                REVISED DECEMBER 2, 2008
        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                  Fifth Circuit

                                                                     FILED
                                                                  November 10, 2008
                                 No. 07-60567                 Charles R. Fulbruge III
                                                                      Clerk

STEPHEN L SHERER

                                           Plaintiff - Appellee
v.

GREEN TREE SERVICING LLC

                                           Defendant - Appellant



                 Appeal from the United States District Court
               for the Southern District of Mississippi, Jackson


Before KING, HIGGINBOTHAM, and WIENER, Circuit Judges.
PER CURIAM:
      Green Tree Servicing LLC appeals the district court’s denial of a motion
to compel the arbitration of Stephen Sherer’s Fair Debt Collection Practices Act
and Fair Credit Reporting Act claims. Scherer is a party to a loan agreement
that underlies his statutory claims. Green Tree Servicing LLC is not a party to
that loan agreement. Nevertheless, the broad language of that agreement’s
arbitration clause requires arbitration in this case. For the following reasons,
we reverse the district court’s order and remand for entry of an order compelling
arbitration.
           I. FACTUAL AND PROCEDURAL BACKGROUND
                                   No. 07-60567

      On January 2, 2002, Stephen Sherer executed a Manufactured Home
Promissory Note, Security Agreement and Disclosure Statement (the “Loan
Agreement”) with Conseco Bank, Inc. The Loan Agreement’s arbitration clause
states that “[a]ll disputes, claims, or controversies arising from or relating to this
Agreement or the relationships which result from this Agreement . . . shall be
resolved by binding arbitration.”
      Green Tree Servicing LLC (“Green Tree”) subsequently obtained the
servicing rights to Sherer’s loan. Before the loan was due, Sherer paid the
balance of his debt. Then, Green Tree allegedly charged Sherer a prepayment
penalty that was contrary to the terms of the Loan Agreement, attempted to
collect that prepayment penalty and interest thereon, and reported Sherer’s
failure to pay the penalty to various credit reporting agencies. Based on these
facts, Sherer sued Green Tree in the United States District Court for the
Southern District of Mississippi under both the Fair Debt Collection Practices
Act, 15 U.S.C. § 1692 (“FDCPA”), and the Fair Credit Reporting Act, 15 U.S.C.
§ 1681 (“FCRA”). In response, Green Tree filed a motion to dismiss and compel
arbitration, which the district court denied based on its holding that equitable
estoppel did not apply. Green Tree filed timely notice of appeal.
                                II. DISCUSSION
A.    Overview Of Our Arbitration Clause Analysis
      We review de novo a district court’s denial of a motion to compel
arbitration. JP Morgan Chase & Co. v. Conegie, 492 F.3d 596, 598 (5th Cir.
2007).
      A two-step analysis is applied to determine whether a party may be
compelled to arbitrate. Id. First, we ask if the party has agreed to arbitrate the
dispute. See id. (“The Court must first ascertain whether the parties agreed to
arbitrate the dispute.”). If so, we then ask if “any federal statute or policy
renders the claims nonarbitrable.” Id. (quoting Wash. Mut. Fin. Group, LLC v.

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Bailey, 364 F.3d 260, 263 (5th Cir. 2004)). As neither party argues that a federal
statute or policy would bar arbitration here, the issue before us is limited to the
analysis’s first step.
       That first step itself contains two questions: (1) is there a valid agreement
to arbitrate the claims and (2) does the dispute in question fall within the scope
of that arbitration agreement. See id. We apply the federal policy favoring
arbitration when addressing ambiguities regarding whether a question falls
within an arbitration agreement’s scope, but we do not apply this policy when
determining whether a valid agreement exists. Fleetwood Enters., Inc. v.
Gaskamp, 280 F.3d 1069, 1073–74 & n.5 (5th Cir. 2002); see Westmoreland v.
Sadoux, 299 F.3d 462, 465 (5th Cir. 2002) (“[W]e will read the reach of an
arbitration agreement between parties broadly, but that is a different matter
from the question of who may invoke its protections.”).1 Because the district
court held, and neither party challenges, that the claims would otherwise be
within the scope of the arbitration clause “[h]ad the defendant signed the
contract,” the present case turns solely on the first question of whether a valid
agreement exists. Put another way, we are asked to determine whether Sherer
has agreed to arbitration with a nonsignatory, such as Green Tree.
B.     Is There A Valid Agreement To Arbitrate
       “Who is actually bound by an arbitration agreement is a function of the
intent of the parties, as expressed in the terms of the agreement.” Bridas


