Thomson CSF, S.A. v. Am. Arbitration Assoc'n

In 1986 Rediffusion Simulation Limited (Rediffusion) (defendant), a British company that made flight simulators, entered into a working agreement with Evans & Sutherland Computer Corporation (E.S.) (defendant). Under the working agreement, Rediffusion agreed to purchase the computer equipment for flight simulators exclusively from E.S. and, in return, E.S. agreed to supply the equipment exclusively to Rediffusion. The working agreement also contained an arbitration clause, and the agreement purported to bind Rediffusion and “each of its affiliates.” Rediffusion was subsequently sold twice, and ultimately sold to Thomson CSF, S.A. (Thomson) (defendant). During the course of the acquisition, E.S. informed Thomson that, if Thomson purchased Rediffusion, E.S. intended to bind Thomson to the terms of the working agreement and the requirement to purchase equipment from E.S. Without conceding that the working agreement would be binding on Thomson, Thomson wrote to E.S. seeking to have the requirements waived, which E.S. declined to do. Thereafter, and directly prior to the acquisition of Rediffusion, Thomson explicitly stated to E.S. that Thomson was not adopting the working agreement and that Thomson did not consider itself bound by the agreement, because Thomson had neither negotiated nor signed the working agreement. After the acquisition, a dispute arose between the parties, and E.S. filed a demand for arbitration against both Rediffusion and Thomson. Rediffusion did not contest the applicability of the arbitration clause, but Thomson filed suit in federal district court, seeking a declaration that it was not bound by the arbitration clause. E.S. filed a cross-motion to compel arbitration. The district court granted E.S.’s motion to compel arbitration. In doing so, the court reasoned that although Thomson did not sign the working agreement, and none of the claims fit under the five traditional categories for binding a nonsignatory to an arbitration agreement, Thomson was nonetheless bound by the arbitration clause because it voluntarily became an “affiliate” of Rediffusion and exercised control over Rediffusion. Thomson appealed.