2015 UT App 272

THE UTAH COURT OF APPEALS

SOLID Q HOLDINGS LLC,

Appellee,

v.

ARENAL ENERGY CORPORATION, RICHARD REINCKE,

AND ERIC JOHNSON,

Appellants.

Memorandum Decision

No. 20140252-CA

Filed November 12, 2015

Fourth District Court, Provo Department

The Honorable Lynn W. Davis

No. 130401096

Paul W. Jones, Attorney for Appellants

Patrick J. Ascione, Attorney for Appellee

JUDGE KATE A. TOOMEY authored this Memorandum Decision, in 

which JUDGES J. FREDERIC VOROS JR. and MICHELE M.

CHRISTIANSEN concurred.

TOOMEY, Judge:

¶1 Arenal Energy Corporation, Richard Reincke, and Eric 

Johnson appeal from the district court’s order denying their 

motion to compel arbitration in their dispute with Solid Q

Holdings LLC (Solid Q). We affirm.

¶2 In July 2012, Solid Q extended a loan to Arenal Energy 

Corporation, for which the two entities executed a promissory 

note (the Note). Reincke and Johnson, who established Arenal 

Energy Corporation, each personally guaranteed the Note. 

Although the Note contained an integration clause, it did not 

include any provision that would require the parties to arbitrate 
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20140252-CA 2 2015 UT App 272

claims arising from it. The parties subsequently amended the 

Note several times but never added an arbitration clause.

¶3 Meanwhile, Arenal Energy Corporation entered into 

separate contracts with Solid Q’s principals, Shaun and Brittni 

Shelton, for their individual consulting services (the Consulting 

Agreements).1 These agreements had integration clauses. But, 

unlike the Note and its various amendments, the Consulting 

Agreements contained arbitration clauses which provided that 

Arenal Energy Corporation and the Sheltons ‚agree*d+ to submit 

any dispute pertaining to [the Consulting Agreements] to 

arbitration prior to commencing any legal action.‛

¶4 Arenal Energy Corporation eventually defaulted on the 

Note. Consequently, Solid Q initiated this lawsuit against Arenal 

Energy Corporation, Reincke, and Johnson (collectively, Arenal) 

on the Note, raising claims of breach of contract, breach of 

contract on personal guarantees, civil conspiracy, and fraud. In 

response, Arenal filed a motion to stay the proceedings and 

compel arbitration, asking the district court to enforce the 

arbitration clause in the Consulting Agreements and to order 

Solid Q’s claims to arbitration. Arenal asserted that even though 

Solid Q was not a signatory to an agreement with an arbitration 

provision, the arbitration clause in the Consulting Agreements 

applied to Solid Q’s lawsuit because Arenal’s breach-of-contract 

claims against the Sheltons were ‚based entirely on the same 

facts, relationships and . . . disputes‛ as Solid Q’s claims arising 

on the Note. Solid Q countered that the Note did not have an 

arbitration provision and that the Note and the Consulting 

Agreements were wholly unrelated.

 

1. By its terms, the Note is governed by Utah law. In contrast, the 

Consulting Agreements indicate that they are governed by Texas 

law.
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20140252-CA 3 2015 UT App 272

¶5 The district court denied Arenal’s motion to compel 

arbitration without prejudice. It reasoned that ‚there is an 

insufficient basis to compel arbitration where [Solid Q] has not 

executed an arbitration agreement, and where [Arenal admits] 

that *Solid Q+ has signed no arbitration agreement.‛ Arenal now 

appeals in accordance with Utah Code section 78B-11-129(1)(a).

I. Motion to Compel Arbitration

¶6 Arenal challenges the district court’s decision to deny its 

motion to compel arbitration. ‚*W+hen a district court denies a 

motion to compel arbitration based on documentary evidence 

alone,‛ we review that decision for correctness. ASC Utah, Inc. v. 

Wolf Mountain Resorts, LC, 2010 UT 65, ¶ 11, 245 P.3d 184. But to 

the extent Arenal contends the district court should have 

equitably estopped Solid Q from avoiding arbitration, we 

generally afford deference to the district court’s decision 

whether to apply equitable estoppel principles to the facts of a 

case. See Glew v. Ohio Sav. Bank, 2007 UT 56, ¶ 19, 181 P.3d 791.

¶7 As in the district court, Arenal admits on appeal that 

‚Solid Q Holdings is not itself *a+ signatory to an arbitration 

provision‛ but argues Solid Q is estopped from refusing to 

arbitrate. According to Arenal, Solid Q’s claims on the Note and 

Arenal’s counterclaims under the Consulting Agreements ‚are 

based entirely on the same facts, relationships and inseparable

disputes.‛ In essence, it contends that, as a signatory to an 

arbitration agreement, it has the right to compel arbitration with 

Solid Q, which is a nonsignatory to the arbitration agreement 

and which originally brought suit against Arenal under a 

separate contract.

