Doe v. the Trump Corporation
6 F.4th 400
| 2d Cir. | 2021Background
- Four plaintiffs sued the Trump Corporation, Donald J. Trump, and family members alleging they made undisclosed, paid endorsements of ACN (a multi-level marketing company) that fraudulently induced plaintiffs to become ACN Independent Business Owners (IBOs).
- Each plaintiff had signed ACN IBO agreements containing arbitration clauses requiring disputes between the IBO and ACN to be arbitrated before the AAA; plaintiffs did not sue ACN and were not parties to any suit against ACN.
- Defendants (non-signatories to the IBO agreements) moved to compel arbitration under equitable estoppel and agency theories; ACN (a non-party to the underlying suit) moved to compel arbitration of discovery and the broader dispute with plaintiffs after plaintiffs served a subpoena on ACN.
- The district court denied both the defendants’ and ACN’s motions: it held defendants could not invoke equitable estoppel to force arbitration and that it lacked an independent jurisdictional basis under FAA §4 to compel ACN’s requested arbitration; the court also found waiver and rejected the agency theory.
- Defendants and ACN appealed; the Second Circuit affirmed the district court, primarily on the equitable-estoppel and subject-matter-jurisdiction grounds, and found key appellate arguments forfeited.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether non-signatory defendants can compel arbitration under equitable estoppel | Plaintiffs: estoppel inapplicable because defendants were third‑party wrongdoers, no close/significant relationship with ACN, and plaintiffs did not treat defendants and ACN as interchangeable | Defendants: plaintiffs’ claims are "intertwined" with the IBO agreements so equitable estoppel permits non-signatories to enforce arbitration clauses | Held: Denied — no close relationship or corporate nexus; estoppel does not bind third‑party wrongdoers to arbitration (affirmed) |
| Whether Contec requires deferring threshold arbitrability questions (estoppel/waiver) to arbitrator | Plaintiffs: defendants forfeited/forfeited the Contec argument; equitable‑estoppel and arbitrability are for the court | Defendants: Contec means arbitrability questions, including estoppel/waiver, should be decided by arbitrator | Held: Forfeited by defendants for appellate review; even if preserved, probably would fail because IBO clauses lacked clear delegation to arbitrator |
| Whether district court had jurisdiction under FAA §4 to compel ACN (a non‑party to the suit) to arbitrate | Plaintiffs: no case/controversy between plaintiffs and ACN; FAA §4 requires an independent jurisdictional basis "save for" arbitration agreement | ACN: underlying litigation and discovery show a dispute over IBO obligations with ACN and thus §4 jurisdiction exists | Held: Denied — no actual controversy between plaintiffs and ACN; Vaden precludes inventing hypothetical disputes to confer §4 jurisdiction |
| Whether defendants waived or lost the right to compel arbitration by litigation conduct | Plaintiffs: defendants waived/arbitration rights through litigation participation | Defendants: timely asserted arbitration; no waiver | Held: District court found waiver, but Second Circuit did not reach waiver issue after affirming on estoppel; waiver argument not necessary to decision |
Key Cases Cited
- Ragone v. Atlantic Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010) (arbitrability inquiry does not consider merits; explains estoppel to bind non‑signatories in narrow circumstances)
- Contec Corp. v. Remote Sol. Co., 398 F.3d 205 (2d Cir. 2005) (discusses delegation clauses and when arbitrator decides threshold arbitrability questions)
- Vaden v. Discover Bank, 556 U.S. 49 (2009) (FAA §4 does not create federal jurisdiction; petitioner must show an independent jurisdictional basis "save for" arbitration)
- Choctaw Generation Ltd. P'ship v. Am. Home Assurance Co., 271 F.3d 403 (2d Cir. 2001) (recognizes estoppel theory allowing non‑signatory to compel arbitration when claims are intertwined with contract obligations)
- Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir. 2008) (limits equitable estoppel where non‑signatory is alleged third‑party wrongdoer)
- Ross v. American Express Co., 547 F.3d 137 (2d Cir. 2008) (estoppel analysis favors arbitration when signatory treated non‑signatory as interchangeable; distinguishes third‑party wrongdoer situations)
- Landau v. Eisenberg, 922 F.3d 495 (2d Cir. 2019) (standard of review for jurisdictional questions and discussion of FAA jurisdictional limits)
- Doctor’s Associates, Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (parties to which §4 refers are the petitioners; relates to FAA petition jurisdiction)