law-nonsignatories
NONSIGNATORIES (ARBITRATION LAW)
According to principles of contract and agency law, arbitration agreements may
bind nonsignatories under any of six theories: (1) incorporation by reference; (2)
assumption; (3) agency; (4) alter ego; (5) equitable estoppel; and (6) third party
beneficiary. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex.
2005).
Transamerica does not fall into any of those six categories, and Rapid does not contend it does. We
therefore conclude Transamerica was not bound to arbitrate.
Rapid Settlements, Ltd v. Green (Tex.App.- Houston [1st Dist.] Jun. 18, 2009)(Op. By Alcala) (transfer of structured
settlement rights, grounds for vacature of arbitration award entered under the Federal Arbitration Act (FAA), applicability of
FAA, does the FAA preempt the TAA?, nonexistence of arbitration agreement between the parties, when are
nonsignatories bound to by arbitration agreement? nonparties to the agreement, nonsignatories)(arbitrator exceeded his
authority in issuing the award. See 9 U.S.C.S. § 10(a)(4).
AFFIRM TC JUDGMENT DENYING CONFIRMATION OF ARB AWARD: Opinion by Justice Alcala
Before Justices Jennings, Alcala and Higley
01-08-00109-CV Rapid Settlements, Ltd. v. Jerry M. Green
Appeal from County Civil Court at Law No 3 of Harris County
Trial Court Judge: Hon. Linda Storey
Rapid implies that whether Transamerica agreed to arbitrate is irrelevant because Transamerica has no cognizable
interest in the arbitration. However, the SSPA itself defines Transamerica as an "interested party." See Transamerica
Occidental Life Ins. Co. v. Rapid Settlements Ltd., No. 01-07-00137-CV, 2008 WL 5263265, at *5 (Tex. App.--Houston [1st
Dist.] Dec. 18, 2008, no pet.) (mem. op.) (citing Tex. Civ. Prac. & Rem. Code Ann. §§ 141.002(7), .006). Two additional
considerations support Transamerica's status as an interested party:
First, the SSPA provides that no structured settlement obligor or annuity issuer . . . can be required . . . to make any
payment to any transferee absent court approval of the transfer. This provision gives [the obligor] an interest sufficient to
contest any attempt to force it to make payments, in the absence of court approval, to anyone other than the original
payee. Second, if [the obligor] were to make payments to the wrong payee, it could become subject to double liability.
This potential liability gives [the obligor] a justiciable interest in any attempt to transfer the right to receive structured
payments absent court approval.
Transamerica, 2008 WL 5263265, at *5 (internal citations omitted). Because the SSPA acknowledges Transamerica as
an interested party, and because the arbitrator's award could potentially subject Transamerica to double liability,
Transamerica does have an interest in the outcome of the arbitration proceedings.
Transamerica was not bound to arbitrate, yet the arbitrator's award purports to bind Transamerica by ordering it to
redirect structured settlement payments. We conclude the arbitrator exceeded his authority in issuing the
award. See 9 U.S.C.S. § 10(a)(4). We hold the trial court did not err by vacating the arbitrator's award
because the arbitrator exceeded his powers in issuing an award against a party not subject to
arbitration. See id. § 10. We overrule Rapid's first issue.
In re Devon Energy Corp (Tex.App.- Houston [1st Dist.] Jun. 8, 2009)(Jennings)
(arbitration mandamus granted, parallel arbit proceeding, nonsignatories)
GRANT PETITION FOR WRIT OF MANDAMUS: Opinion by Justice Terry Jennings
01-09-00174-CV In re Devon Energy Corporation, Devon Energy International, Ltd. and Texneft, Inc.
Appeal from 165th District Court of Harris County
Trial Court Judge:The Honorable Josefina Rendon
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