       1
         As authority for the proposition that only a signatory to an arbitration agreement can
enforce it, Sherer points to the following introductory sentence in Westmoreland: “[i]t is then
not surprising that to be enforceable, an arbitration clause must be in writing and signed by
the party invoking it.” 299 F.3d at 465. Sherer neglects to acknowledge, however, that the
balance of the opinion in Westmoreland addresses the exceptions to that proposition, focusing
primarily on the availability of equitable estoppel (in the absence of language in the arbitration
clause similar to the language at issue here). See id. at 467 (applying the equitable estoppel
standard that we set out in Hill v. G E Power Systems, Inc., 282 F.3d 343, 348–49 (5th Cir.
2002), and concluding that, under the particular circumstances of the case, the nonsignatory
could not compel arbitration).

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S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 355 (5th Cir. 2003). When the
agreement’s terms do not expressly state whether a signatory may be compelled
to arbitrate with a nonsignatory, we have drawn on various theories of contract
and agency law, including equitable estoppel,2 to determine a nonsignatory’s
rights and duties under an arbitration clause.                  See id. at 356 (“Ordinary
principles of contract and agency law may be called upon to bind a nonsignatory
to an agreement whose terms have not clearly done so.”). Here, although the
district court held that it must apply equitable estoppel to determine whether
Green Tree may compel arbitration, we do not need to apply such a theory
because the terms of the Loan Agreement clearly identify when Sherer may be
compelled to arbitrate with a nonsignatory.
       According to the broad terms of the Loan Agreement, Sherer has agreed
to arbitrate any claims arising from “the relationships which result from th[e]
[a]greement.” A loan servicer, such as Green Tree, is just such a “relationship.”
Indeed, without the Loan Agreement, there would be no loan for Green Tree to
service, and no party argues to the contrary. Sherer’s FDCPA and FCRA claims
arise from Green Tree’s conduct as Sherer’s loan servicer and, therefore, fall
within the terms of the Loan Agreement’s arbitration clause. Based on the Loan
Agreement’s language, Sherer has validly agreed to arbitrate with a
nonsignatory, such as the loan servicer Green Tree, and the language is
sufficiently broad to permit Green Tree to compel arbitration.
       We are supported in this conclusion by the Eleventh Circuit’s decision in
Blinco v. Green Tree Servicing LLC, 400 F.3d 1308 (11th Cir. 2005). There, the
Eleventh Circuit interpreted the same arbitration clause language in a statutory
claim against the same loan servicer. Id. at 1310. The court first held that a


       2
         The other five theories we have considered are (1) incorporation by reference,
(2) assumption, (3) agency, (4) veil-piercing or alter ego, and (5) third-party beneficiary. Id. at
356.

