Dеfendants-Appellants Merlin Biomed Group, LLC and Merlin Biomed Advisors, LLC appeal from an October 26, 2000, order of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, Judge) compelling defendants to participate in arbitration proceedings ongoing between Plaintiff-Ap-pellee MAG Portfolio Consult, GMBH (on the one hand) and (on the other hand) Merlin Biomed Asset Management, LLC, Merlin Biomed Advisors, LLC, Merlin Biomed Services, LLC and Dr. Stuart Weisbrod. Defendants appeal, arguing that there is no legal theory applicable to the facts of this case for compelling arbitration, that the district court mistakenly concluded that defendants were created for the purpose of evading the court’s previous order compelling arbitration, and that an evidentiary hearing was required. Because we find that arbitration could not be compelled on the basis of an estoppel theory and that there was insufficient fact finding to support compelling arbitration on the basis of a veil-piercing theory, we vacate the district court’s order and remand for an evidentiary hearing on the *60 question of whether the district court should pierce the corporate veil of the defendants in order to compel arbitration.
BACKGROUND
In January 1998, Stuart Weisbrod and Michael Gotthelf, through Gotthelfs company, MAG Portfolio Consult, GMBH (“MAG”), formed Merlin Biomed Asset Management, LLC (“MBAM”), Merlin Biomed Advisors, LLC, and Merlin Biomed Services, LLC (collectively, “the old Merlins”). Weisbrod and MAG each had a 50% stake in each company forming the old Merlins. The old Merlins managed two investment funds foсused mainly on health care securities. In 1999, Weisbrod and MAG decided to end their partnership, and on May 27, 1999, MAG and the old Merlins executed two agreements which had the effect of extinguishing MAG’s interest in the old Merlins.
The first agreement was a Purchase and Sale Agreement which transferred MAG’s stake in the old Merlins to MBAM in exchange for $26,000 and a guarantee of either $10,000 a year for five years starting in 2000 or 10% of thе annual profits for each of the same years, whichever was greater. The agreement also specified that if any of the old Merlins attempted to transfer assets to other funds in which a member or officer of the old Merlins had an equity interest of 25% or more during the five years MAG was to receive a share of the profits, MAG was entitled to receive 10% of the profits earned from managing those transferred assets. Finally, the agreement specified that the parties would submit disputes arising under it to arbitration.
The second agreement made was a Marketing Agreement. Under that agreement, MAG was to make a good faith effort to ensure that a German company, Deutsche Vermogenbildungsgeselschaft mbH/Deutsche Gesellschaft fur Wertpa-piersparen mbH, would invest in the funds managed by the old Merlins. In the end, the German company did not invest in the funds, and Weisbrod alleges that MAG breached this agreement. As a result of the loss of the assets of the German company, the old Merlins needed new business. Weisbrod “aggressively began to market the Merlin Funds” but found new investors reticent, he claims, because the old Merlins did not invest exclusively in health care funds, their area of еxpertise. Somehow, the solution to this problem required that the old Merlins resign from their duties as fund managers and that they be replaced by newly created entities, Merlin Biomed Group, LLC and Merlin Biomed Investment Advisors, LLC (“the new Merlins”). Weisbrod asserts he was the principal shareholder in all the old and new Merlins and thus had the right to effect the changes that he did. The effect of this transaction was that the old Merlins had substantially reduced profits.
On February 15, 2000, MAG commenced arbitration proceedings against MBAM for breach of the purchase agreement. On March 3, 2000, MBAM brought suit in the United States District Court for the Southern District of New York (Hellerstein, /.) alleging that MAG had, among other things, fraudulently induced MBAM to enter into the purchase and marketing agreements. The complaint also sought an order staying the arbitrаtion proceedings. MAG cross-moved for an order compelling arbitration, which the district court granted. On May 9, 2000, MBAM informed MAG by letter that two of the old Merlins had resigned their management positions and accordingly “no longer earn any performance fees or management fees.” On June 15, 2000, MAG petitioned the district court for an order compelling the new Merlins to join the arbitration proceeding *61 between MAG and MBAM. After a brief hearing, the district court granted MAG’s petition apparently on the basis of either an estoppel theory or a veil-piercing theory. The district court noted there was no “independent commercial basis for resignation [of the old Merlins] and appointment [of the new Merlins]” by Weisbrod and concluded that “Merlin Biomed Group LLC and Merlin Biomed Investment Ad-visors LLC having succeeded to the rights and obligations of the managerial responsibilities for these funds are bound by the original agreement to arbitrate.” The new Merlins appealed.
DISCUSSION
We note, as an initial matter, that an appeal from an order to compel arbitration may be taken immediately where the suit to compel arbitration is “ ‘independent’—that is, if the plaintiff seeks an order compelling or prohibiting arbitration ... and no party seeks any other relief.”
CPR (USA) Inc. v. Spray,
There are five theories “for binding non-signatories to arbitration agreements: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoрpel.”
Thomson-CSF, S.A. v. Am. Arbitration Ass’n,
A. Estoppel
Under the estoppel theory, a company “knowingly exploiting [an] agreement [with an arbitration clause can be] es-topped from avoiding arbitration despite having never signed the agreement.”
Id.
at 778. Guided by “[ordinary principles of contract and agency,” we have concluded that where a compаny “knowingly accepted the benefits” of an agreement with an arbitration clause, even without signing the agreement, that company may be bound by the arbitration clause.
Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S.,
By contrast, the benefit derived from an agreement is indirect where the nonsignatory exploits the contractual relation of parties to an agreement, but does not exploit (and thereby assume) the agreement itself.
