United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 08-2705
                                   ___________

Donaldson Company, Inc.,              *
                                      *
           Plaintiff – Appellee,      *
                                      * Appeal from the United States
     v.                               * District Court for the
                                      * Eastern District of Missouri.
Burroughs Diesel, Inc.,               *
                                      *
           Defendant – Appellant.     *
                                 ___________

                             Submitted: August 26, 2009
                                Filed: September 16, 2009
                                 ___________

Before SMITH, GRUENDER, and BENTON, Circuit Judges.
                           ___________

BENTON, Circuit Judge.

       Donaldson Company, Inc., a nonsignatory, seeks to compel arbitration against
Burroughs Diesel, Inc., a signatory to an agreement with an arbitration clause. The
district court ordered arbitration. Burroughs appeals. Jurisdiction being proper under
28 U.S.C. § 1291, this court reverses and remands.1



      1
       This Court previously issued an opinion on July 20, 2009, relying on Finnie
v. H&R Block Financial Advisors, Inc., 307 Fed. Appx. 19 (8th Cir. 2009)
(unpublished) (per curiam), among other cases. The motion for rehearing is hereby
granted, the previous opinion vacated, and this opinion substituted for it.
                                           I.

       In 1999, Burroughs signed a Dealer Full Service Agreement with Western Star
Truck Sales, Inc. Western Star manufactured trucks that it sold to Burroughs for
resale. A third party, Donaldson, supplied two parts of the air intake system in the
trucks. The Dealer Agreement did not mention Donaldson. It contained an arbitration
provision that

      any controversy or claim arising out of or in connection with this
      Agreement, its construction, interpretation, effect, performance, non-
      performance, termination, or consequences thereof, or any transaction
      contemplated hereby, however characterized as a matter of law (whether
      in contract, tort or otherwise), . . . shall be settled by arbitration in St.
      Louis County, Missouri . . . .

Dealer Agreement ¶ 31. The Agreement provided that it “shall be governed by and
construed in accordance with the laws of the state in which Dealer’s principal place
of business, as designated in Paragraph 6 hereof, is located, and such laws shall be
applied and control any arbitration conducted pursuant to Paragraph 31 hereof.” 

       The engines failed in several trucks purchased from Burroughs. In November
2001, the buyers sued Donaldson, “Western Star Trucks,” and Burroughs in
Mississippi state court. In February 2002, Burroughs cross-claimed against
Donaldson and Western Star. The cross-claim, referring to Donaldson and Western
Star collectively as “Cross-Defendants,” did not distinguish between them in terms of
the misconduct alleged. Western Star answered the cross-claim, raising arbitration as
an affirmative defense, and serving a copy on Donaldson.


      2
       Paragraph 6 says that Laurel, Mississippi, is Burroughs’s principal place of
business.

                                          -2-
       Two days later, Western Star sued, in the U.S. District Court for the Eastern
District of Missouri, to compel arbitration. Neither Burroughs nor Western Star
notified Donaldson of the arbitration proceedings in Missouri.

       In Mississippi, Donaldson answered the cross-claims, conditionally raising an
arbitration defense: “If there is an arbitration agreement between Western Star Trucks
and Burroughs, then the cross-claim is barred by that agreement and the cross claim
should be dismissed and all issues should be resolved by arbitration.” Donaldson
raised other affirmative defenses, including “lack of privity” and the lack of a “legal,
contractual, or other relationship” between Donaldson and Burroughs.

       In December 2002, the Missouri federal court granted Western Star’s motion
to compel arbitration, relying on the arbitration clause in the Dealer Agreement. See
Western Star Truck Sales, Inc. v. Burroughs Diesel, Inc., No. 4:02-cv-457, slip op.
at 9 (E.D. Mo. Dec. 2, 2002). Burroughs then dismissed its Mississippi cross-claim
against Western Star.

       In August 2007, Burroughs moved to schedule trial on its cross-claim against
Donaldson in Mississippi. Soon thereafter, Donaldson alleges, it first learned of the
Missouri arbitration order. In October 2007, Donaldson moved to compel Burroughs
to arbitrate in the Missouri federal court, citing that court’s 2002 arbitration order in
the Western Star-Burroughs case.

