Grand Wireless, Inc. v. Verizon Wireless, Inc.

            United States Court of Appeals
                        For the First Circuit

No.   13-1149

                        GRAND WIRELESS, INC.,

                         Plaintiff, Appellee,

                                  v.

                VERIZON WIRELESS, INC.; ERIN McCAHILL,

                       Defendants, Appellants.


            APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Edward F. Harrington, U.S. District Judge]


                                Before

                   Torruella, Ripple* and Thompson,
                           Circuit Judges.




     Philip R. Sellinger, with whom David G. Thomas, Zachary C.
Kleinsasser, Todd L. Schleifstein and Greenberg Traurig, LLP were
on brief, for appellants.
     Samuel Perkins, with whom Brody, Hardoon, Perkins & Kesten,
LLP was on brief, for appellee.



                            March 19, 2014




      *
          Of the Seventh Circuit, sitting by designation.
             RIPPLE, Circuit Judge.        Grand Wireless, Inc. (“Grand”)

brought this action in Massachusetts state court against Verizon

Wireless, Inc. (“Verizon”) and Verizon employee Erin McCahill.             It

alleged a violation of the federal Racketeer Influenced and Corrupt

Organizations Act (“RICO”) against Ms. McCahill, as well as several

state law claims against both Ms. McCahill and Verizon.                    The

defendants removed the case to the United States District Court for

the District of Massachusetts and moved for an order compelling

arbitration of Grand’s claims.            Grand opposed the motion.        It

contended    that    the   arbitration     clause   should   be   interpreted

narrowly and that, because Ms. McCahill was not a signatory to the

contract containing the arbitration clause, the claim against her

could not be arbitrated in this case.          Adopting Grand’s memorandum

in   opposition     to   the   motion,   the   district   court   denied   the

defendants’ motion to compel and also denied their subsequent

request for reconsideration.

             The defendants timely appealed. They submit that Grand’s

claims were within the scope of the parties’ arbitration agreement

and that arbitration of the claims against Ms. McCahill is not

barred despite her status as a non-signatory of the arbitration

agreement.     We agree and therefore reverse the judgment of the

district court and remand the case for further proceedings.




                                     -2-
                                        I

                                BACKGROUND

A.   Facts

             In September 2002, Grand and Verizon entered into an

Exclusive Authorized Agency Agreement for Commercial Mobile Radio

Service (“Agreement”).      The Agreement authorized Grand to act as a

Verizon    sales   agent   within   a   defined   geographic   area.   The

Agreement governed the business relationship between Grand and

Verizon.     It required Grand to provide services exclusively for

Verizon by offering customers Verizon services, such as sales,

installation, warranty service and equipment maintenance.              The

Agreement also addressed the relationship between Grand, Verizon

and subscribers who purchased products and services through Grand.

On this point, the Agreement provided that subscriber lists were

“the exclusive confidential property of Verizon Wireless.”1            The

Agreement provided for an initial term of five years; at that

point, the Agreement would continue on a month-to-month basis,

terminable by either party on thirty days’ written notice to the

other.

             The Agreement contained a provision entitled, “DISPUTE

RESOLUTION AND ARBITRATION.”        It stated, in pertinent part:

             Except to the extent explicitly provided
             below, ANY CONTROVERSY OR CLAIM ARISING OUT OF
             OR RELATING TO THIS AGREEMENT, OR ANY PRIOR OR

      1
          R.20-1 ¶ 3.3.

                                     -3-
              FUTURE AGREEMENT BETWEEN THE PARTIES, SHALL BE
              SETTLED BY ARBITRATION ADMINISTERED BY THE
              AMERICAN ARBITRATION ASSOCIATION (“AAA”) IN
              ACCORDANCE   WITH   THE    WIRELESS   INDUSTRY
              ASSOCIATION (“WIA”) RULES OF THE AAA, AS
              MODIFIED BELOW, AND JUDGMENT ON THE AWARD
              RENDERED BY THE ARBITRATORS MAY BE ENTERED IN
              ANY COURT HAVING JURISDICTION.[2]

The subsequent paragraphs explicitly stated that the disputes not

covered included several intellectual property issues, as well as

“[s]eeking      to   compel    arbitration”;3      “[s]eeking        to   confirm    or

challenge      any    arbitral    award”;4      seeking    judicial       relief    for

breaches of sections 3.3 and 7 of the Agreement; and seeking

emergency injunctive relief pending the appointment of arbitrators.

