Amicus Curiae Brief — GE Energy Power Conversion France SAS, Corp., fka Converteam SAS, Petitioner v. Outokumpu Stainless USA, LLC, et al.

No. 18-1048

In the

Supreme Court of the United States

GE ENERGY POWER CONVERSION FRANCE SAS,

CORP., A FOREIGN CORPORATION FORMERLY

KNOWN AS CONVERTEAM SAS,

Petitioner,

v.

OUTOKUMPU STAINLESS USA, LLC, et al.,

Respondents.

On Writ of Certiorari to the United States

Court of A ppeals for the Eleventh Circuit

BRIEF OF AMICUS CURIAE PUBLIC

JUSTICE IN SUPPORT OF NEITHER PARTY

K arla Gilbride

Counsel of Record

Stephanie K. Glaberson

Public Justice, P.C.

1620 L Street NW, Suite 630

Washington, DC 20036

(202) 797-8600

kgilbride@publicjustice.net

Counsel for Amicus Curiae

September 24, 2019

291330

A

(800) 274-3321 • (800) 359-6859

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . iii

INTEREST OF AMICUS CURIAE . . . . . . . . . . . . . . . . 1

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . 2

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I.

Equitable Estoppel Has Traditionally

Required a False Statement, Deceptive Act,

or Material Omission by One Party On Which

Another Party Detrimentally Relied . . . . . . . . . .6

II. Estoppel as Applied by the Lower Courts

in the Arbitration Context Involves None of

the Doctrine’s Traditional Elements. . . . . . . . . . 8

A. The “close relationship” estoppel

test departs from the common-law

roots of equitable estoppel when it

focuses exclusively on the closeness of

the defendants and the similarity of

the claims against them . . . . . . . . . . . . . . . . 10

ii

Table of Contents

Page

B. The “concerted misconduct” test

i s e ven f u r t he r r e move d f r om

traditional equitable estoppel in

focusing on the allegations against

the defenda nt s rather tha n the

plaintiff’s wrongful acts . . . . . . . . . . . . . . . 12

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

iii

TABLE OF CITED AUTHORITIES

Page

CASES

Adkins v. Labor Ready, Inc.,

185 F. Supp. 2d 628 (S.D. W. Va. 2001) . . . . . . . . . . . 13

Arthur Andersen LLP v. Carlisle,

556 U.S. 624 (2009) . . . . . . . . . . . . . . . . . . . . . . . passim

AT & T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Autonation Fin. Servs. Corp. v. Arain,

592 S.E.2d 96 (Ga. App. 2003) . . . . . . . . . . . . . . . . . . 13

Brown v. Pacific Life Ins. Co.,

462 U.S. 384 (5th Cir. 2006) . . . . . . . . . . . . . . . . . . . . . 9

Carroll v. Leboeuf, Lamb, Greene

& MacRae, L.L.P.,

374 F. Supp. 2d 375 (S.D.N.Y. 2005) . . . . . . . . . . . 9, 14

CD Partners, LLC v. Grizzle,

424 F.3d 795 (8th Cir. 2005) . . . . . . . . . . . . . . . . . . . . 10

Celentano v. Oaks Condominium Ass’n,

830 A.2d 164 (Conn. 2003) . . . . . . . . . . . . . . . . . . . . . . 7

Dean Witter Reynolds, Inc. v. Byrd,

470 U.S. 213 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

iv

Cited Authorities

Page

Diaz v. Michigan Logistics Inc.,

161 F. Supp. 3d 375 (E.D.N.Y. 2016) . . . . . . . . . . . . . 11

Douzinas v. Am. Bureau of Shipping, Inc.,

888 A.2d 1146 (Del. Ch. 2006) . . . . . . . . . . . . . . . . . . 14

First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Fries v. Greg G. Wright & Sons, LLC,

120 N.E.3d 426 (Ohio App. 2018) . . . . . . . . . . . 10-11, 12

Fundamental Portfolio Advisors, Inc. v.

Tocqueville Asset Mgmt., L.P.,

7 N.Y.3d 96 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Glus v. Brooklyn E. Dist. Terminal,

359 U.S. 231 (1959) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Hill v. G E Power Systems, Inc.,

282 F.3d 343 (5th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . 9

Hughes Masonry Co. v.

