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ry 17, 2009 No. 08-5003 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT
CROSS VI L L E MEDI CALONCOL OGY, P.C., Pla int if f- Ap pe lla nt,
v. GL EN WOO D SY STE MS, L L C, Def endant- Appellee
. ) ) ) ) ) ) ) ) ) ON APPEALFROM TH E UNI TED STATES DI STRI CT COURT FOR THE MI DDL E DIS T RI CT OF TENNESSEE

B e fo re : SU HRHE I

NR I CH , G RI F F I

N, and KE TH L ED GE , Ci rc uit

Judg e s.
KETHL EDGE, Ci r c u it J udg e. Crossville Medica l Oncolog y , P.C. (“Crossville”) appe als the dismiss al of its claims ag ainst Glenwood Sy stems, L L C (“G lenwood L L C”). Crossville argues the district court er

red in holding that Glenwood L L C could enfor ce a n arbitration clause in a c ontrac t to whic h it

wa s n ot a

sig nator y . We a ff ir m. I. A. Glenw o o d

L L C i s a Co n n e c ti c u t l im it e d

li a b il it y c o mp an y th a t p r o v id e s me d ic a l b il li ng service s. Nat L og anatha

n formed the company in 1998, and is its sole member and owne r. In 2000, L og anatha

n formed a De lawar e cor

poration name d “Glenw ood Sy stems, I nc.” ( “Glenw ood I nc.”)
. L og anatha

n was the c orporation’s sole share hold er . T h i s Glenwood e ntity did not conduct anyNo. 08-5003

Cro ssv ill e Me dic al O nc ology , P .C. v . G le nwo od

Sy ste ms , LLC

-2- busines s , is s u e an y

s to c k o r d iv id e n d s , f

il e tax r e tu

r n s , o r ma inta in a b an k a c c o u n t, an d

h a d no employ ees. A ccor ding to L og anatha n, howeve r, he use d the two Gl en wo o d entities’ names

“ int e rc ha ng e a bly [ ,] ” and Gl e nw oo d L L C “ [f]r om t ime to t ime ” did bu sin e ss u

nd e r t he name “Glenw ood Sy stems, I nc.” J.A. 194, 243. On Janu ary 12 , 2 00 4, Cr os sv ill e e nte re d into a wr itt e n a g re e me nt w ith“ Gl e nw oo d Sy ste ms, I nc .” J.A. 29 -3 0. Und er the a g re e me nt, “ Gl e nw oo d” wo uld pr ov ide me dic a l bi lli ngse rv ic e s to Crossville. The ag ree ment provided that any dispute arising out of the ag ree ment would be re solved by an a rb itr a tor in C onne c tic ut. G l e n w o o d

LLC the n pr ov ide d bil lin g se rv ic e s to Cr os sv ill e fo r s e ve ra l mo nth s. Cr os sv ill e late r c la ime d th a t th os e se rv ic e s w e re de fi c ie nt, and te rm inate d th e a g re e me nt. B. Crossville therea fter f

iled a complaint ag ainst “Glenw ood Sy stems, L .L .C., d/b/a G lenwood Sy stems, I nc.” in Te nnessee state cour t. Glenwood L L C removed the c ase to feder al court, and filed
an answ er a

nd counter claims. In its answer, G lenwood L L C asserted a s an af firmative de fense that “the c ontrac t require s the parties to re solve any and all disputes, which a

rise out of or in c onnection with this contract, in ar

bitration.” J.A. 52. Over the next several months, Glenwood L L C responde d to motions for a defa ult judgment and to dismiss its counter claims for lack of standing , and it self filed a mot ion to extend the discovery deadline. Eight mont hs afte r removing the case to fede ral c ourt, Glenwood L L C moved to refe r the
case to arbitration, pursua nt to the agre em en t ’s m andator y arbitration clause. The district court g rante d the motion. More than a y ear and a ha lf later, how ever , and on the da y befor e the a

rbitrationNo. 08-5003

Cro ssv ill e Me dic al O nc ology , P .C. v . G le nwo od

Sy ste ms , LLC

-3- he ari ngwa s sc he du le d to c omm e nc e , Cr os sv ill e fi le d a mot ion in t he dis tr ic t c ourt

to r e tur n th e c a se to t he c ourt on the g ro un d th a t G le nw oo d L L C w a s n ot a pa rt y to t he arb itr a tio n a g re e me nt. Cr os sv ill e a lso fi le d a

mot ion fo r l e ave to a me nd its c omp la int to a dd c la ims a g a ins t G le nw oo d L L C. The district court denie d Crossville’s motions and dismissed the ca se without prejudice . This appea l followed. II. A. “We re view de novo a

dis tr ic t c ourt ’s de c isi on s r e g ard ingbo th the e xiste nc e of a va lid arbitration ag ree ment and the a rbitrability

of a pa rticular dispute.” Floss v. Ryan’ s Family Steak Houses, Inc

. , 211 F.3d 306, 311 ( 6th Cir. 2000). “In decidingwhether [arbitration] agr eeme nts are enfor cea ble, we e x amine applica

ble state-la

w contra ct principles.” Id. at 314. B. Cr o s s v i l l e f

i r s t ar g u e s t h a t G l e n w o o d L L C w a i v e d i t s r i g h t t o ar b i t r a t e b y e ng a g ing in litigation for e ight months befor e demanding arbitration. A party waives its rig ht to arbitration by participating in litigation to such an ex tent that its actions are “complete ly inconsistent with any relianc e” on its rig ht to a

rbitrate a nd cause the opposing party to suffer prejudice
. Gen. Star Nat’l Ins. Co. v. Administratia Asigur arilor de Stat , 289 F.3d 434, 438 (6th Cir. 2002)
. “[W ]aiver of the rig ht to arbitration is not to be lightly inferr ed[,] ” bec ause “ [t ]here is a strong presumption in favor of ar bitration[.] ” Highlands W ellmont Health Network, Inc. v. John Dee re Health Plan, Inc. , 350 F.3d 568, 573 ( 6th Cir. 2003).No. 08-5003