Thomson-CSF,
Thomsoiu-CSF mentions an alternative estoppel theory applicable to arbitration clauses. Under this theory, a court will “estop a signatory from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed,” and the signatory and nonsignatory parties share a close relationship. Id. at 779. Thus, for example, “parties [may be] estopped from avoiding arbitration because they had entered into written arbitration agreements, albeit with the affiliates of [the nonsignatory] parties asserting the arbitration and not the parties themselves.” Id. However, because arbitration is guided by contract principlеs, the reverse is not also true: a signatory may not estop a nonsignatory from avoiding arbitration regardless of how closely affiliated that nonsignatory is with another signing party. Id.
Although the district court was not explicit about the legal theory on which it rested its holding, MAG did argue that the new Merlins could be bound on an estoppel theory. The district court asserted that “[t]he benefits of the bargain having bеen moved from the original signatories to the successors bind the successors to honor the agreement that was made to arbitrate disputes,” suggesting possible reliance upon the first estoppel theory. However, the district court followed up by stating its reliance on two estoppel cases, both of which rely on the second estoppel theory.
See Fluor Daniel Intercontinental, Inc. v. General Electric Co.,
To prevail, then, MAG must show that the new Merlins “knowingly exрloited]” the purchase contract and thereby received a direct benefit from the contract.
Thomsom-CSF,
At oral argument MAG referred us to
Am. Bureau of Shipping v. Tencara Shipyard, S.P.A.,
In this case, again assuming the old and new Merlins are not alter egos of each other or Weisbrod, there is no relationship between the signatories and the nonsigna-tory except that they are competitors for the same business. Even assuming a less than arms length relationship between the old and new Merlins, the most one could say is that the specific terms of the contractual relation between MAG and the old Merlins had been exploited by Weisbrod to the disadvantage of MAG. The -benefit to Weisbrod would not flow, in such a case, from the agreement itself, but from his ability to evade the intent of the agreement through the creation of аlter egos.
B. Veil-Piercing
Under New York law, a court may pierce the corporate veil where 1) “the owner exercised complete domination over the corporation with respect to the transaction at issue,” and 2) “such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil.”
Am. Fuel Corp. v. Utah Energy Dev. Co.,
(1) disregard of corporate formalities; (2) inadequate capitalization; (3) intermingling of funds; (4) overlap in ownership, officers, directors, and personnel; (5) common office space, address and telephone numbers of corporate entities; (6) the degree of discretion shown by the allegedly dominated сorporation; (7) whether the dealings between the entities are at arms length; (8) whether the corporations are treated as independent profit centers; (9) payment or guarantee of the corporation’s debts by the dominating entity, and (10) intermingling of property between the entities.
Freeman v. Complex Computing Co.,
During the hearing below, the district court’s questions focused on the relation between the old Mеrlins and the new Merlins. While the Merlin attorney was evasive, what the district court could ascertain allowed it to conclude that there were “no facts to show independence ... no facts to show separate ownership .... no facts to show an independent commercial basis for resignation and appointment and all that appears is that this is another effort that yоu started before to avoid the clear intentment [sic] of the contract and arbitration.” 1 Thus it appears that the *64 court concluded that the new Merlins were dominated by Weisbrod and the old Mer-lins, thereby fulfilling the first prong of a corporate veil-piercing analysis. The district court also, arguably, found the second prong satisfied as well: the wrong here would be avoiding the “clear intentment [sic] of the contrаct.”
The problem with affirming on this ground is that the hearing was very brief and involved precious little fact finding, while our case law teaches determining whether to pierce the corporate veil is a very fact specific inquiry involving a multitude of factors.
See Freeman,
The district court did ascertain that there was no consideration involved in the new Merlins succeeding to the managing role of the old Merlins.
Id.
(listing as faсtor “whether the dealings between the entities are at arms length”). The district court also pressed the Merlins’ attorney on the question of whether Weisbrod controlled both companies, asking whether “Weisbrod caused the resignation and Weisbrod caused the appointment?”
See Freeman,
The fact finding with regard to the second prong of the veil-piercing analysis is even more cursory and contradicted by a later statement that Weisbrod’s purpose in substituting one company for the other was irrelevant: “I won’t go into the underlying motivation of the business to have or not to have different managers. That is Mr. Weisbrod’s prerogative. The question is whether these additional parties are bound by the original deal and it seems to me they are.” Without a finding that the domination occurred for the purpose of committing a wrong, the second element of a veil-pierbing analysis has not been met. See id. at 1053 (“While complete domination of the corporation is the key to piercing the corporate veil, such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.”) (internal quotations omitted).
Because we cannot affirm the district court based on an estoppеl theory and because the record does not contain sufficient fact finding to support affirmation based on a veil-piercing theory, we remand to the district court for an evidentiary *65 hearing to determine whether compelling arbitration based on a veil-piercing theory is warranted.
CONCLUSION
We find that the new Merlins have not directly benefitted from the purchase agreement between MAG and MBAM and therefore we cannot affirm the district court’s order compelling arbitration on the basis of an estoppel theory. The record before us does not allow us to determine whether the district court intended to compel arbitration on the basis of a veil-piercing theory or whether a piercing of the corporate veil is justified on these facts. Accordingly, we vacate the district court’s order and remand to the district court for an evidentiary hearing on the question of whether the corporate veil of the new Mer-lins should be pierced in order to compel arbitration.
Each party will bear its own costs.
Notes
. The new Merlins seize on this statement and argue it shows that the district court mistakenly found that the new Merlins were created for the purpose of evading arbitrаtion, when, in fact, the new Merlins were created before the arbitration between MBAM and MAG had been ordered by the district court. However, the above quote — and the overall hearing record — do not support this contention. The district court stated that it suspected the new Merlins were a vehicle to allow MBAM to *64 evade its contractual obligations, one of which included arbitration of disputes.