      In Missouri, Donaldson argued that, although it was not a party to the Dealer
Agreement, arbitration was required because: (1) Burroughs’s claim was premised
on and presumed the existence of the Agreement; and (2) Burroughs previously
alleged that Western Star and Donaldson acted in concert. Burroughs responded by
moving for summary judgment, which was denied. The federal court granted




                                          -3-
Donaldson’s motion to compel arbitration, enjoining Burroughs from proceeding in
Mississippi court.3

                                          II.

       This court reviews “de novo a district court’s grant of a motion to compel
arbitration.” 3M Co. v. Amtex Sec., Inc., 

, 1198 (8th Cir. 2008). “A
court must grant a motion to compel arbitration if a valid arbitration clause exists
which encompasses the dispute between the parties.” 

agree that
paragraph 31 of the Agreement is a valid arbitration clause between Western Star and
Burroughs. They dispute whether Donaldson can enforce the arbitration clause
against Burroughs. Donaldson was not a party to the Agreement, and relies on the
doctrine of equitable estoppel in the arbitration context. See, e.g., Dominium Austin
Partners, LLC v. Emerson, 

, 728 (8th Cir. 2001).

       Donaldson contends that since equitable estoppel is the basis, the proper
standard of review of the district court’s grant of arbitration is abuse of discretion,
citing Grigson v. Creative Artists Agency, L.L.C., 

(5th Cir. 2000). The
circuits are split. See Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 

, 756-57 (11th Cir. 1993) (reviewing de novo the district court’s order compelling
arbitration, which invoked equitable estoppel, and labeling the equitable estoppel issue
a “question of law”); Bouriez v. Carnegie Mellon Univ., 

, 294 (3d Cir.
2004) (“We exercise plenary review over the District Court’s order compelling
arbitration,” where the district court invoked equitable estoppel). But see Grigson,

, 528 (“Accordingly, whether to utilize equitable estoppel in this fashion
is within the district court’s discretion; we review to determine only whether it has
been abused.”); Brantley v. Republic Mortg. Ins. Co., 

, 395 (4th Cir.

      3
      In February 2008, the plaintiff-buyers settled with Burroughs, Western Star,
and Donaldson, dismissing their claims. The only claim pending in Mississippi is
Burroughs’s cross-claim against Donaldson.

                                          -4-
2005) (“District court decisions determining the scope of arbitration agreements are
generally reviewed de novo . . . . However, in cases such as the present one, the
arbitration order does not rest on a term of the contract, rather upon the application of
equitable estoppel. We review such equitable estoppel decisions for abuse of
discretion.”) (internal citations omitted).

       Generally, courts review de novo a district court’s grant of a motion to compel
arbitration. See, e.g., 3M 

. There is no reason to depart from
the de novo standard here. Where a district court grants arbitration, its application of
equitable estoppel presents at least mixed questions of law and fact. In this circuit,
mixed questions of law and fact are reviewed de novo. See, e.g., Sargent v.
Commissioner, 

, 1254 (8th Cir. 1991); Cooper Tire & Rubber Co. v.
St. Paul Fire & Marine Ins. Co., 

, 369 (8th Cir. 1995).

                                           A.

       Donaldson, in its petition for rehearing, argues that Mississippi law, not federal
law, should apply based on the choice-of-law provision in the Agreement. “This court
reviews a district court’s choice of law determination de novo.” Am. Home
Assurance Co. v. L & L Marine Serv., Inc., 

, 618 (8th Cir. 1998).