Greater Clark Cnty. Sch. Bldg. Corp.,

659 F.2d 836 (7th Cir. 1981) . . . . . . . . . . . . . . . . . . . . . 9

In re Humana Managed Care Litig.,

285 F.3d 971 (11th Cir. 2002), rev’d on other

grounds, PacifiCare Health Sys., Inc. v. Book,

538 U.S. 401 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

v

Cited Authorities

Page

In re Merrill Lynch Co. FSB,

235 S.W.3d 185 (Tex. 2007) . . . . . . . . . . . . . . . . . . . . 14

Kindred Nursing Ctrs. Ltd. P’Ship v. Clark,

137 S. Ct. 1421 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . 10

Lyng v. Payne,

476 U.S. 926 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

MB Indus., LLC v. CAN Ins. Co.,

74 So.3d 1173 (La. 2011) . . . . . . . . . . . . . . . . . . . . . . . . 7

MS Dealer Serv. Corp. v. Franklin,

177 F.3d 942 (11th Cir. 1999) . . . . . . . . . . . . 5, 6, 12, 13

Noye v. Johnson & Johnson Servs., Inc.,

765 Fed. Appx. 742 (3d Cir. 2019) . . . . . . . . . . . . . . . 11

Perry v. Thomas,

482 U.S. 483 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Prima Paint v. Flood & Conklin Mfg. Co.,

309 U.S. 385 (1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Ragone v. Atl. Video at Manhattan Ctr.,

595 F.3d 115 (2d Cir. 2010) . . . . . . . . . . . . . . . . . . . . . 10

Saltzman v. Thomas Jefferson Univ. Hosps., Inc.,

166 A.3d 465 (Pa. 2017) . . . . . . . . . . . . . . . . . . . . . . . . 11

vi

Cited Authorities

Page

Shetty v. Palm Beach Radiation Oncology

Assocs.-Sunderam K. Shetty, M.D., P.A.,

915 So.2d 1233 (Fla. 4th DCA 2005) . . . . . . . . . . . . . 14

Sokol Holdings, Inc. v. BMB Munai, Inc.,

542 F.3d 354 (2d Cir. 2008) . . . . . . . . . . . . . . . . . . . . . 10

Sunkist Soft Drinks, Inc. v.

Sunkist Growers, Inc.,

10 F.3d 753 (11th Cir. 1993) . . . . . . . . . . . . . . . . . . . . . 9

Tobel v. AXA Equitable Life Ins. Co.,

No. 298129, 2012 WL 555801,

2012 Mich. App. LEXIS 326

(Mich. Ct. App. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . 13

Zitelli v. Dermatology Educ. & Research Found.,

633 A.2d 134 (Pa. 1993) . . . . . . . . . . . . . . . . . . . . . . . . 7

STATUTES AND OTHER AUTHORITIES

9 U.S.C. § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

9 U.S.C. § 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Black’s Law Dictionary (11th Ed. 2019) . . . . . . . . . . . . . . 6

Chr istopher Dr iskill , Note, A Dangerous

Doctrine: The Case Against Using ConcertedMisconduct Estoppel to Compel Arbitration,

60 Ala. L. Rev. 443 (2009) . . . . . . . . . . . . . . . . . . . . . 12

vii

Cited Authorities

Page

H.R. Rep. No. 96, 68th Cong., 1st Sess., 1 (1924) . . . . . . 6

M ichael A . Rosenhouse , Annotation ,

Application of Equitable Estoppel to Compel

Arbitration by or Against Nonsignatory-State Cases, 22 A.L.R. 6th 387 (2007) . . . . . . . . . . . . 8

R e s t a t e m e nt ( F i r s t) o f To r t s § 8 9 4

(June 2019 Update) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

R e s t a t e m e nt (S e c o n d) o f A g e n c y § 8 B

(June 2019 Update) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Richard Frankel, The Arbitration Clause as Super

Contract, 91 Wash. U. L. Rev. 531 (2014) . . . . . . . . . 14

R i c h a r d M . A l d e r m a n , T h e Fa i r D e b t

Collection Practices Act Meets Arbitration:

No n- par ties an d Arbitratio n, 2 4 Loy.

