Vinewood Capital LLC v. Sheppard Mullin Richter and Hampton LLP (N.D. Tex. 2010): U.S. Court Refuses to Uphold Mudaraba Agreement

At issue is this case is an Islamic financial instrument called a mudaraba agreement, by which a bank enters into a profit-sharing arrangement with a borrower. The Agreement at issue includes a clause stating that any disagreements are to be settled through arbitration in the Bahamas. The Court refused to uphold the Agreement because Vinewood Capital was not a signatory to the agreement, and thus denied the motion to compel arbitration of Vinewood’s claims. In May of 2011, the Court dismissed the appeal and closed the case.

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