• March 13, 2009

Donaldson Company, Inc. vs Burroughs Diesel, Inc., Case No. 08-2705 (oral argument, 3/13/09)

A January 2009 per curiam unpublished 8th Circuit decision reversed the U.S. District Court, E.D. Mo. (Laughrey, J.), on its rejection of a non-signatory’s motion to compel arbitration. Finnie v. Looby, et al., 8th Cir. File No. 07-3526 (filed 1/12/09).

The issue has come up again before the 8th Circuit (again from the E.D., Mo., Stohr, J.), oral argument heard on March 13: Donaldson Company, Inc. vs Burroughs Diesel, Inc., Case No. 08-2705. Here, the non-signatory prevailed at the district court and the opposing party appealed. Paraphrasing one Judge’s question to the appellee on the 8th Circuit panel, “Can any of several part suppliers invoke the arbitration clause that a downstream manufacturer has in a contract with one of its customers?”

Whether a non-signatory can compel another, who did sign an arbitration agreement with a third-party, to arbitrate her claim against the non-signatory is a matter of federal law, not state law. Under federal law, the question is whether the non-signatory’s relationship to one of the party’s expressly subject to the arbitration agreement is “sufficiently close” to permit enforcement of the arbitration agreement by the non-signatory. In the Finnie case, the “core of the dispute” fell within the ambit of the arbitration agreement.

The Donaldson case also includes a waiver argument because Donaldson had raised arbitration as an affirmative defense seven years ago but did not move to compel arbitration until several years later. Donaldson argued that, under applicable state law, it was required to raised the arbitration affirmative defense though, at the time, counsel argued Donaldson had no knowledge that there was an arbitration clause.

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