5th Circuit Determines Non-Signatories Can Compel Arbitration

The U.S. Circuit Court of Appeals for the Fifth Circuit affirmed the district court’s decision in Green Tree Servicing, LLC v. House that a non-signatory has standing to compel arbitration due to Mississippi’s intertwined claims test.  The court also affirmed the district court’s decision that the parties agreed to delegate questions regarding arbitrability to the arbitrator because the arbitration clause incorporated the JAMS rules which give the arbitrator power to determine arbitrability.

Under Mississippi’s intertwined claims test, a non-signatory can compel arbitration when a litigant makes “allegations of substantially interdependent and concerted misconduct” between a non-signatory and a signatory that have a close legal relationship. Here, the court concluded that both non-signatory companies had a close legal relationship with a signatory even though the non-signatory parties did not exist at the time the contract was signed.

On appeal, the court also addressed jurisdiction.  In this case, the district court labeled its decision “Final Judgment,” and dismissed the case with prejudice.  While the order recited that either party may move to reopen the case after or during arbitration, the case was an appealable final judgment.  A similar case with similar parties was also in front of a separate federal judge. The court reasoned that it must look at the orders of both courts to resolve whether a final, appealable order had been issued. The court concluded that the other federal case not at issue here was remanded to state court and nothing remained in front of the federal judge. Thus, the “Final Judgment” became final and appealable, and the court had jurisdiction to hear the appeal.

Finally, the appellants argued that the district court failed to consider their allegations that the appellees obtained the arbitration agreement by fraud.  The court dismissed these allegations because the appellants’ fraud allegations were not specific to the arbitration agreement as required by the Supreme Court’s decision in Rent-A-Center v. Jackson.