967 F.3d 1110
11th Cir.2020Background
- Plaintiffs are a group of Herbalife distributors who attended recurring "Circle of Success" events and alleged they were misled into spending substantial sums on tickets and product purchases to qualify for VIP treatment and success.
- Plaintiffs filed a putative class action (including federal RICO claims) against Herbalife and 44 individual top-earning distributors (the "top distributors").
- Six distributors signed Herbalife distributor agreements; three of those agreements contained arbitration clauses; the others contained forum-selection clauses. The agreements incorporate Herbalife’s Rules of Conduct, which Herbalife amended in 2013, 2014, and 2016 to add/retain an arbitration clause.
- Herbalife and the top distributors moved to compel arbitration (and alternatively to transfer venue to the Central District of California), arguing that the arbitration clauses (in agreements or in the Rules) covered the disputes, and that arbitration-delegation rules required sending arbitrability questions to an arbitrator.
- The district court compelled arbitration as to some plaintiffs’ claims against Herbalife but denied the motion to compel arbitration as to the claims against the top distributors and denied transfer of those claims; the top distributors appealed the denial to compel arbitration and sought pendent appellate review of the transfer ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether non‑signatory top distributors can invoke arbitration clauses in plaintiffs' distributor agreements | Plaintiffs: top distributors are not parties to the agreements and therefore cannot invoke arbitration | Top distributors: arbitration clauses (and incorporated Rules) cover disputes with other members or otherwise bind members to arbitrate | Held: No. Under California law one must be party to an arbitration agreement to invoke it; top distributors are not parties and cannot compel arbitration |
| Whether arbitrability was delegated to an arbitrator | Plaintiffs: no contract exists between plaintiffs and top distributors, so no delegation to an arbitrator | Top distributors: AAA rules (and arbitration provisions) delegate threshold arbitrability questions to an arbitrator | Held: Delegation applies only where the parties agreed; absent any contract between plaintiffs and top distributors, the court properly decided arbitrability |
| Whether equitable estoppel allows nonsignatory top distributors to compel arbitration | Plaintiffs: their RICO claims do not rely on the specific terms of the distributor agreements and do not seek to enforce duties created by those agreements | Top distributors: plaintiffs rely on the agreements/compensation structure and alleged concerted misconduct intertwined with distributor obligations, so estoppel applies | Held: Equitable estoppel does not apply—plaintiffs did not rely on contract terms nor assert liability founded in contractual obligations |
| Whether the panel has pendent appellate jurisdiction to review the district court's denial of transfer under §1404(a) | Top distributors: denial of transfer is "inextricably intertwined" with arbitration ruling, so pendent jurisdiction should apply | Plaintiffs: transfer denial is non‑appealable and not necessary to resolve the arbitration question | Held: No pendent jurisdiction; the court lacks jurisdiction to review the transfer denial and dismissed that part of the appeal |
Key Cases Cited
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995) (delegation of arbitrability to arbitrator requires parties' agreement)
- Westra v. Marcus & Millichap Real Estate Inv. Brokerage Co., 28 Cal. Rptr. 3d 752 (Ct. App. 2005) (a party must be signatory to an arbitration agreement to be bound by it)
- MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942 (11th Cir. 1999) (tests for relying on contract terms to compel arbitration via estoppel)
- Goldman v. KPMG, LLP, 92 Cal. Rptr. 3d 534 (Ct. App. 2009) (equitable estoppel standards for nonsignatories seeking to compel arbitration)
- King v. Cessna Aircraft Co., 562 F.3d 1374 (11th Cir. 2009) (standards for pendent appellate jurisdiction review)
- Swint v. Chambers Cty. Comm'n, 514 U.S. 35 (1995) (framework for pendent appellate jurisdiction)