       The Federal Arbitration Act “create[s] a body of federal substantive law of
arbitrability, applicable to any arbitration agreement within the coverage of the Act.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 

, 24 (1983). But
“when deciding whether the parties agreed to arbitrate a certain matter . . ., courts
generally . . . should apply ordinary state-law principles that govern the formation of
contracts.” Hudson v. Conagra Poultry Co., 

, 500 (8th Cir. 2007),
quoting First Options of Chicago Inc. v. Kaplan, 

, 944 (1995). Thus,
state contract law governs the threshold question of whether an enforceable arbitration
agreement exists between litigants; if an enforceable agreement exists, the federal

                                          -5-
substantive law of arbitrability governs whether the litigants' dispute falls within the
scope of the arbitration agreement. Daisy Mfg. Co., Inc., v. NCR Corp., 

,
392 (8th Cir. 1994); Fleetwood Enters. Inc. v. Gaskamp, 

, 1073 (5th
Cir. 2002).

       The Supreme Court has ruled that state contract law governs the ability of
nonsignatories to enforce arbitration provisions. Arthur Andersen LLP v. Carlisle,
556 U.S. ____ (2009). “[A] litigant who was not a party to the relevant arbitration
agreement may invoke §3 [of the Federal Arbitration Act] if the relevant state contract
law allows him to enforce the agreement.” 

. . . is applicable to
determine which contracts are binding under §2 and enforceable under §3 ‘if that law
arose to govern issues concerning the validity, revocability, and enforceability of
contracts generally.’” 

v. Thomas, 

, 493, n. 9 (1987).
See Moses H. 

(“The Act provides two parallel devices for
enforcing an arbitration agreement: a stay of litigation in any case raising a dispute
referable to arbitration, 9 U.S.C. §3, and an affirmative order to engage in arbitration,
§4.”). State law principles allowing “a contract to be enforced by or against
nonparties to the contract,” including “assumption, piercing the corporate veil, alter
ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel,”
govern issues concerning the enforceability of contracts generally. Carlisle, 556 U.S.
at ____. Thus, these state law principles control whether a nonparty to an arbitration
agreement can enforce the agreement under sections 3 and 4.

                                           B.

       The issue in this case is whether Donaldson, a nonsignatory, can enforce the
arbitration provision in the Agreement. Under Mississippi state law, “equitable
estoppel is an extraordinary remedy and should only be invoked to prevent
unconscionable results.” B.C. Rogers Poultry, Inc. v. Wedgeworth, 

,
491 (Miss. 2005), quoting Harrison Enters., Inc. v. Trilogy Commc’ns, Inc., 818 So.

                                          -6-
2d 1088, 1095 (Miss. 2002). Donaldson, relying on B.C. Rogers Poultry, argues that
Mississippi law allows it to use equitable estoppel to compel arbitration against
Burroughs.

       In B.C. Rogers Poultry, a contract poultry grower for Rogers sued Rogers and
the Bank of Morton. The grower alleged that Rogers and the Bank “forced and
coerced him to assign collateral and/or borrow money on Rogers’s behalf.” 

at 486. Rogers moved to compel arbitration, relying on the arbitration clause in its
agreement with the grower. The Bank joined Rogers’ motion, although it was not a
party to the agreement. The trial court denied the motion to compel arbitration.
Rogers and the Bank appealed. Before the appellate court ruled, all claims against
Rogers were discharged in bankruptcy. The Bank, a nonsignatory (alone) on appeal,
sought to compel arbitration by invoking equitable estoppel. The Supreme Court of
Mississippi discussed two theories of equitable estoppel from the Fifth Circuit’s
opinion in Grigson: the “relies on” test and the “concerted misconduct” test. B.C.
Rogers Poultry, 

at 491-92, discussing Grigson, 

. The court
then discussed the traditional principles of estoppel under Mississippi law. 

at 492-93. The court held that the Bank could not compel arbitration with the
grower. 

       Despite the Mississippi Supreme Court’s rejection of a nonsignatory’s motion
to compel arbitration in B.C. Rogers Poultry, Donaldson claims that Mississippi law
permits it to enforce an agreement to arbitrate. Donaldson premises its argument on
the position that Mississippi law recognizes each of the theories of equitable estoppel
discussed in B.C. Rogers Poultry. Assuming that Mississippi law recognizes these
theories, Donaldson still may not prevail by using equitable estoppel.

                                          1.

