Skip to content
DWT logo
People Expertise Insights
About Locations Careers
Search
People
Expertise
Insights
About
Locations
Careers
Search
Blog Posts

Arbitration Clause Can Apply to Nonsignatories

05.06.09
Share
Print this page
The Supreme Court on Tuesday ruled an arbitration clause can be applied against (or for the benefit of) persons who do not sign the clause, as long as governing state law makes that extension to nonsignatories possible. At issue in Arthur Anderson LLP v Carlisle was a tax shelter scheme gone bust, which in turn generated suits by individual investors who had put money into the tax shelters against the advisors and lawyers who recommended the illegal schemes.  Certain LLCs created for the purpose of facilitating the tax scheme (but not the individual investors themselves) signed contracts containing arbitration clauses with one or more of the defendant advisors.When the investors filed suit in federal district court, the defendants moved for a stay under Section 3 of the Federal Arbitration Act (FAA) on the ground that the issues in the suit were "referable to arbitration under an agreement in writing" under Section 3.  The plaintiff/investors fought this, contending that they are not individually bound by whatever clauses the LLCs had signed.The Supreme Court held that state law governs the issue of whether such clauses can be extended to nonsignatories, and there's nothing in the FAA itself that preempts or overrides whatever the outcome is under that state law.Note:  Washington state law is well-settled on the fact that nonsignatories can in certain circumstances be bound by -- or take advantage of -- arbitration clauses.  See McClure v. Davis Wright Tremaine, 77 Wn. App. 312 (1995). 

Related Articles

DWT logo
©1996-2022 Davis Wright Tremaine LLP. ALL RIGHTS RESERVED. Attorney Advertising. Prior results do not guarantee a similar outcome.
NAVIGATE
Home People Expertise Insights
About Locations Careers Events Blogs
STAY CONNECTED

Subscribe to stay informed.

Subscribe
Employees
DWT Collaborate
EEO
Affiliations
Legal notices
Privacy policy
©1996-2022 Davis Wright Tremaine LLP. ALL RIGHTS RESERVED. Attorney Advertising. Prior results do not guarantee a similar outcome.
Close
Close

CAUTION - Before you proceed, please note: By clicking “accept” you agree that our review of the information contained in your e-mail and any attachments will not create an attorney-client relationship, and will not prevent any lawyer in our firm from representing a party in any matter where that information is relevant, even if you submitted the information in good faith to retain us.