The Seventh Circuit recently held in Warciak v. Subway Restaurants, Inc. 880 F.3d 870 (7th Cir., 2018) that Subway Restaurants, Inc. could not use the doctrine of equitable estoppel to require a cell phone user to arbitrate his spam text message claims based on the arbitration agreement in his mother’s cell phone contract with T-Mobile.
In Warciak, the plaintiff’s mother entered into an agreement with T-Mobile for a cell phone plan in 2006, and again in 2012, when she purchased a new phone. Both agreements contained an arbitration clause. Warciak was an authorized user under his mother’s cell phone plan, but he never signed or otherwise became a party to either agreement.
In 2016, Warciak received a spam text message promoting Subway sandwiches. He sued Subway, and Subway moved to compel arbitration arguing that federal estoppel law required Warciak to arbitrate under the arbitration clauses contained in his mother's contracts with T-Mobile. Warciak argued that under Illinois law, he is not bound by his mother’s contracts. The district court granted Subway’s motion to compel arbitration, and Warciak appealed.
The Seventh Circuit recently held that the court must apply traditional state promissory estoppel principles to decide whether a non-party should be bound by the terms of another person’s contract. Scheurer v. Fromm Family Foods, LLC, 863 F.3d 748, 752 (7th Cir. 2017). Accordingly, it applied Illinois law here and held that “Subway cannot rely on estoppel to enforce T-Mobile's arbitration agreement against Warciak.” The court reiterated a 2004 case holding that “[a] claim of equitable estoppel exists where a person, by his or her statements or conduct, induces a second person to rely, to his or her detriment, on the statements or conduct of the first person.” Ervin v. Nokia, Inc., 812 N.E.2d 534, 541 (Ill. App. Ct. 2004). The Seventh Circuit stated that Subway could not show detrimental reliance, and in fact expressly disclaimed detrimental reliance, in its reply brief in support of its motion to compel arbitration. Therefore, the district court was incorrect when it relied on estoppel to enforce the arbitration agreements against Warciak.
The court concluded that Warciak is not bound to the arbitration agreements between T-Mobile and his mother. Thus, it reversed the district court’s order. The court compelled arbitration and remanded for further proceedings.