Marketing partner may enforce arbitration agreement

A health insurance marketing company could enforce an arbitration provision as a third-party beneficiary of an online agreement entered into by the plaintiff, the 4th U.S. Circuit Court of Appeals held in reversing denial of a motion to compel arbitration.
The dispute arose after the plaintiff alleged that the defendant caused a prerecorded telemarketing call to be sent to her cellphone without prior consent in violation of the Telephone Consumer Protection Act. The defendant sought to compel arbitration based on terms the plaintiff accepted while requesting health insurance quotes through a lead-generation website operated by entities affiliated with NextGen Leads.
Although the plaintiff never directly contracted with the defendant, the online agreement broadly required arbitration of disputes related to website use, services provided through the site and third-party products or services. The plaintiff argued the defendant, as a non-signatory, lacked authority to invoke the arbitration clause.
The 4th Circuit first rejected the defendant’s contention that the arbitrator should decide whether the company could enforce the agreement. Relying on prior precedent, the court explained that whether a non-signatory possesses contractual authority to compel arbitration is a threshold issue for courts to resolve under applicable state contract law.
Applying Delaware law, however, the court concluded the defendant qualified as a third-party beneficiary entitled to enforce the arbitration provision. Under Delaware law, a non-signatory may enforce a contract where the contracting parties intended to benefit the third party and that benefit formed a material purpose of the agreement.
The panel determined that the lead-generation website’s entire business model depended on participation by marketing partners such as the defendant. Because the site itself did not provide insurance quotes or products, but instead connected consumers with third-party marketers, the court found that the benefit to those partners was central to the agreement rather than merely incidental. The repeated references in the terms of use to marketing-partner contact and third-party services reinforced that conclusion.
The 18 page opinion is Sessoms v. USHealth Advisors LLC, Lawyers Weekly No. 001-178-26.