Soltero v. Precise DistributionSoltero v. Precise Distribution
OZ Law Group, Greg Ozhekim, and Susan K. Laffer for Defendant and Appellant.
Gonzalez Weerasuriya and Suren N. Weerasuriya for Plaintiff and Respondent.
Precise Distribution, Inc. (Precise) appeals from an order denying its motion to compel arbitration of an employment action brought against it by Nelida Soltero, who previously worked in a Precise distribution warehouse. Precise argues the trial court should have compelled arbitration under the terms of an arbitration agreement between Soltero and Real Time Staffing Services, LLC (Real Time), a temporary staffing agency that placed Soltero with Precise as a temporary worker. Real Time itself is not a party to the lawsuit. We conclude that the trial court correctly denied Precise‘s motion because it was not a party to the arbitration agreement between Soltero and Real Time, and it cannot compel arbitration based on theories of equitable estoppel, third-party beneficiary, or agency. We therefore affirm the order.
Real Time is a temporary staffing agency that hires and places temporary workers at businesses in California, including Precise. Real Time is a subsidiary of EmployBridge, LLC (EmployBridge).1
Soltero applied for employment with Real Time in December 2016. As part of the onboarding process, she electronically signed the Spanish language version of a Mutual Agreement Regarding Arbitration and Class Claims (Agreement). The appellate record includes a purported translation of the document into English.
The Agreement defined “the [C]ompany” to include EmployBridge, multiple other named companies, “and all related entities,” but not their clients.2 The Agreement stated that in the event of “any dispute between [Soltero] and the [C]ompany relating to or arising out of the employment or the termination of” her employment, “[Soltero] and the Company agree to submit all such claims or disputes to be resolved by final and binding arbitration, in accordance with the procedural rules of the Federal Arbitration Act.” The Agreement stated that such disputes included, but were not limited to, grievances for breach of contract, wages, compensation, reimbursement, the Federal Labor Standards Act “and status of comparable or local the laws [sic].”
Real Time placed Soltero on a temporary work assignment with Precise from October 2017 through January 2021. A Real Time manager worked onsite at Precise, serving as the main point of contact for Real Time employees assigned to work there.
In February 2022, Soltero filed a class action complaint against Precise for its alleged failure to provide required meal periods and rest breaks to employees, failure to pay premiums for meal and rest break violations, and related claims for inaccurate wage statements and failure to immediately pay all wages due upon separation of employment, including meal and rest break premiums. Soltero asserted these claims under identified provisions of the
Precise filed a motion to compel arbitration under the Agreement between Soltero and Real Time. Precise argued that even as a nonsignatory to the Agreement, it was entitled to compel arbitration based on theories of equitable estoppel, third-party beneficiary, and agency. Soltero opposed the motion. After a hearing, the trial court denied Precise‘s motion to compel arbitration.
DISCUSSION
By its terms, the Agreement only requires arbitration of employment disputes “between [Soltero] and the [C]ompany.” Although Precise is not a party to the Agreement and does not claim that it falls within its definition of “the Company,” Precise argues that it is nevertheless entitled to compel arbitration under the Agreement based on theories of equitable estoppel, third-party beneficiary, and agency. We address each theory in turn.
I
Standard of Review
Because the material facts are undisputed, we review de novo whether the trial court correctly denied Precise‘s motion to compel arbitration. (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 547 (Fuentes); Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 226, fn. 9 (Goldman).)
II
Equitable Estoppel
Although there is a strong public policy in favor of contractual arbitration, there is no policy compelling anyone to accept arbitration of controversies which they have not agreed to arbitrate. (Victoria v. Superior Court (1985) 40 Cal.3d 734, 744.) Because arbitration is a matter of contract, the basic rule is that one must be a party to an arbitration agreement to be bound by it or invoke it—with limited
One such exception is the doctrine of equitable estoppel. Equitable estoppel precludes a party from asserting rights they otherwise would have had against another when their own conduct renders assertion of those rights inequitable. (Goldman, supra, 173 Cal.App.4th at p. 220.) As applied in the arbitration context, “if a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that very agreement. In other words, a signatory to an agreement with an arbitration clause cannot ‘have it both ways‘; the signatory ‘cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration‘s applicability because the defendant is a non-signatory.‘” (Ibid., internal quotation marks omitted.)
