United States District Court, D. Montana, Billings Division
OPINION and ORDER
SUSAN P. WATTERS, District Judge.
Plaintiff Western Security Bank ("Western Security") moved for summary judgment against Defendant Schneider Limited Partnership ("Schneider"). Defendants Jay Winzenreid, Stephen Emery, and Big Hom Basin Bone and Joint (collectively "Wyoming Doctors") moved to stay this action pending arbitration between the Wyoming Doctors and Meridian Surgical Partners ("Meridian"), who is not a party to this suit. On May 6, 2015, United States Magistrate Judge Carolyn Ostby issued Findings and Recommendations on the pending motions. Judge Ostby recommends that this Court grant Western Security's Motion for Summary Judgment and deny the Wyoming Doctors' Motion to Stay Proceedings. For reasons discussed below, this Court adopts Judge Ostby's Finding and Recommendations in full. Because the parties are familiar with the procedural and factual background of this case, it will not be restated here.
I. Western Security's Motion for Partial Summary Judgment
Western Security moved for summary judgment as to liability against Schneider. Schneider did not respond. Judge Ostby addressed the motion's merits and determined that the undisputed material facts establish that Western Security is entitled to judgment against Schneider.
Pursuant to 28 U.S.C. § 636(b)(l), Schneider was required to file written objections within 14 days of the filing of Judge Ostby's Findings and Recommendations. Schneider did not file any objections. When neither party objects, this Court reviews Judge Ostby's conclusions for clear error. Clear error exists ifthe Court is left with a "definite and firm conviction that a mistake has been committed." United States v. Syrax, 235 F.3d 422, 427 (9th Cir. 2000). After reviewing the Findings and Recommendations, this Court does not find that Judge Ostby committed clear error. Therefore, this Court grants Western Security's Motion for Partial Summary Judgment.
II. The Wyoming Doctors' Motion to Stay Proceedings
The Wyoming Doctors argue that although Western Security was not a signatory to the arbitration agreements, this case should be stayed while the Wyoming Doctors pursue arbitration against Meridian. The Wyoming Doctors advance three alternative arguments in support of their motion: (1) Section 3 of the Federal Arbitration Act ("FAA") compels a stay; (2) this Court should apply the Fifth Circuit's standard and stay the case; and (3) this Court should exercise its discretion and stay the case. Judge Ostby disagreed and recommends that this Court deny the Motion to Stay Proceedings. The Wyoming Doctors timely objected and are therefore entitled to de novo review of the specified findings or recommendations to which they object. 28 U.S.C. § 636(b)(l).
A. Stay under § 3 of the FAA
The FAA requires district courts to stay an action if the issue "is referable to arbitration" under an arbitration agreement. 9 U.S.C. § 3. Nonsignatories to an arbitration agreement are not categorically barred from a stay under§ 3. Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009). Instead, a nonsignatory may be subject to a stay under § 3 if it is bound to the arbitration agreement by "traditional principles of state law." Rajagopalan v. Note World, LLC, 718 F.3d 844, 847 (9th Cir. 2013) (quoting Arthur Anderson, 556 U.S. at 631). (citation omitted).
Here, the Wyoming Doctors argue that Western Security is bound to the arbitration agreements between the Wyoming Doctors and Meridian under theories of (1) incorporation by reference, (2) third-party beneficiary, and (3) equitable estoppel. See Doc. 31 at 5. The Wyoming Doctors' arguments are unique, in that they are merely seeking a stay and not trying to compel Western Security to arbitrate its claims. Nonetheless, the Court will briefly address each argument.
i. Incorporation by reference
The Wyoming Doctors argue that Western Security incorporated the arbitration agreements into the Business Loan Agreement. The Wyoming Doctors cite to a section entitled "Binding Effect, " where the Business Loan Agreement states:
This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.
(Doc. 18-11 at 2) (emphasis added). The Wyoming Doctors allege that among the "Related Documents" are the arbitration agreements between the Wyoming Doctors and Meridian. The Wyoming Doctors continue that this incorporated by reference the arbitration agreements into the Business Loan Agreement. The ...