Provisions followed addressing the procedural aspects of commencing

and conducting arbitration.

              There is no dispute that, under the Agreement, Grand

operated      retail    locations       for   Verizon     products    and   services

beginning in 2002 until the five-year term expired in September

2007.        The     parties     then    continued      their   relationship        on

a month-to-month basis until July 19, 2011, when Verizon notified

Grand of its intent to terminate the relationship. Verizon submits

that at Grand’s request, Verizon extended the termination date to

October 31, 2011, in order to “g[i]ve Grand additional time to



        2
            Id. ¶ 15.
        3
            Id. ¶ 15.2.1.
        4
            Id. ¶ 15.2.2.

                                          -4-
attempt to sell certain of its stores to another Verizon Wireless

agent.”5

                 In October 2011, according to Grand’s complaint:

                 [Verizon] mailed an oversized (6” by 11”)
                 color postcard, featuring the picture of an
                 attractive young woman, to the customers of
                 eight   remaining   Grand  Wireless  stores,
                 proclaiming that these Grand Wireless stores
                 had “CLOSED.”     The mailing provided the
                 customers with the address of the nearest
                 competing Verizon Wireless store.[6]

Grand further alleged that Ms. McCahill had “authorized the mailing

and knew when the mailing went out that it was false.”7                    Grand

stated that it was, at the time of the mailing, in negotiations

with another wireless provider, T-Mobile, to become an authorized

T-Mobile agent. Further, Grand alleged that Ms. McCahill knew that

the mailing “would deal a body blow to Grand Wireless’ ability [to]

continue in business as a T[-]Mobile outlet” and that the mailing

“was       a   deliberate   attempt   to   eliminate   Grand    Wireless   as   a

competitor to nearby Verizon stores.”8             Grand alleged that its

T-Mobile venture failed and that it has since ceased operations.




       5
          Appellants’ Br. 7.     Grand            does    not    dispute   this
representation. See Appellee’s Br. 2.
       6
               R.15 at 17, ¶ 11.
       7
               Id. at 17, ¶ 12.
       8
               Id. at 17, ¶ 13.

                                       -5-
B.    Procedural History

             Grand initially filed the present action in Massachusetts

state court.      Its complaint alleged that Ms. McCahill had violated

RICO, 18 U.S.C. §§ 1961 et seq., by “engag[ing] in a fraudulent

scheme     that   used    the     United    States     mails       to       transmit   false

representations      that       ‘GRAND     WIRELESS     .    .   .      HAS    CLOSED,’   in

violation of the federal mail fraud statute, 18 U.S.C. § 1341.”9

It further alleged that both Ms. McCahill and Verizon had violated

a Massachusetts statute prohibiting unfair and deceptive trade

practices.        Finally, Grand alleged that both Ms. McCahill and

Verizon     had   committed       the    torts    of   injurious            falsehoods    and

intentional interference with an advantageous relationship.

             The defendants removed the case to the district court,

where Verizon and Ms. McCahill moved to compel Grand to arbitrate

its   claims.       Grand    opposed       the    motion     for     arbitration.          It

submitted that the motion to compel arbitration should be denied

for two reasons: (1) that its claims fell outside of the scope of

the arbitration clause; and (2) that Ms. McCahill could not enforce

the   arbitration        clause    because       she   was   not        a    party   to   the

Agreement.

             Before the deadline had passed for the defendants to file

their reply brief, the district court denied the motion to compel.

In ruling, the district court did not issue a written opinion;


       9
           Id. at 18, ¶¶ 16-17 (Count I).

                                           -6-
instead, it simply issued an order stating, “Motion is denied. The

court adopts Plaintiff’s Memorandum. So ordered.”10 The defendants

moved for reconsideration.   The district court denied their motion

in another order, stating, “Court has reconsidered Defendants’

Motion to Compel Arbitration and to Dismiss Complaint or stay

action pending arbitration and again denies same.    So Ordered.”11

The defendants then brought this timely appeal.12

                                 II

                             DISCUSSION

           We have jurisdiction to review an order denying a motion

under the Federal Arbitration Act to compel arbitration.       See 9

U.S.C. § 16(a)(1)(C).    Our review of such a denial is de novo

because whether a matter is arbitrable is a matter of contract

interpretation, and contract interpretation is a matter of law.