“[T]he sine qua non for application of equitable estoppel as the basis for allowing a nonsignatory to enforce an arbitration clause is that the claims [the] plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.” (Goldman, supra, 173 Cal.App.4th at pp. 217–218.) “‘The plaintiff‘s actual dependence on the underlying contract in making out the claim against the nonsignatory . . . is . . . always the sine qua non of an appropriate situation for applying equitable estoppel.‘” (Fuentes, supra, 26 Cal.App.5th at p. 552, internal quotation marks omitted.) “This requirement comports with, and indeed derives from, the very purposes of the doctrine: to prevent a party from using the terms or obligations of an agreement as the basis for his claims against a nonsignatory, while at the same time refusing to arbitrate with the nonsignatory under another clause of that same agreement.” (Goldman, at p. 221.)
Applying these principles, we conclude that the trial court correctly declined to compel arbitration based on the doctrine of equitable estoppel. Soltero is suing Precise for its alleged violations of
Precise relies on the holding of Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782 (Garcia), which also involved the Real Time staffing agency. In that case, the plaintiff Garcia signed an arbitration agreement with Real Time as part of its hiring process. Real Time assigned him to work as a temporary employee for Pexco, which was not a party to the arbitration agreement. After Garcia was terminated, he filed a class action suit against both Real Time and Pexco for violations of the
In affirming the trial court‘s equitable estoppel ruling as to Pexco, the Court of Appeal first noted that “[e]ven though Garcia‘s claims are styled as Labor Code violations, the arbitration agreement applies” because “Labor Code violations are clearly, and indeed expressly, included as one of the types of disputes covered by the arbitration agreement.” (Garcia, supra, 11 Cal.App.5th at p. 786.) The court noted that even Garcia had conceded that the signatory “Real Time may compel arbitration of his statutory claims under the agreement.” (Ibid.)
The court went on to reject Garcia‘s argument that the nonsignatory Pexco could not compel arbitration because he was only asserting statutory claims under the
The court also found it significant that Garcia was suing both Real Time and Pexco for the same
Since the Garcia decision, several federal district courts have questioned whether it correctly applied California‘s equitable estoppel doctrine. (See,
For several reasons, we agree that Garcia misapplied California law on this issue. First, the court relied heavily on the fact that the arbitration clause applied to claims of
Second, Garcia erred by relying on the fact that the
Finally, the Garcia court did not explain how Garcia‘s
For all these reasons, we decline to follow Garcia‘s equitable estoppel holding. We further note that this portion of the Garcia decision was not
Finally, even assuming that Garcia correctly applied the equitable estoppel doctrine, it is distinguishable because Soltero is not suing both Precise and Real Time on a joint employer theory. Instead, she is only suing the nonsignatory Precise. In Hernandez v. Meridian Management Services, LLC (2023) 87 Cal.App.5th 1214 (Hernandez), the court declined to apply equitable estoppel to compel arbitration in analogous circumstances. There, the plaintiff Hernandez signed an arbitration contract with an employer called Intelex, but she also worked for a variety of other related and jointly owned and operated companies referred to in the court‘s opinion as “Other Firms.” The Other Firms did not contract for arbitration with Hernandez. After Hernandez was terminated, she brought employment claims against the Other Firms, but not Intelex. The Other Firms moved to compel arbitration under the arbitration agreement with Intelex based on theories of equitable estoppel, third-party beneficiary, and agency. The trial court denied the motion. (Id. at pp. 1217–1218.)
In affirming, the Court of Appeal quoted and approved the trial court‘s discussion of equitable estoppel as follows: ” ‘[T]ypically the doctrine of equitable estoppel is applied where a signatory has sued both another signatory and certain non-signatories on identical claims.‘” (Hernandez, supra, 87 Cal.App.5th at p. 1219.) ” ‘[The Other Firms] complain[] that it is unfair for [Hernandez] to tailor her complaint in such a way as to avoid arbitration. But it isn‘t, really. There is nothing wrong with either party wanting to appear in court, or in arbitration. And it isn‘t as though [Hernandez] is trying to have it both ways-to appear in court, she has completely given up her claims against Intelex. Parties make tactical “bargains” like this all the time.‘” (Ibid.)
