[00:00:00] Speaker 02:
We'll turn to our next case.

[00:00:04] Speaker 02:
Fucci versus first American title, 24-4051.

[00:00:08] Speaker 02:
I'm tall.

[00:00:16] Speaker 01:
Thank you, Your Honor.

[00:00:18] Speaker 01:
May it please the Court, my name is David Tufts with the law firm Dentons.

[00:00:22] Speaker 01:
I represent the defendants in this case, Ms.

[00:00:26] Speaker 01:
Kirsten Parkin and her employer,

[00:00:28] Speaker 01:
First American Title Insurance Company.

[00:00:31] Speaker 01:
It's my intention to reserve five minutes, assuming that the question of the court allows that.

[00:00:38] Speaker 01:
I am, of course, here to answer the court's questions.

[00:00:40] Speaker 01:
So thank you, Your Honor.

[00:00:42] Speaker 01:
I'll begin with a basic legal principle that permeates everything that's before the court today.

[00:00:50] Speaker 01:
And that principle is that the law requires anyone who claims the benefits of an agreement

[00:00:57] Speaker 01:
honor and abide by the burdens imposed on them by that very same agreement.

[00:01:02] Speaker 01:
That applies to all of the legal doctrines that we're presenting today.

[00:01:06] Speaker 01:
And as you've seen in the paper, there are really five doctrines that we've given the court to examine, any one of which would be sufficient for the court to examine and reverse what happened below.

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And they're all derivative of the

[00:01:24] Speaker 02:
arbitration provision in the contract to which you're not a party.

[00:01:29] Speaker 01:
Yes.

[00:01:30] Speaker 01:
Let me be clear, though, when you say party.

[00:01:33] Speaker 01:
We are not a... Parkin and First American are not signatories to that contract.

[00:01:39] Speaker 01:
But we assert party status, and I have an argument about that, as you've seen in the papers.

[00:01:45] Speaker 01:
That's a very important distinction.

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And so, if I may, that's

[00:01:50] Speaker 01:
issue number one of five, and this issue of party status or, might I say, privity is a very key central issue to this case.

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The issues presented could be labeled in terms of the party issue are the defendant's parties.

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And then the remaining four issues, which are equitable principles, which would apply to allow a non-signatory or a non-party

[00:02:18] Speaker 01:
to enforce rights under an agreement.

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So it's, in my view, critical that the court address the party issue and understand the relationship of the contract and the parties that are parties to that agreement and the role of the escrow agent, Parkin and First American.

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And as I indicated, the court could examine that issue.

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I think the court should start there.

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And I think the cases are

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are compelling on this point.

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And I would give the court four cases, two from Ohio, because there's Ohio law and Florida law, and two from Florida.

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These cases are Hoffman, number two is Waffen, number three, those are Ohio, number three and four are Florida, number three would be Armbruster, and number four would be Seligman.

[00:03:12] Speaker 01:
Those are found on pages

[00:03:14] Speaker 01:
19 and 20 of the opening brief and they're cited throughout all the briefs.

[00:03:18] Speaker 01:
What those cases instruct is the contractual relationship that exists in real estate transactions of this nature.

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You will have a buyer and a seller, right, the parties to the transaction, one will buy an interest in property and one will sell it.

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And what those cases instruct is and examine is the question of what is the relationship of the escrow agent in that situation.

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And they teach that the buyer and the seller agree to an exchange to buy property.

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And then those two parties jointly select an escrow agent and direct the escrow agent to undertake the closing on their behalf.

[00:04:05] Speaker 01:
buyer and seller in privity, and they jointly make an offer to an escrow agent, which the escrow agent can accept, usually does, and that role of receiving the subject matter, receiving the money and the deed, confers upon the escrow agent

[00:04:28] Speaker 01:
privity status.

[00:04:30] Speaker 01:
I will specifically refer you to those cases.

[00:04:32] Speaker 04:
Does it matter that the agreement before us is not an escrow agreement?

[00:04:35] Speaker 04:
It's a purchase agreement.

[00:04:37] Speaker 01:
So it's labeled a purchase agreement, but it contains instructions to the escrow officer as to how to handle the closing.

[00:04:47] Speaker 04:
So in order to accept your or endorse your argument that you just made, would we have to understand the contract at issue here to be an escrow agreement?

[00:04:55] Speaker 01:
So not necessarily.

[00:04:58] Speaker 01:
would be the direct answer to your question.

[00:05:00] Speaker 04:
On the party point though?

