Part III.B.3
Panel’s Analysis of Whether it Had the Authority to Bind Nonsignatory Mr. Stapleton to the Lance Armstrong Arbitration Award (Panel Issue No. 2)
In Part III.B.2 we explained why we believe the Panel’s analysis of whether the parties agreed to arbitrate their dispute about sanctions (Panel Issue No. 1) was on the mark, and why the state court considering the issue de novo should find it helpful in the event the Armstrong parties challenge the panel’s jurisdiction. Today we briefly examine the Panel’s decision on Panel Issue No. 2: “Which parties are properly subject to this Tribunal’s jurisdiction?” (Award at 5)
The issue arose because the SCA Parties contended that Mr. William Stapleton was bound by the arbitration agreement and award because he executed the Settlement Agreement, albeit apparently only in his capacities as an officer of Tailwind and an authorized agent of Armstrong. (See Award at 7.)
Like Panel Issue No. 1—whether the parties agreed to arbitrate SCA’s sanctions claims—Panel Issue No. 2 is a question of arbitrability. See Howsam v. Dean Whitter Reynolds, Inc., 537 U.S. 79, 84 (2002); First Options of Chicago v. Kaplan, 514 U.S. 938, 941, 946-47 (1995). So, as discussed in Parts III.B.1 and III.B.2, the Court would presumably decide it independently—that is, without according deference to the Panel’s decision— were it necessary for it to decide it in the first place.
The SCA Parties, however, wisely chose to confirm the award as a whole rather than attempt to vacate it in part and confirm it in part, for as the Panel’s decision made very clear, there was no basis for finding Mr. Stapleton to be bound by the award. But even though the Court will presumably not have to address the issue, it is helpful for those interested in learning more about arbitration law to understand why the Panel got it right, and why the Texas Court would likely agree.
The First Principle
Arbitration is supposed to be “a matter of consent, not coercion.” Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 678-80 (2010) (citation and quotations omitted). That is the “first principle” of arbitration law (the “First Principle”) set forth in the Steelworkers’ Trilogy.[1] See, e.g., Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287, 295 & n.7, 294 n.6 (2010); AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 648 (1986).
The First Principle is integrally intertwined with “the central or primary purpose of the [Federal Arbitration Act][,]” which is “to ensure that private agreements to arbitrate are enforced according to their terms.”Stolt-Nielsen, 559 U.S. at 679 (citations and quotations omitted). To “enforce” an arbitration agreement “courts and arbitrators must give effect to the contractual rights and expectations of the parties.” Id. When courts do not give effect to the parties’ contractual rights and expectations, they violate the First Principle.
Courts and arbitrators are supposed to apply the First Principle faithfully and rigorously whenever they interpret or apply material arbitration-agreement-terms, and in “doing so [they] must not lose sight of the purpose of the exercise: to give effect to the intent of the parties.” See Stolt-Nielsen, 559 U.S. at 679-81. And the Panel certainly did not lose sight of it here.
Rights and Obligations of Nonsignatories
Courts cannot bind nonsignatories to arbitration agreements-or deem them to be bound by resulting arbitration awards—unless there is under applicable state law a contractual basis for doing so. See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-32 (2009); Equal Employment Opportunity Commission v. Waffle House, Inc., 534 U.S. 279, 293-94 (2002). Here, there was no such basis.
As the Panel explained, “[t]he documents in evidence. . . specify the parties who have agreed to be parties to the [contracts][:]. . . . Tailwind Sports Corp., Lance Armstrong, SCA Promotions, Inc. and SCA Insurance Specialists, Inc.” (Award at 9) “[T]hose persons and entities[,]” and no others, “agreed directly, or by authorized agent, to arbitrate any disputes between any or all of them before this Tribunal, all as defined in [the] agreements.” (Award at 9) “The evidence,” said the Panel, “clearly establishes that Mr. Stapleton acted in a disclosed capacity as a corporate officer or as the authorized agent of Armstrong.” (Award at 8) In either capacity, Mr. Stapleton did not “agree to” submit to the “jurisdiction of this Tribunal” in his individual capacity. (Award at 8-9) In the circumstances, “[t]he evidence and law do not provide any basis for this Tribunal to assert jurisdiction over Mr. Stapleton.” (Award at 9)
The Panel’s decision accordingly was consistent with the general common-law rule that an agent is not liable in its individual capacity for the debts of its disclosed principal. See e.g., Elgohary v. Herrera, 405 S.W.3d 785, 790-91 (Tex. App. 1st Dist. 2013). Mr. Stapleton apparently objected to the Panel’s jurisdiction so there was no argument concerning any alleged voluntary, post-dispute submission to the Panel’s jurisdiction. Likewise there apparently was no other state-law basis for finding that Mr. Stapleton was bound by the arbitration agreement.
Thus, even were the SCA Parties to attempt to challenge the Panel’s decision not to award relief against Mr. Stapleton, such a challenge would likely not succeed, irrespective of whether the Court were to decide the issue independently or with deference to the Panel.
Our next segment will analyze the Panel’s decision on Panel Issue No. 3: “What jurisdiction, if any, does this Tribunal have to award sanctions?” (Award at 5)
Photo Acknowledgements:
All photos used in the text portion of this post were licensed from Yay Images:
| Photo Number (from top down) | Photographer (Using Yay Image Abbreviations) | Text Added? (Y or N) |
| 1 | Sergey Nivens | Y |
| 2 | Wavebreakmedia | Y |
| 3 | Fotoscool | Y |
| 4 | Whiterabbit | Y |
Tags: Agency Law, Arbitrability, Arbitral Authority, Arbitral Power, Arthur Andersen LLP v. Carlisle, AT&T Technologies Inc. v. Communications Workers, Awards against Nonsignatories, Contractual Capacity, EEOC v. Waffle House Inc., First Options of Chicago Inc. v. Kaplan, First Principle, Granite Rock Co. v. International Brotherhood of Teamsters, Howsam v. Dean Witter Reynolds Inc., Individual Capacity, jurisdiction of arbitrators, Non-Parties, non-signatory, Nonsignatory, Representative Capacity, State Contract Law, Stolt Nielsen S.A. v. Animalfeeds Int'l Corp.