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lawsuit against a loan servicer was a claim arising from a relationship that
resulted from the agreement. Id. at 1311 (“Indeed, it is difficult to understand
how Green Tree could be a servicer if there were no [n]ote, and more
importantly, how Green Tree could face statutory servicer liability if there were
no [n]ote to service.”). Then, the court held that Green Tree could compel
arbitration because “[t]he scope of the [n]ote’s arbitration clause is sufficiently
broad to allow non-signatories to invoke the clause where, as here, they face
claims derived from the [n]ote.” Id. at 1312.
      Sherer argues that our precedent requires us to apply a theory such as
equitable estoppel in order to determine whether a nonsignatory may compel
arbitration and that we cannot, therefore, consider the terms of the agreement.
The district court agreed with this argument and felt bound to apply the
equitable estoppel rubric that we established in Grigson v. Creative Artists
Agency, L.L.C., 210 F.3d 524 (5th Cir. 2000). But that approach skips the first
step in determining whether a valid agreement to arbitrate exists: the “terms of
the agreement” dictate “[w]ho is actually bound by an arbitration agreement.”
See Bridas, 345 F.3d at 355. If that fails, then we look to theories such as
equitable estoppel to determine whether a nonsignatory may compel arbitration.
See id. at 356. None of the agreements that we have considered in our opinions
involving nonsignatories expressly addressed whether a nonsignatory may
compel a signatory to arbitrate a claim; as a result, we frequently relied on
theories such as equitable estoppel to determine whether the nonsignatory may




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invoke arbitration.3 The frequency of that reliance, however, does not make the
rule.
        Sherer further argues that the Eleventh Circuit has undermined its
holding in Blinco with its opinion in Becker v. Davis, 491 F.3d 1292 (11th Cir.
2007). Contrary to Sherer’s assertion, Becker did not affect the pertinent part
of Blinco’s reasoning. Instead, Becker referred to the portion of Blinco that
addressed when a nonsignatory may be compelled to arbitrate. Blinco involved
a promissory note signed only by a husband, and the court addressed the
additional issue concerning whether the nonsignatory wife may be compelled to
arbitrate her claims. 400 F.3d at 1310. The court applied equitable estoppel in
order to compel the wife to arbitrate because the terms of the agreement did not
address when a nonsignatory could be compelled to arbitrate (as opposed to
when a nonsignatory could compel arbitration). See id. at 1312. Because Becker
involved a plaintiff suing in her individual capacity for violations of an
agreement that she signed in her capacity as a trustee, the Eleventh Circuit
applied that portion of Blinco that addressed equitable estoppel in order to
determine whether the nonsignatory may be compelled to arbitrate her claims
where the agreement was silent on the matter. See Becker, 491 F.3d at 1296,
1299–1300.




        3
         See, e.g., id. at 351–52 (“The relevant part of . . . the agreement stipulates that ‘[a]ny
dispute, controversy or claim arising out of or in relation to or in connection with th[e]
[a]greement . . . shall be exclusively and finally settled by arbitration, and any Party may
submit such a dispute, controversy or claim to arbitration.’” (alterations and omissions in
original)); Hill, 282 F.3d at 345–46 (noting that the defendant seeking to compel arbitration
was not a party to the agreement in question and that the agreement required the signatory
parties “to submit any claims arising out of [the agreement] to arbitration”); Grigson, 210 F.3d
at 525–27 (stating that the parties to the distribution agreement for the movie “Return of the
Texas Chain Saw Massacre” agreed to arbitrate, inter alia, “all other causes of action (whether
sounding in contract or in tort) arising out of or relating to this [a]greement”); Brief for
Appellee at 7, Westmoreland, 299 F.3d 462 (No. 01-20793) (“[T]he parties hereby agree to . . .
binding international arbitration in Paris, France.”).

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      Here, the language of the Loan Agreement demonstrates that Sherer has
agreed to arbitrate his claims that arise against nonsignatories whose
“relationships . . . result from th[e] [a]greement.” Sherer is bound by the
language of the Loan Agreement, and Green Tree, as a nonsignatory whose
relationship resulted from the Loan Agreement, may therefore compel Sherer to
arbitrate his claims.4
                                 III. CONCLUSION
      For the foregoing reasons, we REVERSE the order of the district court and
REMAND with instructions to grant the motion to compel arbitration.




      4
         We need not and do not address the district court’s holding on the availability of
equitable estoppel.

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