      First, Donaldson argues that it can invoke equitable estoppel against Burroughs
because Burroughs’s cross-claims rely on Burroughs’s agreement with Western Star.
Under Grigson, equitable estoppel allows a nonsignatory to compel arbitration “when

                                         -7-
the signatory to a written agreement containing an arbitration clause must rely on the
terms of the written agreement in asserting its claims against the 

, quoting MS Dealer Serv. Corp. v. Franklin, 

, 947 (11th Cir.
1999). “When each of a signatory’s claims against a nonsignatory makes reference
to or presumes the existence of the written agreement, the signatory’s claims arise out
of and relate directly to the written agreement, and arbitration is appropriate.”

, quoting MS 

.

       The “relies on” test does not help Donaldson. Burroughs does not rely on its
agreement with Western Star in asserting its claims against Donaldson. Burroughs
cross-claimed against Donaldson and Western Star for: negligence, breach of
fiduciary duty, breach of good faith and fair dealing, fraudulent misrepresentation,
fraudulent concealment, and implied warranty of fitness for a particular purpose.
Burroughs does not allege that the Agreement was breached. Burroughs’s allegations
do not refer to the Agreement or presume it exists. Burroughs’s cross-claim would
have a basis for recovery against Donaldson even if there were no Agreement. Cf. MS

-48 (compelling arbitration because “each of [the plaintiff’s]
fraud and conspiracy claims depends entirely upon her contractual obligation . . . for
the service contract”); 

(“Although [the signatory] does not
rely exclusively on the license agreement to support its claims, each claim presumes
the existence of such an agreement.”).

                                          2.

       Second, Donaldson argues that it can invoke equitable estoppel against
Burroughs because Burroughs alleges interdependent and concerted misconduct
between Donaldson and Western Star. Donaldson contends that, under Mississippi
law, the “concerted misconduct” test permits a nonsignatory to compel arbitration
“when the signatory to the contract containing an arbitration clause raises allegations
of substantially interdependent and concerted misconduct by both the nonsignatory

                                         -8-
and one or more of the signatories to the contract.” B.C. Rogers Poultry, 

at 491, quoting 

. Additionally, either (1) the allegations of
concerted misconduct must be dependent upon the agreement containing the
arbitration provision, or (2) there must be “a close legal relationship, such as, alter
ego, parent/subsidiary, or agency relationship,” between the nonsignatory and a
signatory to the agreement. B.C. Rogers Poultry, 

at 491-92.4

                                          a.

       Donaldson argues that Burroughs’s cross-claim alleges “substantially
interdependent and concerted misconduct” by Donaldson and Western Star. Below,
the district court found that Burroughs “alleged in its cross-claim that Donaldson and
Western Star acted as one.” “[T]he focus of our inquiry should be on the nature of the
underlying claims asserted by [the signatory] against [the nonsignatory] to determine
whether those claims fall within the scope of the arbitration clause.” 

; accord MS 

.

       The cases applying the concerted-misconduct test establish that the plaintiff
must specifically allege coordinated behavior between a signatory and a nonsignatory.
In MS Dealer, Franklin, a car buyer, signed a Buyers Order to purchase a car from Jim
Burke Motors, 

. The Order incorporated by reference a Retail
Installment Contract, which obligated the buyer to a service contract through MS
Dealer Service Corporation. The Order contained an arbitration clause. When the
buyer had problems with the car, she sued Burke and MS Dealer. According to her
complaint, Burke and MS Dealer “improperly cooperated, conspired, and otherwise
      4
        In B.C. Rogers Poultry, the Mississippi Supreme Court referred to this test as
the “intertwined-claims test.” 

at 491. In Grigson, the “intertwined-claims
test” covers both the “relies on” test and “concerted misconduct” test taken together.

. This opinion uses “concerted misconduct” to refer to the
concerted misconduct test by itself, and reserves the “intertwined-claims” label to
refer to the two tests taken together.
                                         -9-
colluded” to charge an excessive amount for the service contract. MS Dealer sought
to compel arbitration, which the district court denied because MS Dealer was not a
signatory to the Order. The Eleventh Circuit reversed, concluding “that Franklin’s
claims against Jim Burke and MS Dealer ‘are based on the same facts and are
inherently inseparable.’” 