Consumer L. Rev. 586 (2012) . . . . . . . . . . . . . . . . . . . . 8

Sup. Ct. R. 37.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

T. Leigh Anenson, The Triumph of Equity:

Equitable Estoppel in Modern Litigation,

27 Rev. Litig. 377 (2008) . . . . . . . . . . . . . . . . . . . . . . . . 8

1

INTEREST OF AMICUS CURIAE

Public Justice, P.C. is a national public interest law firm

that specializes in precedent-setting, socially significant

civil litigation, with a focus on fighting corporate and

governmental misconduct.1 To further its goal of defending

access to justice for workers, consumers, and others

harmed by corporate wrongdoing, Public Justice has long

conducted a special project devoted to fighting abuses

of mandatory arbitration. Through this project, Public

Justice has reviewed hundreds of state and federal cases

involving enforcement of mandatory arbitration clauses

by nonsignatories, and its attorneys have litigated several

such cases themselves.

Over the years, Public Justice has observed with

concern as the concept of equitable estoppel, as applied

in cases involving arbitration agreements, has become

increasingly unmoored from the traditional underpinnings

of the common-law doctrine. Public Justice believes that

the “close relationship” and “concerted misconduct”

theories of estoppel discussed below, which the lower

courts only apply in cases involving arbitration, are at odds

with this Court’s admonitions that the Federal Arbitration

Act (“FAA”) does not alter “background principles of state

contract law,” Arthur Andersen LLP v. Carlisle, 556 U.S.

624, 630 (2009), and that the FAA makes “arbitration

agreements as enforceable as other contracts, but not

1. Pursuant to Rule 37.6, Amicus affirms that no counsel for

any party authored this brief in whole or in part, and no person or

entity other than Amicus, its members and its counsel has made

a monetary contribution to support the brief’s preparation or

submission. Petitioner and Respondents have consented in writing

to the filing of this brief.

2

more so.” Prima Paint v. Flood & Conklin Mfg. Co., 309

U.S. 385, 404 n.12 (1967).

The estoppel doctrines discussed in this brief are

potent weapons that corporations can and do use to bind

plaintiffs to arbitrate even when the plaintiffs have not

entered any arbitration agreement with those corporations,

and when the traditional elements of equitable estoppel

are not present. Because the consumers and workers that

Public Justice represents are often the people against

whom these weapons are wielded, contrary to the intent of

the contracting parties, the organization has an interest in

seeing this Court clarify that arbitration-specific estoppel

theories rooted in federal substantive law violate the

FAA’s equal treatment principle regarding arbitration

agreements and other types of contracts.

SUMMARY OF ARGUMENT

The question this case presents is whether the New

York Convention for the Recognition of Foreign Arbitral

Awards (“Convention”) allows a nonsignatory to compel

arbitration based on the doctrine of equitable estoppel.

Implicit in this question is whether Chapter 2 of the FAA,

which implements the Convention in the United States,

9 U.S.C. § 201 et seq., is consistent with chapter 1 of the

FAA, 9 U.S.C. § 1 et seq., with respect to nonsignatories’

rights. Petitioner spends the majority of its brief on this

question, and Amicus expects that Respondents’ brief will

have a similar focus.

But the question of whether Chapters 1 and 2 of the

FAA provide the same rights to nonsignatories sidesteps

an even more fundamental question: what is meant by

3

the “doctrine of equitable estoppel”? That foundational

question should not linger in the shadows of this Court’s

opinion in this case; the Court should address it directly.

As part of its explanation of whether, and why or why

not, to extend a constellation of rights labeled “equitable

estoppel” to a new class of nonsignatories—those seeking

to enforce international arbitration agreements drafted

and entered into by others—this Court should provide

guidance on what, precisely, that disputed constellation

of rights entails.

