The Hon. David G. Trager, United States District Judge for the Eastern District of New

1

York, sitting by designation.

06-4598-cv

Ross v. American Express Company

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

_______________________________

August Term, 2007

(Argued: July 10, 2008 Decided: October 21, 2008)

Docket Nos. 06-4598-cv(L), 06-4759-cv(XAP) 

_______________________________

ROBERT ROSS, on behalf of himself and all others similarly situated

and RANDAL WACHSMUTH, on behalf of himself and all others

similarly situated,

Plaintiffs-Appellees-Cross-Appellants,

 -v- 

 

AMERICAN EXPRESS COMPANY, AMERICAN EXPRESS

TRAVEL RELATED SERVICES COMPANY, and 

AMERICAN EXPRESS CENTURION BANK, 

Defendants-Appellants-Cross-Appellees.

___________________________________________________________

POOLER and HALL, Circuit Judges, and TRAGER, District Judge.1

___________________________________________________________

The plaintiffs appeal from the district court’s memorandum and order, dated September

27, 2005, holding that the defendants may properly avail themselves of arbitration clauses

contained in the plaintiffs’ cardholder agreements. The defendants appeal from the district

court’s further holding which denied their motion to compel arbitration pending the outcome of a

trial in the district court to determine whether the arbitration clauses were validly made. We
2

GRANT the plaintiffs’ appeal, DENY the defendants’ appeal as moot, and REMAND to the

district court for further proceedings in accordance with this opinion. 

MERRILL G. DAVIDOFF (Ruthanne Gordon, Charles P.

Goodwin, and David A. Langer on the brief) Berger &

Montague, P.C., Philadelphia, PA, for Plaintiffs.

EVAN R. CHESLER, Cravath, Swaine & Moore LLP,

(Elizabeth Grayer, Cravath, Swaine & Moore LLP;

Jonathan M. Jacobson, Meredith Kotler, Wilson Sonsini

Goodrich & Rosati on the brief) New York, NY, for

Defendants.

__________

POOLER, Circuit Judge:

Both parties have appealed from the memorandum and order, dated September 27, 2005,

of the United States District Court for the Southern District of New York (Pauley, J.). In that

decision, the district court considered both the defendants’ motion to compel arbitration,

pursuant to Section 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4, and the plaintiffs’

motion for class certification, pursuant to Federal Rule of Civil Procedure 23. The district court

held: (1) that the plaintiffs could be compelled to arbitrate; but (2) that arbitration could not

properly proceed before a trial in the district court determined that the arbitration clauses in the

plaintiffs’ cardholder agreements were validly created; and (3) that the plaintiffs’ proposed

“Injunctive Relief Class” could be certified, but that certification of a “Damages Class” would be

premature. In a second memorandum and order, dated September 21, 2006, the district court

denied the defendants’ motion for reconsideration and reiterated its holding that the

determination of the validity of the arbitration clauses is properly made by the district court, not

an arbitrator.
3

The plaintiffs appeal from the district court’s holding that the defendants may avail

themselves of the arbitration clauses in the cardholder agreements and compel the plaintiffs to

arbitrate their claims. The defendants appeal from that portion of the district court’s first

memorandum and order which denies their motion to compel arbitration in favor of a trial in the

district court concerning the validity of the arbitration clauses contained in the plaintiffs

cardholder agreements. Our review compels us to conclude that we must grant the plaintiffs’

appeal because we are convinced that the district court erred in holding that the cardholder

agreements provide a sufficient contractual basis for sending this case to arbitration. 

Consequently, we have no need to consider the defendants’ appeal. 

FACTS

Because the sole issue we need reach on this appeal is the discrete legal question of

whether or not the plaintiffs’ claims are subject to arbitration, we need not set forth any extensive

description of those claims. This action is related to In re Currency Conversion Fee Antitrust

Litigation, a multi-district class action litigation also pending in the Southern District before

Judge Pauley (“the MDL Action”). The plaintiffs in the MDL Action are holders of MasterCard,

Visa, and Diners Club (“the Network Defendants”) branded credit cards, which are issued by

various prominent banks, including Chase, Citibank, and Bank of America (“the Issuing Banks”). 

The central allegation made by the plaintiffs in the MDL Action is that the Network Defendants

and the Issuing Banks (collectively “the MDL Defendants”) engaged in a conspiracy, in violation

of, inter alia, the Sherman Act, 15 U.S.C. §§ 1 et seq., to fix fees charged to cardholders for

credit card transactions involving foreign currency at a level well above that which would prevail

in a competitive market. The plaintiffs also allege that the MDL Defendants engaged in a
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concerted effort to conceal the allegedly inflated foreign currency transaction fees from credit

card holders. See generally In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385

(S.D.N.Y. 2003).