Cro ssv ill e Me dic al O nc ology , P .C. v . G le nwo od

Sy ste ms , LLC

-4- He re , G le nw oo d L L C pa

rt ic ipate d in

lit ig a tio n w he n it

fi le d a n ans we r a

nd c ounte rc la ims , re sp on de d to tw o mo tio ns, and fi le d a mot ion to e xten d th e dis c ov e ry

de a dli ne . B ut n e ith e r p art y had ser ved any d i s co v ery

reque sts, ex chang ed docume nts, or deposed a ny witnesses bef

ore Glenwood L L C moved to refe r the c ase to a rbitration. Glenwood L L C also asserte d the ar bitration ag ree ment as an af

fi rm ative def

ense in its answe r. We there fore hold that its actions were not inconsistent w it

hit s r igh t t o ar

b it r a te an d th a t C r o s s v il le w a s n o t p r e ju d ic e d b y G le n w o o d

L L C’s delay in assertingthat rig ht. Consequently , Glenwood L L C did not waive its right to ar bitrate. C. Cr os sv ill e a lso argue s th a t G le nw oo d L L C c ann ot e nf or c e the a g re e me nt’ s arb itr a tio n c la us e be c a us e it w a s n ot a

sig nator y to t he a g re e me nt. Th is a

rgume nt i s f

or e c los e d b y

pr e c e de nt. “[N]ons ignatories may

be bound to an arbitration ag ree ment under or dinary contra ct and ag ency principles.” Javitch v . First Union Sec., Inc

. , 315 F.3d 619, 629 ( 6th Cir. 2003). Apply ing those principles, we reje cted an argument identical to Crossville’s in Fede rated Dep’ t Stores, Inc. v. J.V .B. Indus., Inc

. , 8 94 F .2 d 8 62 (6 th Cir . 199 0) . T he re , th e pla int if f a rgue d th a t th e de fe nd ant, J VB I ndustries, “had no rig ht to compel ar bitration of the business destruc tion claims beca use JVB was not a pa

rty to the construction contra cts.” Fede rated , 894 F.2d at 870. The plaintiff a rgued that only TAB —a sepa

rate entity esta b li shed by J VB ’s owner

—executed the c ontrac ts, and that there fore only TAB could enf

orce the ar

bitration provisions in thos e contr acts. Id. We disag ree d, holding that “JVB and TAB wer e alter eg os” and that J VB was “ the re al par ty in interest” to the c ontrac ts. Id. We n ote d that T AB and

JVB “ we re c los e ly

int e rc onne c te d, ” that th e y “ bo th o pe ra

te d o ut o f t

he same office [,] ” and that TAB “ had no assets and no share holders or ma nag ement diffe rent fr om those ofNo. 08-5003

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Sy ste ms , LLC

-5- J BV .” Id. A sing le owner “contr olled both c orporations, a nd TAB was a mere instrumentality of J VB .” Id. Thus, J VB “wa s a proper party to the arbitration[ ,]” despite the fa ct that it had not executed the c ontrac ts containing the ar bitration provision. Id. Th e same is tru e he re . G le nw oo d Inc . w a s “ clo sely int e rc onne c te d” wi th G le nw oo d L L C. The limited liabilit y

company ’s sole member incorporated Glenwood I nc., and w as the c orporation’s sole share holder a

nd direc tor. The two e ntities shared a n office and addr ess. Glenwood I nc. did not conduct a ny business, issue any stock or dividends, file tax returns, or ma intain a bank a ccount, a nd had no employ ees. It was a “ mere instrumentality ” and “ alter e g o” of G lenwood L L C. Id. Th a t is tr ue re g ard le ss o f whe the r Tenne sse e , Co nn e c tic ut, or De lawa re law a pp lie s in deter mining whe ther the a

rbitration ag ree ment is enforc eable . Eac h of those st ates re cog nizes the
same a lter-e g o and instrumentality principles applied in Fede rated
. See Cont’l Bankers Life Ins. Co. of the South v. Bank of Alamo , 57 8 S.W. 2d 62 5, 63 1- 32 (T e nn . 1 97 9) ; Y oung v. Metro. Prop. and Cas. Ins. Co. , 7 5 8 A
. 2 d

4 5 2 , 4 5 6
- 5 7 ( C o n n . Ap p . 2 0 0 0 ); NA MA Hol dings , LLC v . R e late d W

or ld Ma rk e t Ctr

. , 922 A.2d 417, 432-33 (D el. Ch. 2007). Fede rated there fore controls her e. D. F ina lly , Cr os sv ill e argue s th a t th e dis tr ic t c ourt e rr e d in de nyingits motio n to ame nd its complaint to “state proper claims ag ainst Glenwood L L C.” Appellant’s Br. at 17. As shown above , howeve r, Gle n wo o d L L C properly invoked the agree ment’s ar bitration clause. Crossville’s
a me nd me nt

t h e r e f o r e w o u l d

h av e b e e nf

u t i l e , an d t h e d i s t r i c tc o u rtd i d

n o ta b u s e i t s d i s c r e t i o nin denying Crossville’s motion. The judg ment of the district cour t is affirmed.