Combined Energies v. CCI, Inc., 514 F.3d 168, 171 (1st Cir. 2008).

To compel arbitration, the defendants “must demonstrate that a

valid agreement to arbitrate exists, that the[y are] entitled to

invoke the arbitration clause, that the other party is bound by

that clause, and that the claim asserted comes within the clause’s

scope.”    Soto-Fonalledas v. Ritz-Carlton San Juan Hotel Spa &



     10
          R.26.
     11
          R.29.
     12
          The district court     stayed   the   proceedings   pending
resolution of this appeal.

                                -7-
Casino, 640 F.3d 471, 474 (1st Cir. 2011) (internal quotation marks

omitted).    Furthermore, as we also noted in Soto-Fonalledas:

                 Under Section 2 of the FAA, a written
            provision in a contract “to settle by
            arbitration a controversy thereafter arising
            out of such contract . . . shall be valid,
            irrevocable, and enforceable, save upon such
            grounds as exist at law or in equity for the
            revocation of any contract.” 9 U.S.C. § 2.
            The Supreme Court has stated that “the FAA was
            designed to promote arbitration,” and that
            “Section 2 embodies the national policy
            favoring arbitration and places arbitration
            agreements on equal footing with all other
            contracts.”

Id. (quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1749

(2011); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443

(2006)).

            Here, the parties do not dispute the validity of the

Agreement’s arbitration clause. Instead, they dispute: (1) whether

Grand’s claims are within the scope of the arbitration clause; and

(2) whether Ms. McCahill is entitled to invoke the arbitration

clause.    We address each contention in turn.

A.   Scope of the Arbitration Clause

            We first address whether Grand’s claims are within the

scope of the arbitration clause.       Grand and Verizon agreed to

arbitrate “any controversy or claim arising out of or relating to”

their Agreement.13


      13
        R.20-1 ¶ 15. (These words appear in capital letters in the
Agreement. We have employed regular typeface here and in later
                                                    (continued...)

                                 -8-
           As we have noted earlier, the district court simply

adopted    Grand’s   memorandum.   Therefore,    the   district    court

necessarily   took   that   document’s   view   that   the   Agreement’s

arbitration clause was narrow.     Such a construction, according to

that memorandum, would limit application of the arbitration clause

to “battles over the Agency Agreement,” i.e., to claims that

require interpretation of the Agreement’s terms.14       The memorandum

also asserted that narrow arbitration clauses are not entitled to

a presumption of arbitrability.

           In this appeal, Grand takes the same position that it did

in the district court. The defendants contend, however, that

Grand’s claims “relate to” the Agreement because they involve

matters that occurred during the course of the agency relationship.

Specifically, Grand’s claims concern Verizon’s right to contact

freely its customers and Verizon’s termination of its relationship

with Grand.    The defendants also submit that the language of the

arbitration clause is broad, and therefore the dispute is entitled

to a presumption of arbitrability.

           “Unless the parties clearly and unmistakably provide

otherwise,” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S.

643, 649 (1986), the court must resolve a disagreement among the



     13
      (...continued)
uses of this quotation for readability.)
     14
          R.23 at 5-6.

                                   -9-
parties as to whether an arbitration clause applies to a particular

dispute, Granite Rock Co. v. Int’l Bhd. of Teamsters, 130 S. Ct.

