Opinion ID: 2271349
Heading Depth: 2
Heading Rank: 3

Heading: The Class Action Plaintiffs Gave Assent to the Arbitration Clause via their Application for AIK Comp Membership

Text: None of the class action plaintiffs actually signed the engagement letters. However, Ernst & Young argues that each of the class action plaintiffs is nevertheless bound to the arbitration agreements because upon joining AIK Comp, each executed a membership application giving assent to be bound by AIK Comp's contracts. The argument, although presented by Ernst & Young to the trial court, is not mentioned in the order denying the motion to arbitrate. However, we agree that the assent given in the membership application binds the class action plaintiffs to the arbitration clauses. In the membership application, each class action plaintiff upon joining AIK Comp agreed to appoint AIK Comp and its trustees to act as [its] agent[s] in all matters relating to Kentucky Workers' Compensation Statutes and to abide by the rules, regulations and by-laws of [AIK Comp] and to conform to the terms of the agreements they may enter into with any authorized service company  for as long as membership in AIK Comp was maintained, (emphasis added.) Ernst & Young reasons that since AIK Comp's annual audits are matters relating to Kentucky Workers' Compensation Statutes, Maurice Turner [15] acted as an agent of each member when he executed the engagement letters. First, we do not agree with Ernst & Young's argument that AIK Comp acted as the agent of its members when it executed the engagement letters. Under basic agency principles, an agent acts on the principal's behalf and is subject to the principal's control. See Restatement (Third) Of Agency § 1.01 (2006). The audit requirement of KRS 342.347(2) [16] pertains only to AIK Comp. AIK procured the audits for itself, not as an agent on behalf of the individual members. As employers, the members are bound by Kentucky's workers' compensation laws, but they have no duty to obtain an audit and therefore have no need of an agent in obtaining one. In signing the engagement letters, Turner was not acting as an agent of the class action plaintiffs. We construe that language of the membership application as simply enabling AIK Comp to act as agent for the individual members in the processing and settlement of worker compensation claims, just as traditional workers' compensation insurers act as agents of the parties they insure to resolve workers' compensation issues. Ernst & Young's second argument, that the member application compels each member of AIK Comp to conform to the terms of the agreements [AIK Comp] may enter into with any authorized service company, is well taken. We are presented with no sound rationale by which we may conclude otherwise. The plaintiffs do not contend that Ernst & Young is not an authorized service company. By accepting membership in AIK Comp, the class action plaintiffs agreed to conform to AIK Comp's agreements. We find no basis upon which to distinguish the arbitration clauses of the engagement letters from any other agreement with a service company, and thus conclude each class action plaintiff, under the terms of the membership application, agreed to conform to AIK Comp's agreements with Ernst & Young, including the agreement that claims or controversies arising from Ernst & Young's services be submitted to arbitration. Accordingly, we reverse the trial court's order denying Ernst & Young's motion to compel arbitration of the class action claims. Because of that resolution, we need not address Ernst & Young's argument that the class action plaintiffs are third-party beneficiaries under the agreements and are otherwise equitably estopped from disavowing the agreements.