Thompson v. Witherspoon
12 A.3d 685
| Md. Ct. Spec. App. | 2011Background
- Thompsons sued Manulife, UBS, Witherspoon, and others for negligent misrepresentation, deceit, conversion, negligence, and breach of contract related to a $4,000,000 life insurance policy.
- Witherspoon, the Thompsons' son-in-law and Manulife broker, allegedly misrepresented premium payments and concealed nonpayment, leading Manulife to borrow against the policy and erode the policy's value.
- Premiums were initially paid as gifts by appellants’ relatives, but payments stopped 1996–2003; approximately $900,000 was borrowed against the policy to cover premiums plus interest.
- UBS Agreements (Master Account Agreement and InsightOne Brokerage Account Agreement) signed in 2003 contained broad arbitration clauses; appellants were not signatories to these UBS Agreements or the policy.
- Circuit Court granted UBS and Witherspoon’s motions to compel arbitration and stayed proceedings; appellants appealed arguing no contractual basis to compel arbitration.
- Maryland Court of Special Appeals reversed, holding appellants cannot be bound by UBS arbitration provisions because they are non-signatories and there is insufficient direct benefit or intertwining with the UBS Agreements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can non-signatories be compelled to arbitrate? | Thompsons are non-signatories; no contractual basis to compel arbitration against appellants. | Equitable estoppel allows non-signatories to enforce arbitration when closely intertwined with the signatories' contract. | No; circuit court erred in compelling arbitration against appellants. |
| Are appellants equitably estopped from avoiding arbitration? | Appellants benefited from the UBS Agreements and should be bound to arbitration. | Appellants did not directly benefit from the UBS Agreements; claims do not arise from those contracts. | Estoppel not applicable; no direct contractual benefit to bind appellants. |
| Do the UBS Agreements' terms bind appellants despite lack of signature? | Claims are entwined with UBS contractual relationship; arbitration should apply. | Claims against Witherspoon and UBS do not depend on UBS Agreements; no enforceable arbitration on non-signatories. | Arbitration clause not enforceable against appellants; the circuit court erred. |
Key Cases Cited
- Case Handyman & Remodeling Servs., LLC v. Schuele, 183 Md.App. 44 (Md. Ct. Spec. App. 2008) (arbitration may bind non-signatories when intertwined with contract)
- Notre Dame v. Morabito, 132 Md.App. 158 (Md. Ct. Spec. App. 2000) (limitations/two-contract scenario; intertwining contracts can bind non-signatories)
- Thomson-CSF v. Evans & Sutherland Computer Corp., 64 F.3d 773 (2d Cir. 1995) (estoppel and direct benefit analysis for non-signatories)
- American Bankers Ins. Group v. Long, 453 F.3d 623 (4th Cir. 2006) (non-signatories bound when they benefit directly from contract)