¶8 ‚The general rule of arbitration agreements is that one 

who has not manifested assent to an agreement to arbitrate 

cannot be required to submit to arbitration.‛ Ellsworth v. 

American Arbitration Ass’n, 2006 UT 77, ¶ 19, 148 P.3d 983. But, 

‚under certain circumstances, a nonsignatory to an arbitration 
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20140252-CA 4 2015 UT App 272

agreement can enforce or be bound by an agreement between 

other parties.‛ Id. In particular, Arenal relies on the estoppel 

exception recognized in Ellsworth, in which the Utah Supreme 

Court determined a signatory can enforce an arbitration 

provision of a contract if a nonsignatory sues under the contract 

or seeks to benefit from that contract. Id. ¶¶ 19 & n.11, 20 & n.12, 

22.2 The Ellsworth court ultimately held that ‚the nonsignatory 

estoppel exception does not apply to . . . a nonsignatory who is 

not suing on the contract and who has not received direct 

benefits from the contract.‛ Id. ¶ 20. The rationale behind this 

exception is to prohibit a nonsignatory from having it both 

ways—seeking to benefit from an agreement while attempting to 

avoid the duties imposed by that same agreement. See id.

¶9 The nonsignatory estoppel exception does not apply here 

for two reasons. First, Solid Q is not suing based on the 

Consulting Agreements. Instead, Solid Q is suing Arenal for 

claims arising on the Note—an instrument without an 

 

2. The Ellsworth court also identified other rationales for binding 

a nonsignatory to an arbitration agreement. See Ellsworth v. 

American Arbitration Ass’n, 2006 UT 77, ¶ 19 n.11, 148 P.3d 983. 

These rationales include incorporation by reference, assumption, 

agency, veil-piercing or alter-ego, and third-party beneficiary. Id.

Because Arenal does not argue in its opening brief that these 

other rationales apply to this case, we do not consider them. In 

its reply brief, Arenal cites Texas case law in an apparent effort 

to argue that Solid Q should be compelled to arbitrate based on 

agency principles. But because an argument initially raised in an 

appellant’s reply brief is generally considered waived, we will 

not address this argument further. See Brown v. Glover, 2000 UT 

89, ¶ 23, 16 P.3d 540 (explaining that issues first raised in the 

reply brief are considered waived ‚to prevent the resulting 

unfairness to the respondent‛ where ‚the respondent had no 

opportunity to respond‛).
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20140252-CA 5 2015 UT App 272

arbitration provision. Second, beyond pointing out that the 

Sheltons—who are signatories to the Consulting Agreements—

own Solid Q, Arenal has not alleged that Solid Q has received 

direct benefits from the Consulting Agreements.

¶10 Nevertheless, relying on a variation of the estoppel 

exception in other jurisdictions, Arenal contends that ‚when a 

non-signatory Plaintiff’s claims are ‘intertwined’ with claims 

under another agreement[] containing a broad arbitration clause, 

all of the Plaintiff’s claims are arbitrable.‛ But, even under this 

variation, Arenal’s arguments are misplaced. 

¶11 Assuming, without deciding, that this variation would 

comport with Utah law, the cases Arenal identifies do not 

support the proposition that this version of equitable estoppel 

could apply to estop a nonsignatory from avoiding arbitration. 

Rather, the cited cases indicate only that a nonsignatory can 

force a signatory to arbitrate pursuant to a contract when 

‚the signatory plaintiff sues a nonsignatory defendant on the 

contract but seeks to avoid the contract-mandated arbitration by 

relying on the fact that the defendant is a nonsignatory.‛ Id. ¶ 20 

n.12 (citing Bridas S.A.P.I.C. v. Government of Turkm., 345 F.3d 

347, 360–61 (5th Cir. 2003)).3Indeed, the Fifth Circuit has 

 

3. See, e.g., Bridas S.A.P.I.C. v. Government of Turkm., 345 F.3d 347, 

360–61 (5th Cir. 2003) (stating that the ‚simple fact that *the 

signatory’s+ claims against . . . *the nonsignatory+ are inextricably 

intertwined . . . is insufficient, standing alone, to justify the 

application of equitable estoppel‛ to the nonsignatory); Javitch v. 

First Union Sec., Inc., 315 F.3d 619, 628–29 (6th Cir. 2003) (‚When 

only an indirect benefit [from the contract containing the 

arbitration provision] is sought, . . . it is only a signatory that 

may be estopped from avoiding arbitration with a nonsignatory 

when the issues the nonsignatory is seeking to resolve in 

arbitration are intertwined with the underlying contract.‛); 

Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 526–28 (5th 

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20140252-CA 6 2015 UT App 272

acknowledged that the version of estoppel that Arenal’s 

argument depends upon

applies only to prevent a signatory from avoiding 

arbitration with a nonsignatory when the issues the 

nonsignatory is seeking to resolve in arbitration are 

intertwined with the agreement that the estopped party 

has signed. [B]ecause arbitration is guided by 

contract principles, the reverse is not also true: a 

signatory may not estop a nonsignatory from 

avoiding arbitration regardless of how closely 

affiliated that nonsignatory is with another signing 

party. 

