Summary
The Fifth Circuit affirmed the denial of KPMG's motion to compel arbitration of claims brought by the Lowe class, holding that KPMG waived its argument that arbitrability should be decided by an arbitrator. The court further held that the nonsignatory plaintiffs were not equitably estopped from avoiding arbitration because their common-law tort claims were not directly dependent on KPMG's engagement letters. The opinion was designated unpublished and nonprecedential except under the limited circumstances specified by Fifth Circuit Rule 47.5.4.
Topics
Practice areas
Questions Presented
- Whether the gateway issue of arbitrability should have been submitted to an arbitrator under the broad language of the engagement-letter arbitration clauses.
- Whether equitable estoppel bound the nonsignatory Lowe class to the engagement-letter arbitration clauses because its common-law claims were allegedly dependent on those letters.
Holdings
- KPMG waived its argument that arbitrability should be decided by an arbitrator by voluntarily submitting that issue to the district court, and the appellate court would not revive the waived issue.
- A nonsignatory is subject to arbitration under direct-benefits equitable estoppel only when the nonsignatory knowingly obtains direct benefits from the contract or seeks to enforce its terms or asserts claims that must be determined by reference to, or are directly dependent on, the contract containing the arbitration clause. Lowe's tort claims were not directly dependent on the engagement letters, so the district court properly denied KPMG's motion to compel arbitration.
Key quotations
“This appellate court does not resurrect for decision issues that were deliberately waived in the trial court.” (at 385)
“What is clear is that based on Lowe’s pleadings and the arguments proffered by KPMG, Lowe’s claims are not directly dependent on the Engagement Letters.” (at 387)
Factual background
KPMG audited the financial statements of the Singing River Health System and its pension plan pursuant to engagement letters containing arbitration clauses. After the pension plan allegedly became underfunded, Lowe, a former employee and vested plan participant, filed a class action alleging that KPMG knowingly or recklessly participated in the trustees' breaches of fiduciary duty. Lowe was not a signatory to the engagement letters, did not refer to them in her complaint, and disclaimed reliance on them as the source of KPMG's obligations.
Procedural history
Lowe filed a putative class action alleging that KPMG participated in breaches of fiduciary duty relating to shortfalls in the Singing River Health System pension plan. The district court denied KPMG's motion to compel arbitration in the Lowe action, while granting a similar motion in the Jones action because the Jones pleading specifically invoked the engagement letters. KPMG appealed the denial in the Lowe action.