Arbitration: Nonsignatories: 2/4 DCA Reverses Arbitration Award Against Nonsignatory Alter Ego Where Arbitrator Included Nonsignatory In Arbitration

Appellate Court Found That Trial Judge Must Make Determination To Add Alter Ego Nonsignatory, With JAMS Rule Not Dictating A Different Result.

            Benaroya v. Willis, Case No. B281761 (2d Dist., Div. 4 May 17, 2018) (published) (Willhite, J., concurred in by Epstein, P.J. and Collins, J.) (yes, the matter did involve action star Bruce Willis) was a situation where an arbitrator made the decision to add an alleged nonsignatory alter ego respondent to an arbitration between claimant Willis/a lending company and a signatory respondent to which the added party was alleged to be an alter ego. Eventually, the arbitrator found that the nonsignatory was an alter ego and entered an award in excess of $5 million against both arbitration respondents. The trial judge granted Willis/lenders’ petition to confirm the award and denied respondents’ petition to vacate the award with respect to the arbitrator exercising jurisdiction over the nonsignatory.

            The appellate court agreed with the arbitration respondents’ position on appeal, vacating the award against the nonsignatory alter ego and only confirming the award against the signatory arbitration respondent.

            The reason for this overturn was that only the trial court (not the arbitrator) can decide whether an alleged nonsignatory alter ego could be compelled to arbitrate, with nothing in the JAMS arbitration rules changing that conclusion.