And Judge Bea Dissents.
In Setty v. Shrinivas Sugandhalaya LLP, No. 18-35573 (9th Cir. 7/7/21) (Nelson, Rawlinson; Bea, dsst.), the court holds that the district court did not abuse its discretion by rejecting defendant SS Mumbai's argument that plaintiff SS Bangalore should be equitably estopped from avoiding arbitration. Defendant SS Mumbai was a non-signatory to an arbitration agreement contained in a partnership deed to which plaintiff SS Bangalore was a party. Because it was not a party to the arbitration agreement, which was contained in a document executed in India by Indian parties, SS Mumbai tried to rely on the doctrine of equitable estoppel to argue that if the plaintiff was claiming the benefits of the partnership deed, it could not equitably disclaim its obligation to arbitrate. (Quisensit commodum debet et sentire onus.) But the Ninth Circuit concluded plaintiff's intellectual property federal claims were not sufficiently intertwined with the partnership deed, and as a result, the court could not look to the partnership deed to determine whether Indian law should apply to decide the estoppel question. Instead, the court concluded federal common law governs, and decided under federal common law that the facts did not support equitable estoppel.
Dissenting, Judge Bea wrote: "I would hold, simply, that whether a particular contract is governed by the New York Convention or not, a nonsignatory's equitable estoppel claim to compel arbitration is brought pursuant to the FAA, which requires that state contract law (or in the case of a foreign contract, perhaps the foreign state's contract law, depending on the state's choice of law rules) govern the issue."
Comment: This case has a lively procedural history. In a prior opinion, the Ninth Circuit held that SS Mumbai, the defendant and non-signatory to a partnership deed that contained an arbitration provision, could not equitably estop plaintiff SS Bangalore from avoiding arbitration. (See my 1/23/21 post on this case). The Supreme Court granted cert, remanding for further consideration in light of GE Energy Power Conversion Power France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020). GE Energy held the New York Convention does not conflict with enforcing arbitration agreements by non-signatories under domestic-law equitable estoppel doctrines. The Ninth Circuit took up the case again, leading to the current majority opinion and dissent. Given the lengthy dissent, might the procedural history still have legs?
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