Bridas, 345 F.3d at 361 (alteration in original) (citations and 

internal quotation marks omitted). This rule ‚makes sense 

because the parties resisting arbitration had expressly agreed to 

arbitrate claims of the very type that they asserted against the 

nonsignatory.‛ Id. Thus, the cases Arenal cites are inapposite.4

 

(...continued)

Cir. 2000) (estopping a signatory plaintiff from relying upon the 

defendants’ status as nonsignatories to prevent the defendants

from compelling arbitration).

4. Arenal also cites two cases for the proposition that ‚a claim 

against a non-signatory ‘that is based upon the same operative 

facts and is inherently inseparable from the claims against a 

signatory will always contain issues referable to arbitration 

under an agreement in writing.’‛ (Quoting Hill v. G E Power Sys., 

Inc., 282 F.3d 343, 347 (5th Cir. 2002).) The cited discussions in 

these two cases, however, address whether a nonsignatory with 

inherently inseparable claims brought against it is entitled to a 

stay pending the outcome of a signatory’s arbitration under the 

(continued...)
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20140252-CA 7 2015 UT App 272

¶12 In sum, because the estoppel exceptions that Arenal relies 

on apply only to prevent a signatory’s attempt to avoid 

arbitration, see id., or to prevent a nonsignatory’s attempt to 

benefit from an agreement while seeking to avoid that same 

agreement’s arbitration provision, estoppel does not apply here,

see Ellsworth, 2006 UT 77, ¶ 20. Solid Q did not sign the 

Consulting Agreements containing the arbitration provision and 

never sued Arenal on those agreements. Moreover, Arenal has 

not alleged that Solid Q even benefitted from the Consulting 

Agreements. Accordingly, we decline Arenal’s invitation to 

apply equitable principles to this case and thus we affirm the 

district court’s order denying Arenal’s motion to compel 

arbitration. 

II. Attorney Fees On Appeal

¶13 Solid Q seeks an award of attorney fees pursuant to 

rule 33 of the Utah Rules of Appellate Procedure because, it 

argues, this appeal was frivolous and only brought for delay. 

Arenal does not respond to Solid Q’s rule 33 argument.

¶14 Rule 33 allows this court to award ‚just damages‛ to the 

prevailing party, which may include reasonable attorney fees, if 

it determines that an appeal ‚is either frivolous or for delay.‛ 

Utah R. App. P. 33(a). ‚*A+ frivolous appeal . . . is one that is not 

grounded in fact, not warranted by existing law, or not based on 

a good faith argument to extend, modify, or reverse existing 

law.‛ Id. R. 33(b). An appeal is brought for delay if it ‚is one 

interposed for any improper purpose such as to harass, cause 

needless increase in the cost of litigation, or gain time that will 

benefit only the party filing the appeal.‛ Id. The Utah Supreme 

 

(...continued)

Federal Arbitration Act. See Hill, 282 F.3d at 347–48; Harvey v. 

Joyce, 199 F.3d 790, 795–96 (5th Cir. 2000). These cases therefore 

do not lend support to Arenal’s position. 
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20140252-CA 8 2015 UT App 272

Court has indicated that the imposition of rule 33 sanctions ‚is a 

serious matter and only to be used in egregious cases, lest the 

threat of such sanctions should chill litigants’ rights to appeal 

lower court decisions.‛ Redd v. Hill, 2013 UT 35, ¶ 28, 304 P.3d 

861. Thus, sanctions under rule 33 are ‚appropriate for appeals 

obviously without merit, with no reasonable likelihood of 

success, and which result in the delay of a proper judgment.‛ Id.

(citation and internal quotation marks omitted). 

¶15 We conclude that Arenal’s appeal is not an egregious case 

and therefore sanctions are not appropriate. As the district court 

observed, ‚the Ellsworth case appears to have opened the door 

for Utah courts to consider [estoppel and] the other nonsignatory exceptions‛ to the general arbitration rule. Even 

though Arenal’s arguments to extend existing law are unavailing 

on appeal, the issues it raises are neither frivolous nor brought 

solely for delay. Accordingly, we decline to award Solid Q 

attorney fees under rule 33.

CONCLUSION

¶16 Arenal has not demonstrated that Solid Q is a 

nonsignatory that may be bound by an arbitration agreement 

between other parties. We therefore affirm the district court’s 

order refusing to compel arbitration. Because we affirm the 

district court’s order, Solid Q is entitled to its costs. See Utah R. 

App. P. 34(a) (‚*I+f a judgment or order is affirmed, costs shall be 

taxed against appellant . . . .‛). But an award of attorney fees 

incurred on appeal to Solid Q is not merited under rule 33 of the 

Utah Rules of Appellate Procedure.