Horvitz & Levy obtained the reversal of a judgment confirming a multimillion dollar arbitration award against two individuals who were not signatories to their companies’ arbitration agreement.
Two companies entered contracts with an Indian tribe to manage the tribe’s online lending operations. Dan and Mark Koetting were respectively the president and the managing partner of the two companies. Neither of the Koettings was a signatory to the contract’s arbitration agreement. After a dispute arose, the tribe filed arbitration demands against the Koettings and the companies, alleging that the Koettings operated the companies as their alter egos. The Koettings objected that as nonsignatories to the arbitration agreement they were not proper parties to the arbitration or subject to the arbitrator’s jurisdiction, but the arbitrator overruled those objections. The arbitrator determined that the Koettings were alter egos of the companies, and held them jointly and severally liable on a multimillion dollar award against the companies. The trial court then granted the tribe’s motion to confirm the arbitration award.
The Koettings retained Horvitz & Levy to represent them on appeal. Horvitz & Levy persuaded the Court of Appeal to hold that an arbitrator has no power to determine the rights and obligations of anyone who is not a party to the arbitration agreement, including whether a nonsignatory is the alter ego of a party. The court rejected the tribe’s argument that the Koettings consented to delegate that threshold arbitrability question to the arbitrator. The Court of Appeal therefore directed the trial court to enter a new order vacating the arbitration award as to the Koettings.