Porter Capital Corp. v. Thomas, [Ms. 2101203, Aug. 3, 2012] ___ So. 3d ___ (Ala. Civ. App. 2012). The
Court of Civil Appeals affirmed a denial of a motion to compel arbitration.
Porter Capital financed a line of credit for Athlon Pharmaceuticals, Inc.
Dennis R. Thomas, M.D., a 5% shareholder of Athlon, guaranteed the line
of credit. Two arbitration agreements were at issue. Dr. Thomas did not
sign the first one, but he did sign the second one. As to the first one,
Porter Capital argued that Dr. Thomas was an intended third-party beneficiary
of the line of credit because he was a guarantor. The Court of Civil Appeals
rejected this argument, holding that a guarantor is not an intended third-party
beneficiary unless the parties to the underlying agreement consider him
an intended third-party beneficiary. There was no evidence that Porter
Capital considered Dr. Thomas a third-party beneficiary. Also, merely
being a stockholder did not make Dr. Thomas an intended third-party beneficiary
D stockholders are only incidental beneficiaries of contracts that directly
benefit the corporation. The second arbitration agreement was held not
to apply because the dispute was not within its scope D it applied only
to disputes between the lender and "the borrower," and Dr. Thomas
was not the borrower.
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