The court emphasized that the buyer “specifically
alleges that MS Dealer worked hand-in-hand with Jim Burke and Chrysler Credit
Corporation in this alleged fraudulent scheme.” 

v. BDO Seidman, the plaintiffs claimed that they were recruited by
two accounting firms to participate in a fraudulent tax scheme, Currency Options
Bring Reward Alternatives (COBRA). 

, 60-64 (2d Cir. 2005). The
plaintiffs’ “consulting agreements” with the firms contained broad arbitration clauses.
The firms, along with Deutsche Bank, advised and executed an illegal plan where
plaintiffs manufactured losses from partnerships engaged in foreign currency option
transactions. The plaintiffs sued; defendants sought to compel arbitration. The
district court held that the consulting agreements were “mutually fraudulent” and
unenforceable, and denied a motion to compel arbitration. The Second Circuit
reversed and remanded for consideration whether Deutsche Bank, a nonsignatory,
could enforce the arbitration provision. The court noted, “[h]aving alleged . . . that the
Deutsche Bank and BDO defendants acted in concert to defraud plaintiffs . . .
plaintiffs cannot now escape the consequence of those allegations . . . .” 

In
particular, the court noted that the complaint alleged that the “Defendants knowingly
acted in concert to market and implement the fraudulent and illegal COBRA tax
shelter transaction.” 

      In the present case, Burroughs’s cross-claim stated that “Cross-Defendants
concealed and misrepresented the fact that Western Star Heritage model truck was
designed, manufactured and sold with an allegedly defective intake system.” The
pleading also said that “Cross-Defendants conduct was intentional and/or done with
gross negligence.” Although Burroughs’s cross-claim made common allegations

                                          -10-
against Donaldson and Western Star, it did not make any allegations suggesting that
Donaldson and Western Star “knowingly acted in concert,” “improperly cooperated,”
or “worked hand-in-hand.” The concerted-misconduct test requires allegations of
“pre-arranged, collusive behavior” demonstrating that the claims are “intimately
founded in and intertwined with” the agreement at issue. MS 

.
Burroughs’s cross-claims do not allege the level of “substantially interdependent and
concerted misconduct” required by the case law.

                                           b.

       Under Mississippi law, even if Burroughs alleged “substantially interdependent
and concerted misconduct” between Donaldson and Western Star, Donaldson could
compel arbitration only if either (1) the allegations of concerted misconduct were
dependent upon the agreement containing the arbitration provision, or (2) there were
a close legal relationship, “such as alter ego, parent/subsidiary, or agency relationship”
between Donaldson and Western Star.

       In B.C. Rogers Poultry, the court found that neither scenario applied. The court
found the grower’s claims against the Bank were not “dependent upon” the agreement
with Rogers, as the grower did “not rely upon the Broiler Growing Agreement in
asserting his claims.” 

at 491. The court also found that the business
relationship between the Bank and B.C. Rogers Poultry was not sufficiently close for
the Bank to compel arbitration. 

      Burroughs’s allegations are not “dependent upon” its agreement with Western
Star. Like the grower in B.C. Rogers Poultry, Burroughs “does not rely upon [the
Agreement] in asserting [its] claims.” Burroughs’s cross-claims do not refer to the
Agreement or presume it exists, and Burroughs would have a basis for recovery
against Donaldson even if there were no Agreement.



                                          -11-
       Donaldson does not have a sufficiently close legal relationship with Western
Star. The close-relationship test analyzes whether, “under agency or related
principles, the relationship between the signatory and nonsignatory defendants is
sufficiently close that only by permitting the nonsignatory to invoke arbitration may
evisceration of the underlying arbitration agreement between the signatories be
avoided.” MS 

. Under B.C. Rogers Poultry, a nonsignatory
needs an “alter ego, parent/subsidiary, or agency relationship,” or another comparable
legal relationship, with a signatory to satisfy the close-relationship test. 

at 492.

