August 15, 2018 practice point

Non-Signatory Cannot Be Required to Arbitrate

By Julia Karaulna

Recently, the First Circuit Court held that a delivery driver was not bound to arbitrate his claims because he had not signed the arbitration agreement in question and was not bound to the agreement under principles of common law. Ouadani v. TF Final Mile LLC, 876 F.3d 31, 33 (1st Cir. 2017).

Djamel Ouadani worked as a driver delivering products for Dynamex Operations East, LLC (Dynamex), now known as TF Final Mile LLC. Ouadani was required to associate with Selwyn and Birtha Shipping LLC (SBS), a vendor affiliated with Dynamex. Ouadani did not have a written contract with Dynamex or with SBS. Id at 33–34.

After Ouadani filed various wage-and-hour claims against Dynamex in federal court, Dynamex filed a motion to compel arbitration, pointing to a mandatory arbitration clause in the agreement between Dynamex and SBS. In a subsection entitled "Claims Covered By Arbitration Provision," the agreement stated that "[u]nless carved out below, claims involving the following disputes shall be subject to arbitration under this Arbitration Provision regardless of whether brought by Contractor, Dynamex or any agent acting on behalf of either . . . ." Id. at 35. The arbitration provision expressly extended to “disputes regarding any city, county, state or federal wage-hour law." The issue was whether Ouadani, a non-signatory to the agreement, was bound by the arbitration agreement that it contained.

The court discussed agency, equitable estoppel, and third-party beneficiary theories and concluded that none of them applied. As a result, it held that Ouadani was not bound to the arbitration agreement.

Agency. The court ruled that Ouadani was not an "agent" of SBS. Ouadani brought his claims against Dynamex on his own behalf and on behalf of other similarly situated drivers, not on behalf of SBS.

Equitable estoppel. The court stated that equitable estoppel is limited to cases that involve non-signatories who have embraced the contract despite their non-signatory status but then, during litigation, attempt to repudiate the arbitration clause in the contract. Id. at 38. Ouadani did not fall into this category because he had never embraced the agreement between Dynamex and SBS. In fact, he was not even aware of it.

Third-party beneficiary law. The court stated that the "critical fact" that determines whether a non-signatory is a third-party beneficiary is whether the underlying agreement "manifest[s] an intent to confer specific legal rights upon the non-signatory. Id. at 39. Here, the court found that the agreement did not manifest any such intent.

As a result of the foregoing, the First Circuit affirmed the district court’s denial of the motion to compel arbitration, reasoning that Ouadani had never signed the agreement containing the arbitration clause and was not bound to it by any principle of common law.

 

Julia Karaulna is a 2018 J.D. candidate at DePaul University College of Law in Chicago, Illinois.


Copyright © 2018, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).