Opinion ID: 2998165
Heading Depth: 2
Heading Rank: 1

Heading: Zurich’s Appeal

Text: We address Zurich’s appeal first, which deals with the relatively simple issue of whether Jones can be compelled to arbitrate under the deductible agreements. Jones did not sign the agreements containing arbitration clauses and 3 It appears that the district court erroneously ordered arbitration of the deductible agreement issue with respect to Rothschild. According to the briefs and the September 6 letter, the dispute is actually related to Armenta. 8 Nos. 03-3851 & 03-3853 states that it never agreed to arbitrate anything. Zurich argues that Jones is bound to arbitrate issues respecting the deductible agreements despite the fact that it did not sign them, asserting that (1) Watts, as Jones’s parent company, bound Jones to the agreements, and (2) Jones has invoked the benefits of the insurance policies, and thus may not avoid the obligation of arbitration contained in the agreements associated with the insurance policies. The language of the 1994-95, 1995-96, and 1996-97 deductible agreements indicates that “[Watts] and each named insured stated in the Policy(ies) shall be jointly and severally responsible for the obligations under [the agreements].” (Watts’s App. at 150, 176, 189.) Jones was, of course, a “named insured” in the primary liability policies. But “[a]rbitration is contractual by nature—‘a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ ” Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (7th Cir. 1995) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)). That said, there are five doctrines through which a non-signatory can be bound by arbitration agreements entered into by others: (1) assumption; (2) agency; (3) estoppel; (4) veil piercing; and (5) incorporation by reference. Fyrnetics (H.K.) Ltd. v. Quantum Group, Inc., 293 F.3d 1023, 1029 (7th Cir. 2002); accord Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 352 (2d Cir. 1999). Zurich does not argue that Jones has shown an intent to assume obligations under the deductible agreements or that the agreements are incorporated by reference to the insurance policies. Rather than explicitly arguing that principles of agency or veil piercing are applicable, Zurich alludes vaguely to the fact that Jones was a wholly owned Nos. 03-3851 & 03-3853 9 subsidiary of Watts,4 and thus should not be permitted to avoid arbitration. The district court correctly found that the relationship between Watts and Jones is insufficient for Jones to be bound by Watts’s signature on any type of agency or alter ego theory. As the court’s September 9, 2002, order noted, “a mere parent-subsidiary relationship ‘does not create the relation of principal and agent or alter ego between the two.’ ” (Quoting Caligiuri v. First Colony Life Ins. Co., 742 N.E.2d 750, 756 (Ill. App. Ct. 2000)). A corporate relationship is generally not enough to bind a nonsignatory to an arbitration agreement. Thomson-CSF, 64 F.3d at 777. Zurich’s remaining argument, that Jones “cannot take policy benefits without being bound . . . to the associated deductible agreements and the duty to arbitrate issues respecting those agreements[,]” is based on an estoppel theory. A nonsignatory party is estopped from avoiding arbitration if it knowingly seeks the benefits of the contract containing the arbitration clause. See Thomson-CSF, 64 F.3d at 778; see also Indus. Elecs. Corp. of Wis. v. iPower Distribution Group, 215 F.3d 677, 680 (7th Cir. 2000) (stating in dicta that a third-party beneficiary of a contract would be bound by its arbitration provision). But caselaw consistently requires a direct benefit under the contract containing an arbitration clause before a reluctant party can be forced into arbitration. See Thomson-CSF, 64 F.3d at 779 (holding that although the unwilling party received a benefit, the benefit did not derive directly from the agreement containing the arbitration clause and thus arbitration could not be compelled); accord Am. Bureau of Shipping, 170 F.3d at 353 (ordering arbitration because the nonsignatory received the direct benefits of a lower insur- 4 Again, Jones was sold in September 1996, so it was not a subsidiary of Watts for the entire time period relevant to this case. 10 Nos. 03-3851 & 03-3853 ance rate and the ability to sail under the French flag as a result of an agreement containing an arbitration provision). Jones has not sought to enforce any rights it has under the deductible agreements, and in fact there would be no benefits to Jones under those agreements. Even assuming that Jones has benefitted from the deductible agreements by paying lower insurance premiums based on the deductibles, this benefit is too attenuated and indirect to force arbitration under an estoppel theory. We conclude that there are no grounds for compelling Jones to arbitrate, and we will affirm the district court’s decision with respect to this issue.