Such guidance is badly needed by lower federal courts

and state courts alike. Several federal appellate courts

have crafted estoppel doctrines that apply only to disputes

where a plaintiff who is a signatory to an arbitration

agreement brings claims against multiple defendants,

some of whom are signatories to that agreement and some

of whom are not. These arbitration-specific doctrines

turn on factors like the closeness of the relationship

between the signatory and nonsignatory defendants (the

“close relationship” estoppel test) or whether the plaintiff

has alleged concerted and interdependent misconduct

between the signatory and nonsignatory defendants (the

“concerted misconduct” estoppel test). These “alternative

estoppel” doctrines have been embraced by numerous

state courts as well, despite the fact that they bear little

if any resemblance to the traditional elements of equitable

estoppel under those states’ common law.

Traditionally, equitable estoppel was a defense that

prevented one party from taking unfair advantage of

another by making false representations on which the

other party detrimentally relied. This Court has itself held

that “[a]n essential element of any estoppel is detrimental

4

reliance on the adverse party’s misrepresentations.” Lyng

v Payne, 476 U.S. 926, 935 (1986). Yet the arbitrationspecific “close relationship” and “concerted misconduct”

tests require neither detrimental reliance by the

nonsignatory seeking estoppel nor a misrepresentation

by the plaintiff that the nonsignatory seeks to estop.

These doctrines did not arise “to govern issues

concerning the validity, revocability, and enforceability

of contracts generally” but rather take their meaning

“precisely from the fact that a contract to arbitrate is

at issue.” Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987).

Thus the continued use of these doctrines, both in state

and federal courts, is inconsistent with Chapter 1 of the

FAA as applied to nonsignatories in Arthur Andersen.

Nor would these doctrines present the proper standard for

assessing any rights that nonsignatories to international

arbitration agreements might have under Chapter 2 of

the FAA. This Court should say so expressly now, before

the confusion in the law grows any deeper.

ARGUMENT

In Arthur Andersen LLP v. Carlisle, this Court

rejected the Sixth Circuit’s categorical rule that

nonsignatories to a written arbitration agreement could

never seek enforcement of that agreement under the FAA.

556 U.S. at 630-31. Instead, it held, whether a particular

nonsignatory could enforce or be bound by an arbitration

agreement would be decided as a matter of “state law”

that “arose to govern issues concerning the validity,

revocability, and enforceability of contracts generally.” Id.

See also First Options of Chicago, Inc. v. Kaplan 514 U.S.

938, 944 (1995) (courts resolve questions of arbitrability

5

under the FAA using “ordinary state-law principles that

govern the formation of contracts). This Court then listed

the “traditional principles of state law” that might enable

a nonsignatory to claim rights under a contract, including

equitable estoppel. Arthur Andersen, 556 U.S. at 631

(internal quotations omitted).

Equitable estoppel has a history longer than that of

the United States, as Petitioner correctly observed in

its opening brief. Pet. Br. at 15 (citing Glus v. Brooklyn

E. Dist. Terminal, 359 U.S. 231, 232-34 (1959)). But the

unique, arbitration-related theories of estoppel that

Petitioner goes on to describe are of far more recent

vintage. Pet. Br. at 15 (citing MS Dealer Serv. Corp. v.

Franklin, 177 F.3d 942, 947 (11th Cir. 1999)).

Unlike traditional concepts of equitable estoppel

as discussed by this Court in cases like Glus, the more

recent, arbitration-specific variants of the doctrine focus

almost exclusively on the connections between multiple

defendants. They place little or no emphasis on the actions

of the plaintiff, except for considering the allegations

made in the plaintiff’s complaint. This focus on allegations

against multiple defendants turns the doctrine of estoppel

on its head, transforming it from a defense available only

to a misled party into an offensive weapon available only

to an alleged conspirator based on the nature of its alleged

misconduct.

Courts have justified the illogical and sometimes

inequitable results of these alternative estoppel theories

on the basis of efficient dispute resolution: that where

arbitrable claims against a signatory are closely related

to claims against a nonsignatory, declining to resolve all

6

of the claims against both defendants in arbitration would

lead to bifurcated proceedings in multiple forums. But

this Court rejected a nearly identical efficiency argument

in Dean Witter Reynolds, Inc. v. Byrd, where it held

that Congress did not pass the FAA to ensure speedy

and efficient dispute resolution but rather to ensure that

arbitration agreements would be placed “upon the same

footing as other contracts, where [they] belong[].” Byrd,

470 U.S. 213, 218-19 (1985) (quoting H.R.Rep. No. 96, 68th

Cong., 1st Sess., 1 (1924)). The alternative estoppel theory

enunciated in MS Dealer, and similar theories crafted by

other lower courts that Petitioner does not discuss, are just

as inconsistent with the FAA’s “equal footing” principle

as the Ninth Circuit’s position in Byrd was. This Court

should take this opportunity to reject them.