[00:05:02] Speaker 01:
On the party point I'm making, the privity point.

[00:05:04] Speaker 01:
The privity point.

[00:05:05] Speaker 01:
I like to use that word.

[00:05:08] Speaker 01:
The document needs to give some instructions

[00:05:13] Speaker 01:
as to how to handle the escrow, which this document does.

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It's on 3.2.

[00:05:18] Speaker 01:
There's paragraph six about the closing.

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There's payment of fees and all that kind of thing.

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So it's very clearly gives those instructions to First America.

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The law, when you read those four cases, Hoffman, Waffen, Armbruster, and Seligman, you'll see that those cases talk about how

[00:05:42] Speaker 01:
The law can recognize a contract in three different ways.

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To answer your question directly, Justice Roseman, there can be an express contract where it's specifically said what's going to happen, and there's an offer and acceptance.

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There can be a contract implied in fact where the parties have

[00:06:06] Speaker 01:
have had an exchange verbally or in writing about what will happen, and then they act consistent with that.

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Or there can be a contract implied at law.

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And in those cases, why those cases are so important is because in those cases, you have a purchase and sell agreement that's signed by a buyer and a seller.

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And in those cases, the buyer and seller specifically direct escrow activities towards an escrow agent.

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They request the escrow agent to do things.

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The escrow agent is not a signatory.

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The escrow agent just simply acts and undertakes the escrow.

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And then in those cases, there's an allegation that something's gone wrong.

[00:06:49] Speaker 03:
Can I ask you to move on?

[00:06:50] Speaker 03:
Aren't you suggesting that there was an implied-in-law agreement here?

[00:06:54] Speaker 01:
Yes, exactly.

[00:06:55] Speaker 03:
That's right.

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But the fact that there may be an implied-in-law agreement, which you've got to have something, you're basing your breach of fiduciary duties on here.

[00:07:03] Speaker 03:
It's an implied agreement.

[00:07:04] Speaker 03:
What does that have to do with whether that implied agreement somehow incorporated the arbitration clause of the PSAs?

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That's two separate things, and I don't think any of those cases that you cite

[00:07:21] Speaker 03:
any of the four stand for that proposition.

[00:07:25] Speaker 01:
Good point and fair point, Your Honor.

[00:07:26] Speaker 01:
I am harping on this idea that there's privity.

[00:07:30] Speaker 03:
I'm trying to get you to the point of how do you get to this arbitration clause through potentially an implied agreement that your claims are based on.

[00:07:39] Speaker 03:
That implied agreement is not this contract that has this arbitration clause between the parties.

[00:07:46] Speaker 01:
So fair point, and I'll give you some additional cases.

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Those cases that I've cited

[00:07:52] Speaker 01:
mandate under state law that the escrow agent is in privity.

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So we do need to establish privity.

[00:07:58] Speaker 01:
Having established privity, we ask ourselves, what does the arbitration clause contemplate?

[00:08:04] Speaker 01:
Is First American and Ms.

[00:08:06] Speaker 01:
Parkin as the escrow agent the subject of this arbitration clause, which says all disputes between the parties will go to arbitration?

[00:08:15] Speaker 03:
The parties.

[00:08:16] Speaker 01:
Right.

[00:08:16] Speaker 01:
And that is the district court's finding.

[00:08:19] Speaker 01:
the appellee's argument that they are not signatories, they are not parties.

[00:08:23] Speaker 01:
That question is examined under state law and I'll give you some cases.

[00:08:28] Speaker 04:
Before you do, can I ask you a question?

[00:08:30] Speaker 04:
Do you think firm waiver applies here?

[00:08:31] Speaker 04:
The firm waiver rule applies here?

[00:08:34] Speaker 04:
That you needed to object to the magistrate judge's ruling in order to preserve it through the district court proceedings to appellate review?

[00:08:42] Speaker 01:
Yes, and I believe that we did object.

[00:08:45] Speaker 04:
Did you object to that sort of the textual aspect of the arbitration agreement?

[00:08:51] Speaker 04:
Yes, I think we did.

[00:08:52] Speaker 04:
You contend that you did?

[00:08:53] Speaker 04:
Yes.

[00:08:54] Speaker 01:
Yes, we did.

[00:08:55] Speaker 01:
I'm sorry.

[00:08:58] Speaker 01:
Back to your question, Judge Moritz.

[00:09:01] Speaker 01:
So I would cite you to the case of Conceal versus Neogen.

[00:09:05] Speaker 01:
That's a Florida case.

