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Full Opinion
United States Court of Appeals
For the First Circuit
No. 17-1583
DJAMEL OUADANI, on behalf of himself and all others similarly
situated,
Plaintiff, Appellee,
v.
TF FINAL MILE LLC, f/k/a Dynamex Operations East, LLC,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Lynch and Selya, Circuit Judges,
and Levy, District Judge.*
Diane M. Saunders, with whom Ogletree, Deakins, Nash, Smoak
& Stewart, P.C. was on brief, for appellant.
Stephen Churchill, with whom Hillary Schwab, Brant Casavant,
and Fair Work, P.C. were on brief, for appellee.
November 21, 2017
* Of the District of Maine, sitting by designation.
LYNCH, Circuit Judge. Djamel Ouadani worked as a
delivery driver from March to August 2016, delivering products for
Dynamex Operations East, LLC ("Dynamex"), now known as TF Final
Mile LLC. As a condition of his employment, Ouadani was required
to associate with a vendor affiliated with Dynamex, named Selwyn
and Birtha Shipping LLC ("SBS"). Ouadani received his compensation
from SBS, which had a written contract with Dynamex. Ouadani did
not have a written contract either with Dynamex or with SBS.
In August 2016, Ouadani complained to Dynamex that he
lacked the independence of a contractor, and that he should be
paid as an employee if Dynamex continued to exert the same degree
of control over his work. He was terminated shortly after he
complained.
After his termination, Ouadani brought various wage-and-
hour claims against Dynamex in federal district court, styling his
action as a putative class action on his behalf and on behalf of
others similarly situated. Dynamex responded by filing a motion
to compel arbitration, pointing to an agreement between Dynamex
and SBS that contained a mandatory arbitration clause.
The district court denied Dynamex's motion, reasoning
that Ouadani had never signed the agreement containing the
arbitration clause and had no idea that the agreement even existed.
Ouadani v. Dynamex Operations E., LLC, No. 16-12036, 2017 WL
1948522, at *3-5 (D. Mass. May 10, 2017). On appeal, Dynamex
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argues that Ouadani should nonetheless be compelled to arbitrate
under federal common law principles of contract and agency.
Because these arguments are without merit, we affirm.
I. Background
A. Facts1
In early 2016, Ouadani applied to Dynamex for a job as
a delivery driver, transporting products ordered through Google
Express. After contacting Dynamex, Ouadani was invited to a
meeting at the Dynamex offices in Wilmington, Massachusetts. At
the meeting, Dynamex employees interviewed Ouadani and asked him
to complete a number of forms, including one indicating his
available days and hours. Dynamex also gave Ouadani a Dynamex
shirt, albeit one that he had to pay for; took his photograph for
a Dynamex identification badge; told him that he needed to pass a
drug test; and provided him with information about the services
the company provided for Google Express. Dynamex told Ouadani
1 The facts in this section are drawn from Ouadani's
complaint, exhibits to the complaint, and the Independent
Contractor Agreement between Dynamex and SBS. We accept these
facts, which Dynamex does not dispute for purposes of evaluating
its motion to compel arbitration, as true for purposes of this
appeal. We do not and need not reach the issue of whose employee
or independent contractor Ouadani was. This decision also does
not concern the separate issue of whether the arbitration agreement
between Dynamex and SBS is enforceable.
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that he would be paid eighteen dollars per hour, or seventy-two
dollars for a four-hour shift.
During the meeting at the Dynamex offices in Wilmington,
Dynamex also gave Ouadani the names and telephone numbers of three
Dynamex-affiliated vendors and told Ouadani that he would have to
"associate" with one of them. For aught that appears, the term
"associate" was never defined. Ouadani decided to associate with
SBS. SBS was owned and managed by another Dynamex delivery driver,
Edward Alwis, whom Ouadani had never met. Neither SBS nor Dynamex
classified Ouadani as an employee.