2847, 2857-58 (2010).       “[A] court may order arbitration of a

particular dispute only where the court is satisfied that the

parties agreed to arbitrate that dispute.”            Id. at 2856.    “When

deciding whether the parties agreed to arbitrate a certain matter

. . . courts generally . . . should apply ordinary state-law

principles that govern the formation of contracts.”           First Options

of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).           We conduct our

analysis with the federal policy in favor of arbitration in mind,

such that, “as with any other contract, the parties’ intentions

control, but those intentions are generously construed as to issues

of arbitrability.”      Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614, 626 (1985).             “At a minimum, this

policy   requires    that   ‘ambiguities    as   to   the    scope   of   the

arbitration   clause    itself   [must     be]   resolved    in   favor   of

arbitration.’”    PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 15

(1st Cir. 2010) (alteration in original) (quoting Volt Info. Scis.,

Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468,

475-76 (1989)).     This presumption in favor of arbitration applies

unless the party opposing arbitration rebuts it.            Dialysis Access

Ctr., LLC v. RMS Lifeline, Inc., 638 F.3d 367, 379 (1st Cir. 2011);

Paul Revere Variable Annuity Ins. Co. v. Kirschhofer, 226 F.3d 15,

25 (1st Cir. 2000) (“It is true that, generally speaking, the


                                  -10-
presumption in favor of arbitration applies to the resolution of

scope questions.”).

            To determine whether Grand’s claims fall within the scope

of the arbitration clause, “we focus on the factual allegations

underlying [the] claims in the [c]omplaint.” Dialysis Access Ctr.,

LLC, 638 F.3d at 378.         Grand alleged that Verizon’s “false and

deliberate misrepresentation to Grand Wireless customers that Grand

Wireless had ceased to do business” harmed Grand.15            Grand made

factual    allegations   regarding      Verizon’s    termination   of   its

relationship with Grand.        The complaint described the customer

mailing and Grand’s belief that Verizon and Ms. McCahill knew that

the   mailing   contained     false    information   yet   authorized   its

distribution in order to harm Grand in “a deliberate attempt to

eliminate Grand Wireless as a competitor.”16

            Based on the allegations in Grand’s complaint, resolution

of this dispute will entail determining, at least, the status of

Grand and Verizon’s relationship as of October 2011, whether the

customers contacted by Verizon were customers of Grand, the extent

of Verizon’s knowledge regarding Grand’s transition of business to

T-Mobile, and whether Grand’s stores were, in fact, closed at the

time of Verizon’s mailing.        These factual issues relate to the

terms of the Agreement or, at a minimum, to the relationship


      15
           R.15 at 13.
      16
           Id. at 17, ¶ 13.

                                      -11-
established between Grand and Verizon under the Agreement. Grand’s

allegations     about     Verizon’s      termination     of     their     business

relationship may implicate extensive portions of the Agreement

concerning      termination.          Other     allegations         may    require

consideration of the portions of the Agreement regarding Verizon’s

rights with respect to customers obtained by Grand.                 Given that a

number of factual disputes arising from Grand’s claims likely will

have to be resolved by reference to the Agreement, it is clear that

Grand’s claims “arise out of or relate to” the Agreement and

therefore fall within the scope of the arbitration clause.

             Even were we less sure of the arbitration clause’s

applicability to Grand’s claims, we would apply the presumption of

arbitrability here.       See Kirschhofer, 226 F.3d at 25 (holding that

the presumption of arbitrability is applied to scope questions that

arise   “when   the     parties   have    a   contract       that   provides   for

arbitration of some issues and it is unclear whether a specific

dispute falls within that contract” (internal quotation marks

omitted)).    This presumption is particularly appropriate where, as

here, the arbitration clause is broadly worded.                AT&T Techs., 475

U.S.    at   650;   see   also    Granite     Rock,    130    S.    Ct.   at   2858

(characterizing an arbitration clause that covered “[a]ny claim,

dispute, or controversy . . . arising from or relating to . . . the

validity, enforceability, or scope of . . . the entire Agreement”

as broad (emphasis added) (internal quotation marks omitted)). “An


                                      -12-
order to arbitrate the particular grievance should not be denied

unless it may be said with positive assurance that the arbitration

clause is not susceptible of an interpretation that covers the

asserted dispute. Doubts should be resolved in favor of coverage.”

United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363

U.S.    574,    582-83   (1960).     Thus,   where   the   language   of   an

arbitration clause is broad and “‘[i]n the absence of any express

provision excluding a particular grievance from arbitration, we

think only the most forceful evidence of a purpose to exclude the

claim from arbitration can prevail.’” AT&T Techs., 475 U.S. at 650

(quoting Warrior & Gulf, 363 U.S. at 584-85).

