District court denies motion to compel arbitration because Defendant was a non-signatory to the relevant arbitration agreement and Plaintiff did not meet its burden in showing that it was acting as agent for one of the other signatories

arbitration agreement with green background

From Lexology, Laura Kelly and David Zaslowsky discuss a recent case in which a court denied a motion to compel arbitration because the defendant was not a signatory to the arbitration agreement and did now show it was an agent of the signatory. They write

The court denied Sutherland’s motion to compel, reasoning that Sutherland had failed to meet its burden of establishing that it was AT&T’s agent. When deciding whether parties have agreed to arbitrate a certain matter, courts will generally apply state contract law principles. The general principle is that non-signatories are not bound by an arbitration agreement. But a corollary principle is that an arbitration agreement may be enforced by or against a non-signatory where the party can prove assumption, agency, alter ego, waiver, estoppel, third party beneficiary, or incorporation by reference. The court declined to consider evidence of agency submitted by Sutherland for the first time in its reply brief and further reasoned that Plaintiff’s allegation that Sutherland was AT&T’s “vendor” was not a deliberate, clear, and unequivocal statement capable of binding Plaintiff to the judicial admission that Sutherland was AT&T’s agent. The court concluded that, without any evidence of agency, Sutherland had failed to satisfy its burden to compel arbitration. The court, therefore, denied the motion to compel and granted expedited discovery to resolve whether Sutherland could be considered AT&T’s agent and thereby invoke the arbitration clause in the Terms of Service.

Although the court ultimately denied the motion to compel arbitration, it did hold that the arbitration agreement in the AT&T Terms of Service (which required Plaintiff to click a box on a webpage in order to proceed with obtaining service) was enforceable. The court expressly rejected that such a method of accepting an arbitration agreement was unconscionable, citing a growing body of case law in the Northern District where similar arbitration agreements were held to provide adequate notice to consumers of mandatory arbitration.

Read the full story at US: District court denies motion to compel arbitration because Defendant was a non-signatory to the relevant arbitration agreement and Plaintiff did not meet its burden in showing that it was acting as agent for one of the other signatories. – Lexology

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