986 F.3d 1139
9th Cir.2021Background
- In 1999 two brothers (Balkrishna and Nagraj Setty) executed a Partnership Deed in Mumbai that contained an arbitration clause for disputes "between the partners." Neither SS Mumbai nor SS Bangalore (the companies later formed by the brothers) were signatories to that Deed.
- The brothers split and formed competing Indian companies: Shrinivas Sugandhalaya (BNG) LLP (SS Bangalore, plaintiff) and Shrinivas Sugandhalaya LLP (SS Mumbai, defendant). A U.S. trademark dispute followed.
- SS Bangalore sued SS Mumbai in U.S. federal court asserting federal trademark claims and pendant Alabama state claims; SS Mumbai moved to compel arbitration and to stay proceedings, arguing a nonsignatory (SS Mumbai) may compel a signatory (SS Bangalore) to arbitrate under equitable estoppel.
- The district court denied SS Mumbai’s motions. The Ninth Circuit initially affirmed relying on Yang; the Supreme Court vacated and remanded after overruling Yang in GE Energy.
- On remand the Ninth Circuit majority applied federal substantive common law to the arbitrability threshold, concluded SS Mumbai failed to show equitable estoppel, and affirmed the denials; Judge Bea dissented, arguing state (and likely Indian) contract law should govern and would remand for choice-of-law and merits.
Issues
| Issue | Plaintiff's Argument (SS Bangalore) | Defendant's Argument (SS Mumbai) | Held |
|---|---|---|---|
| Which law governs whether a nonsignatory may compel arbitration (choice-of-law)? | The Partnership Deed’s arbitration clause applies only among partners; threshold choice-of-law cannot be resolved by the Deed and state/foreign contract law should determine whether a nonsignatory can compel arbitration. | The Partnership Deed and its India-related choice should control; Indian law (or relevant contract law) should apply to enforce the arbitration clause against the signatory. | Majority: federal substantive common law governs arbitrability of federal claims by/against nonsignatories. Dissent: state or Indian contract law should govern and case should be remanded. |
| May SS Mumbai, a nonsignatory, invoke equitable estoppel to compel SS Bangalore to arbitrate? | Equitable estoppel does not apply because the dispute is not clearly intertwined with the Partnership Deed; ownership and prior-use facts, not Deed provisions, explain rights to the marks. | SS Mumbai argues equitable estoppel bars SS Bangalore from avoiding arbitration under Partnership Deed. | Court: Equitable estoppel not shown; district court did not abuse its discretion in denying motion to compel arbitration. |
| Should the district court stay the litigation pending arbitration? | Opposed (proceed in court). | Requested a stay if arbitration is compelled. | Court: Denial of stay affirmed because denial to compel arbitration was not error. |
Key Cases Cited
- GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020) (Supreme Court: New York Convention does not bar application of domestic equitable-estoppel doctrines under FAA Chapter 1)
- Yang v. Majestic Blue Fisheries, LLC, 876 F.3d 996 (9th Cir. 2017) (prior Ninth Circuit decision limiting nonsignatory enforcement under the Convention; later overruled by GE Energy)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (Supreme Court: Chapter 1 of FAA permits application of traditional state contract-law doctrines to enforce arbitration agreements against nonsignatories)
- Letizia v. Prudential Bache Securities, Inc., 802 F.2d 1185 (9th Cir. 1986) (Ninth Circuit decision applying federal substantive law to arbitrability in a securities fraud context)
- In re Henson, 869 F.3d 1052 (9th Cir. 2017) (Ninth Circuit: when a nonsignatory invokes equitable estoppel under FAA Chapter 1, state contract law and forum choice-of-law rules govern)
- Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) (Ninth Circuit applying state contract law to determine whether a nonsignatory may compel arbitration)
- Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042 (9th Cir. 2009) (equitable estoppel requires that the dispute be intertwined with the contract containing the arbitration clause)
- Rajagopalan v. NoteWorld, LLC, 718 F.3d 844 (9th Cir. 2013) (doctrine: non-signatory defendants have not been allowed to invoke equitable estoppel against signatory plaintiffs)
- Casa del Caffe Vergnano S.P.A. v. ItalFlavors, LLC, 816 F.3d 1208 (9th Cir. 2016) (federal common law governs certain threshold issues under Chapter 2, but not necessarily equitable-estoppel questions under Chapter 1)