Non-signatories Are Bound To Arbitration Agreement – You Know, the Ones That Did NOT Sign the Contract
Oh, no. But I never signed the contract. In Bentley v. Control Grp. Media Co., No. 19-CV-2437-DMS-RBB, 2020 U.S. Dist. LEXIS 118076 (S.D. Cal. July 6, 2020) the Court sided with defendants, The Control Group Media Company, Inc. (a holding company for the other defendants), Instant Checkmate, LLC, and Truthfinders, LLC (collectively, “Defendants”) and granted their motion to compel arbitration. Defendants’ motion for limited expedited discovery was denied as moot.
Here, Plaintiffs’ putative class action arises from Defendants’ failure to remove Plaintiffs’ criminal record information from their websites. Plaintiffs and putative class members hired an online service (Easy Expunctions) to “expunge certain criminal records related to past offenses qualifying for expungement or sealing under Texas law.” The package Plaintiffs and putative class members purchased included the “providing [of] legal notice to all background check companies, including Defendants, to remove their expunged criminal records.” Easy Expunctions mailed said notice to Defendants on multiple occasions. Defendants did not acquiesce in the removal of expunged criminal records.
…YOU AND INSTANT CHECKMATE UNDERSTAND AND AGREE THAT ALL CLAIMS, DISPUTES OR CONTROVERSIES BETWEEN YOU AND INSTANT CHECKMATE, ITS PARENTS, AFFILIATES, SUBSIDARIES OR RELATED COMPANIES […] SHALL BE RESOLVED BY THE FINAL AND BINDING ARBITRATION PROCEDURES SET BELOW…
In its analysis, the Court noted that the subject contract is bound by the Federal Arbitration Act (“FAA”) and that determining whether parties have agreed to arbitration turns on “general state-law principles of contract interpretation, while giving due regard to the federal policy of arbitration.” The court went on to list the five theories pursuant to which a non-signatory can be forced to observe an arbitration clause: (1) incorporation by reference, (2) assumption, (3) agency, (4) veil piercing alter ego, and (5) estoppel.
The Court has stayed the immediate litigation to permit an arbitrator to decide the questions of arbitrability. If permissible, the substantive claims will be arbitrated as well.