Arbitration May Apply to Non-Signatories

 By Doug Reiser

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The Supreme Court issued a ruling on May 5, 2009, which may further support Washington precedent holding non-signatories to binding arbitration. The ruling was first reported on Davis Wright Tremaine’s Washington Construction Law Blog on May 6, 2009.

In Arthur Anderson LLP v. Carlisle, the Supreme Court found that clients of Arthur Anderson had set up small limited liability companies (LLC) as tax shelters for investments. Those LLCs entered into arbitration agreements with the brokerage as a resolution process for any disputes between the parties. But the individuals, themselves, had not personally executed these arbitration agreements.

The Supreme Court, acting under prior precedent, upheld enforcement of the provisions claiming that the agreement was intended to benefit and both the individual and the brokerage against the individual. Therefore, the court would mandate arbitration of the matter.

Washington Construction Law Blog’s author, John Parnass, cites Davis Wright Tremaine’s own case, McClure v. Davis Wright Tremaine, 77 Wn. App. 312 (1995), whereby the Supreme Court rendered a similar finding, permitting a non-signatory to take advantage of a binding arbitration clause.

The case’s result should provide interesting options to lawyers and contractors wishing to push a less time consuming method of dispute resolution, perhaps even in the arena of lien litigation, which often involves third parties.

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