[00:09:06] Speaker 01:
And Hunter versus Shields, which is an Ohio case.

[00:09:10] Speaker 01:
And then I've got two more cases.

[00:09:11] Speaker 01:
Let me talk about those.

[00:09:12] Speaker 01:
Those are cases.

[00:09:16] Speaker 02:
Go ahead, but be quick.

[00:09:17] Speaker 02:
I haven't even gotten to my question yet, so.

[00:09:20] Speaker 02:
I apologize, Your Honor.

[00:09:21] Speaker 03:
Well, I just would like for you to answer my question.

[00:09:24] Speaker 03:
Without signing the cases, how do you take this implied agreement that you suggest is out here based on the case law between the agency, or between the, I'm sorry, between the escrow agents and the parties, and how do you somehow then pull in

[00:09:40] Speaker 03:
this contract, the PSAs, and the arbitration clause.

[00:09:44] Speaker 03:
I'm not seeing how you connect the dots.

[00:09:47] Speaker 01:
Well, I'll be as concise as I can.

[00:09:49] Speaker 01:
It's because that clause all disputes between the parties.

[00:09:54] Speaker 01:
It's because the law recognizes Ms.

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Parkin and First American as a party in privity, as a party.

[00:10:02] Speaker 01:
And I was going to cite the Aquinn case and the Coakley case, and I don't mean to be

[00:10:07] Speaker 01:
I'm sensitive to not belabor it.

[00:10:08] Speaker 02:
At this point, I'm going to interrupt you and ask my questions.

[00:10:12] Speaker 02:
By all means, please do, Your Honor.

[00:10:15] Speaker 02:
The signatories to the agreement didn't have to have an arbitration clause in there, did they?

[00:10:22] Speaker 01:
They could have left it out.

[00:10:23] Speaker 01:
Yes, of course.

[00:10:25] Speaker 02:
And so in a sense, you're in privity, but you can't do anything more than they can.

[00:10:30] Speaker 02:
If they didn't have an arbitration clause, you couldn't arbitrate.

[00:10:33] Speaker 02:
Do you agree?

[00:10:35] Speaker 01:
Correct.

[00:10:35] Speaker 01:
We are relying on paraffinite.

[00:10:37] Speaker 02:
But the parties, the signatories, both agreed that they would waive the arbitration clause.

[00:10:44] Speaker 02:
They eliminated the arbitration clause.

[00:10:47] Speaker 02:
It was the trustee in bankruptcy, but he stood in the precise shoes of that signatory to the contract.

[00:10:56] Speaker 02:
So I actually think you have some pretty good arguments absent that waiver agreement, why you should be able to demand arbitration.

[00:11:04] Speaker 02:
But once you have this waiver of arbitration clause by the two parties, I don't see what leg you have to stand on because your rights to compel arbitration are derivative of what the signatories said.

[00:11:18] Speaker 02:
I think you have to agree with that.

[00:11:21] Speaker 02:
I think you even did.

[00:11:23] Speaker 02:
But if it's derivative, you lost any right to compel arbitration.

[00:11:28] Speaker 02:
Did you not?

[00:11:29] Speaker 01:
I think not.

[00:11:30] Speaker 01:
And I'd like to try to persuade you otherwise, Your Honor.

[00:11:33] Speaker 01:
This is a good question.

[00:11:35] Speaker 01:
You're right, we're evoking paragraph 9, First American Park, and evoke that.

[00:11:39] Speaker 01:
I have case law, but I'll just go right to the legal principle, which is that a non-signatory who acts consistent with the contract such that the contract writes vest has vested rights.

[00:11:56] Speaker 01:
And the rights vested in Ms.

[00:11:57] Speaker 01:
Parkin and First American when they undertook the escrow for which they're being charged to have violated.

[00:12:03] Speaker 01:
Those rights vested and the other signatories at that point have no power to waive those rights on behalf of the party who enjoys the vested rights.

[00:12:16] Speaker 01:
First American is not a party to those waivers.

[00:12:18] Speaker 02:
Well, to be vested, was there any reliance?

[00:12:22] Speaker 01:
Yes.

[00:12:23] Speaker 02:
What evidence is there any reliance on the arbitration provision?

[00:12:28] Speaker 01:
Because as Waffen instructs, when the buyer and seller enter into their transaction with an arbitration clause and send those instructions to First American, as was the case here, First American was free to say, I don't agree to these terms.

[00:12:43] Speaker 01:
I don't like this contract.

[00:12:44] Speaker 01:
They, by accepting the contract, they were accepting all of the terms.

