In Case Handyman and Remodeling Services, LLC v. Schuele, homeowners entered into a home improvement contract with a contractor who was a franchisee of Case Handyman Services (CHS). The general conditions section of the contract contained a broad arbitration clause. The homeowners paid certain funds to the contractor, as called for by the contract, but the contractor subsequently declared bankruptcy and did not perform the work. The homeowners then brought suit against CHS. The trial court denied CHS’s motion to compel arbitration, at which point CHS appealed.
Maryland’s Court of Special Appeals reversed, holding that CHS, a non-signatory of the contract, could enforce the arbitration clause against the homeowners pursuant to the doctrine of equitable estoppel. The court looked to federal law, choosing to follow several federal court decisions that have allowed non-signatories to enforce arbitration clauses when it would be inequitable to allow the signatory to avoid the contract. The court’s holding is limited to cases in which the signatory’s claims against the non-signatory rely substantially on the written agreement.
Case Handyman and Remodeling Services, LLC v. Schuele, 959 A.2d 833 (Md. Ct. Spec. App. 2008)