       Donaldson contends that the close-relationship test can be satisfied purely by
the claims asserted, without considering the actual relationship between the
defendants, and that Burroughs’s cross-claims satisfy the test because of the identical
allegations against Donaldson and Western Star. Donaldson conflates the close-
relationship test with the analysis of whether a signatory raises allegations of
“substantially interdependent and concerted misconduct.”

       Donaldson cites Ingstad v. Grant Thornton, LLP, for the proposition that a
“‘close relationship’ . . . may be found in the structure of the [plaintiff’s] complaint.”
No. 3:05-cv-98, 

, at *5 (D.N.D. Dec. 19, 2006). First, Donaldson
acknowledges that no Mississippi court has followed Ingstad. Second, Ingstad
misapplies the Second Circuit’s opinion in Denney. The Denney court found that the
plaintiffs’ complaint satisfied the “allegations of concerted misconduct” requirement,
not the close-relationship test. “Having alleged . . . that the Deutsche Bank and BDO
defendants acted in concert to defraud plaintiffs, and that defendants’ fraud arose in
connection with BDO’s tax-strategy advice, plaintiffs cannot now escape the
consequences of those allegations by arguing that the Deutsche Bank and BDO
defendants lack the requisite close relationship. . . .” 

(internal
citations omitted) (emphasis added). The Denney court does not say the plaintiffs’
complaint established a close relationship between Deutsche Bank and BDO. Rather,

                                          -12-
it clarifies that the close-relationship test does not matter when there are allegations
of “interdependent or concerted misconduct” and those claims are dependent upon,
or intertwined with, the agreement containing the arbitration provision. The Denney
court remanded for consideration of the relationship between the claims and the
agreement, not the relationship between Deutsche Bank and BDO. 

(instructing the district court to consider, “specifically, whether the issues the
Deutsche Bank defendants seek to arbitrate are indeed intertwined with the consulting
agreements”).

       The close-relationship test does not look to the claims asserted. Rather, it
analyzes the relationship between the signatory and nonsignatory parties “under
agency or related principles.” MS 

. Under these principles,
the business relationship between B.C. Rogers Poultry and the Bank was not
sufficiently close. B.C. Rogers Poultry, 

at 492. Likewise, the business
relationship between Donaldson and Western Star is not sufficiently close. Donaldson
has no relationship with Western Star or Burroughs other than supplying parts for the
trucks at issue. Donaldson contends its supply-chain relationship with Western Star
is sufficient. If it were, any supplier could enforce an arbitration provision if the
manufacturer had agreed to arbitration. The supply-chain relationship between
Donaldson and Western Star is not nearly as close as the “alter ego, parent/subsidiary,
or agency relationship” contemplated in B.C. Rogers Poultry.5




      5
        Donaldson fails to demonstrate a sufficiently close relationship with Western
Star whether the close-relationship test is part of the equitable estoppel analysis, as in
B.C. Rogers Poultry, or is its own distinct ground for allowing a non-signatory to
compel arbitration. See MS 

(listing equitable estoppel and
a sufficiently close legal relationship as separate circumstances where nonsignatories
can compel arbitration); 

(same); Qualcomm Inc. v. Am.
Wireless License Group, LLC, 

, 269 (Miss. 2007) (same).
                                          -13-
                                           3.

       “Absent allegations of substantially interdependent and concerted misconduct
between a non-signatory and a signatory who have a close legal relationship, the
Mississippi law of equitable estoppel should first be examined to determine if
conditions are present where equity should allow a non-signatory to compel
arbitration.” 

law, equitable estoppel requires: (1) belief in and
reliance upon some representation, (2) a change in position on account of that belief
and reliance, and (3) detriment resulting from the reliance. 

not assert that it believed or relied on any representation about
arbitration, or changed its position to its detriment in reliance on a representation. It
does not appear that Donaldson even knew about the arbitration agreement between
Burroughs and Western Star until this litigation began. Donaldson may not invoke
equitable estoppel in this case.

                                          III.

      The order compelling arbitration is reversed, and the case remanded for further
proceedings consistent with this opinion.
                      ______________________________




                                          -14-