Aikens v. Johnson, 3:16-cv-00729

Elvira Aikens executed a Merrill Lynch IRA Adoption Agreement in 1993 that named David Aikens (plaintiff) as a 12.5% beneficiary; the agreement contains a broad arbitration clause.
Elvira withdrew and closed the account between 1997 and 2001; she died in 2006.
Plaintiff (pro se) sued Merrill Lynch and Benjamin Johnson alleging theft of inheritance, fraud, and failure to produce financial documents.
Merrill Lynch moved to dismiss or alternatively to stay the case pending arbitration under the IRA Custodial Agreement; Johnson moved to dismiss for lack of jurisdiction.
Merrill Lynch contended the arbitration clause is enforceable against plaintiff as a third-party beneficiary and that plaintiff’s claims arise from the IRA contract.
The court concluded the FAA applies, found plaintiff bound as a third-party beneficiary, denied dismissal but stayed and administratively closed the case pending arbitration; Johnson’s dismissal motion was denied without prejudice.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the FAA governs and arbitration applies to plaintiff's claims	Arbitration should not override unspecified “laws of 1993”; heirs were not notified	IRA Adoption Agreement contains a valid, broad arbitration clause covering disputes and plaintiff is bound as a beneficiary	FAA governs; arbitration clause applies; claims fall within its scope; stay ordered pending arbitration
Whether a nonsignatory/third-party beneficiary can be compelled to arbitrate	Plaintiff did not meaningfully contest third-party beneficiary status	Plaintiff is a named beneficiary in the IRA agreement and is bound as a third-party beneficiary; he relies on the contract to claim damages	Plaintiff is bound as a third-party beneficiary and must arbitrate under the agreement
Effect of co-defendant (Johnson) not clearly covered by arbitration clause	Case should proceed in court against all defendants	Presence of a co-defendant not subject to arbitration does not preclude staying the case for arbitration of arbitrable claims	Court stayed action pending arbitration; Johnson’s dismissal denied without prejudice

Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524 (5th Cir.) (arbitration favored and applicable principles)
Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (U.S.) (federal policy favoring arbitration)
Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (U.S.) (broad interpretation of “involving commerce” under the FAA)
Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069 (5th Cir.) (two-step test for arbitration: validity and scope)
Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (U.S.) (arbitration must be enforced even with non-arbitrating parties present)
Bridas S.A.P.I.C. v. Government of Turkmenistan, 345 F.3d 347 (5th Cir.) (circumstances where nonsignatories may be bound to arbitrate)