               Grand presents us with no such “forceful evidence” to

rebut the presumption of arbitration. Instead, it asks us to apply

“conventional contract interpretation.”17 In its view, the language

“arising out of or relating to this agreement . . . unambiguously

limits the scope of arbitrable claims to those [situations] which

depend for resolution on interpreting or applying some provision of

the Agency Agreement.”18           Because “no provision of the Agency

Agreement controls, is implicated, needs to be read or sheds any

light on the adjudication of Grand’s mail fraud claim,” Grand




       17
            Appellee’s Br. 14.
       18
            Id. at 4 (internal quotation marks omitted).

                                     -13-
submits, its claims are not within the scope of the arbitration

clause.19

              We   cannot    accept      Grand’s   view.         As    we    discussed

previously, resolution of some of the issues raised by Grand’s

claims may well require resort to the Agreement. Moreover, Grand’s

attempt at rebutting the presumption of arbitrability needed to

show that the parties intended to exclude this type of dispute from

the scope of the arbitration clause, see AT&T Techs., 475 U.S. at

650,    not   merely     that     the   arbitration     clause    lacked      explicit

language covering Grand’s claims.             Contrary to Grand’s view, where

arbitration clauses included broad language requiring arbitration

of disputes “arising out of or relating to” parties’ contracts,

courts have found arbitration appropriate on a variety of claims

similar to those presented here.            See, e.g., Shearson/Am. Express,

Inc. v. McMahon, 482 U.S. 220, 223, 241-42 (1987) (holding that

parties could be compelled to arbitrate RICO claims relating to,

inter alia, making false statements and omitting material facts

where brokerage agreement stated, “any controversy arising out of

or relating to my accounts, to transactions with you for me or to

this    agreement      or   the    breach   thereof,     shall        be    settled   by

arbitration”       (internal      quotation     marks   omitted));          cf.,   e.g.,

Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386,

387-88, 391 (1st Cir. 1993) (holding that defendant’s Massachusetts


       19
            Id. at 14.

                                         -14-
unfair and deceptive trade practices counterclaim was subject to

arbitration where clause covered “[a]ll claims, disputes and other

matters in question arising out of, or relating to this Agreement

or the breach thereof”).

             In sum, in adopting Grand’s memorandum in opposition to

the defendants’ motion to compel arbitration, the district court

approved Grand’s statement that “Verizon unambiguously restricted

the arbitration clause to battles over the Agency Agreement,” and,

therefore, the presumption of arbitrability would not enter into

play.20    This conclusion is unsupported by the case law and the

facts of this case.       The broad language of the arbitration clause

presented    here   encompasses   the   dispute   described   in   Grand’s

complaint.

B.   Ms. McCahill’s Ability to Invoke the Arbitration Clause

             The allegations against Ms. McCahill arise out of actions

that she allegedly took as part of her employment by Verizon.         She

therefore wants to avail herself of the arbitration clause in the

Agreement signed by her employer, Verizon.        The district court, by

adopting Grand’s memorandum, must be understood to have ruled that

the claims against Ms. McCahill are not covered by the arbitration

clause because she was not a party to the Agreement and because the

arbitration clause does not call specifically for arbitrating

disputes with individual employees.       Verizon and Ms. McCahill now


      20
           R.23 at 5-6.

                                   -15-
challenge this determination.    They take the view that, because

Ms. McCahill was acting as an agent of Verizon and the claims

against her “relate solely to her performance as an employee,” she

is entitled to invoke the arbitration clause.21

           In order to compel arbitration of the claims against her,

Ms. McCahill must establish that she is “entitled to invoke the

arbitration clause.”    Soto-Fonalledas, 640 F.3d at 474 (internal

quotation marks omitted).   “[T]he FAA does not require parties to

arbitrate when they have not agreed to do so . . . .”    Volt Info.