I.

Equitable Estoppel Has Traditionally Required

a False Statement, Deceptive Act, or Material

Omission by One Party On Which Another Party

Detrimentally Relied.

As traditionally conceived, equitable estoppel is a

“defensive doctrine preventing one party from taking

unfair advantage of another when, through false language

or conduct, the person to be estopped has induced another

person to act in a certain way, with the result that the

other person has been injured in some way.” Black’s Law

Dictionary (11th Ed. 2019). Proving the defense involves

five elements: “(1) there was a false representation or

concealment of material facts, (2) the representation was

known to be false by the party making it, or the party was

negligent in not knowing its falsity, (3) it was believed to

be true by the person to whom it was made, (4) the party

making the representation intended that it be acted on,

7

or the person acting on it was justified in assuming this

intent, and (5) the party asserting estoppel acted on the

representation in a way that will result in substantial

prejudice unless the claim of estoppel succeeds.” Id. See

also Restatement (First) of Torts § 894 (June 2019 Update)

(describing elements of equitable estoppel when used

defensively); Restatement (Second) of Agency § 8B (June

2019 Update) (describing elements of equitable estoppel

when it involves one party misrepresenting its authority

to act on behalf of another).

Although estoppel, like all equitable doctrines, must

be applied flexibly, the same key elements are always

required: a false statement, misleading action or material

omission by the party to be estopped (wrongful act), and

a change in position by the party seeking estoppel based

on believing the false statement or wrongful act to be

true (detrimental reliance). These elements appear in

the formulation of the doctrine as announced by the high

courts of nearly every state. See, e.g., MB Indus., LLC v.

CAN Ins. Co., 74 So.3d 1173, 1180 (La. 2011) (“equitable

estoppel applies only where a party has made false or

misleading representations of fact and the other party

justifiably relied on the representation”); Fundamental

Portfolio Advisors, Inc. v. Tocqueville Asset Mgmt., L.P., 7

N.Y.3d 96, 107 (2006) (in absence of evidence of detrimental

reliance, essential element lacking); Celentano v. Oaks

Condominium Ass’n, 830 A.2d 164, 186 (Conn. 2003)

(describing “two essential elements” of equitable estoppel

under Connecticut law, including detrimental reliance);

Zitelli v. Dermatology Educ. & Research Found., 633

A.2d 134, 139 (Pa. 1993) (“There are two essential

elements to estoppel; inducement and reliance.”). And

these same essential elements have characterized the

8

doctrine since its introduction into English law in the

18th century. T. Leigh Anenson, The Triumph of Equity:

Equitable Estoppel in Modern Litigation, 27 Rev. Litig.

377, 386-87 (2008).

II. Estoppel as Applied by the Lower Courts in the

Arbitration Context Involves None of the Doctrine’s

Traditional Elements.

A large number of cases in federal district and circuit

courts have analyzed the question of when a nonsignatory

to an arbitration agreement may use the doctrine of

equitable estoppel to compel a signatory to that agreement

to arbitrate. See Richard M. Alderman, The Fair Debt

Collection Practices Act Meets Arbitration: Non-parties

and Arbitration, 24 Loy. Consumer L. Rev. 586, 596

(2012) (describing equitable estoppel as “the most common

argument used by non-parties as the basis for enforcing

an arbitration provision.”). For the most part, these cases

have not required a showing of detrimental reliance by

the party seeking estoppel. Michael A. Rosenhouse,

Annotation, Application of Equitable Estoppel to Compel

Arbitration by or Against Nonsignatory--State Cases,

22 A.L.R. 6th 387 (2007) (describing a “unique body” of

caselaw that “federal courts have initiated” and “that

is peculiarly applicable” in cases involving arbitration

agreements, and noting that this “doctrine differs from

traditional equitable estoppel in that it contains no

requirement of justifiable reliance”).

