## Facts

- Larry Eugene Benton was injured in a car accident and received hospital treatment at Vanderbilt University Medical Center.
- Benton was insured by Blue Cross/Blue Shield of Tennessee, which had a provider agreement with Vanderbilt requiring Vanderbilt to accept discounted rates and not bill insured patients for amounts above those rates.
- Blue Cross paid Vanderbilt most charges; Vanderbilt asserted an unpaid balance of $14,772.09 that the provider agreement prohibited Vanderbilt from collecting from Blue Cross members.
- Vanderbilt filed a hospital lien against any recovery Benton might obtain from the at-fault driver to collect the unpaid balance.
- After obtaining a tort recovery, Benton sued Vanderbilt, alleging (among other theories) breach of contract as an intended third-party beneficiary of the Vanderbilt–Blue Cross provider agreement.
- The provider agreement contained a binding arbitration clause for disputes “arising out of or relating to” the agreement.
- Vanderbilt moved to compel arbitration and stay the lawsuit, arguing Benton was bound by the arbitration clause because he sought to enforce the agreement as a third-party beneficiary.

## Issues

1. Whether an arbitration clause in a contract is enforceable against a non-signatory third-party beneficiary who sues to enforce that contract.
2. Whether the arbitration clause applies only to the contract-based claims, as opposed to any independent statutory or tort claims asserted alongside them.

## Decision

- The Tennessee Supreme Court held that an arbitration provision is enforceable against a third-party beneficiary who files an action to enforce the contract containing the arbitration clause.
- The court affirmed the appellate decision ordering arbitration and remanded for further proceedings consistent with its opinion.
- The court indicated the clause reaches claims seeking to enforce contract rights, but may not reach claims that do not depend on the contract.

## Legal Principles

- Tennessee enforces arbitration agreements according to their terms; such provisions are generally valid and enforceable absent ordinary contract defenses.
- An intended third-party beneficiary derives rights from the contract and is generally bound by the contract’s terms and conditions.
- A third-party beneficiary may not accept contractual benefits while avoiding contractual burdens, including an agreement to arbitrate.
- Contract language referring to disputes between the “parties” does not automatically exclude arbitration when a third-party beneficiary sues to enforce the agreement; the key inquiry is whether the claim arises out of or relates to the contract being enforced.
- The enforceability of arbitration against a beneficiary is limited to claims that seek to enforce or depend on the contract containing the arbitration clause; unrelated claims require separate analysis.

## Conclusion

Because Benton’s breach-of-contract theory depended on his asserted status as an intended beneficiary of the Vanderbilt–Blue Cross provider agreement, he was bound by that agreement’s arbitration clause for contract-based claims, and the case was remanded to compel arbitration consistent with that holding.


Benton v. Vanderbilt Univ., 137 S.W.3d 614 (Tenn. 2004)