Fisser v. International Bank

United States Court of Appeals for the Second Circuit · 1960 · Corporations

282 F.2d 231 (1960)

Updated August 22, 2026

CorporationsArbitrationAlter egoPiercing the corporate veilFederal Arbitration Actwritten arbitration provisionnonsignatoryinstrumentality rule

Facts

Libelants, German coal importers, entered into a written coal affreightment contract with Allied Transportation Corporation that contained an arbitration clause. Allied alone signed the formal contract, but libelants alleged Allied was merely the alter ego of International Bank, which had been identified during negotiations as the principal operating through a Liberian corporation. Allied later completely breached the contract and had little capital, and libelants sought to compel the bank to arbitrate liability and damages on the theory that if Allied was its alter ego, the bank was bound to all contractual obligations including arbitration. The record showed the bank helped organize Allied and contemplated financing it, but also showed Allied had outside participants in management and no proof that the bank used control to mislead libelants or cause the breach.

Issue

Can a nonsignatory parent corporation be compelled under the Federal Arbitration Act to arbitrate pursuant to a written arbitration clause signed only by its subsidiary if the subsidiary was the parent's alter ego? If so, did libelants prove on this record that Allied was International Bank's alter ego?

Rule

The Federal Arbitration Act requires only that the arbitration provision itself be in writing; it does not require that every party bound by it personally sign. Who is bound is determined by ordinary contract principles, and if a parent is bound to a contract under alter ego principles, it is likewise bound to the contract's arbitration clause. But veil piercing under the instrumentality rule requires proof of: (1) complete domination of the subsidiary's finances, policy, and business practice as to the challenged transaction so that it had no separate mind, will, or existence of its own; (2) use of that control to commit fraud or wrong, to violate a statutory or other positive legal duty, or to commit a dishonest and unjust act in contravention of the plaintiff's rights; and (3) proximate causation of the plaintiff's injury by that control and breach of duty.

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Pine Harbor Metals, a company in Cleveland, signed a written supply contract with Lakefront Components, a subsidiary of Harbor Crest Holdings. The contract contained a clause requiring arbitration in Chicago of any dispute arising under the agreement, but Harbor Crest did not sign the contract.

Pine Harbor later claims Lakefront was merely Harbor Crest's alter ego and seeks to compel Harbor Crest to arbitrate. Harbor Crest argues that the Federal Arbitration Act bars arbitration because it never signed the contract. Which is the best answer?

Explanation. The majority held that the Federal Arbitration Act requires a written arbitration provision, but not the personal signature of every party who may be bound. Who is bound is determined by ordinary contract principles. Thus, if a nonsignatory parent is bound to the contract under alter ego principles, it is likewise bound to the contract's arbitration clause.