The Mississippi Supreme Court handed down a decision this month upholding the proposition that an arbitration agreement can be enforced against someone who did not sign the agreement. However, the facts of the case were unusual in that the individual (Donna Stuckey) against whom arbitration was ordered presented evidence that at least some of the documents involved in the transactions contained forged signatures.
In this case, the defendants had pledged certain property to the bank as collateral for loans made to their cattle business. Mrs. Stuckey’s name appeared approximately fifty-five times on documents containing arbitration provisions. However, Mrs. Stuckey claimed the only document she actually signed was one deed of trust which did not include an arbitration provision. Mrs. Stuckey admitted she was one of the owners of the cattle business. She asserted numerous claims, including forgery, against the bank and one of its employees who was also an owner of the cattle business. She further claimed she suffered damages when the bank employee took profits from the sale of cattle without her knowledge or permission. Because the only document which Mrs. Stuckey admitted had been signed by her did not include an arbitration provision, she disputed the matter was subject to arbitration.
The Supreme Court disagreed, concluding that it did not matter whether Mrs. Stuckey’s signature was forged and it did not matter that the deed of trust had no arbitration clause. The Court held since Mrs. Stuckey was a co-owner in the cattle business she was a third-party beneficiary to the loan agreements which included arbitration provisions. The Court also concluded that Mrs. Stuckey was equitably estopped from claiming she was not subject to arbitration on the basis that she could not claim breaches of duties associated with the loan documents and at the same time claim that she was not bound by the provisions in those documents.
This decision serves as a reminder of two principles: (1) You can’t have your cake and eat it too. The Mississippi Supreme Court recognizes and disfavors simultaneous attempts to claim the benefits of a contract and to disclaim application of certain contract provisions. (2) Arbitration continues to be favored by courts.
The Mississippi Supreme Court handed down a decision this month upholding the proposition that an arbitration agreement can be enforced against someone who did not sign the agreement. However, the facts of the case were unusual in that the individual (Donna Stuckey) against whom arbitration was ordered presented evidence that at least some of the documents involved in the transactions contained forged signatures.
In this case, the defendants had pledged certain property to the bank as collateral for loans made to their cattle business. Mrs. Stuckey’s name appeared approximately fifty-five times on documents containing arbitration provisions. However, Mrs. Stuckey claimed the only document she actually signed was one deed of trust which did not include an arbitration provision. Mrs. Stuckey admitted she was one of the owners of the cattle business. She asserted numerous claims, including forgery, against the bank and one of its employees who was also an owner of the cattle business. She further claimed she suffered damages when the bank employee took profits from the sale of cattle without her knowledge or permission. Because the only document which Mrs. Stuckey admitted had been signed by her did not include an arbitration provision, she disputed the matter was subject to arbitration.
The Supreme Court disagreed, concluding that it did not matter whether Mrs. Stuckey’s signature was forged and it did not matter that the deed of trust had no arbitration clause. The Court held since Mrs. Stuckey was a co-owner in the cattle business she was a third-party beneficiary to the loan agreements which included arbitration provisions. The Court also concluded that Mrs. Stuckey was equitably estopped from claiming she was not subject to arbitration on the basis that she could not claim breaches of duties associated with the loan documents and at the same time claim that she was not bound by the provisions in those documents.
This decision serves as a reminder of two principles: (1) You can’t have your cake and eat it too. The Mississippi Supreme Court recognizes and disfavors simultaneous attempts to claim the benefits of a contract and to disclaim application of certain contract provisions. (2) Arbitration continues to be favored by courts.
