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Surprise! An undisclosed third party may be able to compel arbitration if the issues in dispute are intertwined with the arbitration agreement.

Network_iStock_000005265503LargeBy Kate T. Spelman

A California federal district court recently granted defendant Turn, Inc.’s motion to compel arbitration of a dispute with a putative class of New York Verizon subscribers.  Henson, et al. v. Turn, Inc., No. C 15-01497 JSW (N.D. Cal. Mar. 14, 2016).  Turn, an online marketing platform, partners with Verizon to utilize subscriber information to connect advertisers with their target audience.  Verizon subscribers sued Turn to prevent the company from allegedly surreptitiously monitoring their web browsing activities.  Turn moved to dismiss or stay the action on the basis of an arbitration clause contained in the service agreements between the subscriber plaintiffs and Verizon.  Turn was not a signatory to the service agreements.

The court held that under both New York and California law, a non-signatory to an arbitration agreement may compel arbitration when the claims at issues are “intertwined with the agreement.”  In this case, because the parties’ dispute hinged on a provision in the plaintiffs’ subscriber agreements with Verizon, and because the defense of the lawsuit would necessarily require introduction of those agreements, the issues were found to be “intertwined with the agreement” such that Turn could invoke the arbitration provision contained therein.  

This case follows a number of recent decisions, including those in DirectTV v. Imburgia, Roberts, et al. v. AT&T Mobility LLC, and Merkin et al. v. Vonage America Inc. et al, which have broadly construed defendants’ rights to bind consumers to arbitration provisions in service agreements.  However, this decision goes even further in permitting a third party to benefit from such an arbitration provision, even when the third party is not expressly disclosed in the agreement itself.