Scis., 489 U.S. at 478.     “[N]or does it prevent parties who do

agree to arbitrate from excluding certain claims from the scope of

their arbitration agreement.”   Id.    We recognize that, of course,

as a general proposition, a contract cannot bind a non-party.    We

also recognize, however, that “there are exceptions allowing non-

signatories to compel arbitration” and that “[a] non-signatory may

be bound by or acquire rights under an arbitration agreement under

ordinary state-law principles of agency or contract.”   Restoration

Pres. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d 54, 62 n.2 (1st

Cir. 2003).22


     21
          Appellants’ Br. 24.
     22
         Our decision in Restoration Preservation Masonry, Inc.
v. Grove Europe Ltd., 325 F.3d 54, 62 n.2 (1st Cir. 2003), cites
with approval cases from other circuits acknowledging that
non-signatories may have rights under an arbitration contract under
certain circumstances. See id. (citing Grigson v. Creative Artists
Agency, 210 F.3d 524, 527 (5th Cir. 2000); Sunkist Soft Drinks,
Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993),

                                -16-
           Grand’s complaint makes clear that Ms. McCahill’s alleged

actions were taken in her capacity as Verizon’s agent or employee.

She allegedly mailed (or directed to have mailed) postcards to the

company’s customers while she was employed for the company and in

furtherance of company business.          These allegations form the sole

basis of liability against Verizon and against Ms. McCahill.

Grand, in naming Ms. McCahill in its complaint, identified her as

“Director of Indirect Communication, Erin McCahill.”23              It further

suggested that it was suing Ms. McCahill in her capacity as a

Verizon   agent    when    it   stated   that    its   claims     were   against

Ms. McCahill “and all other [Verizon] executives who aided and

abetted her in issuing the mailed announcements.”24

           Grand    puts    forward      but    one    argument    as    to   why

Ms. McCahill cannot invoke the arbitration clause: that the mention

of employees in certain parts of the Agreement, combined with the

lack of mention of employees in the arbitration clause, makes clear

that the parties never agreed that claims against employees--even


abrogated by Lawson v. Life of the S. Ins. Co., 648 F.3d 1166, 1171
(11th Cir. 2011); Hughes Masonry Co. v. Greater Clark Cnty. Sch.
Bldg. Corp., 659 F.2d 836, 841 n.9 (7th Cir. 1981)). Additionally,
in Sourcing Unlimited, Inc. v. Asimco International, Inc., we noted
that “[c]ourts routinely recognize that arbitration agreements may
require arbitration even where all parties to the dispute did not
sign the arbitration agreement.” 526 F.3d 38, 46 n.8 (1st Cir.
2008) (citing Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d
682, 687 (7th Cir. 2005)).
     23
          R.15 at 13.
     24
          Id. at 18, ¶ 16.

                                      -17-
those   sued   for    actions   taken    within   the   scope   of     their

employment--could avail themselves of the arbitration agreement.

Evaluating Grand’s contentions requires us to apply New York State

law, which governs the interpretation of the contract.           New York

State requires that the contract be construed according to its

plain meaning.       MHR Capital Partners LP v. Presstek, Inc., 912

N.E.2d 43, 47 (N.Y. 2009).       It permits the court to regard the

plain wording of the instrument as well as its structure to

ascertain that plain meaning.      Niagara Frontier Transp. Auth. v.

Euro-United Corp., 757 N.Y.S.2d 174, 176 (App. Div. 2003).

          We have examined the Agreement from stem to stern, both

with respect to its wording and with respect to its structure.           We

see no basis for Grand’s assertion.       In the contract, the parties

do refer to employees in other contexts, such as ensuring that

employees of Grand are not considered the employees of Verizon.

Given the nature of the relationship established by the contract

between the two companies, it is not at all surprising that this

consideration would be the focus of special attention in the text

of the agreement.      The remaining references are likewise in areas

where specific reference to employees would be expected.             We fail

to see how such references and the absence of an explicit reference

to employees in the arbitration clause in any way evince an intent

on the part of the parties to bar employees, acting in the scope of




                                  -18-
their employment, from the protection of the arbitration clause

adopted by their employer.

            Verizon and Grand certainly wished to have their disputes

settled by arbitration.     Since Verizon could operate only through

the actions of its employees, it would have made little sense to

have agreed to arbitrate if the employees could be sued separately

without regard to the arbitration clause.         Notably, contrary to

Grand’s assertion, the arbitration clause is written in broad

language to encompass “any controversy or claim arising out of or

relating to” the Agreement.       Moreover, the parties entered into

this agreement knowing that the legal landscape recognized the

right of employees to seek the protection of their employers’

arbitration clauses.

