The Fifth Circuit and the Texas Supreme Court have held that whether a non-signatory is bound by an arbitration agreement is to be decided by the court, absent agreement to the contrary. Amberson v McAllen, No. 21-50960 (January 3, 2023 pages 4 and 5).
In a dispute over the applicability of a forum selection clause contained in a franchise agreement, the Fifth Circuit recently held that non-signatories to a franchise agreement may be bound to the contract’s choice of forum provision under the equitable doctrine that binds non-signatories who are “closely related” to the contract. Franlink Incorporated v BACE Services, Incorporated, 50 F.4th 432 (5th Cir. 2022)
Earlier in 2022, the Fifth Circuit held that a company could not compel arbitration where a non-party to the contract was not a third-party beneficiary of the contract. In this case, a pipeline inspection firm hired inspectors, and their employment agreement contained an arbitration provision. After the firm sent the inspectors to work for the client company, the inspectors filed suit against the client company under the Fair Labor Standards Act. The court agreed with the district court that the client company could not enforce the arbitration agreement between the inspectors and their firm. The court explained that, where, as here, the parties dispute whether an enforceable arbitration agreement exists between them, it takes a court to decide. Applying Texas contract law and equitable doctrines to this case, the court concluded that the client company was not a third party beneficiary of the contract and therefore cannot enforce the arbitration agreement. Newman v. Plains All Am. Pipeline, L.P., 23 F.4th 393 (5th Cir. 2022)
An interesting paper on when non-signatories to arbitration agreements may nevertheless been compelled to arbitrate can be found at
This paper details six theories by which non-signatories have been bound to arbitrate.
1. Entering into a contractual relationship which incorporates an existing arbitration clause
2. Assuming the obligation to arbitrate by participating in the arbitration process
3. Being an agent of a non-signatory, for example when a non-signatory employee of a signatory corporation seeks arbitration against a signatory plaintiff.
4. Holding an alter ego to the terms of an agreement requiring arbitration.
5. Equitable estoppel precluding enjoyment of rights under a contract while avoiding burdens and obligations of the contract.
6. Being a third party beneficiary where the contract manifests an intent to confer specific legal rights on the non-signatory.
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