Opinion ID: 1871069
Heading Depth: 2
Heading Rank: 1

Heading: Schmitz Associates

Text: Appellants seek to compel Schmitz Associates to arbitrate its claims under both the Amway Rules of Conduct and the Pro Net Terms and Conditions, despite the fact that Schmitz Associates was not a signatory to the Amway distributorship agreement nor the Pro Net membership agreement. Though appellants offer several theories in support  third-party beneficiary, estoppel, agency and an alter ego-like argument  none is persuasive. To be bound as a third-party beneficiary, the terms of the contract must clearly express an intent to benefit that party or an identifiable class of which the party is a member. Peters v. Employers Mut. Cas. Co., 853 S.W.2d 300, 301 (Mo. banc 1993). In cases where the contract lacks an express declaration of that intent, there is a strong presumption that the third party is not a beneficiary and that the parties contracted to benefit only themselves. State ex rel. William Ranni Assocs., Inc. v. Hartenbach, 742 S.W.2d 134, 141 (Mo. banc 1987). Furthermore, a mere incidental benefit to the third party is insufficient to bind that party. Id. at 140. Here, neither the Amway distributorship agreement nor the Pro Net agreement express any intent to benefit Schmitz Associates, and any benefits actually obtained from the agreement were merely incidental. Although appellants cite Schmitz Associates' acknowledgment that it relied on and profited from Netco's Amway relationship, a relationship predicated on the Amway Rules of Conduct and Netco's status as an Amway distributor, the mere fact that Schmitz Associates had a mutually beneficial relationship with Netco does not make Schmitz Associates a third-party beneficiary. Schmitz Associates' reliance and profits from that relationship are the kind of insufficient incidental benefits to which the rule refers. Thus, because Schmitz Associates is not a third-party beneficiary to the agreements, it cannot be bound to the arbitration clauses in those agreements. The equitable estoppel argument, under both the Amway agreement and the Pro Net agreement, is that Schmitz Associates has asserted rights under those agreements in bringing this lawsuit, so it cannot now disavow the obligations that the agreements impose and, in particular, the obligation to arbitrate the claims. However, a close reading of the petition shows that Schmitz Associates is not seeking to enforce any provision in the Amway or Pro Net agreements. Appellants are being sued, instead, under conspiracy theories, not because they breached any contractual term. Appellants next claim that Schmitz Associates is bound to arbitrate under the Amway distributorship agreement (though not under the Pro Net agreement) as an agent of Charlie and Kim Schmitz. In support, appellants cite Byrd v. Sprint Communications Co., L.P., 931 S.W.2d 810, 815 (Mo.App.1996), for the proposition that non-signatory agents [are] bound by arbitration agreements signed by their principals. In this Court's view, however, Byrd was wrongly decided. Under hornbook rules of agency, it is the principal that can be bound by the signature of the agent, not the agent that can be bound by the signature of the principal. This is so because the principal can control the conduct of the agent, which is the essence of the agency relationship. State ex rel. Bunting v. Koehr, 865 S.W.2d 351, 353 (Mo. banc 1993). It is not the other way around, that the agent can control the principal. Otherwise the principal would be the agent for the agent. Thus, without the benefit of Byrd , the agency theory is to no avail, and the rule controls that [a] party cannot be required to arbitrate a dispute that it has not agreed to arbitrate. Dunn, 112 S.W.3d at 436. To the extent it is to the contrary, Byrd is overruled. Appellants alter ego-like argument is that Schmitz Associates should be bound under the Pro Net agreement because Schmitz Associates is part of the Schmitz organization and the Schmitz organization, rather than Netco alone, was admitted to membership in Pro Net. Again, however, Schmitz Associates was not a signatory to the Pro Net agreement. The Schmitz organization, on the other hand, cannot bind Schmitz Associates because the organization has no legal significance. Apparently, appellants would have this Court disregard Schmitz Associates' status as a separate and independent corporation, but the only way to achieve that result is to pierce the corporate veil. That remedy, however, in the context of the issues presented here, is only available where outside control of the corporation has been used to commit fraud or wrong, to perpetrate the violation of statutory or other positive legal duty, or [a] dishonest and unjust act.... 66, Inc. v. Crestwood Commons Redev. Corp., 998 S.W.2d 32, 40 (Mo. banc 1999). Suffice it to say that appellants have neither pled nor proven this element. Absent that proof, Schmitz Associates is not bound to arbitrate under the alter ego theory.