Commercial Division Blog
Court Grants Motion to Compel Arbitration Brought By Corporate Officers Not Signatories to Arbitration Agreement
On January 3, 2018, Justice Masley of the New York County Commercial Division issued a decision in Huntsman Intl., LLC v. Albemarle Corp., 2018 NY Slip Op. 30014(U), granting a motion to compel arbitration brought by persons that had not signed the agreement containing the arbitration provision, explaining:
The Individual Defendants seek to compel arbitration despite being nonsignatories to the arbitration agreement. The Individual Defendants argue that agents to signatories of an arbitration agreement may benefit from arbitration agreements entered into by their principals. If the alleged conduct relates to their behavior as officers or directors or in their capacities as agents of the corporation, then non-signatories may compel arbitration. Huntsman opposes on the theory that New York law forbids a non-signatory from compelling arbitration unless the right of the non-signatory is expressly provided for in the agreement. Huntsman construes Section 10.11 of the SPA, stating this Agreement is not intended to confer upon any other Person any rights or remedies hereunder, to exclude the Individual Defendants from coverage under the arbitration clause.
The court rejects Huntsman's argument. Individual defendants may seek to compel arbitration as former directors of a signatory. The obligation can also attach where agents seek to enforce arbitration agreements entered into by their principal so long as the alleged misconduct relates to their behavior as agents of the corporation.
Guided by these principles, the court finds that the Individual Defendants may join the arbitration. It is true that the Individual Defendants are non-signatories to the SPA, but each defendant was nevertheless high-level executives of the signatory company, possessing varying degrees of knowledge about, and control over, the disputed transaction. Two of the Individual Defendants were charged with possessing knowledge under Section 4.27 (f); two of the Individual Defendants executed separate amendments to the SPA; and three of the Individual Defendants received hundreds of thousands to millions in cash bonuses for helping close the underlying transaction. Litigation will be stayed where non-signatories were closely related to the signatories and is alleged to have engaged in substantially the same improper conduct.
(Internal quotations and citations omitted).
Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you or a client have a question regarding a dispute that is subject to an arbitration agreement.