Opinion ID: 4149289
Heading Depth: 2
Heading Rank: 1

Heading: Close Relationship/Successor-in-Interest

Text: First, the wholesalers argue that even if they cannot directly enforce the arbitration agreements they assigned, they can enforce them as nonsignatories under a “close relationship” theory. “‘[S]tate contract law governs the ability of nonsignatories to enforce arbitration provisions,’” PRM Energy Sys., 592 F.3d at 833 (quoting Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 732 (8th Cir. 2009)), and the parties agree Minnesota law applies here. Under that exception, a nonsignatory can compel arbitration “when ‘the relationship between the signatory and nonsignatory defendants is sufficiently close that only by permitting the nonsignatory to invoke arbitration may evisceration of the underlying arbitration agreement between signatories be avoided.’” CD Partners, 424 F.3d at 798 (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999), abrogated on other grounds by Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009)). The wholesalers cite CD Partners, in which we concluded three corporate officers could compel arbitration under an arbitration agreement to which their corporation was a signatory, even though the officers themselves were not signatories, because the relationship between the corporation and the officers was sufficiently close and because the underlying arbitration agreement would be eviscerated if the officers could not compel arbitration. Id. at 797-800. According to the wholesalers, “the ‘close relationship’ doctrine is not limited only to agents or affiliates of a corporate signatory,” but also applies to “‘third-party beneficiaries of a contract, . . . corporate officers or corporate entities affiliated with a signatory, or . . . successors-in-interest of a signatory,’” (quoting Cent. Transp. Servs., Inc. v. Cole, No. 13-1295, 2013 WL 6008303, at  (D. Kan. Nov. 13, 2013)). But here, as assignors, the “nonsignatory” defendants are predecessors-ininterest to their assignees, not successors-in-interest. We are aware of no authority supporting the proposition that a predecessor-in-interest bears a sufficiently close relationship to a successor-in-interest such that the predecessor-in-interest can compel -6- arbitration under an agreement to which only the successor-in-interest is a signatory. Such a rule could create unforeseen mischief and encourage collusion. We conclude the district court did not err by rejecting this theory.