The plaintiffs in this action are also holders of MasterCard, VISA, and Diners Club credit

cards. They assert claims against American Express Company and certain of its affiliated entities

(collectively “Amex”). The plaintiffs’ central allegation is that Amex “has actively conspired

with the MDL Defendants to fix, maintain, and conceal the artificially inflated” foreign currency

transaction fees alleged in the MDL Action. It is crucial to note that the plaintiffs in this action

are not holders of Amex credit cards and therefore do not seek relief as purchasers of Amex

products. Rather, Amex is alleged to have “joined, participated, ratified, and materially

supported [the] collusive arrangement between and among the MDL Defendants” to charge

artificially inflated fees on MasterCard, VISA, and Diners Club transactions involving foreign

currencies. 

In order to obtain their MasterCard and VISA credit cards, each plaintiff enters into a

standard cardholder agreement with the Issuing Banks. Of particular import here is that the

cardholder agreements include a broad arbitration clause which provides that “[a]ny dispute,

claim, or controversy . . . arising out of or relating to relating to this Agreement” be settled in an

arbitral, not a judicial, forum. The cardholder agreements leave no doubt that, should either party

choose it, arbitration shall be the exclusive means of dispute resolution:

YOU UNDERSTAND AND AGREE THAT IF EITHER YOU

OR WE ELECT TO ARBITRATE A CLAIM, THIS

ARBITRATION SECTION PRECLUDES YOU AND US FROM

HAVING A RIGHT OR OPPORTUNITY TO LITIGATE

CLAIMS THROUGH COURT, OR TO PARTICIPATE OR BE
5

REPRESENTED IN LITIGATION FILED IN COURT BY

OTHERS. EXCEPT AS OTHERWISE PROVIDED ABOVE,

ALL CLAIMS MUST BE RESOLVED THROUGH

ARBITRATION IF YOU OR WE ELECT TO ARBITRATE. 

The plaintiffs allege that the inclusion of these arbitration clauses in the cardholder

agreements furthered the alleged conspiracy in violation of the antitrust laws. Specifically, they

assert that Amex and the MDL Defendants held a series of meetings called for the purpose of

“discuss[ing] the implementation of compulsory arbitration clauses on general purpose

cardholders in an effort to impede consumer litigation, with a particular emphasis on class

actions.” The plaintiffs further allege that 

[b]y colluding with its competitors to insert compulsory arbitration

clauses in its cardholder agreements, American Express and its coconspirators intended to suppress competition and deprive their

cardholders of a meaningful choice concerning the arbitration of

disputes; shield themselves from potential liability arising from

their illegal conduct; facilitate the conspiracies [to inflate foreign

transaction fees]; and deprive their cardholders of their rights under

the Truth in Lending Act and the nation’s antitrust laws. 

Again, there is no dispute that Amex is not a party to the cardholder agreements, nor that

it has any other direct contractual relationship with the plaintiffs. We therefore do not see that

Amex would dispute the plaintiffs’ contention that “the only connection Amex claims to Plaintiff

cardholders is its alleged antitrust conspiracy.” Plaintiffs’ Br. at 16. Amex nevertheless asserts

that its status as an alleged co-conspirator with the entities which are indisputably parties to the

cardholder agreements allows it to avail itself of the compulsory arbitration clauses in those

agreements. Thus, in support of its motion to compel arbitration, Amex argued as follows: 

Plaintiffs’ antitrust claims against American Express in this action

arise directly from the cardmember agreements that Plaintiffs
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signed with [the Issuing Banks]. Those agreements contain

mandatory arbitration provisions. Plaintiffs should not be

permitted to circumvent their obligation to arbitrate claims relating

to those cardmember agreements through the device of a separate

lawsuit against American Express. Because Plaintiffs’ claims

against American Express arise out of, and are intertwined with,

the cardmember agreements, the doctrine of equitable estoppel

requires Plaintiffs to arbitrate those claims, even though American

Express is not a party to those agreements. 

The district court agreed with this contention. Quoting JLM Indus., Inc. v. Stolt-Nielsen.

S.A., 387 F.3d 163, 176 (2d Cir. 2004), Judge Pauley noted that “‘a non-signatory to an

arbitration agreement may compel a signatory to that agreement to arbitrate a dispute where a

careful review . . . discloses that the issues the non-signatory is seeking to resolve in arbitration

are intertwined with the agreement that the estopped party has signed.’” Ross v. American

Express Co., No. 04 Civ. 5723, 2005 WL 2364969, at *4 (S.D.N.Y. Sept. 27, 2005) (internal

quotation marks omitted). Relying upon Denny v. BDO Seidman, LLP, 412 F.3d 58, 70 (2d Cir.