Unbeknownst to Ouadani, Dynamex and SBS had entered into
an "Independent Contractor Agreement for Transportation Services"
(the "Agreement") in January 2016, pursuant to which SBS agreed to
perform delivery services "brokered or subcontracted by Dynamex"
(the "Contracted Services"). SBS was permitted to hire employees
or subcontractors to perform some or all of the Contracted
Services. The Agreement included the following arbitration
provision:
In the event of a dispute between the parties,
the parties agree to resolve the dispute as
described in this Section (hereafter "the
Arbitration Provision"). This Arbitration
Provision is governed by the Federal
Arbitration Act, 9 U.S.C. § 1, et seq., and
applies to any dispute brought by either [SBS]
or Dynamex arising out of or related to this
Agreement, [SBS's] relationship with Dynamex
(including termination of the relationship),
or the service arrangement contemplated by
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this Agreement, including cargo claims and
payment disputes, but excluding all claims
that may be adjudicated in small claims court.
The provisions of this Arbitration Provision
shall remain in force after the partiesâ
contractual relationship ends. BY AGREEING TO
ARBITRATE ALL SUCH DISPUTES, THE PARTIES TO
THIS AGREEMENT AGREE THAT ALL SUCH DISPUTES
WILL BE RESOLVED THROUGH BINDING ARBITRATION
BEORE AN ARBITRATOR AND NOT BY WAY OF A COURT
OR JURY TRIAL.
In a subsection entitled "Claims Covered By Arbitration
Provision," the Agreement stated that â[u]nless carved out below,
claims involving the following disputes shall be subject to
arbitration under this Arbitration Provision regardless of whether
brought by Contractor, Dynamex or any agent acting on behalf of
either . . . .â The arbitration provision expressly extended to
"disputes regarding any city, county, state or federal wage-hour
law."
The Agreement also contained a provision that required
SBS's subcontractors to "satisfy and comply with all the terms of
th[e] Agreement" and required SBS to provide Dynamex with a written
agreement from any subcontractor that SBS utilized attesting that
the subcontractor had agreed to comply with the terms of the
Agreement. SBS did not have Ouadani execute such a written
agreement.
After passing his drug test, shadowing another delivery
driver for a couple of days, receiving his Dynamex identification
badge, and obtaining a cell phone and scanner set up with Google
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Express's software, Ouadani began working as a delivery driver for
Dynamex. Dynamex required Ouadani to wear a Dynamex-issued shirt,
which was marked by a large Dynamex logo, and his Dynamex
identification badge when he delivered products for Dynamex.
Ouadani used a Dynamex-issued e-mail address to receive
communications and directions from Dynamex managers. Dynamex
provided Ouadani with his assigned shifts for each week, and gave
Ouadani specific instructions about his delivery schedules,
including delivery locations, the order of deliveries, and
delivery timeframes.
For each four-hour shift worked by Ouadani, Dynamex paid
SBS seventy-two dollars, from which Dynamex subtracted, as to
Ouadani, amounts related to insurance, use of cell phones and
scanners, technology charges, failure to work assigned shifts,
late log-ins, and damaged or stolen products. In addition to these
amounts, SBS deducted, as to Ouadani, 17.5 percent of the net
payment it received from Dynamex to pay for workers' compensation,
other insurance, and payroll expenses. SBS then provided the
remaining funds to Ouadani. To perform his duties, Ouadani used
his own car and paid for his own gas without reimbursement.
Ouadani calculates that, after mileage costs and the various
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deductions by Dynamex and SBS, his net pay for a four-hour shift
ranged from $1.35 to $8.10 per hour.
In August 2016, Ouadani complained to Dynamex that he
was not given the independence of a contractor, and that he would
need to be paid as an employee if Dynamex continued to exercise
the same degree of control over his work. Shortly after receiving
Ouadani's complaint, Dynamex permanently removed him from the
driver schedule, thereby effecting the termination of his
employment.
