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ARBITRATION - PORTER CAPITAL CORP. V. THOMAS

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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