• May 7, 2009

This week, reversing the U.S. Court of Appeals for the Sixth Circuit, the US Supreme Court (Scalia, writing for the majority) held that no federal law bars a State from allowing one party, a non-signatory to an arbitration agreement, from invoking an arbitration agreement signed by an adversary with a third-party and, on that basis, moving to stay the lawsuit and compel arbitration with the third party. Moreover, if the motion is denied, the U.S. Supreme Court made clear that the movant could seek immediate interlocutory appeal under §3 of the Federal Arbitration Act. Accordingly, the Court held that a trial court’s denial of a motion to stay a lawsuit and compel arbitration under such circumstances was immediately appealable under §3 of the Federal Arbitration Act. (The Sixth Circuit had held that non-signatories could not invoke the arbitration agreement and held that the Court of Appeals did not have jurisdiction over the matter. The U.S. Supreme Court’s majority flatly rejected the second proposition and sent the case back down to address the first one.)

(Souter, Roberts, and Stevens dissented, laying greater (and decisive) emphasis on Congress’ strong policy against interlocutory appeals and the simplicity of a bright-line rule that non-signatories to an arbitration agreement could not obtain an interlocutory appeal under §3 of the Federal Arbitration Act.)

Now pending before the U.S. Court of Appeals for the Eighth Circuit and covered in this blog on March 13 is a case where the non-signatory seeks to compel arbitration against an entity that had entered into an arbitration agreement with a third-party. The U.S. Supreme Court case, Arthur Andersen v. Carlisle, won’t, in my view decide the Eighth Circuit case but will now be the backdrop against which the Eighth Circuit panel will decide their case.

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