B. District Court Proceedings
On October 11, 2016, Ouadani filed a putative class
action complaint against Dynamex, asserting that Dynamex
misclassified him and other delivery drivers as independent
contractors in violation of state and federal wage-and-hour laws.
The complaint also alleged that the misclassification had unjustly
enriched Dynamex, and that Dynamex had improperly retaliated
against Ouadani in violation of Mass. Gen. L. ch. 149, § 148A.
Ouadani sought to recover unpaid wages, reimbursement of improper
deductions and unpaid travel expenses, and damages resulting from
Dynamex's retaliation.
On February 9, 2017, Dynamex filed a motion to compel
arbitration pursuant to the Federal Arbitration Act ("FAA"), 9
U.S.C. §§ 1-16. Ouadani opposed the motion. On May 10, 2017, the
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court entered a memorandum and order denying Dynamex's motion.
Dynamex timely appealed the order.
II. Analysis
We review de novo a district court's interpretation of
an arbitration agreement and its decision regarding whether or not
to compel arbitration. S. Bay Bos. Mgmt. v. Unite Here, Local 26,
587 F.3d 35, 42 (1st Cir. 2009).
The FAA provides that written arbitration agreements
concerning transactions in interstate commerce "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; see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111-
12 (2001). The FAA embodies a "liberal federal policy favoring
arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24 (1983). That policy requires "ambiguities as to
the scope of the arbitration clause itself [to be] resolved in
favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of
Leland Stanford Junior Univ., 489 U.S. 468, 476 (1989).
On the other hand, a "basic precept" underlying the FAA
is that "arbitration is a matter of consent, not coercion." Stolt-
Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681 (2010)
(quoting Volt Info. Scis., 489 U.S. at 479). As such, "a party
cannot be required to submit to arbitration any dispute which he
has not agreed so to submit." AT&T Techs., Inc. v. Commc'ns
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Workers of Am., 475 U.S. 643, 648 (1986) (quoting United
Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
574, 582 (1960)). It is undisputed that Ouadani never signed the
Agreement containing the arbitration clause at issue, or even knew
about it. A party that seeks to compel arbitration "must show [1]
that a valid agreement to arbitrate exists, [2] that the movant is
entitled to invoke the arbitration clause, [3] that the other party
is bound by that clause, and [4] that the claim asserted comes
within the clause's scope." InterGen N.V. v. Grina, 344 F.3d 134,
142 (1st Cir. 2003). The pertinent question on appeal concerns
the third prong: is Ouadani, a nonsignatory to the Agreement, bound
to arbitrate his claims against Dynamex?
To answer that question, we look to federal common law,
which incorporates "general principles of contract and agency
law." Id. at 144. Examples of such principles include
incorporation by reference, assumption, agency, alter ego,
estoppel, and third-party beneficiary. See id. at 146-50, Thomson-
CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.
1995). The theories asserted by Dynamex on appeal include (1)
that Ouadani is bound to arbitrate inasmuch as he is an "agent" of
SBS, (2) that Ouadani should be equitably estopped from refusing
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to arbitrate, and (3) that Ouadani is bound by the arbitration
clause because he is a third-party beneficiary of the Agreement.
A. Agency
Dynamex asserts that Ouadani should be bound to
arbitrate because he is an "agent" of SBS. We disagree. Dynamex
notes that the arbitration clause in the Agreement reaches disputes
"brought by [SBS], Dynamex or any agent acting on behalf of
either." (emphasis added). But Ouadani is not, in this context,
bringing his wage-and-hour claims as an "agent acting on behalf"
of SBS. To the contrary, Ouadani is bringing his claims against
Dynamex on his own behalf and purportedly on behalf of other
similarly situated drivers. The alleged agency relationship
between Ouadani and SBS is irrelevant to the "legal obligation in
dispute." See InterGen, 344 F.3d at 148 (refusing to compel
arbitration against a parent corporation which was not a signatory
to an arbitration agreement, even though its subsidiary was a
signatory and acted as the parent's agent in certain other
contexts, because there was no evidence that the subsidiary acted
as the parent's agent when it committed the specific acts that
were the subject of the dispute).