[00:12:50] Speaker 02:
All they did is accept that they will disperse the money in accordance with the terms of the paragraph involving the escrow agent.

[00:12:59] Speaker 02:
What else did they have to?

[00:13:02] Speaker 01:
I would submit that I think that's incorrect.

[00:13:05] Speaker 01:
First American and American agreed that they would receive the money and follow the instructions of the escrow as outlined in the PSA.

[00:13:14] Speaker 02:
subject themselves to all of

[00:13:33] Speaker 02:
not just the escrow instructions.

[00:13:35] Speaker 01:
So may I refer the court to the Aquin and the Coakley cases?

[00:13:43] Speaker 01:
I do.

[00:13:44] Speaker 01:
I would ask the court to review those.

[00:13:46] Speaker 01:
I'm sure you have.

[00:13:47] Speaker 01:
Spell those, so I'll... I'm sure you have, but I would... Just spell them quickly.

[00:13:51] Speaker 01:
Yes.

[00:13:51] Speaker 01:
So Aquin is O-C-W-E-N versus Holman.

[00:13:55] Speaker 01:
Okay.

[00:13:56] Speaker 01:
That's all right.

[00:13:56] Speaker 01:
I just need the first name.

[00:13:57] Speaker 01:
And Coakley is

[00:13:59] Speaker 01:
K-O-E-C-H-L-I.

[00:14:02] Speaker 01:
And what do they say?

[00:14:04] Speaker 01:
And those cases hold, in the context of a non-signatory to an arbitration provision, that where you have a clause.

[00:14:13] Speaker 01:
So it's interesting because one of the clauses said the parties, this very exact issue, and the non-signatories claiming rights.

[00:14:21] Speaker 01:
And the other clause said the buyer and seller, very specifically buyer and seller.

[00:14:25] Speaker 01:
And the court in those cases held that

[00:14:28] Speaker 01:
the arbitration clause was enforceable on behalf of the non-signatory, and that the word party should be read to encompass that non-signatory.

[00:14:37] Speaker 02:
So those cases are directly open.

[00:14:39] Speaker 02:
Was there a waiver by the buyer and seller?

[00:14:40] Speaker 02:
Was there a waiver of the arbitration clause?

[00:14:42] Speaker 01:
There was no Rockwell waiver in those cases.

[00:14:45] Speaker 01:
Did you have a case where there was a waiver?

[00:14:48] Speaker 01:
I don't have a case involving an escrow with a waiver.

[00:14:52] Speaker 01:
The case I would cite the court to, because I like citing cases to the court.

[00:14:57] Speaker 01:
The cases I would give the court on the issue of vesting as the key cases would be Hall, Joseph Buck Check, and Gomez.

[00:15:11] Speaker 01:
And those are in your brief.

[00:15:12] Speaker 01:
Yes, you can find the full citations in the brief.

[00:15:15] Speaker 01:
Those cases, to paraphrase the cases, and I can say them out of my time, I want to be respectful, but I'll just answer this.

[00:15:23] Speaker 01:
I'll follow your instruction.

[00:15:24] Speaker 01:
Go ahead.

[00:15:24] Speaker 01:
You say those three cases stand... Those three cases stand for the proposition that once the rights vest by reliance upon the agreement, by performing consistent with the agreement, they can't be waived by one of the other signatories to the relationship or the other two signatories.

[00:15:41] Speaker 01:
But they require reliance to that.

[00:15:44] Speaker 01:
And the reliance... And they establish... Those cases establish under state law... And in what way...

[00:15:50] Speaker 02:
I'll give you time to answer.

[00:15:51] Speaker 02:
In what way did First American rely on the arbitration?

[00:15:56] Speaker 02:
What evidence in the record is there that in some way First American relied on the arbitration agreement?

[00:16:04] Speaker 01:
The answer is that First American, the evidence of the record is that First Americans relied on the PSAs by accepting their burdens and undertaking the obligations to act and serve as the aspirations.

[00:16:17] Speaker 01:
That is the reliance.

[00:16:18] Speaker 01:
And then that's the first step of reliance.

[00:16:21] Speaker 01:
The latest possible reliance would be when the first American filed its motion to compel arbitration, which happened before the waiver was even signed.

[00:16:30] Speaker 04:
But does your vested rights argument assume that you're a third party beneficiary?

[00:16:35] Speaker 01:
That's a great question.

[00:16:36] Speaker 01:
I would say yes, and I would phrase it this way.