At first glance, this arbitration-specific line of

cases appears to maintain a link to equitable estoppel’s

conceptual underpinnings by preventing the estopped

party from taking inconsistent positions with respect to

9

the contract containing the arbitration clause. See, e.g.,

Hughes Masonry Co. v. Greater Clark Cnty. Sch. Bldg.

Corp., 659 F.2d 836, 838-39 (7th Cir. 1981) (plaintiff cannot

“rely on the contract when it works to [the plaintiff’s]

advantage, and repudiate it when it works to [the

plaintiff’s] disadvantage”) (citations omitted). But all too

often, courts employ this “estoppel” doctrine even where

the connection between the plaintiff’s claims and the

contract containing the arbitration requirement is tenuous

or nonexistent. See Sunkist Soft Drinks, Inc. v. Sunkist

Growers, Inc., 10 F.3d 753, 758 (11th Cir. 1993) (finding

equitable estoppel where each of the plaintiff’s claims

merely “makes reference to” and “presumes the existence

of” the licensing agreement containing the arbitration

clause); see also Brown v. Pacific Life Ins. Co., 462 U.S.

384, 399 (5th Cir. 2006) (allowing a nonsignatory to compel

arbitration “when the signatory to the contract containing

an arbitration clause raises allegations of substantially

interdependent and concerted misconduct by both the

nonsignatory and one or more of the signatories to the

contract,” even though the plaintiff’s claims did not rely

on the terms of that contract) (citing Hill v. G E Power

Systems, Inc., 282 F.3d 343, 349 (5th Cir. 2002)).

While still using the name “estoppel,” these federally

derived doctrines have largely abandoned any pretense

of being rooted in equity. To the contrary, they are based

on concepts of relatedness or similarity in the case of the

close relationship test, and judicial efficiency in the case

of the concerted misconduct test. See Carroll v. Leboeuf,

Lamb, Greene & MacRae, L.L.P., 374 F. Supp. 2d 375,

378 (S.D.N.Y. 2005) (“the doctrine [of arbitration-specific

estoppel] appears to depend upon . . . considerations of

adjudicative economy, not consent”).

10

Neither of these tests embodies the sort of “traditional

principles of state law” that would allow nonsignatories

to enforce contracts other than arbitration agreements.

Arthur Andersen, 556 U.S. at 631. And this court has

periodically reminded lower courts that they may not

treat arbitration agreements differently from other types

of contracts. Kindred Nursing Ctrs. Ltd. P’Ship v. Clark,

137 S. Ct. 1421, 1426 (2017) (referring to the FAA’s “equaltreatment principle”). This principle should apply with

equal force to nonsignatories and equitable estoppel.

A.

The “close relationship” estoppel test departs

from the common-law roots of equitable

estoppel when it focuses exclusively on the

closeness of the defendants and the similarity

of the claims against them.

Several circuit courts have adopted an “alternative

estoppel” theory under which “a nonsignatory [may] force

a signatory into arbitration . . . when the relationship of

the persons, wrongs and issues involved is a close one.” CD

Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir. 2005).

Specifically, as framed by the Second Circuit, this “close

relationship” test requires 1) that the subject matter of

the dispute with the nonsignatory defendant be “factually

intertwined” with the subject matter of the dispute with

the signatory defendant, and 2) that the relationship

between the signatory and nonsignatory defendants be

sufficiently close to “justify sending [the] entire dispute

to arbitration.” Ragone v. Atl. Video at Manhattan Ctr.,

595 F.3d 115, 127-28 (2d Cir. 2010) (citing Sokol Holdings,

Inc. v. BMB Munai, Inc., 542 F.3d 354, 359 (2d Cir. 2008)).

State courts have adopted similar versions of this “close

relationship” test. See Fries v. Greg G. Wright & Sons,

11

LLC, 120 N.E.3d 426, 444 (Ohio App. 2018) (“arbitration

may be compelled by a nonsignatory against a signatory

due to the close relationship between the entities involved,

as well as the relationship of the alleged wrongs to the

nonsignatory’s obligations and duties in the contract”)

(citations and internal quotations omitted); Saltzman v.

