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A Hawaii appellate court held that a broker who did not sign a property acquisition agreement was not bound by the arbitration provision it contained, and that no other applicable legal theory could compel binding arbitration.
In Sher v. Cella, No. 27715, 2007 WL 1064163 (Haw. Ct. App. April 11, 2007), Sher had purchased a $7.5 million oceanfront home from a seller represented by real estate broker Cella. When Sher subsequently discovered problems with the property, he invoked the arbitration provision in the property acquisition agreement that was signed by Sher and the sellers, but not by Cella.
In reversing the trial court's order compelling Cella to arbitrate, the Court first ruled that – because arbitration is a matter of contract law – as a non-signatory to the agreement Cella could not be required to submit to arbitration because he never agreed to do so.
In addition, the Court systematically ruled out the three legal theories raised by Sher that could have bound Cella to arbitrate even as a non-signatory. These included: agency law (Cella was Sher's agent, not the principal), equitable estoppel (Cella's commission was not a direct benefit of the agreement), and, third-party beneficiary laws (though Cella was an intended beneficiary, his status was unrelated to the claims made by Sher).
In essence, as a non-signatory to the acquisition agreement, the Court found Cella's ties to the actual purchase agreement were too tenuous to bind him to the arbitration agreement.
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