2005), which was decided after oral argument had taken place on Amex’s motion, Judge Pauley

held that “allegations of concerted misconduct between a signatory and a non-signatory could

establish a close relationship between them” sufficient to invoke the doctrine of equitable

estoppel. Id. at *5. Thus, “[h]aving alleged that American Express acted in concert with [the

Issuing Banks], Plaintiffs cannot now escape the consequences of those allegations by arguing

that American Express and [the Issuing Banks] lack the requisite close relationship or that their

Sherman Act claims against American Express are not connected to that relationship.” Id.

(internal quotation marks omitted).

Judge Pauley proceeded to “consider whether arbitration can be compelled in light of

Plaintiff’s claim that the [arbitration] clauses were imposed pursuant to an illegal antitrust
 This Court previously denied the plaintiffs’ motion to dismiss Amex’s appeal. That 2

motion rested upon the correct assertion that Section 16 of the FAA affords the Court jurisdiction

to hear interlocutory appeals from denials of motions to compel arbitration brought pursuant to

Section 4 of the FAA. Section 4 provides that “[a] party aggrieved by the alleged failure, neglect,

or refusal of another to arbitrate under a written agreement for arbitration may petition any

7

conspiracy.” Id. at *7. He began with the familiar rule of Prima Paint Corp. v. Flood & Conklin

Mfg. Co., 388 U.S. 395, 403-04 (1967), to the effect that “[w]hen a party challenges the validity

of an arbitration clause directly, ‘the federal court may proceed to adjudicate it.’” Id. Finding

that the plaintiffs had “submitted evidence to support their claim” that the arbitration clauses

were the product of an illegal antitrust conspiracy, Judge Pauley concluded that they were

entitled to a trial on this issue and that Amex’s motion to immediately compel arbitration

therefore must be denied. Id. at *8-10. The instant appeals followed Judge Pauley’s denial of

Amex’s motion for reconsideration of this holding. See Ross v. American Express Co., No. 04

Civ. 5723, 2006 WL 2707393 (S.D.N.Y. Sept. 21, 2006). 

ANALYSIS

A. Jurisdiction.

To reiterate, although the district court ruled that Amex could potentially avail itself of

the arbitration clauses contained in the cardholder agreements, it denied Amex’s motion to

immediately compel arbitration, brought pursuant to Section 4 of the FAA, because it further

held that a trial must first be held to determine whether the arbitration clauses were validly made. 

Although we ordinarily have jurisdiction to review only final orders of district courts, see 28

U.S.C. § 1291, Section 16(a)(1)(B) of the FAA affords us jurisdiction to consider Amex’s

interlocutory appeal of the district court’s denial of the motion to compel arbitration. 9 U.S.C. §

16(a)(1)(B).

2
United States district court . . . for an order directing that such arbitration proceed in the manner

provided for in such agreement.” 9 U.S.C. § 4 (emphasis added). In their motion to dismiss, the

plaintiffs argued that because Judge Pauley did not find that a written agreement to arbitrate

existed between the plaintiffs and Amex, but held that arbitration could be compelled pursuant to

the principle of equitable estoppel, this Court could not properly hear Amex’s appeal under

Section 16. We rejected this argument, holding that “[i]n every relevant sense, . . . [Amex is]

appealing from the refusal to compel arbitration under a written arbitration agreement.” Ross v.

American Express Co., 478 F.3d 96, 99 (2d Cir. 2007). We note, however, that one of our sister

circuits has rejected our analysis and held that an interlocutory appeal may not be taken from a

denial of a motion to compel arbitration when the party bringing the appeal is not a signatory of

the arbitration agreement at issue. See Carlisle v. Curits, Mallet-Prevost, Colt & Mosle, LLP,

521 F.3d 597, 602 (6th Cir. 2008). In fact, it appears that a substantial split among the Circuits

has now developed over this jurisdictional question. See Sourcing Unlimited, Inc. v. Asimco

Intern., Inc., 526 F.3d 38, 44 n.6 (1st Cir. 2008).

8

While we plainly have jurisdiction to hear Amex’s appeal, our jurisdiction over the

plaintiffs’ appeal is not so obvious and it would have been helpful if the plaintiffs had offered a

bit more explanation in their briefs as to why their appeal can be entertained by this Court. The

plaintiffs appeal from the district court’s holding to the effect that Amex may potentially avail

itself of the arbitration clauses in the cardholder agreements. Where, as here, “a federal appellate

court reviews a district court decision on an interlocutory basis, it may not at the same time

review unrelated questions that are not themselves entitled to expedited consideration.” In re

Methyl Tertiary Butyl Ether (“MTBE”) Prods. Liab. Litig., 488 F.3d 112, 122 (2d Cir. 2007). 

