Ellsworth v. The American Arbitration Association

2006 UT 77
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Stanford M. Ellsworth, No. 20050371
Plaintiff and Appellant,
v.
The American Arbitration Association,
a New York corporation;
Lowell Construction Company,
a Utah corporation, and F I L E D
Carol Lee Fairbanks Naylor,
Defendants and Appellees. December 5, 2006
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Third District, Salt Lake
The Honorable J. Dennis Frederick
No. 040920270
Attorneys: D. Scott Crook, Scott M. Ellsworth, Salt Lake City,
for plaintiff
Robert F. Babcock, Kent B. Scott, Shawn W. Potter,
Salt Lake City, Evan A. Schmutz, Curtis R. Hussey,
Provo, for defendants
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DURHAM, Chief Justice:
INTRODUCTION
¶1 This case involves a dispute over whether Plaintiff
Stanford M. Ellsworth is bound by the arbitration provision of a
construction and remodeling contract. The district court granted
summary judgment in favor of Defendant Lowell Construction
Company (Lowell), finding that Mr. Ellsworth was bound by the
arbitration provision and dismissing Mr. Ellsworth’s suit for
declaratory relief. Mr. Ellsworth appealed, arguing that:
(1) the district court erred in granting Lowell’s motion for
summary judgment because of disputed material facts; and (2) the
district court erred by dismissing Mr. Ellsworth’s action rather
than issuing a stay pending the conclusion of the arbitration
proceedings as required by Utah Code section 78-31a-108(7)

1 The sole issue before this court concerns the forum that
dispute resolution should take between Mr. Ellsworth and Lowell.
Any other questions regarding contractual obligations outside
this narrow issue are not before us.
2 The marriage is now dissolved.
3 Mr. Ellsworth states in his affidavit that the insurance
policy was “never in [his] name” and that he believes it
“remained in the name of Ms. Naylor’s deceased husband, Douglas.”
4 Mr. Evershed is a representative and principal of Lowell.
No. 20050371 2
(2002). We hold that the district court erred in entering
summary judgment in favor of Lowell because, as a matter of law,
the facts of this case do not amount to direct and specific
evidence of an agreement to arbitrate.1 Because our holding is
dispositive of this appeal, we do not address whether the
district court should have stayed the proceedings.
BACKGROUND
¶2 “When reviewing a district court’s grant of summary
judgment, we view the facts and all reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party,
here the plaintiff. We recite the facts accordingly.” Wayment
v. Clear Channel Broad., Inc., 2005 UT 25, ¶ 3, 116 P.3d 271
(citation and internal quotation marks omitted).
¶3 In 1997, Mr. Ellsworth married Carol Lee Fairbanks
Naylor. Prior to marriage, Ms. Naylor owned a house and property
located in Salt Lake City, and the couple resided in Ms. Naylor’s
home throughout their marriage.2 During the marriage, Ms. Naylor
remained the sole legal owner of the house. In April 2002, a
tree fell on Ms. Naylor’s home. Shortly thereafter, Ms. Naylor
began planning for repairs to the damaged house; the repairs were
to be paid for by an insurance policy.3
¶4 Ms. Naylor negotiated the terms of a contract to repair
the home with Gary Evershed, with the work to be completed by
Lowell.4 Mr. Ellsworth was present during conversations Ms.
Naylor had with Mr. Evershed but never represented that he
intended to be a party to the agreement, that he had any
ownership interest in the house, or that Ms. Naylor had authority
to act as his agent. On June 11, 2002, Mr. Evershed presented a
contract (the June 11 Agreement), prepared by Lowell, to Ms.
Naylor. On the June 11 Agreement’s cover page, both Ms. Naylor
and Mr. Ellsworth were listed as “Owners,” and the “Project” was