Cases from other circuits which have found an agent to
be subject to a principal's arbitration agreement are
distinguishable. Those cases held that nonsignatory defendants
who are agents of a signatory corporation may compel arbitration
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against signatory plaintiffs. See Grand Wireless, Inc. v. Verizon
Wireless, Inc., 748 F.3d 1, 10-11 (1st Cir. 2014) (holding that a
nonsignatory employee of a signatory corporation may compel
arbitration against signatory plaintiffs); Pritzker v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1121-22 (3d Cir.
1993) (holding that a nonsignatory employee and a nonsignatory
corporate sister of a signatory corporation may compel arbitration
against signatory plaintiffs); Arnold v. Arnold Corp.-Printed
Commc'ns For Bus., 920 F.2d 1269, 1281-82 (6th Cir. 1990) (holding
that nonsignatory officers and directors of a signatory
corporation are entitled to compel arbitration against signatory
plaintiffs); Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185,
1187â88 (9th Cir. 1986) (holding that nonsignatory employees of a
signatory broker are entitled to compel arbitration against
signatory plaintiffs). These holdings were predicated on (1) the
fact that the claims of the signatory plaintiffs arose from the
nonsignatory agents' conduct on behalf of the signatory
principals, and (2) the signatory principals' intent to protect
their agents by means of the arbitration provisions. See Grand
Wireless, 748 F.3d at 10-11; Pritzker, 7 F.3d at 1122; Arnold, 920
F.2d at 1282; Letizia, 802 F.2d at 1188. These rationales are
inapposite here because Ouadani is a nonsignatory plaintiff who is
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trying to avoid arbitration, not a nonsignatory defendant seeking
to compel it.
B. Equitable Estoppel
Equitable estoppel "precludes a party from enjoying
rights and benefits under a contract while at the same time
avoiding its burdens and obligations." InterGen, 344 F.3d at 145.
Federal courts generally "have been willing to estop a signatory
from avoiding arbitration with a nonsignatory when the issues the
nonsignatory is seeking to resolve in arbitration are intertwined
with the agreement that the estopped party has signed." Id.
(quoting Thomson-CSF, 64 F.3d at 779). But courts have been
reluctant to estop a nonsignatory attempting to avoid arbitration.
Id. at 145-46. In the latter scenario, "estoppel has been limited
to 'cases [that] involve non-signatories who, during the life of
the contract, have embraced the contract despite their non-
signatory status but then, during litigation, attempt to repudiate
the arbitration clause in the contract.'" Id. at 146 (quoting
E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 200 (3d Cir. 2001)).
Dynamex claims that Ouadani knowingly sought and
obtained benefits from the Agreement because he performed the
"Contracted Services" pursuant to the Agreement for compensation.
It also argues that the Agreement would be "useless" without
drivers like Ouadani to perform the contemplated services. These
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arguments are unpersuasive because the benefits of the arbitration
clause of the Agreement accrue to the contracting signatories --
Dynamex and SBS -- not to Ouadani. Ouadani can hardly be said to
have "embraced" the Agreement when he was unaware of its existence.
Dynamex presses another, similar argument: Ouadani
"knowingly exploit[ed]" the Agreement by asserting claims that can
only be determined by reference to the Agreement. In particular,
Dynamex argues that Ouadani's claims "are premised on his position
that he performed the 'Contracted Services'" on behalf of SBS, and
that "such a relationship could only exist through the Agreement"
because Ouadani acknowledges that "he associated with [SBS] and
was paid directly by [SBS]."
