Inception Mining, Inc. v. Danzig, Ltd., 311 F. Supp. 3d 1265

Background

Danzig, Ltd. initiated arbitration in Boston against Inception Mining, Inc. (formerly Gold American Mining Corp.) and two individual Utah residents, Michael Ahlin and Trent D'Ambrosio (the Individual Plaintiffs), asserting claims under several February 25, 2013 agreements including a consulting agreement (the Danzig Agreement).
The Danzig Agreement names only Gold American Mining Corp. and Danzig, Ltd., and contains an arbitration clause; the Individual Plaintiffs did not sign that agreement in their individual capacities.
Plaintiffs filed suit in federal court seeking declaratory and injunctive relief to stay the SLC and Boston Arbitrations as to the Individual Plaintiffs and to resolve arbitrability threshold issues.
Earlier district rulings allowed this court to decide whether the Individual Plaintiffs must arbitrate; portions addressing other contract arbitrability claims were held moot or lacked jurisdiction and one part was stayed pending a North Carolina ruling which was later resolved.
The court considered whether Utah or North Carolina law governs and applied Utah choice-of-law principles, concluding Utah law governs the Danzig Agreement and whether nonsignatories can be compelled to arbitrate under it.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Individual Plaintiffs agreed to arbitrate under the Danzig Agreement	Individual Plaintiffs never signed and thus did not agree to arbitrate	Though nonsignatories, the Individual Plaintiffs are bound via agency or estoppel	Held: Individual Plaintiffs did not agree to arbitrate; Utah law requires direct, specific evidence of an agreement to arbitrate
Whether Utah law governs arbitrability	Utah has the most significant relationship to the contract and governs	Defendants did not meaningfully contest forum choice	Held: Utah law applies under the forum state choice-of-law analysis
Whether agency binds nonsignatory agents to principal’s arbitration clause	Plaintiffs: agency does not make agents personally bound absent agreement or authority	Defendants: agents exercised control and should be bound through agency principles	Held: Agency doctrine does not permit a signatory to compel a nonsignatory agent to arbitrate; agents may invoke but are not compelled by principal’s arbitration clause
Whether estoppel (nonsignatory estoppel/direct benefits) binds the Individual Plaintiffs	Plaintiffs: Utah estoppel doctrines do not apply where signatory seeks to compel a nonsignatory who didn’t receive direct benefits	Defendants: various equitable-estoppel theories (including doctrines in other circuits) should apply to compel arbitration	Held: Utah precedents foreclose the estoppel theories defendants urge; no direct-benefits estoppel or other recognized Utah estoppel variants apply to compel these nonsignatories to arbitrate

Key Cases Cited

Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, 562 F.3d 1067 (10th Cir.) (describing preliminary injunction standards)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (procedural questions of arbitrability are for arbitrators unless parties clearly assign them to courts)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (parties must clearly agree to arbitrate arbitrability; courts decide gateway issues absent clear agreement)
Ellsworth v. American Arbitration Ass'n, 148 P.3d 983 (Utah 2006) (Utah's framework for nonsignatory estoppel and limits on binding nonsignatories)
Solid Q Holdings, LLC v. Arenal Energy Corp., 362 P.3d 295 (Utah Ct. App.) (rejecting the use of estoppel to bind nonsignatories when a signatory seeks to compel arbitration)
American Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349 (2d Cir.) (discussed as an alternative approach on direct-benefits estoppel but held not persuasive under Utah law)
Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435 (3d Cir.) (cited on nonsignatory arbitration theories)