DK Joint Venture 1 v. Weyand
2011 U.S. App. LEXIS 16107
5th Cir.2011Background
- Plaintiffs filed arbitration demands against Weyand, Thiessen, and numerous defendant corporations based on Subscription Agreements containing arbitration provisions.
- 19 investors intervened in state-court actions asserting similar claims; the cases were removed to the Northern District of Texas and consolidated.
- The district court held all defendants bound by the arbitration agreements and stayed the case pending arbitration.
- An AAA panel awarded damages: $13,317,381 against Weyand and $311,329 against Thiessen.
- The plaintiffs moved to confirm the arbitration award; the district court granted confirmation and entered judgment; Weyand and Thiessen appeal on personal liability and jurisdiction grounds.
- The central issue on appeal is whether Weyand and Thiessen are personally bound by arbitration agreements entered into by the corporations they led; the court must decide this de novo under FAA standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Weyand and Thiessen personally bound by the arbitration agreements? | Weyand and Thiessen acted as executives of the corporations; language in arbitration provisions binds affiliates. | Only the signatories (the corporations) agreed to arbitrate; the individuals did not personally agree. | No; individuals not bound personally under contract and agency principles. |
| Did the arbitration panel have jurisdiction to bind non-signatories? | Arbitration provisions empowered the panel to decide arbitrability and its jurisdiction. | Arbitrator cannot bind non-signatories absent their consent. | Arbitration panel lacked jurisdiction to render an award against Weyand and Thiessen. |
| Should the court defer to the arbitrator on arbitrability under the subscription agreements? | Arbitrator must decide arbitrability per agreement to AAA rules. | Arbitrability must be decided by courts when party claims no agreement. | Courts determine existence of an agreement first; not entitled to deference on jurisdiction questions. |
| Is judicial estoppel available to bind Weyand/Thiessen to arbitrate? | Weyand previously compelled arbitration against others; inconsistent positions. | Different contexts; signatory status matters; no inconsistency. | Judicial estoppel does not apply. |
| Is the September 3 judgment a final appealable decision? | Intervenors unresolved; no finality under 54(b) for Rule 54(b). | Judgment resolved all claims actually in the case. | Yes; the judgment was a final decision under 28 U.S.C. § 1291 and this court has jurisdiction. |
Key Cases Cited
- Roe v. Ladymon, 318 S.W.3d 502 (Tex.App.-Dallas 2010) (no personal arbitration where signatory status lacking for individual)
- Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435 (3d Cir. 1999) (non-signatories not bound absent authority or agreement)
- Merrill Lynch Investment Managers v. Optibase, Ltd., 337 F.3d 125 (2d Cir. 2003) (non-signatory bound only with agency/aided authority distinctions)
- Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993) (distinguishes signatory vs nonsignatory binding)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitrability depends on clear and unmistakable evidence of delegation)
- Agere Systems, Inc. v. Samsung Electronics Co., 560 F.3d 337 (5th Cir. 2009) (wholly groundless standard not applicable when question is existence of agreement)
- Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211 (5th Cir. 2003) (court must decide existence of arbitration agreement before sending dispute to arbitration)