Non-Signatories Compelled to Arbitrate

Entities operating numerous locally owned drug stores in Mississippi filed suit in state court against four corporations. All plaintiffs and one defendant were signatories to an agreement which incorporated an arbitration clause.  The case was removed and all defendants moved to compel arbitration. The motion was granted and all parties were ordered to submit their claims to arbitration.  Crawford Professional Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249 (5th Cir. 2014).

The Fifth Circuit held that the plaintiffs’ claims against the non-signatory defendants were based on and inextricably related to the obligations imposed by the agreement containing the arbitration clause, thus, the arbitration clause was enforceable. In so ruling, the Fifth Circuit effectively modified prior decisions which applied federal common law to determine whether to allow non-signatories to compel arbitration.  The Court relied on Arthur Anderson LLP v. Carlisle, 556 U.S. 624 (2009) where the Supreme Court held that under the Federal Arbitration Act, traditional principles of state law may allow the enforcement of an arbitration contract by or against non-parties to the contract through various theories of state contract law, including equitable estoppel.   

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