5 The parties dispute the facts surrounding a previous draft
of the agreement, which Lowell claims misidentified Mr.
Ellsworth’s first name. In his affidavit, Mr. Evershed claims
that the mistake was corrected when brought to his attention by
Mr. Ellsworth and Ms. Naylor. In his own affidavit, Mr.
Ellsworth denies that he said anything to Mr. Evershed about the
error.
6 The contracts differ as to material terms such as the
specific tasks to be performed, the dates of performance, and the
provisions for payment of costs. However, the remainder of the
contracts apparently come from the same form contract.
3 No. 20050371
identified as the “Naylor/Ellsworth Residence.”5 However, the
signature page had only one signature line, labeled “Owner.” Ms.
Naylor signed the June 11 Agreement’s signature page as “Owner”;
Mr. Ellsworth did not.
¶5 After the June 11 Agreement was entered, Ms. Naylor and
Lowell began negotiating for Lowell to perform additional
remodeling work on the home. The circumstances surrounding Mr.
Ellsworth’s involvement in those negotiations are substantially
similar to those of the June 11 Agreement. A contract for that
project (the June 20 Agreement), prepared by Lowell, was
presented to Ms. Naylor on June 20, 2002. As with the June 11
Agreement, the cover page of the June 20 Agreement listed both
Ms. Naylor and Mr. Ellsworth as “Owners” and identified the
“Project” as the “Naylor/Ellsworth Residence Remodel.” The June
20 Agreement’s signature page also had only one signature line,
underscored by the word “Owner,” and the contract was signed only
by Ms. Naylor.
¶6 The terms of the June 11 Agreement and the June 20
Agreement are nearly identical, particularly the provisions
relevant to this appeal.6 The arbitration provision at issue
here, found at item 10.8 of the June 11 Agreement and item 15.8
of the June 20 Agreement, provides as follows: “All claims or
disputes between the Contractor and the Owner arising out of or
relating to the Contract Documents, or the breach thereof, shall
be decided by arbitration.”
¶7 The dispute in this case arises specifically from the
events following the signing of the contract, which are hotly
debated by the parties. From the facts in the record, it appears
that Mr. Evershed approached Mr. Ellsworth on several occasions,
outside the presence of Ms. Naylor, in order to talk about the
project. Mr. Ellsworth claims that, on all of these occasions,
he deferred making any decisions about the project until he could

7 Lowell asserts that the discrepancy in the quoted and
actual costs, as well as the failure to deliver invoices and
supporting documentation to Ms. Naylor and Mr. Ellsworth, is the
result of active fraud and concealment by Mr. Ellsworth. Mr.
Ellsworth denies this.
8 Mr. Ellsworth’s claims against Ms. Naylor and her
counterclaims against him were dismissed by stipulation of the
parties in April 2005. Mr. Ellsworth also voluntarily dismissed
his claims against the AAA.
9 Mr. Ellsworth joined Ms. Naylor’s motion to stay
arbitration.
No. 20050371 4
speak with Ms. Naylor. On the other hand, Lowell claims that on
certain occasions Mr. Evershed discussed costs of the project
with Mr. Ellsworth, and Mr. Ellsworth asked him not to tell Ms.
Naylor about the total costs of some parts of the work. Mr.
Ellsworth denies this. In April 2003, Lowell represented that it
had completed the work and sent a final bill to Ms. Naylor.
¶8 Following the completion of the project, a dispute
arose between Ms. Naylor and Lowell concerning unperformed work
that was nevertheless billed to the insurance company, disputed
costs, undelivered invoices, and a lack of supporting
documentation of the costs of the project.7 Through their
attorneys, Ms. Naylor and Lowell exchanged a series of
correspondence regarding their disputes.
¶9 In June 2004, Lowell filed a Demand for Arbitration
with the American Arbitration Association (AAA) against both Mr.
Ellsworth and Ms. Naylor. Mr. Ellsworth objected to the
jurisdiction of the arbitrator, claiming that he was not party to
either the June 11 Agreement or the June 20 Agreement, which
contain the arbitration clauses on which Lowell based its demand.
In September of that year, Mr. Ellsworth also filed a complaint
naming the AAA, Lowell, and Ms. Naylor as defendants. In his
complaint, Ellsworth asked for (1) a declaratory judgment that he
is not a party to the June 11 Agreement or the June 20 Agreement
and is therefore not subject to the agreements’ arbitration
clauses, and (2) a stay of the arbitration proceedings and a
permanent injunction prohibiting Lowell and the AAA from
proceeding against him through methods of dispute resolution that
he did not bargain for. Ms. Naylor answered Mr. Ellsworth’s
complaint and made counterclaims and cross-claims against the
other parties.8 She also moved to stay the arbitration
proceedings.9 Lowell opposed that motion and moved to dismiss
all claims against it and to compel arbitration.

