In Hirsch v. Amper Financial Services, 215 N.J. 174 (2013), decided on Aug. 7, the New Jersey Supreme Court held that the doctrine of equitable estoppel should not be invoked to compel arbitration involving a non-signatory to an arbitration agreement, unless it can be shown that the party seeking to compel arbitration relied upon the conduct of the opposing party and thereby acted to its detriment. Hirsch is significant because it expressly limited the Appellate Division’s holding in EPIX Holdings v. Marsh & McLennan Cos., 410 N.J. Super. 453, 463-468 (App. Div. 2009), which suggested that arbitration could be compelled against or by a non-signatory on equitable estoppel grounds whenever the claims and relations between the signatory and non-signatory parties are complex and intertwined.
Hirsch involved claims for securities fraud brought by a husband and wife and their limited partnership against Scudillo and SAI, a securities broker-dealer. Scudillo was the principal and registered representative of SAI. In 2002, Eisner Amper, the plaintiffs’ accounting firm, referred them to Amper Financial Services (AFS), a financial services firm for investment planning. AFS was owned (in 50 percent shares) by Scudillo and Eisner Amper. The plaintiffs invested approximately $3.4 million through Scudillo in an initial conservative portfolio, that “sacrifice[d] a higher rate of return for principal stability.” The plaintiffs and Scudillo did not enter into any written agreements concerning the initial investment.