[00:16:41] Speaker 01:
If you address the party issue and apply those four cases I've cited, then

[00:16:46] Speaker 01:
It would be correct to find under that state law that First American is a party.

[00:16:50] Speaker 01:
Parkin is a party in privity.

[00:16:52] Speaker 01:
And therefore, the waiver is an absurdity.

[00:16:55] Speaker 01:
The other entities can't waive those rights of a fellow party.

[00:16:59] Speaker 01:
So you're correct in the sense that you only would even reach the question of waiver if you don't address the privity issue or reject us on the privity issue.

[00:17:10] Speaker 04:
But also conclude that you're a third party beneficiary.

[00:17:13] Speaker 01:
That's right.

[00:17:15] Speaker 01:
Thank you, counsel.

[00:17:15] Speaker 01:
Thank you, your honor.

[00:17:17] Speaker 01:
Thank you to the panel.

[00:17:28] Speaker 00:
Good morning.

[00:17:28] Speaker 00:
Reed Lambert for the appellees.

[00:17:33] Speaker 00:
The appellees consist of about over 50 families who lost $25 million or so, or $20 million or so, in the NOAA tenant in common

[00:17:46] Speaker 00:
event center, what essentially turned into a Ponzi scheme.

[00:17:52] Speaker 00:
I want to pick up where we kind of left off, riffing on the waiver and the question of reliance.

[00:18:02] Speaker 00:
I think it's a fair question.

[00:18:04] Speaker 00:
To say that First American relied on the arbitration provision is quite a stretch in light of the fact that their first response to the plaintiff's complaint

[00:18:17] Speaker 00:
was a motion to dismiss that asserted in very strong language that they had absolutely nothing to do with the purchase and sale agreement and therefore the action should be dismissed.

[00:18:29] Speaker 00:
They called that an agreement to which they were not even a party and I think that that was accurate.

[00:18:36] Speaker 00:
It is an agreement to which they're not a party.

[00:18:38] Speaker 00:
I want to clear up the question about party.

[00:18:41] Speaker 00:
Are you claiming judicial estoppel from that, or what are you claiming?

[00:18:46] Speaker 02:
I mean, that's very interesting.

[00:18:48] Speaker 00:
I am claiming judicial estoppel, and I understand the arguments to the contrary.

[00:18:55] Speaker 00:
Even if there is not judicial estoppel, my claim is that in order to show reliance, you would have to say, when we entered in and performed these services, we were relying on the arbitration agreement.

[00:19:08] Speaker 00:
It seems that it would then follow that your response to the complaint would be a motion to compel arbitration, not a statement that says, in a very factual way, we're not a party to that contract.

[00:19:21] Speaker 00:
That doesn't show reliance on the contract to show up and say, we're not parties to that contract.

[00:19:26] Speaker 02:
Is there anything in the record to show that First American takes ESCO duties only if the underlying agreement

[00:19:38] Speaker 02:
provides for arbitration?

[00:19:40] Speaker 00:
No.

[00:19:41] Speaker 02:
Nothing about that anymore?

[00:19:44] Speaker 00:
No.

[00:19:44] Speaker 00:
In fact, the only, well, there was evidence to the contrary on an unrelated contract, incidentally.

[00:19:52] Speaker 00:
I don't believe it's before this court because there were originally two arbitration agreements.

[00:19:56] Speaker 00:
We're only dealing with one of them at this level.

[00:20:01] Speaker 00:
Judge Moritz, I think, was on to what is an important baseline principle in this whole argument, which is

[00:20:08] Speaker 00:
There are two separate contracts we're talking about.

[00:20:10] Speaker 00:
The purchase and sale agreement is a contract, the parties to which are the buyer and the seller.

[00:20:16] Speaker 00:
And that's all.

[00:20:17] Speaker 00:
And that's what the court found.

[00:20:19] Speaker 00:
And that's what the signature block said.

[00:20:20] Speaker 00:
And that's what the introductory language said.

[00:20:22] Speaker 00:
It's very hard to get over that hump.

[00:20:25] Speaker 00:
What the four cases that counsel talked about say is outside of that purchase and sale agreement, you have the escrow arrangement.

[00:20:34] Speaker 00:
I've consistently called it an arrangement.

[00:20:37] Speaker 00:
throughout this case and alleged that it gives rise to fiduciary duties, which those four cases say.