5 No. 20050371
¶10 A hearing concerning Ms. Naylor’s motion to stay
arbitration and Lowell’s motion to dismiss the complaint and
compel arbitration was held before the district court on January
31, 2005. After the hearing, the court granted Lowell’s motion
to dismiss Mr. Ellsworth’s action, denied Ms. Naylor’s motion for
a stay of the arbitration proceedings, and ordered the parties to
arbitrate. Mr. Ellsworth appealed to this court on April 11,
2005. We originally transferred the case to the Utah Court of
Appeals pursuant to Utah Code section 78-2-2(4) (2002). We then
recalled the case on February 21, 2006, after briefs had been
filed but before the court of appeals had heard oral argument.
We have jurisdiction over this matter pursuant to Utah Code
section 78-2-2(3)(j) (2002).
STANDARD OF REVIEW
¶11 While Lowell moved to dismiss Mr. Ellsworth’s complaint
pursuant to rule 12(b)(6) of the Utah Rules of Civil Procedure,
when “matters outside the pleading are presented to and not
excluded by the court, the motion shall be treated as one for
summary judgment and disposed of as provided in Rule 56.” Utah
R. Civ. P. 12(b) (2006). Because “affidavits or other evidence”
were presented to, and not excluded by, the district court, we
review that court’s decision as a summary judgment. DOIT, Inc.
v. Touche, Ross & Co., 926 P.2d 835, 839 (Utah 1996).
¶12 “[A] challenge to a summary judgment presents for
review only conclusions of law because, by definition, cases
decided on summary judgment do not resolve factual disputes.”
Schurtz v. BMW of N. Am., Inc., 814 P.2d 1108, 1111 (Utah 1991).
We review the district court’s legal conclusions for correctness,
without according deference to the district court. Id.
ANALYSIS
¶13 Mr. Ellsworth appeals the judgment and order of the
district court on two grounds. First, he argues that the
district court erred by granting summary judgment in favor of
Lowell. Second, he argues that the district court was required,
under Utah law, to stay the judicial proceeding pending the
outcome of the arbitration instead of dismissing his suit. We
agree with Mr. Ellsworth that the district court’s grant of
summary judgment in favor of Lowell was improper and erroneous.
Moreover, under the facts of this case, we do not believe that
direct and specific evidence of an assent to arbitrate by Mr.
Ellsworth exists. Accordingly, we hold, as a matter of law, that
Mr. Ellsworth is not bound by the arbitration clause. We
reverse and remand to the district court with instructions to
enter declaratory relief and grant an injunction in favor of Mr.

No. 20050371 6
Ellsworth. Because our holding disposes of Mr. Ellsworth’s
appeal, we do not address whether the district court should have
stayed the proceedings.
¶14 Arbitration is a matter of contract law, Cade v. Zions
First Nat’l Bank, 956 P.2d 1073, 1076 (Utah Ct. App. 1998), and
state-law principles of contract formation apply, id. at 1077
(citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
944 (1995)). In order to require a party to submit to
arbitration, there must be an agreement to arbitrate. Id. at
1076–77. While there is a presumption in favor of arbitration,
that presumption applies only when arbitration is a bargained-for
remedy of the parties. Id. at 1077. The “minimum threshold for
. . . enforcement[ of an arbitration agreement is] direct and
specific evidence of an agreement between the parties.” McCoy v.
Blue Cross & Blue Shield of Utah, 2001 UT 31, ¶ 17, 20 P.3d 901.
Direct and specific evidence requires non-inferential evidence.
Id. Furthermore, it requires an agreement between the particular
parties regarding arbitration of future disputes. Id.
¶15 The district court erred in granting summary judgment
for Lowell because the facts offer no direct and specific
evidence of an agreement to arbitrate. The district court relied
on two things to support its decision that Mr. Ellsworth was
bound by the agreement to arbitrate: first, the contract itself,
and second, Mr. Ellsworth’s participation in decision-making
related to the contract.
I. THE APPEARANCE OF MR. ELLSWORTH’S NAME ON THE CONTRACT
DOCUMENTS, BY ITSELF, IS INSUFFICIENT EVIDENCE TO SHOW
THAT HE ASSENTED TO THE AGREEMENT TO ARBITRATE
¶16 First, the district court relied on the actual contract
in making its decision. Specifically, the court relied on the
fact that Mr. Ellsworth was identified as an “Owner” and his
residence was designated as the “Project.” We do not think that
the mere fact that Mr. Ellsworth’s name appears on the cover page
of the contract, without more, is sufficient to constitute assent
to arbitrate with Lowell, especially when the contract was
drafted by Lowell and unsigned by Mr. Ellsworth.
¶17 Moreover, the remainder of the contract makes the
inclusion of Mr. Ellsworth’s name ambiguous. Any ambiguity in a
contract is to be construed against the drafter, in this case,
Lowell. Nielsen v. O’Reilly, 848 P.2d 664, 666 (Utah 1992). One
such ambiguity is the discrepancy between the listing of two
owners on the cover pages of the contracts and the inclusion of
only one space for the owner’s signature. No one argues that Mr.
Ellsworth requested that his name be on the document. To the

