Eighth Circuit Finds Incorporation Of AAA Rules Authorizes Arbitrator To Determine Whether Non-Signatory Can Arbitrate
In a short and sweet opinion issued just six weeks after argument, the Eighth Circuit yesterday held that an arbitrator was authorized to decide whether a non-signatory was able to arbitrate a dispute. Eckert/Wordell Architects, Inc. v. FJM Props. of Willmar, LLC, __ F.3d __, 2014 WL 2922343 (8th Cir. June 30, 2014).
The dispute was over the design and construction of a laser eye clinic in Minnesota. The contract containing the arbitration agreement was between the architects and Fischer Laser Eye Center, the owner of the property where the clinic would be. The shareholders of Fischer later formed a separate company to own and develop the land for the clinic, and that second company then changed its name to FJM Properties. When it discovered problems with ventilation, FJM Properties demanded arbitration with the architects. That arbitration proceeding went on for more than a year. Just a month before the evidentiary hearing, the architects objected to participating further, based on their assertion that they had no arbitration agreement with FJM Properties. The arbitrator found he had power to determine whether the parties had an arbitration agreement and invited briefing.
The architects went to federal district court and asked the judge to stop the arbitration. But the court agreed that the arbitrator had the power to decide whether FJM could enforce the arbitration agreement between Fischer and the architects. In a single paragraph of analysis, the Eighth Circuit affirmed. It reminds us that “threshold questions of arbitrability are for a court to decide, unless there is clear and unmistakable evidence the parties intended to commit questions of arbitrability to an arbitrator.” In this case, the parties’ incorporation of the AAA’s Construction Industry Arbitration Rules (which allow arbitrators to rule on their own jurisdiction) served as “a clear and unmistakable indication the parties intended for the arbitrator to decide threshold questions of arbitrability.” Reading between the lines, the fact that the architects drafted the contract and then tried to design an escape hatch from arbitration after the proceeding was nearly concluded did not help their cause.