Court Finds That Third-Party Beneficiaries May be Forced to Arbitrate Under AAA Rules
Wiggins v. Warren Averett, LLC
In 2010, Eastern Shore Children’s Clinic, P.C. (“Eastern Shore”) entered into a contract with Warren Averett, an accounting firm, to provide services to Eastern Shore, including providing individual income-tax returns to each of Eastern Shore’s doctors, including Warner Wiggins (“Wiggins”). The contract included a clause that mandated arbitration and incorporated American Arbitration Association (AAA) rules. Wiggins later became involved in a dispute with Warren Averett related to their preparation of his income tax returns. When he filed a suit alleging accounting malpractice, Warren Averett filed a motion to compel arbitration which was granted. Wiggins appealed.
The Alabama Supreme Court found that even though Wiggins was not a signatory to the contract that included the arbitration clause, his case against Warren Averett would proceed to arbitration, and that the arbiter would determine whether the arbitration clause applied to Wiggins. In denying Wiggins’ appeal, the Court relied on a long line of cases that have established that when an arbitration contract adopts the AAA rules, that amounts to a “clear and unmistakable” indication that the arbiter will have the authority to determine initial issues of arbitrability, even when applied to third-party beneficiaries.