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S6 | MONDAY, MARCH 31, 2014 | Alternative Dispute Resolution
| NYLJ.COM

Arbitrating Against Non-Signatories:
a bill of lading which specifically refers to a

charter party and in unmistakable language
incorporates the charter party’s arbitration
section can compel a party to the charter The Current State of Play
party to arbitrate ... .”6 In the case law, the
same principle extends beyond admiralty to
a variety of other kinds of contracts which
also incorporate by reference.7

Assumption

A non-signatory may be compelled to
arbitrate when its conduct evinces intent to
be bound by the arbitration agreement. In
Gvozdenovic v. United Air Lines,8 for example,
1,202 former PanAm flight attendants, whose
division had been acquired by United Airlines,
sought to vacate a labor-related arbitration

award because they were not parties to the
underlying collective bargaining agreement
that contained the arbitration clause. The
Second Circuit rejected their challenge, noting
the flight attendants’ “active and voluntary
participation in the arbitration; for example,
through [their union], they chose a committee
to represent them in the arbitration, and, on
their behalf, the committee withdrew funds

from the bank account set up to cover its
expenses, chose counsel to represent the
transferring flight attendants in the arbitra-
tion and argued vigorously that they should
receive full credit for their time of employ-
ment with Pan Am.”9 As the court explained,
“[i]t is hornbook law that parties by their
conduct may agree to send issues outside an
arbitration clause to arbitration,” and the
10
flight attendants’ “conduct manifested a clear
intent to arbitrate the dispute.”11

Agency

Agency is “the fiduciary relation which
results from the manifestation of consent by
one person to another that the other shall act

on his behalf and subject to his control, and
consent by the other so to act.”12 Under tra-
ditional principles of agency law, a principle
is bound by the acts of its agent, such as the
agent’s agreement to arbitrate, where such
agreement is undertaken within the scope of
the agent’s duties.13 When agents are involved, K
arbitrability also works in the opposite direc- OC
tion, in that “employees or disclosed agents GST
BI
of an entity that is a party to an arbitration
agreement are protected by that agreement.”14
Disponent Owners and the Charterers,
In Hirschfeld Prods. v. Mirvish,15 for exam- ing arbitral jurisdiction over a non-signatory the matter in dispute shall be referred
ple, a joint venture agreement (JVA) to pro- BY JOHN DELLAPORTAS
to an arbitration clause in a contract signed
duce “Hair” at the Old Vic Theater in London by other parties.2
to three persons in New York, one to be
contained the following clause:
Arbitration is a creature of contract, appointed by each of the parties hereto,
Should a dispute arise from this agree- made between consenting parties. As and the third by the two so chosen, and
such, it is generally thought that those Incorporation By Reference
their decision, or that of any two of them,
ment or from its interpretation then the who have not signed an arbitration agree- shall be final, and, for purpose, of enforc-
Producers agree that such dispute shall A non-signatory may be compelled to ing any award, this agreement may be
be referred to an Arbitrator to be appoint- ment cannot be compelled to arbitrate. arbitrate against a signatory to an arbitra- made a rule of the Court. The arbitrators
ed in the absence of agreement between While that is often the case, like most legal tion agreement when that non-signatory has shall be commercial men.4
the disputing parties by the President for rules, it has its exceptions. The U.S. Court executed a contract that incorporates by
the time being of the Society of West End of Appeals for the Second Circuit, in Thom- reference the existing arbitration agree- When the vessel foundered off the coast of
Theatre in accordance with U.K. law.16
son-CSF, S.A. v. American Arbitration Asso- the Azores, its charterer, Nimpex, which was
ciation, recognized five: (1) incorporation ment. The converse is also true—a non- not a signatory to the charter party, sought
The production flopped. The plaintiff, a by reference; (2) assumption; (3) signatory in such circumstances can also to arbitrate liability for the lost cargo against
party to the JVA, then sued the president agency; (4) veil-piercing/alter ego; and compel arbitration against a signatory. In one of the signatories. The Second Circuit
Import Export Steel v. Mississippi Valley
and chairman, respectively, of the theatrical (5) estoppel.1 Courts have cited each of Barge Line,3 for example, a charter party affirmed the motion to compel, as Nimpex was
production company, which was the coun- these common law principles as support-
(i.e., an admiralty contract between a vessel the holder of bills of lading which unequivo-
terparty to the JVA. On appeal, the New York cally incorporated “[a]ll the terms, condi-
Court of Appeals affirmed the arbitrability owner and a shipper) contained the follow- tions, liberties and exceptions of the charter
of the dispute. Even though the defendants JOHN DELLAPORTAS is a partner in Morgan, Lewis & ing arbitration clause:
party.”5 According to the Court of Appeals:
were not personally signatories to the JVA,
Bockius’ litigation practice.
Should any dispute arise between the
“[T]he rule in this circuit is that a holder of