But the plaintiffs assert (without any supporting analysis) – and the defendants do not argue

otherwise – that we may properly exercise jurisdiction pursuant to the principle of pendent

appellate jurisdiction. That principle establishes that, if an interlocutory appeal of a district

court’s ruling is properly before us, we have the discretion to entertain an appeal of another

ruling of the district court if “the two rulings were ‘inextricably intertwined’ or if ‘review of the

[latter] decision was necessary to ensure meaningful review of the [former].’” Id. (quoting Swint
9

v. Chambers County Comm’n, 514 U.S. 35, 51 (1995)); see also Golino v. New Haven, 950 F.2d

864, 868 (2d Cir. 1991) (“[W]here we have jurisdiction to consider some questions on appeal, we

may exercise our discretion to take pendent jurisdiction over related questions.”). 

That discretion is properly exercised here. Judge Pauley’s holding that the plaintiffs may

be compelled to arbitrate pursuant to the terms of their cardholder agreements was a necessary

prerequisite for his holding that arbitration could not proceed until the district court determined

whether the arbitration clauses in the cardholder agreements were validly created. The two

rulings are thus certainly inextricably intertwined. As set forth below, however, we believe that

Judge Pauley’s initial ruling was incorrect. It would therefore be a manifest waste of the time

and resources of parties, courts, and arbitrators were we to entertain only the defendants’ appeal

here, and leave consideration of the plaintiffs’ appeal to some unspecified future date. That is, if

arbitration is improper in this case, everyone is served if that determination is made now. We

therefore hold that we have discretionary jurisdiction over the plaintiffs’ appeal.

B. The Plaintiffs’ Appeal.

We begin with two bedrock principles of arbitration law. First, we recognize that the

FAA was “enacted to replace judicial indisposition to arbitration,” Hall Street Assocs., L.L.C. v.

Mattel, Inc., 128 S. Ct. 1396, 1402 (2008), and is an expression of “a strong federal policy

favoring arbitration as an alternative means of dispute resolution.” Hartford Accident & Indem.

Co. v. Swiss Reinsurance Am. Corp., 246 F.3d 219, 226 (2d Cir. 2001). In fact, this Court has

said that “it is difficult to overstate the strong federal policy in favor of arbitration, and it is a

policy we have often and emphatically applied.” Arciniaga v. General Motors Corp., 460 F.3d

231, 234 (2d Cir. 2006) (internal quotation marks omitted). 
 We have held that, in addition to estoppel, the common law principles of incorporation 3

by reference, assumption, agency, and veil-piercing/alter ego may be utilized when a signatory

moves to compel arbitration with a non-signatory to a contract containing an arbitration

agreement. See Merrill Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d 125, 129 (2d Cir.

2003). Where, however, as here, a non-signatory moves to compel arbitration with a signatory, it

remains an open question in this Circuit whether the non-signatory may proceed upon any theory

10

On the other hand, however, we must remember that 

it remains the case that arbitration “is a matter of consent, not

coercion.” Volt Info. Scis. v. Bd. of Trs. of Leland Stanford Junior

Univ., 489 U.S. 468, 479 (1989). Specifically, “‘arbitration is a

matter of contract,’” and therefore “‘a party cannot be required to

submit to arbitration any dispute which [it] has not agreed so to

submit,’” Vera v. Saks & Co., 335 F.3d 109, 116 (2d Cir. 2003)

(quoting Transit Mix Concrete Corp. v. Local Union No. 282, 809

F.2d 963, 967 (2d Cir. 1987)). Thus, “[w]hile the FAA expresses a

strong federal policy in favor of arbitration, the purpose of

Congress in enacting the FAA ‘was to make arbitration agreements

as enforceable as other contracts, but not more so.’” Cap Gemini

Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 364 (2d Cir.

2003) (quoting Opals on Ice Lingerie v. Body Lines Inc., 320 F.3d

362, 369 (2d Cir. 2003); further internal quotation omitted). 

JLM Industries, Inc., 387 F.3d at 171.

