Corporate America Credit Union v. Rubin Brown LLP

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 10-11077 ELEVENTH CIRCUIT
SEPT 22, 2010
Non-Argument Calendar
JOHN LEY
________________________
CLERK
D.C. Docket No. 2:09-cv-02126-IPJ
CORPORATE AMERICA CREDIT UNION,
Plaintiff-Appellee,
versus
JOSEPH HERBST, et al.,
Defendants,
RUBINBROWN LLP,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
________________________
(September 22, 2010)
Before BLACK, PRYOR and COX, Circuit Judges.
PER CURIAM:
Plaintiff Corporate America Credit Union provides liquidity and other services
to retail credit unions in Alabama. It is one of twenty-six corporate credit union
members of U.S. Central Federal Credit Union, a wholesale credit union. Corporate
America held a debt-like interest in U.S. Central called Members’ Capital Shares. In
2008, U.S. Central reported a writedown of subprime-mortgage investments. As a
result, its credit and debt ratings were downgraded. To improve its capital position
and prevent additional downgrades by rating agencies, U.S. Central requested that its
twenty-six members exchange their Members’ Capital Shares for equity-like Paid-In-
Capital Shares.
U.S. Central retained Defendant RubinBrown LLP to prepare a valuation of the
Paid-In-Capital Shares, and these parties executed an agreement related to the
services that RubinBrown would perform. This agreement contained a binding
arbitration clause stating, “[t]he parties agree that any and all disputes between them
in any way concerning the services provided by RubinBrown pursuant to the
Agreement . . . shall be committed to binding arbitration . . . .” (Dkt. 23-1 at 14.)
RubinBrown produced a valuation report, the first page of which noted that the
report was prepared for “[i]nternal purposes for use by U.S. Central, its 26 corporate
members, and their respective auditors . . . .” (Dkt. 34-1 at 4.) The report represents
that the Paid-In-Capital Shares were worth at least $450 million, and Corporate
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America asserts that it relied on this report in agreeing to exchange its Members’
Capital Shares in U.S. Central for Paid-In-Capital Shares. It alleges that soon after
the exchange, U.S. Central was placed in conservatorship, and the Paid-In-Capital
Shares were worthless.
Corporate America sued various directors of U.S Central alleging securities
fraud and breach of fiduciary duty. It also sued RubinBrown alleging professional
negligence and state securities law violations arising from the valuation of the Paid-
In-Capital Shares. Relying on the arbitration agreement between RubinBrown and
U.S. Central, RubinBrown moved to dismiss or alternatively to stay and compel
arbitration of Corporate America’s claims. RubinBrown also moved to dismiss for
want of personal jurisdiction. The district court denied the motions, and RubinBrown
filed this interlocutory appeal challenging the denial of its motion to compel
arbitration.
Corporate America is not a party to the contract between RubinBrown and U.S.
Central. RubinBrown argues that Corporate America is a third-party beneficiary of
that contract and is therefore bound by its arbitration agreement. In the alternative,
RubinBrown argues that Corporate America is estopped from seeking to avoid
application of the arbitration agreement because all of Corporate America’s claims
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against RubinBrown derive from the contract containing the arbitration clause. After
review of the record, we conclude that these arguments are without merit.
In some circumstances, a non-signatory may be bound to an arbitration
agreement. See e.g. Infiniti of Mobile, Inc. v. Office, 727 So. 2d 42, 48 (Ala. 1999).
But, an arbitration agreement restricted to the immediate parties does not bind a non-
party. World Rentals & Sales, LLC v. Volvo Constr. Equip. Rents, Inc., 517 F.3d
1240, 1244 (11th Cir. 2008) (citation omitted). “[I]f the language of the arbitration
provision is party specific and the description of the parties does not include the
nonsignatory, this Court’s inquiry is at an end, and we will not permit arbitration of
claims against the nonsignatory.” Smith v. Mark Dodge, Inc., 934 So. 2d 375, 381
(Ala. 2006) (citation omitted). After review of the record, we agree with the district
court’s analysis on pages seven through twelve of its order concluding that the
arbitration agreement in this case was party specific; it binds U.S. Central and
RubinBrown, but it does not bind non-signatories like Corporate America. (Dkt. 41
at 7-12.)
We also conclude that Corporate America should not be compelled to arbitrate
its claims under the doctrine of equitable estoppel. “Equitable estoppel precludes a
party from claiming the benefits of a contract while simultaneously attempting to
avoid the burdens that contract imposes.” Blinco v. Green Tree Servicing LLC, 400
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F.3d 1308, 1312 (11th Cir. 2005). “The purpose of the doctrine is to prevent a
plaintiff from, in effect, trying to have his cake and eat it too; that is, from relying on
the contract when it works to his advantage by establishing the claim, and repudiating
it when it works to his disadvantage by requiring arbitration.” In re Humana Inc.
Managed Care Litig., 285 F.3d 971, 976 (11th Cir. 2002) rev’d on other grounds.,
PacifiCare Heath Sys., Inc. v. Book, 538 U.S. 401, 123 S. Ct. 1531 (2003) (citation
and quotation omitted). Corporate America’s claims arise from alleged negligent
and/or fraudulent misrepresentations contained in the valuation report prepared by
RubinBrown. (Dkt. 1 at 48, 51, 56-57.) They do not arise from the terms of the
contract between RubinBrown and U.S. Central. “The plaintiff’s actual dependence
on the underlying contract in making out the claim . . . [is] the sine qua non of an
appropriate situation for applying equitable estoppel.” In re Humana, 285 F.3d at
976. Because Corporate America’s claims are not intertwined with the contract
between U.S. Central and RubinBrown, the court did not abuse its discretion in
declining to compel arbitration under the doctrine of equitable estoppel.
AFFIRMED.
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