Equitable Estoppel as a Basis for Compelling Nonsignatories to Arbitrate-A Bridge Too Far?

I. Introduction Despite the often-cited strong judicial presumption in favor of the United States Supreme Court has consistently held that party who has not agreed to arbitrate will normally have a right to a court's decision about the merits of its dispute.1 Indeed, the Federal Arbitration Act (FAA)2 and section 1 of the Uniform Arbitration Act of 1955 (UAA)3 require an arbitration agreement to be in writing. However, the Supreme Court's conclusion in Doctor's Assn, Inc. v. Casarotto4 that an arbitration clause may not be treated differently from any other contractual language5 has accelerated the development of legal and equitable principles whereby a nonsignatory to an arbitration agreement can be compelled to arbitrate based upon implied consent to such an agreement. II. Statutory Basis for Arbitration Arbitration agreements are enforceable under both state and federal law. The FAA, which applies to contracts relating to interstate commerce, provides that written agreements to arbitrate controversies arising out of an existing contract shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.6 When applicable, the FAA preempts all conflicting state laws under the Supremacy Clause of United States Constitution.7 If the FAA does not apply, thirty-four states and the District of Columbia have enacted a version of the UAA, and an additional thirteen states and Puerto Rico have enacted statutes that provide for the enforcement of agreements to arbitrate both existing and future controversies.8 Although the FAA may presumptively apply to matters affecting interstate commerce, the parties may designate which arbitration act, state or federal, they wish to control proceedings under a contract.9 III. The Controlling Effect of Ordinary Contract Law State law regarding the formation of a contract and the determination of its terms controls the evaluation of whether an agreement to arbitrate exists.10 Thus, regardless of whether a proceeding is subject to the FAA, state law regarding the formation of contracts determines whether an agreement to arbitrate exists. 11 Such state contract law recognizes the validity of contracts arising from numerous sources even without an express written agreement: An agreement implied in fact is founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.'12 The combined application of general equitable and ordinary contract principles to arbitration agreements enables courts to find that a party who has never physically signed an arbitration agreement has nevertheless assented by implication. IV. Origin of Implied Consent On February 12, 1925, Congress enacted the United States Arbitration Act,13 later known as the FAA, to counter the then existing judicial hostility toward arbitration.14 Nevertheless, some reluctance toward use of arbitration agreements remained, particularly with respect to statutory causes of action.15 With a series of Supreme Court decisions in the 1980s, judicial hostility was displaced by an express judicial policy favoring arbitration.16 Nevertheless, the origin of doctrinal precedent compelling nonsignatories to arbitrate may be traced to the interval between the enactment of the FAA and the sea-change in judicial attitudes toward arbitration, which began in the early 1980s. As one of the first cases to examine the issue, the Second Circuit's opinion in Fisser v. International Bank17 illustrates the operation of implied consent in the earliest stage of its application.18 The court reviewed the question of whether a bank could be compelled to arbitrate a dispute arising out of the breach of a written freight contract between a German coal importer and a Liberian corporation alleged to be the alter ego of the bank. …