In this interesting treatment of the issue of compelling a non-party to arbitrate, In the Matter of the Arbitration Between: Sunskar LTD. v. CDII Trading, Inc., et al., 11 Civ. 2499 (S.D.N.Y. 2011)(DLC), provides a good synopsis of the law and practice of the federal courts on compelling non-signatories to arbitrate.  The issue arises with frequency in international litigation and dispute resolution.

The petitioner, Sunskar, sought to compel CDII Trading as well as China Direct Industries to arbitrate pursuant to a charter party allegedly made with the two respondents in 2011.  The Court found that a trial of the issues was not necessary and instead determined:

First, Sunskar did indeed enter into a Charter Party with CDII.  The Court found that the operative questions were “whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) if federal statutory claims are asserted, whether Congress intended those claims to be nonarbitrable; and (4) if some, but not all, of the claims in the case are arbitrable, whether to stay the balance of the proceedings pending arbitration”.  The Court found the third and fourth issues not relevant and that the scope of the agreed arbitration agreement was broad enough to encompass the claims.

Second, the Court reiterated that, as the Second Circuit has ruled,

The Second Circuit “has made clear that a nonsignatory party may be bound to an arbitration agreement if so dictated by the ordinary principles of contract and agency.”

More specifically, the Court articulated the following as the five recognized theories under which nonsignatories may be bound to the arbitration agreements of others: “1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel.”

Third, however, Sunskar had “declined to argue that China Direct is liable under an alter eqo theory” or indeed under any other congnizable theory.  Instead it argued only that China Direct was “doing business as” CDII.  This the Court found was an insufficient ground to compel arbitration.