Sun Valley Ranch 308 Ltd. P’ship v. Robson – 11/20/2012

November 26, 2012

Arizona Court of Appeals Division One Holds That Non-Signatories to an Agreement Containing an Arbitration Clause May Compel Arbitration Under Certain Circumstances.

Plaintiffs Englewood Properties, Inc. (“Englewood”) and various entities run by Steven Robson (the “Robson Entities”) signed a partnership agreement creating Sun Valley Ranch 308 Limited Partnership (“SVR 308”) for the purpose of constructing apartments pursuant to a Construction Contract between the SVR 308 and one of the Robson Entities.  Englewood later asserted various claims regarding the project against both the Robson Entities and two non-signatories to the partnership agreement:  Steven Robson and Scott Management Company (“SMC”).  All defendants moved to compel arbitration pursuant to an arbitration clause in the SVR 308 partnership agreement, which applied to “any controversy or dispute aris[ing] out of or relating to [the partnership agreement] or breach hereof.”  The superior court denied the motion and the defendants timely appealed.

The Arizona Appeals Court vacated and remanded.  The Court first held that all claims asserted by Englewood “related to” the partnership agreement, and thus were covered by the arbitration clause.  Citing Consolidated Brokers Insurance Services, Inc. v. Pan-Am Assurance Co., Inc., 427 F. Supp. 2d 1074 (D. Kan. 2006), the Court ruled that the claims arising under the Construction Contract related to the partnership agreement because the two agreements were interrelated, as evidenced by the allegations in Englewood’s complaint.  Likewise, Englewood’s unjust enrichment, receivership, and judicial dissolution claims related to the partnership agreement and thus were covered by the arbitration clause.  The Court rejected Englewood’s argument that only the superior court could appoint a receiver or dissolve the partnership, explaining that arbitrators have broad powers under A.R.S. § 12-3008(B)(1).

The Court next held that Robson and SMC, non-signatories to the partnership agreement, could enforce the arbitration clause.  Because Englewood alleged that Robson was an alter ego of the Robson entities, he could demand arbitration to the same extent as the Robson Entities.  See Rowe v. Exline, 63 Cal. Rptr. 3d 787 (Cal. Ct. App. 2007).  Additionally, the fact that the claims against Robson required interpretation of the partnership agreement and Robson’s conduct was intertwined with that of the other defendants who signed the Partnership Agreement provided an independent basis for him to compel arbitration.  See CD Partners, LLC v. Grizzle, 424 F.3d 795, 798 (8th Cir. 2005).  Similarly, because the claims against SMC were based on the partnership agreement, SMC could compel arbitration.

Judge Downie authored the opinion; Presiding Judge Timmer and Judge Gemill concurred.