[00:20:42] Speaker 00:
In fact, Seligman was one of the cases that I found and relied on when we drafted the complaint in the first place to say, even though there's not a contract, and we can't assert a claim for breach of contract against these parties because we don't have a written contract with them, there are fiduciary duties that arise that bind an escrow agent to look at the agreement to the

[00:21:05] Speaker 00:
at the transaction they're closing and close it in a fashion that is consistent with that, and to not disperse money without permission, and to safeguard the money appropriately, and to safeguard the money consistent with duties to both parties.

[00:21:22] Speaker 00:
That's what we allege was breached.

[00:21:24] Speaker 02:
And your basic complaint against First American is that they dispersed

[00:21:30] Speaker 02:
money to Remington prematurely.

[00:21:33] Speaker 02:
They should have made sure that the construction had taken place, but instead released all the money that they had said.

[00:21:41] Speaker 00:
Is that right?

[00:21:42] Speaker 00:
And one of the four or five reasons why that breached their fiduciary duty is because it was not consistent with the contract between the parties.

[00:21:51] Speaker 00:
But there are other reasons as well that are set forth in the complaint and discussed in some detail in the briefing and in the opinions of both magistrate and the district court.

[00:22:02] Speaker 02:
Let's just take the one where the duty arises out of the terms of the purchase agreement.

[00:22:09] Speaker 02:
I assume that it says, we'll have an escrow, maybe it said with First American.

[00:22:14] Speaker 02:
And it will disperse the money only when certain work has been performed.

[00:22:21] Speaker 02:
That's one of your arguments.

[00:22:24] Speaker 00:
Right.

[00:22:24] Speaker 00:
The agreement between the parties was, we will send the money to First American.

[00:22:30] Speaker 00:
And then it recited, First American will disperse it to pay for the property and the construction costs.

[00:22:36] Speaker 02:
Aren't there cases saying that if your claim is based on duties

[00:22:43] Speaker 02:
set forth in the contract, then the escrow agent in this case could say, well, if you're going to rely on that contract to seek relief from us, then you're bound by the contract's arbitration provision as well.

[00:23:04] Speaker 02:
Aren't there cases to that effect?

[00:23:06] Speaker 00:
There are literally in the country hundreds of cases in Ohio and in Florida

[00:23:13] Speaker 00:
In Florida, a small handful of cases.

[00:23:15] Speaker 00:
In Ohio, a relatively good body of cases.

[00:23:19] Speaker 00:
I'll explain why it doesn't apply here.

[00:23:21] Speaker 00:
OK, but at least I stated a principle of law halfway correctly.

[00:23:27] Speaker 00:
Well, I can give you what I believe is the demarcation, because the answer is not in that event.

[00:23:35] Speaker 00:
It's always arbitration.

[00:23:36] Speaker 00:
It's absolutely not that.

[00:23:39] Speaker 00:
Because it's an equitable principle.

[00:23:40] Speaker 00:
And so the touchstone is kind of fairness to the parties and so forth.

[00:23:43] Speaker 00:
And there are two reasons why that doesn't apply here.

[00:23:46] Speaker 00:
And the first is because if you are asserting a claim for breach of contract, and virtually every single case that has been cited to the court on that principle, you have a situation like in Aquin, where Aquin came in as an assignee in the court's term

[00:24:04] Speaker 00:
took over all of the obligations and rights and liabilities under the contract.

[00:24:10] Speaker 00:
It came in and assumed those rights.

[00:24:13] Speaker 00:
Then it applies because you're saying if you're going to sue us for breach of contract, sometimes you'll have a parent to subsidiary contracts with the parent.

[00:24:22] Speaker 00:
They sue the subsidiary and say, you can't compel arbitration under the contract.

[00:24:26] Speaker 00:
The subsidiary says, look,

[00:24:28] Speaker 00:
All we did is show up to perform the very contract here.

[00:24:32] Speaker 00:
What you're suing us for is breach of the very contract that contains the arbitration permission.

[00:24:37] Speaker 02:
So they can demand arbitration.

[00:24:38] Speaker 00:
Yes, in this case.

[00:24:39] Speaker 02:
So why can't we hear?

[00:24:40] Speaker 00:
Right.

[00:24:41] Speaker 00:
So iSports, very important case in Ohio, the iSports case.

[00:24:48] Speaker 00:
And what the court said there was is while that principle is true, if you have what is essentially not a case alleging a breach of contract,

[00:24:58] Speaker 00:
but alleging something else that may touch the contract in some respects.

[00:25:02] Speaker 00:
They say it could be a statutory claim.

[00:25:05] Speaker 00:
It could be a tort claim.

[00:25:07] Speaker 00:
It could be a claim arising under a different obligation between the party.

