TX Supreme Court Allows Non-Signatories to Compel Arbitration

The Texas Supreme Court has in the past year or two emphasized that non-signatories to arbitration agreements can still be required to arbitrate certain disputes. (see prior blog posts here, here, and here). This morning, the Court analyzed circumstances in which a non-signatory can actually compel arbitration pursuant to a contract to which the non-signatory was, of course, not a party. The majority opinion, written by Justice Hecht, continues the trend of judicial empowerment of arbitration contracts.

In this case, a jilted potential purchaser of a Ford dealership sued Ford, the dealership, and the eventual succesful purchaser when Ford exercised a right of first refusal and caused the purchase and sale agreement (“PSA”) between first purchaser and the dealership to be terminated. The PSA was a contract between the dealership and the first purchaser; Ford and the eventual purchaser were not parties.

The first purchaser sued based on a theory that Ford’s right of first refusal was not valid and did not allow Ford to terminate the PSA or allow the dealership to get out of the PSA. The first purchaser also sued the eventual purchaser for interfering with the PSA. The PSA, which, again was between only the dealership and the first purchase, included an arbitration clause. However, in what could be described as the “flip side” of the normal fact pattern, Ford and the eventual purchaser, who were never parties to the PSA, moved to compel arbitration, based on the PSA’s arbitration clause.

The trial court and the Court of Appeals refused to compel arbitration, but the Supreme Court saw the issue differently. According to Justice Hecht, since the plaintiff-first purchaser’s claims against Ford and the eventual purchaser were completely intertwined with its claims against the dealership, and since a arbitration agreement did exist between it and the dealership, equitable estoppel requires that all the claims be arbitrated.

In her dissent, Justice O’Neill argues that this claim for tortious interference with a contract could not be so intertwined with a claim for breach of that contract to support equitable estoppel, especially since the arbitration clause itself was not a traditional sweepingly broad clause.

The opinion discusses in detail the doctrine of equitable estoppel as it applies to the enforcement of arbitration agreements, and it continues a powerful trend in Texas jurisprudence making arbitration clauses extremely difficult to avoid.

Meyer v. WMCO-GP, ___ S.W.3d ___ (Tex. 2006) (Cause No. 04-0252)

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