2019 CO 56
Colo.2019Background
- PRO Rugby (Plaintiffs) and USAR (a signatory) executed a Sanction Agreement authorizing PRO Rugby to operate a professional rugby league; the Agreement included a broad arbitration clause covering “any agent, employee, successor, or assign.”
- The Agreement contemplated appointing Rugby International Marketing (RIM) as PRO Rugby’s agent, but no separate agency agreement was ever executed and RIM did not yet exist when the Sanction Agreement was signed.
- PRO Rugby and its principal (Schoninger) sued USAR and others, alleging concerted actions that forced PRO Rugby out of business; RIM was named as a defendant in tort and contract-based claims.
- The trial court previously dismissed contract claims against RIM because RIM was not a signatory; later, plaintiffs moved to stay proceedings and compel arbitration as to RIM, asserting RIM was USAR’s agent (and thus covered by the arbitration clause).
- The district court granted a stay, reasoning that RIM fell within the arbitration clause as USAR’s agent; RIM petitioned the Colorado Supreme Court under C.A.R. 21 to review that order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nonsignatory agent can be compelled to arbitrate under an arbitration clause that covers parties and their agents | The clause’s plain language covers agents; RIM is USAR’s agent, so RIM must arbitrate | RIM is a nonsignatory that never agreed to arbitrate and no agency/assumption/benefit exists to bind it | A nonsignatory cannot be compelled to arbitrate absent recognized legal/equitable exceptions; plaintiffs failed to prove any exception |
| Whether delegation of arbitrability to arbitrator binds a nonsignatory | Delegation clause shows parties intended arbitrability issues to go to the arbitrator, so arbitrator should decide RIM’s arbitrability | Parties’ intent to delegate cannot alone bind a nonparty; a legal basis is required to make a nonparty subject to the contract | Delegation does not bind a nonsignatory absent a separate legal ground to bind that nonsignatory |
| Whether RIM was a third-party beneficiary of the Sanction Agreement | The Agreement anticipated appointing RIM and thus conferred rights/benefits that bind RIM | RIM did not exist when Agreement signed; no specific legal rights were conferred; any benefits would require a separate agreement | RIM was not a third-party beneficiary and therefore not bound |
| Whether equitable estoppel or agency principles bind RIM | RIM accepted benefits/promises under the Agreement and/or functioned as USAR’s agent, so estoppel/agency bind it to arbitrate | At signing RIM didn’t exist, no agency agreement or benefits were conferred, and a principal cannot bind an agent to arbitration | Neither equitable estoppel nor agency principles apply to bind RIM here |
Key Cases Cited
- United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960) (arbitration is contractual; parties cannot be compelled to arbitrate disputes they have not agreed to submit)
- Lane v. Urgitus, 145 P.3d 672 (Colo. 2006) (order compelling arbitration is interlocutory and not immediately appealable)
- Smith v. Multi-Fin. Sec. Corp., 171 P.3d 1267 (Colo. App. 2007) (generally only signatories can invoke arbitration; exceptions exist under contract/agency principles)
- Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995) (recognizes exceptions for binding nonsignatories under agency and related theories)
- Bridas S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347 (5th Cir. 2003) (enumerating theories for binding nonsignatories to arbitration)
- Covington v. Aban Offshore Ltd., 650 F.3d 556 (5th Cir. 2011) (discusses agency and nonsignatory arbitration enforcement)
- Ouadani v. TF Final Mile LLC, 876 F.3d 31 (1st Cir. 2017) (equitable estoppel can bind nonsignatory who knowingly exploited the contract)
- InterGen N.V. v. Grina, 344 F.3d 134 (1st Cir. 2003) (third-party beneficiary test: intent to confer specific legal rights)
- Allen v. Pacheco, 71 P.3d 375 (Colo. 2003) (nonparty may be bound where context shows intent and legal basis such as privity or succession)
- Everett v. Dickinson & Co., 929 P.2d 10 (Colo. App. 1996) (nonsignatory cannot enforce arbitration clause absent recognized contractual relationship)