[00:25:13] Speaker 00:
And even if the breach of that contract is something that is necessary in order to prove the claim, that doesn't make it a claim for breach of contract that would invoke the language of the arbitration agreement.

[00:25:27] Speaker 02:
If the ESCO agreement said when First American gets the money, go ahead and give it to Remington at that time, then you wouldn't have a claim of any sort against Remington, would you?

[00:25:39] Speaker 00:
If the agreement that we had signed said First American will give the money to Rockwell immediately at closing, then I would agree that would be a problem.

[00:25:50] Speaker 00:
But the problem wouldn't be that the

[00:25:53] Speaker 00:
But that's not, if the contract was silent, let's say that the contract didn't have any provision, then we have the same exact claim.

[00:26:02] Speaker 00:
It's just that we have one less reason to do it.

[00:26:04] Speaker 00:
See, the law is not that the escrow agent becomes a party to the contract or that the escrow agent now has all the duties under the contract.

[00:26:14] Speaker 00:
This escrow agent didn't assume any of the obligation to transfer the property to us.

[00:26:19] Speaker 02:
But it seems to me that

[00:26:22] Speaker 02:
All your theories, including breach of fiduciary duty, depend on what First American is required to do under the contract, because if it was supposed to disperse the money immediately, then your claims would disappear.

[00:26:37] Speaker 00:
No, but if the contract was silent, again, if the contract was silent, we would still have this claim because First American knew that they were receiving this money.

[00:26:47] Speaker 00:
They knew that these properties were unbuilt.

[00:26:49] Speaker 00:
They knew that these properties were vacant land.

[00:26:52] Speaker 00:
They had closed the transaction buying the vacant land a few weeks prior, and they knew that we were paying the full purchase price with the building.

[00:27:00] Speaker 00:
Our convention is,

[00:27:01] Speaker 00:
And there's case law supporting it.

[00:27:03] Speaker 00:
Based on that fiduciary duty, they would have at least an obligation to communicate to us that the money was all being given to Rockwell.

[00:27:11] Speaker 00:
We didn't know that.

[00:27:12] Speaker 00:
Had we known that, we wouldn't have done these deals.

[00:27:14] Speaker 02:
To the extent you have that claim, you could argue that's not dependent on the contract.

[00:27:21] Speaker 02:
Right.

[00:27:21] Speaker 02:
And then it would be.

[00:27:22] Speaker 02:
But your claims, in fact, depend in part on the contract.

[00:27:28] Speaker 02:
And to that extent, it's arbitrable.

[00:27:31] Speaker 02:
I don't know what... It is only... If you have... Let me just post it.

[00:27:36] Speaker 02:
If some of your claims are dependent on the terms of the contract and some aren't, what happens with respect to arbitration?

[00:27:45] Speaker 00:
Well, Isports is the answer.

[00:27:47] Speaker 00:
And Atricure, which is a federal circuit case, digesting the Ohio law and kind of stating the principles that it took from it,

[00:27:58] Speaker 00:
consistent with ISPORT, both tell you that that would be a situation where we have claims that are not entirely dependent on the breach of contract.

[00:28:09] Speaker 00:
They may touch upon the contract, but the underlying theories are tort.

[00:28:12] Speaker 00:
Or in this case, we have a new idea when we get back to the trial court, which is this whole idea of maybe the breach of the implied escrow agreement.

[00:28:21] Speaker 00:
But even that doesn't make them parties to the contract.

[00:28:25] Speaker 00:
I think that iSports and Aptricure would then control and say, this is something that is related to the contract, but it is not so closely related.

[00:28:32] Speaker 00:
And since they didn't undertake the duties and obligations of the contract, we're not suing them for not delivering, we're not suing them for failure to close the transaction or something.

[00:28:43] Speaker 04:
But why aren't your claims for aiding and abetting tortious conduct, conspiracy, materially aiding state law securities fraud, why don't those claims

[00:28:54] Speaker 04:
fall within this sort of concerted misconduct exception and allow the FA to come in and invoke the arbitration clause provisions under an equitable estoppel theory under both Ohio and Florida law.

[00:29:10] Speaker 00:
Okay, well this will be, I've got three minutes so I think we can get this answer without any trouble there, but the concerted misconduct theory

[00:29:18] Speaker 00:
is one that has some appeal here because there are some questions as to whether there's a conspiracy, whether these third parties came in and meddled.

[00:29:28] Speaker 00:
Reason number one is because under both Florida and Ohio law, we have to look to the language of the contract to determine the scope of the arbitration agreement.

