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Posted: March 14, 2016

Movant Should Have Been Allowed Discovery on Whether Non-Parties Should be Compelled to Arbitrate

On March 8, 2016, the First Department issued a decision in Matter of Rural Media Group, Inc. v. Yraola, 2016 NY Slip Op. 01598, holding that the movant on a motion to compel arbitration should have been allowed discovery on the question of whether persons who were not parties to the agreement containing an arbitration provision nonetheless should be compelled to arbitrate, explaining:

With respect to the petitioners who were nonsignatories to the agreement . . . the motion court correctly determined that respondent did not meet her burden, on this record, of showing that the intent to arbitrate may be imputed to these entities under theories of veil piercing/alter-ego, equitable estoppel, or de facto merger. Respondent bears a heavy burden with respect to each of these theories, and interrelatedness, standing alone, is not enough to subject a nonsignatory to arbitration. We are mindful, however, of respondent’s assertion that she has not had the opportunity to engage in discovery regarding the corporate structure of these petitioners, which the present record demonstrates is complex and closely interrelated. Accordingly, we modify the order denying the motion to compel with respect to these petitioners to the extent of denying the motion without prejudice to respondent’s renewal of the motion following the completion of discovery in arbitration.

(Internal quotations and citations omitted).

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