It is obvious that this latter principle renders problematic any holding that the plaintiffs

can be compelled to arbitrate with Amex. Arbitration is a matter of contract, but the plaintiffs

have not entered into any contract whatever with Amex, let alone any contract containing an

arbitration clause. The cardholder agreements signed by the plaintiffs, which contain the

arbitration clause of which Amex seeks to avail itself, were not signed by Amex. Nevertheless,

this Court has “recognized a number of common law principles of contract law that may allow

non-signatories to enforce an arbitration agreement, including equitable estoppel,” Ross, 478

F.3d at 99, the principle upon which the district court relied in holding that the plaintiffs could be

compelled to arbitrate with Amex.3
other than estoppel. See Astra Oil Co., Inc. v. Rover Navigation, Ltd., 344 F.3d 276, 279 n.2 (2d

Cir. 2003). We do not see that Amex is seeking to compel arbitration on any other theory than

estoppel, nor did the district court suggest that any theory other than estoppel was applicable

here.

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The district court’s opinion improperly extends the principle of compelling arbitration

through equitable estoppel to a situation where the requisite contractual basis for arbitration does

not exist. We therefore must reverse the district court’s holding which accepts Amex’s

contention that it may avail itself of the arbitration clauses contained in the plaintiffs’ cardholder

agreements. 

To begin, this Court set forth the basic doctrine in JLM Industries:

Our cases have recognized that under principles of estoppel, a nonsignatory to an arbitration agreement may compel a signatory to

that agreement to arbitrate a dispute where a careful review of “the

relationship among the parties, the contracts they signed . . ., and

the issues that had arisen’ among them discloses that ‘the issues the

non-signatory is seeking to resolve in arbitration are intertwined

with the agreement that the estopped party has signed.” Choctaw

Generation Ltd P’ship v.American Home Assurance Co., 271 F.3d

403, 406 (2d Cir. 2001) (internal quotation marks and citation

omitted).

387 F.3d at 177. In a very recent opinion, in a passage which is highly relevant to the case now

before us, we elaborated upon the proper utilization of the principle of estoppel in the arbitration

context:

JLM Industries did not say or mean that whenever a relationship of

any kind may be found among the parties to a dispute and their

dispute deals with the subject matter of an arbitration contract

made by one of them, that party will be estopped from refusing to

arbitrate. . . . [I]n addition to the “intertwined” factual issues, there

must be a relationship among the parties of a nature that justifies a

conclusion that the party which agreed to arbitrate with another

entity should be estopped from denying an obligation to arbitrate a

similar dispute with the adversary which is not a party to the

arbitration agreement.
12

Sokol Holdings, Inc. v. BMB Munai, Inc., __ F.3d __, 2008 WL 4249201, at *3 (2d. Cir. Sept.

18, 2008).

It is also noted in JLM Industries that this Court “ha[s] had no occasion to specify the

minimum quantum of ‘intertwined-ness’ required to support a finding of estoppel” and that “the

estoppel inquiry is fact-specific.” 387 F.3d at 178. But this Court’s cases which have applied

estoppel against a party seeking to avoid arbitration have tended to share a common feature in

that the non-signatory party asserting estoppel has had some sort of corporate relationship to a

signatory party; that is, this Court has applied estoppel in cases involving subsidiaries, affiliates,

agents, and other related business entities. See Contec Corp. v. Remote Solution Co., Ltd., 398

F.3d 205, 209 (2d Cir. 2005) (holding that post-merger survivor corporation could invoke

arbitration agreement signed by corporation subsumed in merger); JLM Industries, 387 F.3d at

178 (holding that plaintiffs could not avoid arbitration of antitrust conspiracy claim where

plaintiffs argued that the conspiratorial conduct giving rise to claim was undertaken by nonsignatory parent companies rather than contracting subsidiaries); Astra Oil Co., Inc., 344 F.3d at

280 (compelling arbitration where plaintiff acted toward non-signatory affiliated corporation “as

if it were signatory”); Smith/Enron Congeneration Ltd. P’ship v. Smith Cogeneration Int’l., Inc.,

198 F.3d 88, 97 (2d Cir. 1999) (compelling plaintiff to arbitration where “it treated a group of

related companies as though they were interchangeable”). 

A number of cases from the district courts of our Circuit have similarly held that estoppel

is warranted when a non-signatory defendant owns or controls a signatory defendant. Most

interestingly, Judge Pauley has held in the MDL Action that the Issuing Banks can avail
13

themselves of the arbitration clauses contained in cardholder agreements signed by the Network

Defendants and the plaintiffs in the MDL Action. This was because the plaintiffs had asserted

the existence of “[m]ore than simply an agency relationship” between the Network Defendants

and the Issuing Banks; they had in fact alleged that “the issuing banks control the network

defendants.” In re Currency Conversion Fee Antitrust Litig., 361 F. Supp. 2d 237, 262

(S.D.N.Y. 2005). See also, e.g., Birmingham Assocs., Ltd. v, Abbott Labs., 547 F. Supp. 2d 295,

