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Monday, March 11, 2013

Eighth Circuit Describes and Permits a Scheme to Get Around Arbitration

8th CircuitIn In re: Wholesale Grocery Products Antitrust Litigation, five retail grocers sought to bring anti-trust class action suits against two wholesale grocers.  Each retail grocer did business with and had an arbitration agreement with only one of the two wholesalers.  

According to the Eighth Circuit's opinion, "[i]n an effort to avoid arbitration, each Retailer brought claims only against the Wholesaler with whom they did not have a supply and arbitration agreement."  At the District Court level, the wholesalers argued that the doctrine of equitable estoppel permitted the non-signatory wholesalers to invoke the arbitration agreements and moved to have the retailers' claims dismissed and arbitration compelled.  The District Court granted the wholesalers' motion.

On appeal, the Eighth Circuit reversed holding that parties cannot invoke the doctrine of equitable estoppel in order to enforce arbitration agreements to which they are not signatories.  The Court noted that

[E]quitable estoppel applies when a complaint involves "allegations of prearranged, collusive behavior demonstrating that the claims are intimately founded in and intertwined with the agreement at issue.”  In contrast, merely alleging that a non-signatory conspired with a signatory is insufficient to invoke equitable estoppel, absent some “intimate[] . . . and intertwined” relationship between the claims and the agreement containing the arbitration clause. [citations omitted]

Here, the Eighth Circuit found that the retailers' claims were not intertwined with the agreement containing the arbitration clause.

The Eighth Circuit remanded the case to address the wholesalers' claim, left unresolved by the District Court, that some of the arbitration agreements are enforceable by non-signatories as successors-in-interest.  It did not address the retailers' arguments that the arbitration agreements are unenforceable as against public policy, as that argument will only be relevant should the District Court resolve the successor-in-interest argument in the wholesalers' favor.

Judge Benton dissented.

[JT]

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