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Nonsignatories Get Their Day at the Supreme Court; Transcript Now Available (Web)

Today, the U.S. Supreme Court heard arguments in a case that may decide the extent to which nonsignatories can use arbitration clauses to stay or compel arbitration. The transcript in Arthur Andersen LLP v. Carlisle, No. 08-146, is now available here.

Arthur Andersen focuses on the relationship between two Federal Arbitration Act sections, 16(a)(1)(A), and 3. The former provides that a party may apply to stay judicial proceedings if a district court concludes that the issue involved can be referred to arbitration, and Section 3 allows for direct appeal of a district court order denying an application to stay proceedings.

The petition was brought by Arthur Anderson, an accounting firm now in dissolution; Curtis, Mallet-Prevost, Colt & Mosle LLP, a New York-based law firm, and three others who advised the respondent, Carlisle, on setting up a tax shelter for proceeds from the sale of its business.

The only arbitration agreement in the transactions surrounding the sale is between the respondent and its investment adviser, Bricolage Capital LLC, which is no longer involved in the proceedings because it filed for bankruptcy.

Carlisle originally filed suit against the petitioners for fraud, civil conspiracy, professional and legal malpractice, and negligence claims, after the Internal Revenue Service found the tax shelters illegal.  After Bricolage filed for bankruptcy and left the proceedings, petitioners motioned to compel arbitration under the agreement.  The district court denied the motion and the Sixth U.S Circuit Court of Appeals dismissed for lack of jurisdiction, citing the fact that petitioners were not signatories to the arbitration agreement between Carlisle and Bricolage.

The issues before the Supreme Court are whether Section 16(a)(l)(A) provides appellate jurisdiction over an appeal involving nonsignatories to the arbitration agreement, and whether Section 3 allows a court to stay claims against nonsignatories when the nonsignatories can otherwise enforce the arbitration agreement under contract and agency law.

For an in-depth discussion of the facts and issues involved, see Arbitration Back at the Supreme Court, Again, on Nonsignatories’ Rights, 27 Alternatives 14 (January 2009), available free with membership here, for purchase by article here as part of the ADR Briefs feature, and on Lexis and Westlaw.

For the briefs and the Sixth Circuit's opinion in the case, see Scotusblog’s Andersen v. Carlisle wiki, here.

This is the third arbitration case the Court has heard this term. Decisions haven’t yet been issued in the cases.  In 14 Penn Plaza, et al. v. Pyett, No. 07-581 (transcript can be found here), argued Dec. 1, the issue was whether an arbitration clause contained in a collective-bargaining agreement that waives union members’ rights to bring statutory discrimination claims in a judicial forum is enforceable. The case details were reviewed on this site, here.

Also, oral argument was held on the first day of the term, Oct. 6, 2008, in Vaden v. Discover Bank, et al., No. 07-773 (transcript can be found here). In that case, the Court reviewed the jurisdictional question of whether under FAA § 4, federal question subject matter jurisdiction must be established on the face of a motion to compel arbitration, or can also arise from the parties’ underlying substantive dispute. For a summary see the CPR News archive here.

--Jason Frank, CPR Intern