            Indeed, a number of our sister circuits have addressed

this issue, and all have held that an agent is entitled to the

protection of her principal’s arbitration clause when the claims

against her are based on her conduct as an agent.25              When the

non-signatory party is an employee of the signatory corporation and

the underlying action in the dispute was undertaken in the course

of   the   employee’s   employment,   these   circuits   have   fashioned,



      25
         See, e.g., Pritzker v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 7 F.3d 1110, 1121 (3d Cir. 1993); Roby v. Corp. of
Lloyd’s, 996 F.2d 1353, 1360 (2d Cir. 1993); Arnold v. Arnold
Corp.-Printed Commc’ns for Bus., 920 F.2d 1269, 1281-82 (6th Cir.
1990); Letizia v. Prudential Bache Secs., Inc., 802 F.2d 1185,
1187-88 (9th Cir. 1986).

                                  -19-
uniformly, a federal rule designed to protect the federal policy

favoring arbitration.      That rule, founded on general state law

principles of agency, is that when “a principal is bound under the

terms of a valid arbitration clause, its agents, employees, and

representatives     are   also    covered    under   the   terms   of   such

agreements.”     Pritzker v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 7 F.3d 1110, 1121 (3d Cir. 1993).          Such a rule is necessary,

our sister circuits have reasoned, because a corporate entity or

other business can only operate through its employees and an

arbitration agreement would be a meaningless arrangement if its

terms did not extend to them.       See id. at 1122.     Any other rule, in

the view of these courts, would permit the party bringing the

complaint to avoid the practical consequences of having signed an

agreement   to    arbitrate;     naming    the   other   party’s   officers,

directors or employees as defendants along with the corporation

would absolve the party of all obligations to arbitrate.                See,

e.g., Arnold v. Arnold Corp.-Printed Commc’ns for Bus., 920 F.2d

1269, 1281 (6th Cir. 1990). Indeed, long before the signing of the

contract in this case, our circuit, although not elaborating the

rule or the reasons for it, had expressed its approval of the rule.

Hilti, Inc. v. Oldach, 392 F.2d 368, 369 n.2 (1st Cir. 1968) (“If

arbitration defenses could be foreclosed simply by adding as a

defendant a person not a party to an arbitration agreement, the

utility of such agreements would be seriously compromised.”).


                                    -20-
Notably, the highest court of New York State, the state whose law

generally governs this contract in the absence of any federal

preemption, has taken the view that the need to respect the basic

policy of the FAA--the protection of the agreement to arbitrate--

requires the use of the federal rule articulated by these circuits.

See Hirschfeld Prods., Inc. v. Mirvish, 673 N.E.2d 1232, 1233 (N.Y.

1996).

           The Supreme Court’s decision in Arthur Andersen LLP

v. Carlisle, 556 U.S. 624 (2009), calls into some question the

propriety of relying on a rule based on federal law in this

situation. In that case, Carlisle and his associates had consulted

with the accounting firm Arthur Andersen LLP about minimizing their

tax liability.     Id. at 626.    On the basis of that consultation,

Carlisle entered into management contracts with Bricolage Capital,

LLC.     Id.     These   management   contracts   contained   arbitration

clauses.   Id.    After the Internal Revenue Service determined that

the tax strategy was illegal, Carlisle and his associates filed a

diversity action against Arthur Andersen, Bricolage and others.

Id. at 626-27.    Claiming that equitable estoppel required Carlisle

and his associates to arbitrate these claims under the agreements

with Bricolage, Arthur Andersen sought a stay of the diversity

action pending arbitration.       Id. at 627.     In the course of its

decision, the Supreme Court wrote:

           Because “traditional principles” of state law
           allow a contract to be enforced by or against

                                  -21-
          nonparties    to    the    contract    through
          “assumption, piercing the corporate veil,
          alter   ego,   incorporation   by   reference,
          third-party beneficiary theories, waiver and
          estoppel,” the Sixth Circuit’s holding that
          nonparties to a contract are categorically
          barred from § 3 relief was error.

Id. at 631 (emphasis added) (quoting 21 Richard A. Lord, Williston

on Contracts § 57:19, at 183 (4th ed. 2001)).

