Arizona Supreme Court Rejects the “Closely Related” Doctrine

Image by Deniece Platt from Pixabay

When may a litigant take advantage of a forum selection clause in a contract that he never signed? This is a question that has attracted considerable attention from the courts (and on this blog). Historically, a non-party was covered by a clause only when permitted under such doctrines as assumption, agency, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary, waiver, or estoppel. Over the past thirty years, however, U.S. courts have created a new doctrine that makes it easier for non-signatories to benefit from forum selection clauses. This doctrine posits that a person is covered by a forum selection clause in a contract that he never signed if he is “closely related” to a contract signatory.

In 2021, Robin Effron and I co-authored a paper in which we traced the rise of the closely related doctrine in the United States. The doctrine has only grown in popularity since then. In late November 2025, however, something unusual happened. The Arizona Supreme Court rejected the closely related doctrine as a matter of Arizona common law. In this post, I first summarize and critique its decision. I then offer some preliminary thoughts on what the future may hold.

Henderson v. Moskowitz

Nomad Capitalist USA, LLC (“Nomad”) is a company that provides advice and support to individuals interested in “relocating to foreign jurisdictions, obtaining foreign citizenship, and planning offshore tax strategies.” Robert Sullivan entered into a contract with Nomad that contained (1) an Arizona choice-of-law clause, and (2) an exclusive forum selection clause choosing the courts of Hong Kong. The contract was signed on Nomad’s behalf by Andrew Henderson, the company’s founder and manager. It is important to emphasize that Henderson did not sign the contract in his personal capacity. He signed only as a representative of Nomad.

Sullivan subsequently sued Nomad and Henderson in Arizona state court for breach of contract, unjust enrichment, and consumer fraud. Both defendants moved to dismiss based the Hong Kong forum selection clause. Sullivan argued that Henderson’s motion should be denied because he was not a party to the agreement containing the clause. Henderson responded that he was entitled to take advantage of the clause under the “closely related” doctrine because he was closely related to Nomad. Sullivan responded in turn that if the parties had truly intended for Henderson to be covered by the forum selection clause, they would have said so. In support of this position, Sullivan noted that both the indemnification provision and the social media provision in the agreement expressly stated that they would apply to Henderson. The forum selection clause, by contrast, contained no such language.

The Arizona Supreme Court granted review to decide whether to adopt the closely related doctrine. It unanimously declined to do so for five reasons. First, the court noted that the parties could easily have brought Henderson within the scope of the forum selection clause—as they did with the indemnification and social media clauses—but did not. Second, it observed that existing doctrines (e.g., alter ego, third-party beneficiary) were adequate to address the issues posed by non-signatories in cases involving forum selection clauses. Third, it concluded that it would be inequitable to permit Henderson to “essentially clothe himself in contract benefits (including provisions that mention him but also those that don’t) to escape otherwise applicable liabilities.” Fourth, it held that Arizona has a strong interest in enforcing its consumer fraud law. Fifth, and finally, the court stated that “Arizona courts generally decline to create new common law duties absent legislative guidance.”

A Critique

The holding in Henderson is defensible. The Arizona Supreme Court observed—reasonably, in my view—that existing common law doctrines are sufficient to deal with the problem of non-signatories in cases involving forum selection clauses. It also reasonably called out the incongruity of permitting the non-signatory Henderson to invoke the forum selection clause when that clause—contra other provisions in the agreement—did not mention him by name.

Nevertheless, I found the decision frustrating to read because the court failed to acknowledge (or engage with) the many cases in which the closely related doctrine has received a warmer reception. The purpose of the doctrine is to prevent fragmented litigation proceedings by making it easier to bring willing non-signatories within the ambit of a forum selection clause. This is a sensible goal. It is, however, not discussed at any length in Henderson. It would have been nice if the court had taken a broader view of the doctrine, its purposes, and its reception by other U.S. courts, all of which were exhaustively reviewed in my and Robin’s 2021 paper.

Instead, the Arizona Supreme Court cited to only three non-Arizona cases in its decision. First, it cited a 2022 decision by the Fifth Circuit for the proposition that “there is good reason to be dubious” of the closely related doctrine. This citation is misleading because the Fifth Circuit ultimately adopted and applied the doctrine in the case cited. Second, the court cited a 2024 decision by the Sixth Circuit rejecting the closely related doctrine as “a judicial concoction without underlying authority or justification.” This citation is also misleading because the Sixth Circuit made this statement in the context of explaining why federal courts lacked the authority to create the closely related doctrine as a matter of federal common law. When a state supreme court is asked to adopt the doctrine as a matter of state common law, as was the case in Henderson, there is no issue with respect to the court’s authority. Third, the court cited a 2009 federal district court decision from Texas for the proposition that the doctrine is “so vague as to be unworkable.” This statement does support the court’s decision not to adopt the doctrine as a matter of Arizona common law. There are, however, more than one hundred non-Arizona cases that go the other way. None of these cases are discussed (or even mentioned) in Henderson.

In summary, the outcome is Henderson is defensible but undertheorized. The Arizona Supreme Court had a golden opportunity to enter into conversation with other U.S. courts about how to address a recurring legal issue. Instead, it handed down a narrow opinion that focused almost exclusively on past Arizona cases.

Looking Ahead

It will be interesting to see how the lower state courts in Arizona apply Henderson. On the one hand, the decision is framed as a rejection of the closely related doctrine. On the other hand, it has enough idiosyncratic elements to make it potentially distinguishable. What will happen, for example, in a future case where other provisions in the agreement fail to refer to the non-signatory by name? When the claim does not involve Arizona consumer law? When the choice-of-law clause and the forum selection clause choose the same (non-Arizona) jurisdiction?  A future Arizona court may well decide this case in the same way as Henderson. But there’s no way to know for sure.

It will also be interesting to see what happens the next time a federal court sitting in diversity in Arizona is asked to apply the closely related doctrine. The Ninth Circuit has long recognized the doctrine as a matter of federal common law. As discussed above, however, the Sixth Circuit recently held that the federal courts lack the power to adopt such a rule. To date, there have been few instances where state and federal law have come into conflict because most jurisdictions have adopted the closely related doctrine. The state rule and the federal rule in Arizona are, however, now on a collision course.

Unless the Ninth Circuit revisits its earlier decisions, we may be entering a world where a closely related non-signatory may take advantage of a forum selection clause in federal court (as a matter of federal law) even as that same non-signatory is denied this ability in Arizona state court (as a matter of state law). Such an outcome is difficult to reconcile with the anti-forum-shopping sentiment expressed in the U.S. Supreme Court’s seminal decision in Erie Railroad Company v. Tompkins (1938). Going forward, closely related non-signatories in Arizona will have a strong incentive to remove a case to federal court to take advantage of the federal rule. To discourage such forum shopping, the Ninth Circuit would do well to revisit its earlier decisions recognizing the doctrine as a matter of federal common law. The closely related doctrine is arguably a substantive rule of contract law (governed by state law) rather than a procedural rule of judicial economy (governed by federal common law in federal court). It logically follows that a federal court sitting in diversity should apply state law determine the rights and obligations of non-signatories, as the Supreme Court has done in the arbitration context. Whether this will actually occur, however, remains to be seen.