Opinion ID: 1735181
Heading Depth: 2
Heading Rank: 1

Heading: Invoking the protection of the Contract's arbitration provision.

Text: ¶ 36. The parties argue that two different cases control the issue of whether a non-signatory can invoke the protection of a contract's arbitration provision. Sullivan urges this Court to follow its ruling in Parkerson v. Smith, 817 So.2d 529 (Miss. 2002), where we ruled that a manufacturer of a mobile home could not compel arbitration based on a contract it had not signed. In Parkerson, the plaintiff filed suit against the seller of a mobile home and against the manufacture alleging failure to comply with express and implied warranties. Id. at 530. Defendants ATX and Protex Weatherproofing argue that Parkerson is not controlling because it dealt with arbitration issues within the context of the Federal Magnuson-Moss Warranty Act. ¶ 37. This Court ruled in Parkerson that, The language of the Act clearly indicates that by enacting it, Congress intended to preserve for consumers the right to bring suit for breach of written or implied warranties. Therefore, the Magnuson-Moss Warranty Act has superceded the FAA in regard to breach of consumer warranties, and binding arbitration cannot be compelled in this case without contravening the purposes of the Act. Id. at 534. However, the Court also stated that, Champion [the manufacturer] was not a party to the contract containing the arbitration provision, and therefore may not invoke the arbitration clause to which it was never a party. To hold otherwise would allow a manufacturer which is not a signatory to an agreement to assert rights found in that agreement. Id. at 535. ¶ 38. Defendants argue that this Court should adopt a Fifth Circuit decision expanding arbitration rights to a party who was a non-signatory to the arbitration agreement. Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir. 2000). At issue in Grigson was whether a defendant who was a non-signatory to a distribution agreement could compel arbitration, when the complaint alleged tortious interference with the distribution agreement. Id. at 526. The Fifth Circuit ruled that the lower court was correct to grant the motion to compel based on equitable estoppel. Id. ¶ 39. Defendants urge this Court to adopt the principle of equitable estoppel as announced in Grigson. While I see the wisdom of equitable estoppel to compel arbitration in some cases, principles of equity should not grant arbitration rights to a third party who tortiously interferes with a contract, and should not allow them to avoid a court of law, and/or take away the injured party's constitutional right of a jury trial. U.S. Const. amend. VII. Although federal statutory authority favors arbitration, the U.S. Constitution does not. In absence of clear compliance with the FAA as evidenced by all parties clearly agreeing to abrogate a constitutional right (which they have the right to agree to do so), the Constitution demands adherence over a favored congressional act. ¶ 40. The application of equitable estoppel is fact driven and must be determined on a case-by-case basis. There are some instances, when a non-signatory to a contract can invoke the protection of an arbitration agreement. Since Sullivan's theory of holding ATX liable for the employment contract is predicated upon Protex Weatherproofing being the alter ego and wholly owned subsidiary of ATX, ATX may invoke the protection of the arbitration provision in the Contract claim. ¶ 41. Several courts have found that when there is a close relationship between a signatory to the agreement and a non-signatory, such as alter ego or parent/subsidiary, then the non-signatory has standing to compel arbitration. See Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir.1993); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315 (4th Cir.1988); Interocean Ship. Co. v. Nat'l Ship. & Trading Corp., 523 F.2d 527, 539 (2d Cir.1975). ¶ 42. Sunkist is most closely related to the facts of the case sub judice. In Sunkist, there was a dispute between a signatory to a contract and a non-signatory as to whether the non-signatory could compel arbitration. 10 F.3d at 755. The non-signatory was Del-Monte Corporation, the parent corporation of SSD, the company which signed the agreement containing the arbitration provision. Id. The Court stated that, Essentially, Sunkist contends that Del Monte, through its management and operation of SSD, caused SSD to violate various terms and provisions of the license agreement. Id. at 758. Sullivan is relying on a similar argument to hold ATX liable for the Contract that Protex Weatherproofing executed. ¶ 43. The Eleventh Circuit in Sunkist went on to say that, when the charges against a parent company and its subsidiary are based on the same facts and are inherently inseparable, a court may refer claims against the parent to arbitration even though the parent is not formally a party to the arbitration agreement. Id. at 757 (quoting J.J. Ryan, 863 F.2d at 320). ¶ 44. The Second Circuit has explained: the mere fact that a party did not sign the arbitration agreement does not mean that it cannot be held bound by it. Ordinary contract principles determine who is bound. In an appropriate situation, the corporate veil may be pierced and a party may be held bound to arbitrate as the signatory's alter ego. Interocean Ship. Co., 523 F.2d at 539. ¶ 45. If the plaintiff claims that the signatory and the non-signatory are essentially the same entity for purposes of holding the non-signatory liable for a breach of contract, then he cannot at the same time take the contradictory position that the arbitration clause does not apply to the non-signatory. As Sullivan is asserting his claim against ATX as the alter ego of Protex Weatherproofing for breach of the Contract, ATX should be allowed to compel arbitration with respect to the claims that arise out of the breach of the separate and distinct Contract, which at the same time protects Protex Weatherproofing's right to compel arbitration as contained in the Contract.