304 (S.D.N.Y. 2008) (because non-signatory-parent company “was directly involved in

negotiating” contract containing arbitration clause and “participated” in drug development

program established by that contract, signatory plaintiff “could have foreseen . . . it might be

required to arbitrate” with parent company); Carroll v. LeBoeuf, Lamb, Greene & McCrae, 374

F. Supp. 2d 375, 378 (S.D.N.Y. 2005) (because signatory plaintiffs “specifically and repeatedly

allege” that signatory defendant “acted at all relevant times [as] the agent” of non-signatory

defendants, plaintiffs were estopped from avoiding arbitration with non-signatories); Fraternity

Fund Ltd. v. Beacon Hill Asset Mgmt. LLC, 371 F. Supp. 2d 571, 578 (S.D.N.Y. 2005) (nonsignatory to partnership agreement could avail itself of arbitration clause contained therein where

plaintiffs alleged it owned 99% of signatory).

We have also extended estoppel beyond situations involving affiliated corporate entities. 

Thus, this Court has applied estoppel in a situation where a defendant, while a non-signatory to

the construction contract containing an arbitration clause, was nevertheless explicitly named

therein as having certain tasks to perform under that contract. See Choctaw Generation Ltd.

P’ship, 271 F.3d at 406 (non-signatory party which was to provide letter of credit under

construction contract could avail itself of arbitration clause because “dispute concerns the duty to
14

replenish a letter of credit”). Somewhat similarly, one of this Circuit’s district courts has recently

held that an employee plaintiff who signed an employment contract with one firm (“AVI”) could

be compelled to arbitrate her sexual harassment claims against another firm (“ESPN”) under that

contract because “she was hired by AVI specifically to work as a makeup artist for ESPN; . . . she

was required to . . . follow the instructions and directives of ESPN talent and ESPN supervisors .

. . ;” and she alleged that she had been harassed by ESPN employees. Ragone v. Atlantic Video

at Manhattan Center, No. 07 Civ. 6084, 2008 WL 4058480, at *9 (S.D.N.Y. Aug. 29, 2008)

(internal quotation marks omitted). 

But the limits of the application of estoppel in compelling arbitration are well illustrated

in our decision in Sokol Holdings, Inc. In that case, plaintiff Sokol entered into an energy

exploration contract containing an arbitration clause (“the Emir Contract”) with Tolmakov, who

was the principal owner of a firm called Emir Oil LLP. The Emir Contract provided that Sokol

would purchase a percentage of Tolmakov’s interest in Emir Oil LLP. But Sokol alleged in its

complaint that “the BMB defendants tortiously interfered with Sokol’s contract rights with

Tolmakov under the Emir Contract and induced Tolmakov to sell his interest in Emir to BMB

instead of Sokol.” 2008 WL 4249201, at *1. BMB, which was not a party to the Emir Contract,

nevertheless asserted that it was entitled under the principle of estoppel to compel Sokol to

arbitrate its claims against BMB. We rejected that assertion because Sokol’s complaint alleged

that BMB’s only relationship to the Emir Contract was as a third-party wrongdoer and,

recognizing that arbitration is a matter of consent, we concluded that Sokol “in no way consented

to extend [the Emir Contract] to an entity which tortiously subverted [its] rights under [the Emir

Contract].” Id. at *6. We supported this conclusion by a review of the cases in which this Court
15

had applied estoppel principle to compel arbitration. That review disclosed 

a pattern which is consistent with the basic principle that one does

not give up one’s right to court adjudication except by consent. In

each case, the promise to arbitrate by [one signatory], the entity

opposing arbitration, was reasonably seen on the basis of the

relationships among the parties as extending not only to [the other

signatory], but also to [a non-signatory related to the latter], an

entity that was, or would predictably become, with [the] knowledge

and consent [of the party opposing arbitration], affiliated or

associated with [the other signatory] in such a manner as to make it

unfair to allow [the party opposing arbitration] to avoid its

commitment to arbitrate on the ground that [the non-signatory] was

not the very entity with which [the party opposing arbitration] had

a contract. . . . It was, of course, essential in all of these cases that

the subject matter of the dispute was intertwined with the contract

providing for arbitration. . . . While the arbitrability of the subject

matter of the dispute was an essential condition to a finding of

estoppel, however, it was not sufficient to justify that conclusion. 

As we implied in JLM Industries in requiring a “careful review of

the relationship among the parties,” the further necessary

circumstance was a relationship among the parties which either

supported the conclusion that [the party opposing arbitration] had

consented to extend its agreement to arbitrate to [the nonsignatory], or, otherwise put, made it inequitable for [the party

opposing arbitration] to refuse to arbitrate on the ground that it had

made no agreement with [the non-signatory].

