Tenth Circuit Affirms Denial Of Motion To Compel Arbitration Based On Unsigned Agreement

The Tenth Circuit recently affirmed a district court’s denial of a motion to compel arbitration in a securities fraud lawsuit brought by two investors in a company. The basis for the motion to compel was an arbitration provision contained in an unsigned copy of the company’s Operating Agreement that had been provided to the plaintiffs prior to them making their investment in the company. The Tenth Circuit ruled that the mere fact that the plaintiffs invested in the company following their receipt of an unsigned Operating Agreement did not establish that the plaintiffs agreed to, and accepted, the terms of the Operating Agreement, including its arbitration provision because under the controlling state law, a contact between the parties had not been formed. The Tenth Circuit also agreed with the district court that the plaintiffs were not equitably estopped from asserting their lack of signature on the Operating Agreement as a basis for avoiding arbitration. The Tenth Circuit acknowledged the legal principle that a party may be bound by an arbitration agreement in a contract he did not sign, if that party is seeking to enforce rights under that contract. But the court found no evidence that the plaintiffs in the instant case were seeking to enforce rights under the Operating Agreement. Bellman v. I3Carbon, LLC, No. 12-1275 (10th Cir. May 29, 2014).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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