West Virginia Federal Court Refuses to Force Non-Signatory to Participate in Arbitration

Carlton Fields

Carlton Fields

Mountain Valley Pipeline LLC (MVP) contracted with U.S. Trinity Energy Services LLC for the construction and installation of the Mountain Valley Pipeline across property in Greenbrier County, West Virginia. Trinity subcontracted with M.T. Bores LLC to furnish equipment to excavate a tunnel in connection with the installation of the pipeline. But before the installation was completed, MVP terminated the project.

M.T. Bores claimed that it was not paid in full for the excavation equipment and thereafter placed a mechanic’s lien against the property for the balance due. M.T. Bores then instituted an action in the Greenbrier County Circuit Court seeking enforcement of the mechanic’s lien against MVP’s real property. The case was removed to the U.S. District Court for the Southern District of West Virginia, and Trinity thereafter moved to compel arbitration under the arbitration clause in the subcontract between M.T. Bores and Trinity. M.T. Bores did not dispute that it was required to arbitrate its claims but rather sought to compel MVP to participate in the arbitration.

Although recognizing that MVP was not a party to the subcontract, M.T. Bores sought to compel MVP’s participation based on the doctrine of equitable estoppel and third-party beneficiary theory. M.T. Bores argued that MVP should be estopped from refusing to arbitrate because it directly benefitted from the subcontract since the equipment contributed to MVP’s pipeline. The district court declined to apply the doctrine of equitable estoppel where MVP had not asserted any claim against M.T. Bores arising from the subcontract but rather was only defending claims brought against it by M.T. Bores. The district court similarly rejected M.T. Bores’ argument that MVP was a third-party beneficiary of the subcontract insofar as it was the owner of the property that was the site of M.T. Bores’ performance under the subcontract, finding that there was no evidence that the subcontract was created for MVP’s sole benefit. The district court noted that “[a] project owner will doubtless receive incidental benefits from its contractor’s subcontracts; but those benefits alone will not render the owner a third-party beneficiary.”

M.T. Bores also argued that MVP should be compelled to arbitrate in the interest of judicial economy since the claims against MVP and Trinity were inextricably intertwined. Although the district court agreed that M.T. Bores’ claims against MVP and Trinity involved some overlapping legal and factual issues, the court found the claims were not so “inextricably intertwined” to justify requiring MVP to participate in an arbitration absent its consent.

The district court similarly found no merit to M.T. Bores’ argument that MVP was an essential party to the arbitration since Trinity’s payment obligations to M.T. Bores under the subcontract were linked to, and may have been contingent on, MVP’s payment to Trinity.

Even so, the district court noted that an express provision in the subcontract deprived M.T. Bores of the ability to compel MVP to arbitrate absent Trinity’s consent. The district court accordingly denied M.T. Bores’ motion to compel MVP to participate in the arbitration between Trinity and M.T. Bores.

M.T. Bores, LLC v. Mountain Valley Pipeline, LLC, No. 5:20-cv-00602 (S.D. W. Va. Aug. 2, 2021).

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Carlton Fields

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