Id. (citation omitted; emphasis supplied).

This reasoning controls here. It is indisputable that the subject matter of the dispute

between the parties – the alleged conspiracy between Amex and the Issuing Banks to violate the

antitrust laws – is related to the subject matter of the cardholder agreements the plaintiffs signed

with the Issuing Banks. After all, the goal of the alleged conspiracy was to fix fees on

transactions with foreign enterprises which the plaintiffs conducted by means of the credit cards

they received as a result of signing the cardholder agreements. But the further necessary

circumstance of some relation between Amex and the plaintiffs sufficient to demonstrate that the
16

plaintiffs intended to arbitrate this dispute with Amex is utterly lacking here. Amex has no

corporate affiliation with the Issuing Banks; the plaintiffs allege without contradiction that Amex

is in fact a competitor of the Issuing Banks in the credit card market. Amex did not sign the

cardholder agreements, it is not mentioned therein, and it had no role in their formation or

performance. The plaintiffs did not in any way treat Amex as a party to the cardholder

agreements. On the contrary, they do not allege to have treated Amex at all. Just as with BMB

in Sokol Holdings, Inc., Amex’s only relation with respect to the cardholder agreements was as a

third party allegedly attempting to subvert the integrity of the cardholder agreements. In sum,

arbitration is a matter of contract and, contractually speaking, the plaintiffs do not know Amex

from Adam. Amex therefore cannot avail itself of the arbitration agreements contained in the

cardholder agreements.

It remains for us to consider Denney v. BDO Seidman, LLP, 412 F.3d 58 (2d Cir. 2005),

the case upon which Judge Pauley primarily relied in holding that the plaintiffs here could be

estopped from avoiding arbitration of their claims against Amex. Denney concerned the

following dispute:

Plaintiffs claim that they were recruited by accounting firms BDO,

Pasquale & Bowers, LLP, and Dermody, Burke, and Brown,

Certified Public Accountants, in 1999 to participate in a tax

scheme, Currency Options Bring Reward Alternatives

(“COBRA”). At that time, plaintiffs were expecting to realize

substantial capital gains from certain stock holdings. Defendants

told plaintiffs that they could offset such gains, and thereby reduce

their taxes, by forming partnerships to engage in digital foreign

currency option transactions. Defendants assured plaintiffs that

COBRA was a lawful tax strategy and that they had an independent

opinion letter from Jenkens & Gilchrist, a major law firm, attesting

to COBRA’s validity.

Id. at 61 (citations and footnote omitted).
17

The plaintiffs signed consulting agreements with the accounting firms which contained

broad arbitration clauses. The district court held, however, that the “‘extraordinarily vague

language’ of the consulting agreements” rendered them “‘mutually fraudulent’ and consequently

unenforceable. Accordingly, the district court denied defendants’ motion to compel arbitration.” 

Id. at 63 (internal citation omitted). This Court reversed that holding, finding that “[t]he district

court’s legal conclusion . . . fails to take into account controlling law in this Circuit, which

indicates that where an arbitration provision is severable from the contract in which it is

embedded, arbitration provisions may indeed be enforceable even if aspects of the underlying

agreements are not.” Id. at 65.

Having held that the arbitration clause in the consulting agreement was enforceable, this

Court then proceeded to consider an issue which the district court had no occasion to address:

whether defendant Deutsche Bank, which did not sign the consulting agreements, could avail

itself of the arbitration clause in the agreements. Citing cases from the Fifth and Eleventh

Circuits, this Court held that because the plaintiffs alleged that Deutsche Bank had engaged in a

conspiracy relating to the COBRA tax shelters, they “cannot now escape the consequences of

those allegations by arguing that the Deutsche Bank and BDO defendants . . . are not connected

to Deutsche Bank’s relationship with BDO.” Id. at 70.

But Denney does not end at this point. Having found that conspiracy allegations were

sufficient to support the possibility of the application of estoppel, this Court then “remand[ed]

the cause to the district court to enable it to consider the merits of the estoppel claim asserted by

the Deutsche Bank defendants and, specifically, whether the issues the Deutsche Bank

defendants seek to arbitrate are indeed intertwined with the consulting agreements.” Id. Upon
 We hasten to point out that the remand decision in Denney appeared after Judge 4

Pauley’s decision holding that Amex could avail itself of the arbitration clauses in the cardholder

agreements. It is therefore perfectly understandable that he did not consider that decision. What

is not perfectly understandable is why both parties, whose briefs relating to the instant appeals

were filed long after the remand decision in Denney, fail to make any mention of the decision

beyond noting that this Court ordered a remand. 

