Fucci, et al. v. First American Title Insurance Company, et al.

Summarized by Leo Weiss , Office of the U.S. Trustee
6 months 4 days ago

Case Type:

Business

Case Status:

Affirmed

Citation:

24-4051 (10th Circuit, Sep 10,2025) Published

Tag(s):

Ruling:

On rehearing, the Circuit Court affirmed its prior decision affirming the District Court's denial of a title company and its employee, ("FA Defendants"), motion to compel arbitration of an action under various contract and tort theories where the FA defendants closed various real estate purchase sales and the now bankrupt seller had not performed on its contracts to complete the projects, The Courts held that the FA Defendants were not parties to the arbitration agreement between the seller and buyers, were not intended third party beneficiaries of the purchase contracts, or seller's agent.

Procedural context:

The Tenth Circuit issued a very slightly modified opinion reaffirming its prior decision affirming the District Court of Utah's opinion holding that the Appellants, "FA Defendants," could not compel the arbitration of an action in which the FA Defendants had closed various real estate sales and the various purchase contracts had a mandatory arbitration provision for disputes between the parties. Seller filed a Chapter 7 bankruptcy and his bankruptcy trustee had waived the arbitration provisions on behalf of the estate. The FA defendants argued that the sales contracts arbitration clauses were intended to cover their actions as a party to the contracts or as third party beneficiaries of the contracts or as agents of the Seller under the contracts. The District Court denied their motion to compel arbitration finding that: 1) They were not parties to the contract under applicable Ohio and Florida law; 2) They were not intended to be third party beneficiaries as there was no showing that the purchasers and sellers intended the FA Defendants to be benefitted by the contracts; and 3) No agency was demonstrated between the FA Defendants and the Seller and even if there had been such an agency the bankruptcy trustee's waiver of the arbitration provisions barred the FA Defendants from asserting that this agency will allow the FA defendants from the benefit of the arbitration clauses. On appeal, the Tenth Circuit affirmed the District Court for substantially the same reasons. The FA Defendants' petition for rehearing was partially granted. However, only minor non-substantive modifications to original opinion were made on rehearing.

Facts:

Rockwell was a real estate developer who sought to finance many of his projects by selling the projects to the numerous plaintiffs in the action prior to their actual construction. Many of these purchasers were induced to invest in the projects as "1031 exchange" investments. Rockwell never completed the projects but diverted the proceeds for his personal gain. First American and one of its employees, "FA Defendants," were sued by the various purchasers who alleged that these defendants were supposed to hold the sale proceeds from a sale in escrow until the project was completed but failed to do so. Instead, they released the funds to Rockwell shortly after the closings allowing Rockwell to divert the funds for his personal gain. However, the District Court found that there were no escrow agreement executed by the parties. Rockwell filed a Chapter 7 bankruptcy after the various purchasers sued him for breach of contract. His bankruptcy trustee waived the arbitration provisions within the purchase agreements. The various contracts had a choice of law provision. Some contracts applied Ohio law. Other contracts applied Florida law. The FA defendants argued that they were parties to the contracts and their arbitration provisions. The Courts held otherwise. The Tenth Circuit distinguished and questioned a Colorado Court of Appeals opinion finding that a title company was a third party beneficiary of this type of contract, finding instead that Ohio and Florida law would not find a title company was a third party beneficiary of the contracts. Whatever validity the defendants' agency argument might have had were found to have been waived by the trustee's actions even though it did not appear that the defendants could actually prove an agency relationship in the first instance.

Judge(s):

Hartz, Moritz and Rossman

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