Thomas Jefferson Univ. Hosps., Inc., 166 A.3d 465, 470

n.2 (Pa. 2017) (a nonsignatory may enforce an arbitration

agreement where there is an “obvious and close nexus”

between the nonsignatory and “either the contract itself

or the contracting parties”).

Although most of these formulations make some

reference to the contract containing the arbitration clause,

such a connection is not always required. See, e.g., Noye v.

Johnson & Johnson Servs., Inc., 765 Fed. Appx. 742, 74647 (3d Cir. 2019) (construing Pennsylvania law and holding

that a close relationship among the parties is sufficient to

establish estoppel, even if there is no connection between

the claims and the contract); Diaz v. Michigan Logistics

Inc., 161 F. Supp. 3d 375, 382 (E.D.N.Y. 2016) (applying

equitable estoppel simply because the plaintiff’s claims

against the two defendants were similar, making the

“subject matter” of the disputes “factually intertwined,”

without any discussion of whether the claims relied on

or even referenced the contract). As applied by these

courts, the “close relationship” estoppel test allows any

combination of overlapping parties, overlapping claims

or overlapping contractual obligations to render the

nonsignatory sufficiently related to arbitrable disputes

to be pulled into the arbitration clause’s orbit.

These cases make no allusion to inconsistent conduct by

the party being estopped, let alone that the nonsignatory

12

seeking estoppel relied on such inconsistency to its

detriment. In short, the “close relationship” estoppel test

has only the barest passing resemblance to traditional

equitable estoppel, a state of affairs that even courts

that embrace the doctrine tacitly recognize. See Fries,

120 N.E.3d at 444 (describing the “close relationship”

test and then, in a separate sentence, stating that “a

nonsignatory to an arbitration agreement may [also] be

bound by the arbitration agreement under a variety of

ordinary contractual and agency related legal theories,

including but not limited to estoppel”).

B. The “concerted misconduct” test is even

further removed from traditional equitable

estoppel in focusing on the allegations against

the defendants rather than the plaintiff’s

wrongful acts.

The Eleventh Circuit made this decoupling of

claims from contract explicit in what has been called the

“seminal case” involving arbitration-specific estoppel,

MS Dealer v. Franklin, 177 F.3d 942 (11th Cir. 1999).

Christopher Driskill, Note, A Dangerous Doctrine: The

Case Against Using Concerted-Misconduct Estoppel to

Compel Arbitration, 60 Ala. L. Rev. 443, 445 (2009). The

court in MS Dealer held that a nonsignatory could compel

arbitration in two different circumstances: 1) “when the

signatory to a written agreement containing an arbitration

clause must rely on the terms of the written agreement

in asserting its claims against the nonsignatory” and

2) “when the signatory to the contract containing the

arbitration clause raises allegations of substantially

interdependent and concerted misconduct by both the

nonsignatory and one or more of the signatories to the

13

contract.” MS Dealer, 177 F.3d at 947 (citations, internal

quotations and alterations omitted).

The Eleventh Circuit itself subsequently abandoned

MS Dealer’s second, “concerted misconduct” prong as an

independent ground for allowing nonsignatories to compel

arbitration, holding in another case three years later

that the “purpose of the doctrine is to prevent a plaintiff

from, in effect, trying to have his cake and eat it too” and

that the “plaintiff’s actual dependance on the underlying

contract in making out the claim against the nonsignatory

defendant is therefore always the sine qua non of an

appropriate situation for applying equitable estoppel.” In

re Humana Managed Care Litig., 285 F.3d 971, 976 (11th

Cir. 2002), rev’d on other grounds, PacifiCare Health Sys.,

Inc. v. Book, 538 U.S. 401 (2003). But while the “concerted

misconduct” estoppel test may no longer be a freestanding

basis for compelling arbitration within the Eleventh

Circuit, numerous federal and state courts continue to

apply it. See, e.g., Brown, 462 F.3d at 399 (affirming district

court order compelling arbitration with nonsignatory

because “the complaint asserts concerted misconduct by

all parties”); Adkins v. Labor Ready, Inc., 185 F. Supp. 2d

628, 641 (S.D. W. Va. 2001) (claims against nonsignatory

defendants “inherently inseparable” from claims against

signatory); Tobel v. AXA Equitable Life Ins. Co., No.

