Federal Court Allows Nonsignatory to Compel Arbitration Based on the Doctrine of Equitable Estoppel
A federal district court in Florida allowed a nonsignatory to compel arbitration under the doctrine of equitable estoppel because the claims against the nonsignatory derived from an agreement providing for arbitration.
In Hudson Global Resources Management, Inc. v. Beck, No. 8:05-CV-1446-T-27TBM, 2006 WL 1722353 (D. Fla. June 20, 2006), Hudson sued Beck, Belbot, and Tech USA, alleging a conspiracy to violate Beck and Belbot’s non-competition agreement (“the Agreement”) with Hudson. Even though it was not a party to the Agreement, Tech USA moved to compel arbitration pursuant to an arbitration clause in the Agreement.
As the Court noted, the doctrine of equitable estoppel allows a nonsignatory to compel arbitration in two circumstances: (1) when a signatory to an arbitration clause must rely on the terms of the underlying agreement to assert claims against a nonsignatory; and (2) “when the signatory raises allegations of ‘substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract.’”
Since Hudson was alleging that Beck, Belbot, and Tech USA were engaged in a conspiracy whereby Beck and Belbot resigned from Hudson to join Tech USA, the Court found that Hudson was relying on the Agreement to assert claims against Tech USA. The Court also found that Hudson’s claims against Tech USA were based on allegations of “substantially interdependent and concerted misconduct” by Beck, Belbot, and Tech USA. The Court thus concluded that the Tech USA was entitled to compel arbitration.