[00:29:38] Speaker 00:
If you're familiar with the Croma case that we cite in our briefing, Croma is a case that has everything.

[00:29:45] Speaker 00:
It's got makeup.

[00:29:46] Speaker 00:
It's got funny puns.

[00:29:48] Speaker 00:
It's got the Kardashians.

[00:29:49] Speaker 00:
It's a great case.

[00:29:50] Speaker 00:
It's got everything.

[00:29:51] Speaker 00:
But what it stands for is the proposition that unless someone has actually become a party, has taken on the obligations, the full obligations of the contract, essentially taken it by an assignment, I would say,

[00:30:04] Speaker 00:
then when you have an arbitration clause that is limited narrowly to disputes between the parties, any dispute with a third party would be outside of that.

[00:30:15] Speaker 00:
The appellants in CHROMA asked almost the exact same question that you just asked me.

[00:30:23] Speaker 00:
And they said, well, in that case, it seems like it wouldn't be equitable to say, well, these third parties can't get benefit of this just because it defines the scope.

[00:30:32] Speaker 00:
And this is the answer they gave.

[00:30:34] Speaker 00:
They said they argued the doctrine based on notions of fairness should operate to permit a non-signatory who is not bound to an agreement to enforce it, notwithstanding the fact that the claim is outside of the arbitration clause's scope.

[00:30:47] Speaker 00:
Such a holding would be, and this is the Court's conclusion, such a holding would be, well, inequitable.

[00:30:53] Speaker 00:
Under it, we would effectively be rewriting the agreement between the signatories about which disputes they would arbitrate to require one of them to arbitrate disputes that they had not agreed to.

[00:31:04] Speaker 00:
That's the answer for the question.

[00:31:06] Speaker 00:
That's answer number one to the question, which is,

[00:31:11] Speaker 00:
It's not in the scope of the dispute.

[00:31:12] Speaker 00:
Answer two to the question is the whole purpose and every case that there are cases that don't discuss this, but it's not because they say something different.

[00:31:22] Speaker 00:
It's because they cut it short.

[00:31:25] Speaker 00:
Every case that discusses why we have the concerted misconduct exception says the whole reason is is because we don't want scoundrels out there saying I'm going to sue this party.

[00:31:35] Speaker 00:
Because if I sue them, they don't have an arbitration clause, and their conspirator who does have an arbitration clause, I'll leave them out.

[00:31:44] Speaker 00:
And so the whole purpose of the Concert of Misconduct is to say we want to stop the arbitration clause from being eviscerated

[00:31:52] Speaker 00:
by artful pleading or by picking the parties who are not parties to the agreement.

[00:31:59] Speaker 04:
When we're thinking about the concerted misconduct avenue here, how should we be thinking about the Rockwell waiver in assessing whether it applies?

[00:32:11] Speaker 00:
Took the words right out of my mouth.

[00:32:13] Speaker 00:
So that being the case, that the whole purpose is that we don't want to eviscerate the arbitration clause.

[00:32:18] Speaker 00:
This arbitration clause has already been well eviscerated by Rockwell.

[00:32:22] Speaker 00:
Not only did it waive it in writing, it also waived it by showing up and filing its own motion to dismiss and litigating the matter without ever demanding arbitration.

[00:32:34] Speaker 00:
I would submit that whatever arbitration rights there were in that contract are waived.

[00:32:40] Speaker 00:
The only disputes that it related to were disputes between the parties.

[00:32:45] Speaker 00:
Those are the disputes between the buyers and Rockwell, which is a debtor in bankruptcy.

[00:32:50] Speaker 00:
Thank you.

[00:32:50] Speaker 00:
I want to ask one question.

[00:32:52] Speaker 02:
OK.

[00:32:53] Speaker 02:
You seem to assume it was a matter for the court to decide the scope of the arbitration agreement with respect to co-conspirators.

[00:33:02] Speaker 02:
Would that not be something that the arbitrator would decide in the first instance?

[00:33:07] Speaker 00:
No.

[00:33:07] Speaker 00:
In this case, it is for the court.

[00:33:09] Speaker 00:
There are instances where an arbitration agreement itself commits that issue to the arbitrator.

[00:33:15] Speaker 00:
And frankly, courts are all over the map on what happens in that instance.

[00:33:19] Speaker 00:
But where there is no such provision, it is the province of the court to determine whether a matter is arbitrable.

[00:33:26] Speaker 00:
Thank you.