298129, 2012 WL 555801, at *1, 2012 Mich. App. LEXIS

326, at *1 (Mich. Ct. App. 2012) (allegations of concerted

misconduct among defendants permitted nonsignatories

to enforce arbitration provision); Autonation Fin. Servs.

Corp. v. Arain, 592 S.E.2d 96, 101 (Ga. App. 2003) (finding

both of MS Dealer’s estoppel tests consistent with Georgia

law).

14

Not all courts have embraced the “concerted

misconduct” version of estoppel, and cour ts and

commentators alike have noted the awkwardness of a

doctrine premised on equity being used to empower

parties whose only connection is that they are accused of

colluding with one another. See In re Merrill Lynch Co.

FSB, 235 S.W.3d 185, 194 (Tex. 2007) (“while conspirators

consent to accomplish an unlawful act, that does not

mean they impliedly consent to each other’s arbitration

agreements”); Richard Frankel, The Arbitration Clause

as Super Contract, 91 Wash. U. L. Rev. 531, 586 n.229

(2014) (“There appears to be no contract-law analog for

rewarding a party that behaves illegally by granting the

party rights under the contract.”).

Indeed, those courts that continue to apply “concerted

misconduct” estoppel no longer even attempt to link it

to equitable estoppel’s traditional roots. Instead they

justify use of the doctrine by referring to considerations

of judicial economy, by invoking the federal policy favoring

arbitration, or both. See Carroll, 374 F. Supp. 2d at 378

(interrelated claims doctrine “appears to depend upon the

broad federal policy favoring arbitration”); Douzinas v.

Am. Bureau of Shipping, Inc., 888 A.2d 1146, 1153 (Del.

Ch. 2006) (“to refuse to compel arbitration for claims

against the [nonsignatory defendants] would render

the arbitration between the signatories meaningless

and thwart the state and federal policy in favor of

arbitration”); Shetty v. Palm Beach Radiation Oncology

Assocs.-Sunderam K. Shetty, M.D., P.A., 915 So.2d 1233,

1235 Fla. 4th DCA 2005) (equitable estoppel appropriate

where claims against nonsignatory were “inextricably

linked” with claims already being arbitrated against a

signatory). But while this Court has invoked the federal

15

policy favoring arbitration on many occasions, that policy

has no bearing on the question of whether and under what

circumstances nonsignatories may compel arbitration.

Arthur Andersen, 556 U.S. at 630 n.5 (“Whatever the

meaning of this vague prescription that courts must

respect the federal policy favoring arbitration, it cannot

possibly require the disregard of state law permitting

arbitration by or against nonparties to the written

arbitration agreement.”).

Yet courts throughout the country continue to

disregard state law regarding equitable estoppel in

favor of arbitration-specific doctrines that “derive their

meaning from the fact that an agreement to arbitrate is

at issue.” AT & T Mobility LLC v. Concepcion, 563 U.S.

333, 339 (2011). Until this Court provides further guidance

about what it meant in Arthur Andersen, confusion and

inconsistency will continue to pervade this area of law. And

innumerable consumers and workers who never misled

any corporation to its detriment will still find themselves

forced to defend against motions to compel arbitration

brought by defendants who are not parties to any relevant

arbitration agreement, based on misguided arbitrationspecific “estoppel” doctrines that have no place in state

common law.

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CONCLUSION

This Court should reiterate that equitable estoppel

will only permit a nonsignatory to enforce an arbitration

agreement under the same circumstances that would

permit a nonsignatory, under relevant state contract

law principles, to enforce any other type of contract.

Arbitration-specific estoppel tests violate the “equaltreatment principle” that undergirds this Court’s FAA

precedents. This Court should utilize the opportunity this

case presents for a review of the intersection between

arbitration and equitable estoppel to provide much-needed

guidance to the lower courts in this unsettled area of law.

Respectfully submitted,

K arla Gilbride

Counsel of Record

Stephanie K. Glaberson

Public Justice, P.C.

1620 L Street NW, Suite 630

Washington, DC 20036

(202) 797-8600

kgilbride@publicjustice.net

Counsel for Amicus Curiae

September 24, 2019