## Facts

- Rediffusion Simulation Ltd., a British flight-simulator manufacturer, entered a 1986 “Working Agreement” with Evans & Sutherland Computer Corp. (E & S) for exclusive purchase/supply of certain simulator imaging equipment.
- The Working Agreement contained an arbitration clause requiring arbitration of disputes between the “parties,” and defined “E & S” and “Rediffusion” to include their “affiliates.”
- Rediffusion was later acquired by Hughes Aircraft Co., which amended and extended the Working Agreement.
- On December 31, 1993, Hughes sold Rediffusion to Thomson-CSF, S.A. (Thomson), which renamed it Thomson Training and Simulation Ltd. and began integrating it into Thomson’s training and simulation division.
- Before the acquisition, E & S told Thomson that if Thomson bought Rediffusion, both Rediffusion and Thomson’s division would be required to purchase all needed equipment from E & S.
- Thomson sought a waiver and expressly stated it was not bound by an agreement it had neither negotiated nor signed.
- E & S filed an AAA demand for arbitration naming both Rediffusion and Thomson; Rediffusion did not contest arbitrability, but Thomson refused to participate.

## Issues

1. Whether a nonsignatory parent corporation may be compelled to arbitrate under its subsidiary’s arbitration clause based on affiliate status, control, and relatedness of the disputes.
2. Whether any recognized doctrine—incorporation by reference, assumption, agency, veil-piercing/alter ego, or estoppel—bound Thomson to the Working Agreement’s arbitration clause.

## Decision

- The Second Circuit reversed the district court’s order compelling Thomson to arbitrate and remanded.
- The court held Thomson could not be required to arbitrate because arbitration depends on consent, and Thomson did not agree to arbitrate with E & S.
- The court rejected the district court’s “hybrid” approach tying arbitrability to affiliate status, corporate control, and interrelated issues.
- The court found no basis to bind Thomson under incorporation by reference, assumption, agency, veil-piercing/alter ego, or estoppel.

## Legal Principles

- Arbitration is contractual; a party may be compelled to arbitrate only disputes it agreed to arbitrate.
- A nonsignatory may be bound to an arbitration agreement only through traditional contract and agency doctrines, including:
  - incorporation by reference,
  - assumption,
  - agency,
  - veil-piercing/alter ego, or
  - estoppel.
- Corporate ownership or control of a subsidiary, without a showing satisfying an established doctrine, does not bind the parent to the subsidiary’s arbitration clause.
- Estoppel requires the nonsignatory to have knowingly exploited the agreement or received direct benefits from it; indirect benefits flowing from ownership of a contracting subsidiary are insufficient.

## Conclusion

The Second Circuit held that Thomson, as a nonsignatory parent that expressly disavowed the contract, could not be compelled to arbitrate because none of the established doctrines that can bind nonsignatories to arbitration applied.


Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773 (2d Cir. 1995)