The Seventh Circuit recently ruled that a party was bound to an arbitration award despite not being a signatory to the agreement to arbitrate. The court based its decision on the doctrine of "direct benefits estoppel," ruling that, even though the plaintiff was a non-signatory to the franchise agreement that contained an arbitration clause, she had received a direct benefit from the franchise agreement, and thus was bound under the terms of the arbitration award.
In yet another decision that underscores the "elemental tenet" of arbitration that a party cannot be compelled to arbitrate if he or she has not agreed to arbitrate, the Massachusetts Appeals Court recently ruled that a non-signatory to an agreement cannot be compelled by a signatory to arbitrate a dispute that the non-signatory did not agree to arbitrate.
Like other states, Massachusetts has enacted an arbitration statute that provides a streamlined procedure for compelling a party to arbitrate. Section 1 of the Massachusetts Uniform Arbitration Act, G.L. c. 251, recognizes two types of arbitration agreements: (i) those requiring parties to a contract to submit any dispute arising between them to arbitration, and (ii) those requiring parties to submit an existing dispute to arbitration. If a party reneges on either type of agreement, the aggrieved party can file an application in the Massachusetts Superior Courts to compel arbitration. Such applications are heard as motions and typically must be served on the non-arbitrating party in the manner required for original writs of summons, though the parties can agree, and often do agree, on another procedure for service.