18

examining what transpired on remand, we find ourselves compelled to disagree with Amex’s

assertion that Denny “compels affirmance here.” Amex Reply Br. at 10.4

On remand, Judge Scheindlin examined Deutsche Bank’s alleged role in the conspiracy

involving the COBRA tax shelters. She found that its role was not insubstantial: “Plaintiffs

opened accounts with Deutsche Bank at the recommendation of Jenkins. Deutsche Bank

promoted the strategy, counseled plaintiffs, and carried out . . . securities transactions on

plaintiffs’ behalf.” Denney v. Jenkens & Gilchrist, 412 F. Supp. 2d 293, 296 (S.D.N.Y. 2005). 

But Judge Scheindlin still found that the plaintiffs’ claims against Deutsche Bank did not arise

from the consulting agreements themselves: 

Plaintiffs do not allege that Deutsche Bank induced the [consulting

agreements]. Deutsche Bank’s alleged role in the conspiracy was

to advise plaintiffs on the “nature, structure and potential financial

returns” of the COBRA transactions and execute those transactions

for plaintiffs. Plaintiffs allege that “the Deutsche Defendants had

only limited contact with the Plaintiffs and Class Members, largely

consisting of whatever conversations were necessary to get the

forms completed and the money wired to the Deutsche Defendants,

as fiduciaries for the Plaintiffs . . . .

Id. at 299-300 (footnotes omitted). In sum, Deutsche Bank could not avail itself of the arbitration

clauses in the consulting agreements merely because it performed certain functions under the

terms of the consulting agreements. On the contrary, “[i]t is not sufficient that the dispute

between plaintiffs and Deutsche Bank is related to consulting services provided by BDO

pursuant to the [consulting agreements].” Id. at 300.
19

This Court stated in JLM Industries that it would be wrong “to suggest that a claim

against a co-conspirator of a party alleged to have engaged in antitrust violations will always be

intertwined to a degree sufficient to work an estoppel.” 387 F.3d at 178 n.7. Judge Scheindlin’s

opinion on remand in Denny recognizes the vitality of the principle that the application of

estoppel in the context of conspiracy allegations is problematic. It is problematic because

arbitration is of course a matter of contract “under general principles of contract law” parties

should not be compelled to arbitrate unless “the totality of the evidence supports an objective

intention to agree to arbitrate.” Sarhank Group v. Oracle Corp., 404 F.3d 657, 662 (2d Cir.

2005).

The logic of Judge Scheindlin’s opinion on remand in Denny applies a fortiori in the

instant case. The plaintiffs here entered into cardholder agreements with the Issuing Banks in

order to become holders of MasterCard, Visa, and Diners Club credit cards. As we have already

noted, the plaintiffs do not allege that they have subsequently had any contact whatsoever with

Amex, and the latter makes no claim to the contrary. Amex is a complete stranger to the

plaintiffs’ cardholder agreements; it did not sign them, it is not mentioned in them, and it

performs no function whatsoever relating to their operation. 

In sum, we believe that the plaintiffs have it precisely correct when they assert that “there

[was] no reason for someone signing up for a Chase Visa card, for example, to believe that he (or

she) was entering into any kind of relationship with [Amex]. Indeed, [Amex] was ostensibly

competing against the issuing banks and their Visa and MasterCard brands/networks, in a

supposedly bitter marketplace rivalry.” Plaintiffs’ Br. at 27. In decisive contrast to JLM

Industries, where this Court applied the doctrine of equitable estoppel to alleged co-conspirators

who were also the parent corporations of signatories of the arbitration agreements, and from
20

whom the plaintiffs “purchas[ed] shipping services directly,” 387 F.3d at 178, the district court

here “based its findings exclusively on allegations of collusion. Such interaction has no

resemblance to the conduct of the parties in this Court’s equitable estoppel cases.” Plaintiffs’ Br.

at 28 (emphasis added). We therefore reverse the district court’s holding that the plaintiffs may

be compelled to arbitrate with Amex based upon the principle of equitable estoppel.

C. Amex’s Appeal.

Having concluded that the plaintiffs may not properly be compelled to arbitrate with

Amex on the basis of their cardholder agreements, Amex’s appeal of the district court’s decision

to the effect that arbitration could not proceed before a trial on the question of whether the

arbitration clauses in the cardholder agreements were validly created is moot.

CONCLUSION

The plaintiffs’ appeal is GRANTED and Amex’s appeal is DENIED as moot. We

REMAND this action to the district court for further proceedings in conformance with this

opinion.