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Because courts have split on the applicability of equitable estoppel in allowing non-signatories to compel arbitration in tax shelter cases, and because of the harm of increased costs that parties would otherwise suffer, the United States District Court for the Northern District of California granted a stay of proceedings to allow the Ninth Circuit to decide the estoppel question.
In Jones v. Deutsche Bank NA, No. C 04-05357 JW, 2007 WL 1456041 (N.D. Cal. May 17, 2007), Deutsche Bank sought to stay further court proceedings as it appealed the denial of its motion to compel arbitration, arguing that the doctrine of equitable estoppel applied to the case.
The Court found Deutsche Bank's appeal satisfied both requirements for a stay of proceedings, presenting a substantial question of law and demonstrating irreparable harm would result should the stay not be granted.
The Ninth Circuit Court of Appeals has yet to decide "whether the doctrine of equitable estoppel allows a non-signatory to an arbitration agreement to compel arbitration where a signatory alleges that all the promoters of a tax shelter, including the non-signatory promoter, acted in concert to defraud the signatory." Courts in other jurisdictions have split on the issue, leading the Court to find a substantial question of law raised by Deutsche Bank's appeal.
In finding irreparable harm would result if the stay was denied, the Court observed the "parties' resources" would "have been needlessly expended" in preparing for trial if the Ninth Circuit would eventually reverse the lower court and compel arbitration.
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