998 F.3d 867
9th Cir.2021Background
- Isabelle Franklin was a travel nurse employed by staffing agency United Staffing Solutions, Inc. (USSI) and signed an Arbitration Agreement and an Assignment Contract with USSI that included broad arbitration clauses covering statutory claims.
- USSI assigned Franklin to Community Regional Medical Center (the Hospital) via a managed-service vendor (RightSourcing); the Hospital was not a signatory to USSI’s contracts and did not directly employ Franklin.
- Franklin sued the Hospital (not USSI) in a class/collective action alleging FLSA and California Labor Code wage-and-hour violations (missed meal/rest breaks, off-the-clock work, inaccurate wage statements, unpaid travel reimbursement) and unfair business practices.
- The district court granted the Hospital’s motion to compel arbitration and dismissed the claims without prejudice, reasoning the Hospital could compel arbitration as a nonsignatory under equitable estoppel because Franklin’s statutory claims were “intimately founded in and intertwined with” her USSI contracts.
- The Ninth Circuit affirmed, applying California equitable-estoppel doctrine (following Garcia v. Pexco) and emphasizing the broad language of the arbitration agreements and USSI’s role in setting wages, timekeeping, meal-waiver procedures, and payroll.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nonsignatory hospital can compel arbitration of an employee’s statutory claims | Franklin: statutory wage/hour claims arise independently of employment contracts, so Hospital (a nonsignatory) cannot force arbitration | Hospital: equitable estoppel permits a nonsignatory to invoke arbitration when claims are intertwined with a signatory contract | Held: Yes—Hospital may compel arbitration under California equitable estoppel (claims intertwined with USSI contracts) |
| Whether Franklin’s statutory claims are "intimately founded in and intertwined with" her USSI employment contracts | Franklin: she sued only the Hospital and statutory claims do not depend on the employment contract | Hospital: USSI controlled wages, timekeeping, meal waivers, and payroll—claims depend on contract terms | Held: Claims are intertwined with the Assignment Contract and Arbitration Agreement; arbitration required |
| Whether the Ninth Circuit should reject Garcia v. Pexco as an outlier | Franklin: Garcia was wrongly decided and shouldn’t bind this court | Hospital: Garcia aligns with California appellate precedent and the CA Supreme Court denied review, so it governs | Held: Court follows Garcia; no convincing evidence CA Supreme Court would decide differently; federalism/comity support following state precedent |
| Whether prior Ninth Circuit cases (e.g., Narayan, Elijahjuan) preclude arbitration of statutory wage claims | Franklin: Narayan/Elijahjuan show statutory claims don’t automatically fall within arbitration | Hospital: those cases are distinguishable (different issues and narrower arbitration clauses); here arbitration clauses are broad | Held: Distinguishing facts and broad arbitration language mean those cases do not bar arbitration here |
Key Cases Cited
- Garcia v. Pexco, LLC, 217 Cal. Rptr. 3d 793 (Ct. App. 2017) (staffing-client statutory claims can be subject to arbitration under equitable estoppel when intertwined with staffing agreement)
- Metalclad Corp. v. Ventana Env’t Organizational P’ship, 1 Cal. Rptr. 3d 328 (Ct. App. 2003) (equitable estoppel prevents a party from using a related nonsignatory to evade arbitration)
- Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) (equitable-estoppel framework for nonsignatory invoking arbitration under state law)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (FAA incorporates state contract law principles on who may enforce arbitration agreements)
- Boucher v. All. Title Co., 25 Cal. Rptr. 3d 440 (Ct. App. 2005) (party may not use a contract and then avoid its arbitration clause)
- Goldman v. KPMG, LLP, 92 Cal. Rptr. 3d 534 (Ct. App. 2009) (analysis of when statutory claims are intertwined with contractual obligations for estoppel)
- Narayan v. EGL, Inc., 616 F.3d 895 (9th Cir. 2010) (scope-of-contract analysis distinguishing when claims arise out of contract)
- Elijahjuan v. Superior Court, 147 Cal. Rptr. 3d 857 (Ct. App. 2012) (scope-of-arbitration analysis emphasizing clause language)