10 We believe that in finding this fact, the district court
erred since summary judgments should not resolve factual
disputes. Schurtz v. BMW of N. Am. Inc., 814 P.2d 1108, 1111
(Utah 1991).
7 No. 20050371
contrary, Mr. Ellsworth forcefully asserts that he and Ms. Naylor
made clear to Lowell that Mr. Ellsworth would not be responsible
for the contract. Lowell drafted the contract, and it is unknown
what circumstances led it to include Mr. Ellsworth as an owner on
the cover page, while not providing him a space to clearly
manifest his assent through a signature. Even assuming that
Lowell is correct in saying that it was “not aware of the
ownership status of the Naylor/Ellsworth residence until after
the present dispute arose,” as the drafter of the contract,
ambiguities will be construed against it. Id. Construing this
discrepancy against Lowell means that only Ms. Naylor assented to
arbitrate because only she manifested her assent to arbitrate by
signing the contract. The fact that Mr. Ellsworth’s name appears
on the cover page may have been no more than drafter’s error, and
using the standard of direct and specific evidence, we cannot
infer that there was an agreement to arbitrate between the
particular disputants in this case--Mr. Ellsworth and Lowell.
¶18 We hold that the fact that a person’s name appears on a
contract as a party to it, without more, is not direct and
specific evidence that that particular person has assented to the
agreement to arbitrate. In this case, it is therefore
insufficient as a matter of law to show that Mr. Ellsworth
assented to an agreement to arbitrate.
II. MR. ELLSWORTH’S PARTICIPATION IN DECISION-MAKING
RELATED TO THE CONTRACT DID NOT BIND HIM TO THE AGREEMENT TO
ARBITRATE UNDER THE DOCTRINES OF NONSIGNATORY ESTOPPEL OR AGENCY
¶19 Of course, no signature is required for a person to
become party to a contract. Commercial Union Assocs. v. Clayton,
863 P.2d 29, 34 (Utah Ct. App. 1993). Performance may bind a
party to a contract that it has not signed. Id. Thus, the
second piece of direct and specific evidence the court relied
upon was “substantial participation” by Mr. Ellsworth in
decision-making related to the contract along with his wife.10
The district court accepted Lowell’s argument that Mr.
Ellsworth’s “substantial participation” meant he was “estopped
from denying his duties under the Agreement and should be
required to arbitrate pursuant thereto.” The general rule of
arbitration agreements is that one who has not manifested assent
to an agreement to arbitrate cannot be required to submit to
arbitration. Int’l Paper Co. v. Schwabedissen Maschinen &

11 Mr. Ellsworth correctly points out that the nonsignatory
estoppel exception has never been applied in Utah. Nevertheless,
we know of no reason why it could not be, in the appropriate
situation.
Traditionally, five theories for binding a nonsignatory to
an arbitration agreement have been recognized: (1) incorporation
by references; (2) assumption; (3) agency; (4) veil-
piercing/alter-ego; and (5) estoppel. Int’l Paper Co. v.
Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 417 (4th
Cir. 2000). Sometimes a sixth theory, third-party beneficiary,
is added, but it is closely analogous to the estoppel theory.
Bridas S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 356, 362 (5th
Cir. 2003). In this case, only the agency and estoppel theories
apply.
12 Another variety of nonsignatory estoppel is that enforced
by a nonsignatory when the signatory plaintiff sues a
nonsignatory defendant on the contract but seeks to avoid the
contract-mandated arbitration by relying on the fact that the
defendant is a nonsignatory. Bridas, 345 F.3d at 360–61 (citing
Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 526–28
(5th Cir. 2000)).
No. 20050371 8
Anlagen GMBH, 206 F.3d 411, 416 (4th Cir. 2000). However, under
certain circumstances, a nonsignatory to an arbitration agreement
can enforce or be bound by an agreement between other parties.
Id. at 416–17.11
¶20 We do not believe that the nonsignatory estoppel
exception applies to Mr. Ellsworth. The rationale behind this
exception is that a nonsignatory should be estopped from avoiding
arbitration when the nonsignatory seeks to benefit from some
portions of the contract but avoid the arbitration provisions.
Id. at 418. In cases where estoppel has been implemented against
a nonsignatory, the nonsignatory has sued a signatory on the
contract to his benefit but sought to avoid the arbitration
provision of the same contract.12 See Bridas S.A.P.I.C. v. Gov’t
of Turkm., 345 F.3d 347, 361 (5th Cir. 2003). A nonsignatory
will also be estopped when it receives a “direct benefit” from
the contract which contains the arbitration clause. Am. Bureau
of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d
Cir. 1999). This variety of nonsignatory estoppel has been
employed only when the nonsignatory sues the signatory on the
agreement after receiving “direct benefits” but seeks to avoid
arbitration. See Bridas, 345 F.3d at 362. Mr. Ellsworth does
not fit under either of these categories. He is not attempting
to sue Lowell on the contract; on the contrary, he seeks to avoid
the obligations of the contract altogether. Also, he has not