Likewise, Soltero is not trying to have it both ways because she has foregone any claims against Real Time and opted to litigate her claims in court only against Precise, which is not a party to the arbitration agreement. She is entitled to make this choice. In these circumstances, there is nothing unfair about applying to Precise “the usual requirement that you must be a party to a
III
Third-Party Beneficiary
Third-party beneficiary theory is another exception to the usual rule that only a party to an arbitration agreement may enforce it. (Fuentes, supra, 26 Cal.App.5th at p. 551.) Precise argues that it is a third-party beneficiary of the employment agreement between Soltero and Real Time because the essential purpose of the employment agreement was to provide labor to Real Time‘s clients, such as Precise. As a third-party beneficiary of the employment agreement, Precise contends that it has standing to enforce the arbitration agreement between Soltero and Real Time that is part of their employment agreement.
In this context, however, the question is not whether the party seeking to compel arbitration is a third-party beneficiary of the contract containing the arbitration clause, but whether it is a third-party beneficiary of the arbitration clause itself. (Fuentes, supra, 26 Cal.App.5th at pp. 551–552.) To invoke the third-party beneficiary exception, the nonsignatory ” ‘ha[s] to show that the arbitration clause . . . was made expressly for [its] benefit.‘” (Ibid., quoting Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 838.)
In Fuentes, for example, the seller of a motorcycle (Riverside) sought to compel arbitration under the arbitration clause of a finance agreement between the buyer and another party (Eaglemark). (Fuentes, supra, 26 Cal.App.5th at pp. 545–546.) The Court of Appeal assumed that Riverside was a third-party beneficiary of the finance agreement because it required that Eaglemark pay the loan proceeds to Riverside. (Id. at p. 552 [“We accept, for the sake of argument, that Riverside was the third party beneficiary of Eaglemark‘s promise to pay the loan proceeds to it.“].) Yet the court concluded that Riverside was not a third-party beneficiary of the arbitration clause in the finance agreement. The court explained: “The arbitration clause . . . had its own list of intended third party beneficiaries; as we have already discussed, Riverside was not among them. Thus, the contract affirmatively disproves any intent that the arbitration clause should benefit Riverside.” (Ibid.)
The same is true here. The arbitration agreement had its own list of intended third-party beneficiaries. Although the English language translation leaves much to be desired, it required arbitration of any employment disputes
IV
Agency
“The agency exception is another exception to the general rule that only a party to an arbitration agreement may enforce it.” (Garcia, supra, 11 Cal.App.5th at p. 788.) “The exception applies, and a defendant may enforce the arbitration agreement, ‘when a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement. . . .‘” (Ibid., quoting Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614.)
Soltero‘s complaint does not allege that Precise acted as an agent of Real Time or vice versa. Nor did Precise submit any evidence of such an agency relationship. The record includes no allegation or evidence that either entity had control over or a right to control the other or authority to act on the other‘s behalf. Absent any such allegation or evidence of an agency relationship, there is no basis to apply the agency exception. (Hernandez, supra, 87 Cal.App.5th at pp. 1220–1221 [refusing to apply agency exception to compel arbitration in absence of any allegation or evidence that plaintiff‘s employers had authority to act on behalf of each other].)
Precise contends that Soltero “effectively” alleged that Precise and Real Time were her joint employers (and therefore agents of one another) by alleging in the venue paragraph of her complaint that she “was staffed by [Real Time], located in San Bernardino, to work at Precise‘s distribution warehouse.” But Precise cites no authority holding that a principal-agent relationship arises as a matter of law whenever a staffing agency provides a client with a temporary worker.6 The law is to the contrary. (Grande v. Eisenhower Medical Center (2020) 44 Cal.App.5th 1147, 1166–1167
DISPOSITION
The order denying Precise‘s motion to compel arbitration is affirmed. Respondent is entitled to recover her costs on appeal.
I CONCUR:
DO, J.
I CONCUR IN THE RESULT:
IRION, Acting P. J.
BUCHANAN, J.