978 F.3d 572
8th Cir.2020Background:
- In 2008 Neal executed a Chase Promissory Note and Credit Agreement governed by Ohio law that capped interest and included a broad arbitration clause covering disputes between “you and us or our employees, agents, successors or assigns”; the agreement defines “we/us” as Chase and its successors, assigns, and any other holder of the Agreement.
- Chase sold the loan to Jamestown Funding Trust in 2017; Navient (NSL and affiliates) became the loan servicer and thus an agent of the loan holder.
- Neal sued Chase and Navient in 2018 alleging the servicer imposed interest above Ohio’s legal maximum; after discovering Jamestown owned the loan, Neal dismissed Chase but did not add Jamestown and kept Navient defendants in the suit.
- Navient moved to compel arbitration under the Credit Agreement; Neal opposed, arguing Navient is not a signatory, successor, assign, or holder and therefore cannot invoke the arbitration clause.
- The district court denied Navient’s motion, concluding the contract’s definition of who may compel arbitration excludes nonsignatory agents and that alternate estoppel did not apply; the appellate court reversed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nonsignatory servicer/agent (Navient) may compel arbitration under the Credit Agreement | Navient is not a signatory, successor, assign, or holder; contract language excludes nonsignatory agents from compelling arbitration | Ohio agency and contract principles permit a nonsignatory agent to enforce arbitration when alleged misconduct arises from the principal's contract | Yes. Under Ohio law a nonsignatory agent may compel arbitration where liability arises from the agency/principal contract |
| Whether alternate estoppel prevents Neal from avoiding arbitration | The agreement’s clear language precludes nonsignatories from compelling arbitration; estoppel cannot override that | Neal’s claims are integrally founded in and rely on the Credit Agreement, so alternate estoppel bars him from disavowing arbitration | Yes. Alternate estoppel applies because Neal’s claims are intertwined with the contract containing the arbitration clause |
Key Cases Cited
- Plummer v. McSweeney, 941 F.3d 341 (8th Cir. 2019) (denial of motion to compel arbitration reviewed de novo)
- Williams v. Aetna Fin. Co., 700 N.E.2d 859 (Ohio 1998) (presumption favoring arbitration and resolve doubts in favor)
- Arnold v. Arnold Corp.-Printed Communications For Business, 920 F.2d 1269 (6th Cir. 1990) (nonsignatory defendants may be compelled to arbitrate to prevent circumvention of arbitration agreement)
- Illinois Controls, Inc. v. Langham, 639 N.E.2d 771 (Ohio 1994) (Ohio applies Restatement (Second) of Agency principles)
- I Sports, Inc. v. IMG Worldwide, Inc., 813 N.E.2d 4 (Ohio Ct. App. 2004) (alternate estoppel allows nonsignatories to compel arbitration when claims are intertwined with contract)
- Taylor v. Ernst & Young, L.L.P., 958 N.E.2d 1203 (Ohio 2011) (distinguishes presumption applicable when a nonsignatory seeks to invoke arbitration)