13 The parties briefed the agency issue from this point of
view--Ms. Naylor as the agent of Mr. Ellsworth. We note that the
result would be the same regardless of which spouse we consider
the agent.
9 No. 20050371
received any direct benefit from the contract. His occupancy of
a repaired home of which he was not an owner is not a direct
benefit, but an indirect one “where the nonsignatory exploits the
contractual relation of parties to an agreement, but does not
exploit (and thereby assume) the agreement itself.” MAG
Portfolio Consult, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58,
61 (2d Cir. 2001). We hold that the nonsignatory estoppel
exception does not apply to Mr. Ellsworth, a nonsignatory who is
not suing on the contract and who has not received direct
benefits from the contract. Even if his conduct indicates an
assent to the contract, it in no way indicates that he assented
to arbitration. This is true whether we consider the disputed or
undisputed facts of the case.
¶21 Furthermore, Mr. Ellsworth is not bound to the
arbitration agreement through the nonsignatory theory of agency.
There is no evidence that Ms. Naylor had the authority to act as
an agent for Mr. Ellsworth.13 Mr. Evershed does not explicitly
claim in his affidavit that he ever believed that Ms. Naylor had
an agent’s authority. Even if Lowell believed this, there is a
lack of evidence of any conduct by Mr. Ellsworth or Ms. Naylor
which might have led to that conclusion. Instead, Mr. Ellsworth
claims that the couple made no representation to Lowell that Ms.
Naylor had an agent’s authority. “‘[T]he [spouse’s] authority to
act for [the other spouse] is not implied from the marital
relation, nor from the mere fact that he occupied, or managed and
controlled, [the other spouse’s] property . . . .’” Macris v.
Sculptured Software, Inc., 2001 UT 43, ¶ 22, 24 P.3d 984 (quoting
Capitol Elec. Co. v. Campbell, 217 P.2d 392, 394 (Utah 1950)).
Some additional fact or circumstance is needed to establish that
a person acts as the agent of his or her spouse. Id. The record
discloses no clear fact or circumstance that would have intimated
to Lowell that Ms. Naylor acted as Mr. Ellsworth’s agent
sufficient to bind him to the arbitration agreement.
¶22 Finding no nonsignatory estoppel as relied on by the
district court and, further, finding no evidence of an agency
relationship between the spouses, we conclude that the district
court erred in finding that Mr. Ellsworth participated in the
contract in a manner that would manifest his assent to the
arbitration agreement.

No. 20050371 10
CONCLUSION
¶23 The facts of the case, even as alleged by Lowell, do
not indicate direct and specific evidence of an agreement to
arbitrate. Mr. Ellsworth’s name on the contract documents alone
is insufficient evidence of his assent to arbitration.
Additionally, any participation by Mr. Ellsworth was insufficient
to bind him to the agreement to arbitrate under the theories of
nonsignatory estoppel or agency. The district court erred in
granting summary judgment for Lowell Construction Company and
dismissing Mr. Ellsworth’s complaint. Mr. Ellsworth is entitled
to judgment as a matter of law, and the decision of the district
court is reversed and the case remanded.
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¶24 Associate Chief Justice Wilkins, Justice Durrant,
Justice Parrish, and Justice Nehring concur in Chief Justice
Durham’s opinion.