, Inc., to the arbitration proceedings. In this action, Bilberry Golf sought a permanent injunction to prevent the arbitrator from exercising jurisdiction over it because it was not a signatory to the arbitration agreement.
Although Leevers argued that Bilberry Golf should be joined to the arbitration under either an equitable estoppel or agency theory, the Court rejected both arguments and issued the permanent injunction.
Under the theory of equitable estoppel, "a nonsignatory may compel a signatory to arbitrate when the signatory to a written agreement containing an arbitration clause 'must rely on the terms of the written agreement in asserting [its] claims' against the nonsignatory[,]' or 'when the signatory . . . raises allegations of . . . substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories.'"
In this case, Leevers, a signatory to the agreement containing the arbitration clause, was attempting to compel the nonsignatory Bilberry Golf to arbitrate. Therefore, this Court held that the equitable estoppel exception did not apply to this situation.
The Court also rejected Leevers' agency argument, noting that nothing in the relationship between Foxchase and Bilberry Golf gave Foxchase the power to contractually bind Bilberry. Although a contractual relationship between Foxchase and Bilberry did exist, that contract did not contain an arbitration agreement.
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