Court Holds That an Arbitrator Did Not Have Authority to Bind a

Non-Signatory to the Arbitration

In Benaroya v. Willis, an arbitrator from JAMS recently joined a non-signatory to an Arbitration Agreement and found against him.  A California Court of Appeals reversed that decision.

In Benaroya, Benaroya is a movie company, which contracted with West Side Corporation to pay Bruce Willis, the President of West Side, to perform in a movie being produced by Benaroya.  A dispute arose regarding Willis' payment and Willis and West Side commenced arbitration proceedings against Benaroya pursuant to an arbitration agreement.  Willis and West Side then moved to amend their arbitration demand to name Michael Benaroya, individually, even though he was not a party to the agreement on the grounds that he was Benaroya's alter ego.  The arbitrator granted the request finding that Benaroya was the alter ego of his company.  The arbitrator found in favor of Willis against Benaroya.  The trial court denied Benaroya's petition to vacate the award as to Michael Benaroya and granted Willis' and West Side's petition to confirm the award.  The court of appeal reversed holding that the trial court had erred in confirming the award.  The court recognized that while a relevant JAMS rule permits an arbitrator to determine who among the signatories to an arbitration agreement are proper parties, the rule cannot and does not permit an arbitrator to determine whether a non-signatory to an arbitration agreement can be compelled to arbitrate.  That discretion lies solely with the trial court.  

This holding supports all previous decisions finding that a real estate company or agent, who is not a signatory to a residential purchase agreement containing an arbitration provision is not required to arbitrate, if the buyers and sellers proceed to arbitration.

Shannon B. Jones, Partner sbj@sbj-law.com