Wednesday, June 21, 2017

Stretching to Compel Third Party Arb

Garcia v. Pexco, LLC, No. G052872 (D4d3 May 16, 2017)

Temp works for Temp Service. He brings a wage-and-hour class action against Temp Service and a Company where he was assigned to work. The employment contract between Temp and Temp Service has an arbitration clause with a class action waiver. Company isn’t a party, but joins Temp Service’s motion to compel, which the trial court grants. 

In an appeal under the death knell doctrine, Temp says Company can’t compel arbitration because it’s not a party to the arb agreement. But the court says Temp is equitably estopped from claiming Company can’t compel arbitration.

Generally, equitable estoppel can permit a non-party to compel arbitration against a plaintiff whose claims are “intimately founded in and intertwined with the underlying contract obligations.” Plaintiffs’ claims here are all statutory claims under the Labor Code. But the court nonetheless finds equitable estoppel applies because the claims presume an employment relationship between Company and Temp.

That, to me, doesn’t seem like enough. Generally for equitable estoppel to apply you need to actually attempt to enforce the terms of the contract. And indeed, those were the facts of Boucher v. Alliance Title Co., 127 Cal. App. 4th 262 (2005), the key case the court relies on here. It is true, that, like this case Boucher involved claims brought under the Labor Code. But the claims in Boucher entailed nonpayment of wages due under the terms of an employment contract, as well as claims for breach of contract and breach of the covenant of fair dealing—all claims that specifically sought the enforce the terms of an agreement between Boucher and his employer. There’s no sense that this case involves those kinds of claims. (Although the description of Plaintiff’s claims is pretty sparse, so maybe the opinion is just unclear.)

As a fallback, the Court also finds that arbitration could have been compelled on basis of agency. Agency is indeed a legit basis for a non-signatory to compel. Generally the non-signatory seeking to compel must act as the agent of the party that signed the arb agreement. It seems a little weird here that Company would be Temp Service’s agent and not the other way around. Plaintiff, however, alleged that Temp Service and Company were each agents of each other and alleged each count generally against “Defendants” as joint employers. Although there are cases that say boilerplate agency allegations aren’t enough to let a non-party compel, the court finds them distinguishable due to the alleged joint employer relationship. Without citation, court says that makes Temp Service and Company “agents of each other in their dealings with” Plaintiffs. Again, I’m not sure that really makes any sense.

Affirmed.


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