State Law Controls Who May Be Bound By Arbitration Clause Under The FAA

Overruling prior precedent, the Fifth Circuit holds that state law, rather than federal common law, controls who may be bound by an arbitration clause under the Federal Arbitration Act (FAA). Crawford Professional Drugs, Inc. v. CVS Caremark Corp., Cause No. 12–60922, 2014 U.S. App. LEXIS 6282, (5th Cir., April 4, 2014).

In Arthur Andersen, LLP v. Carlisle, 556 U.S. 624 (2009), the Supreme Court held that under the FAA, traditional principles of state law may allow an arbitration contract to be enforced by or against nonsignatories through a number of state–contract–law theories, including equitable estoppel. In Crawford, the Fifth Circuit modified prior decisions applying federal common law, rather than state contract law, to conform with Arthur Andersen.