Bequest Funds, LLC (Bequest) retained Rainstar Financial Group, LLC (Rainstar) to provide commercial loan brokerage services. As a result of Rainstar’s services, Bequest executed a line of credit agreement (LOC) with Magnolia Financial Group, LLC (Magnolia).
The LOC had a binding arbitration provision which provides, “Any dispute, claim or controversy arising out of or relating to this Agreement, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration”.
Bequest did not contest Magnolia’s motion to compel arbitration so the court granted Bequest’s motion to compel arbitration.
Rainstar also filed a motion to compel Bequest to arbitrate which the Court denied.
While legal theories to enforce arbitration with a non signatory exist (e.g., assumption, piercing the corporate veil, alter ego, incorporate by reference, third-party beneficiary, waiver, and estoppel), Rainstar did not articulate what theory, if any, would authorize it to compel arbitration with Bequest and therefore failed in its burden to establish the existence of an arbitration agreement with Bequest.
Bequest Funds, LLC v Magnolia Fin. Grp., Civil Action 3:23-CV-0866 (N.D. Tex. October 17, 2023).
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