          Carlisle holds that, at least as a general principle,

state law governs the inquiry as to whether a non-party to an

arbitration agreement can assert the protection of the agreement.26

See id. at 630-32; Lawson v. Life of the S. Ins. Co., 648 F.3d

1166, 1170-71 (11th Cir. 2011).   Carlisle leaves unclear, however,

whether the Court intended to disturb the uniform body of precedent

in the courts of appeals, which we just have examined, holding that

a uniform federal rule is required with respect to the amenability


     26
        The text of Arthur Andersen LLP v. Carlisle, 556 U.S. 624
(2009), leaves somewhat unclear, however, whether, in determining
the amenability of a non-signatory party to an arbitration clause,
a court must consult general principles of state contract law or
the precise law of the state whose law governs the contract. As we
just have noted, the Court at one point speaks in terms of
traditional principles of contract law, id. at 631, but at another,
it speaks in terms of “the relevant state contract law,” id. at
632. We have chosen to interpret Carlisle as requiring reference
to the provisions of the applicable state law.        See Awuah v.
Coverall N. Am., Inc., 703 F.3d 36, 42-43 (1st Cir. 2012) (applying
Massachusetts law). In this respect, we have viewed Carlisle as
simply following the general proposition that in “deciding whether
an agreement to arbitrate is to be enforced, we normally apply
ordinary state-law principles that govern the formation of
contracts, including validity, revocability, and enforceability of
contracts.”   Bezio v. Draeger, 737 F.3d 819, 822-23 (1st Cir.
2013); see also First Options of Chi., Inc. v. Kaplan, 514 U.S.
938, 944 (1995).

                               -22-
of employees acting within the scope of their employment to the

arbitration clauses in their employers’ contracts.           As we have

noted earlier, the cases requiring that the employees of a company

be bound by the arbitration agreements of their employers are based

on the specific rationale that such a rule is necessary to protect

the federal policy embodied in the FAA of favoring arbitration.

Without it, according to the rationale of those cases, a party

could frustrate an arbitration clause by simply naming employees as

party defendants along with the signatory company in a judicial

action.    Nothing     in   Carlisle     specifically   disapproves   the

fashioning of federal law to avoid this specific abuse.         Notably,

at one point in Carlisle, the Court seemingly limited the scope of

its holding; it wrote:

               We have said many times that federal law
          requires that “questions of arbitrability
          . . . be addressed with a healthy regard for
          the federal policy favoring arbitration.”
          Whatever   the   meaning    of   this   vague
          prescription, it cannot possibly require the
          disregard of state law permitting arbitration
          by or against nonparties to the written
          arbitration agreement.

556 U.S. at 630 n.5 (quoting Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24–25 (1983)).         Moreover, as we have

just noted, in Carlisle, the Court specifically noted that the

state law in that case permitted arbitration and was therefore

compatible with and, indeed, supportive of the federal policy

embodied in the FAA.    See id.


                                  -23-
               We need not decide definitively whether Carlisle has

abrogated this specific line of federal cases. Even if the Supreme

Court’s decision in Carlisle does signal the abrogation of the

principle that, as a matter of federal law, the employees of a

signatory      of    an    arbitration    agreement    are    protected     by   the

agreement, Grand has not suggested any principle of New York law

that impedes the interpretation of the agreement to protect the

employee under the contract.27            It relies solely on the text of the

contract--a         text   that    does   not    support     the   illogical     and

impractical vision that an employee who acts solely within the

scope     of   her    employment    is    not    protected   by    her   employer’s

arbitration clause.

                                     Conclusion

               The district court incorrectly denied the motion by

Verizon and Ms. McCahill to compel Grand to arbitrate its claims

against them.        Accordingly, we reverse and remand to the district

court for further proceedings consistent with this opinion.

               REVERSED AND REMANDED.




     27
         As we noted earlier, before the advent of Carlisle, the
courts of New York State had recognized, emphatically, the need for
a uniform federal rule to govern whether an agent is amenable to
the arbitration agreement of a principal. See Hirschfeld Prods.,
Inc. v. Mirvish, 673 N.E.2d 1232, 1233 (N.Y. 1996). There is no
indication, and Grand does not suggest, that New York State would
choose a different, and unique, rule to the contrary if it were to
determine, in the wake of Carlisle, that a federal rule was no
longer applicable.

                                          -24-