To support this argument, Dynamex cites two
distinguishable California cases concerning an arbitration clause
involving SuperShuttle International ("SuperShuttle"), a provider
of door-to-door airport shuttling services. Dynamex first cites
Kairy v. Supershuttle International Inc., No. 08-CV-02993, 2012 WL
4343220 (N.D. Cal. Sept. 20, 2012), a case in which former
SuperShuttle franchisees who drove for SuperShuttle, as well as
nonsignatory secondary drivers who drove for SuperShuttle pursuant
to a relationship with the franchisees, brought wage-and-hour
claims against SuperShuttle. Id. at *1, *9. There, the district
court compelled arbitration against the secondary drivers, even
though they were not signatories to the relevant franchise
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agreements, because they "knowingly exploited the rights and
privileges granted under the [franchise] agreements" by
"participat[ing] actively and for compensation in the rights and
duties described in the [franchise agreements]." Id. at *9.
Notably, the secondary drivers' federal and state labor law claims
required the drivers to "specifically perform[] under the
[franchise agreements]." Id.
Dynamex also cites Supershuttle International, Inc. v.
Aysov, Nos. CIV 535204-08, 2015 WL 10388413 (Cal. Super. Dec. 23,
2015). In that case, a California state trial court compelled
arbitration against nonsignatory SuperShuttle drivers because they
were found to have received financial benefits from the franchise
agreement, which provided the only basis for their assertion of
state labor law claims against SuperShuttle. Id. at *2.
These cases are distinguishable. Unlike the secondary
SuperShuttle drivers, Ouadani did not "knowingly exploit[]" or
"participate actively and for compensation," Kairy, 2012 WL
4343220, at *9, in the rights described in the Agreement -- he did
not even know that the Agreement existed. And the Agreement does
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not provide the only basis for Ouadani's claims, which stem from
his arrangement with Dynamex.2
C. Third-Party Beneficiary
The third-party beneficiary doctrine, while similar in
some ways to estoppel, is a distinct ground for compelling a
nonsignatory to arbitrate. While a court considering the
application of equitable estoppel includes a focus on the parties'
conduct after the execution of the contract, a court analyzing
whether the third-party beneficiary doctrine applies looks to the
parties' intentions at the time the contract was executed. See
Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 362 (5th
Cir. 2003) (quoting DuPont, 269 F.3d at 200 n.7). The "critical
fact" that determines whether a nonsignatory is a third-party
beneficiary is whether the underlying agreement "manifest[s] an
intent to confer specific legal rights upon [the nonsignatory]."
2 Dynamex also cites Fluehmann v. Associates Financial
Services, No. Civ.A. 01-40076, 2002 WL 500564 (D. Mass. Mar. 29,
2002), to support his estoppel argument. That case can be
distinguished for similar reasons. The district court in Fluehmann
compelled arbitration, under an estoppel theory, against a
plaintiff who had cosigned a mortgage deed with her husband but
had not signed the accompanying loan agreement or the arbitration
agreement that was incorporated into the loan agreement. Id. at
*1-2. The court held that the plaintiff could not "have it both
ways" -- because her cause of action arose from the interdependence
of the loan agreement and the mortgage deed, she could not reap
the benefit of bringing a suit dependent on the loan agreement
without being subject to the accompanying burden of binding
arbitration. Id. at *7. Here, Ouadani's claims against Dynamex
do not require him to embrace the Agreement.
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InterGen, 344 F.3d at 147 (emphasis added). Here, the language of
the Agreement does not manifest any such intent.
In InterGen, we noted that the third-party beneficiary
theory should be approached "with care" because the law "requires
'special clarity' to support a finding 'that the contracting
parties intended to confer a benefit' on a third party." Id. at
146 (quoting McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994)).
As such, a mere benefit to the nonsignatory resulting from a
signatory's exercise of its contractual rights is not enough. Id.
at 146-47.
Dynamex fails to identify any language in the Agreement
that can be read to provide Ouadani with "specific legal rights."
InterGen, 344 F.3d at 147. Dynamex points to the provision of the
Agreement stating that SBS's subcontractors "must satisfy and
comply with all the terms of th[e] Agreement" and requiring SBS to
provide Dynamex, at Dynamex's request, with a "written agreement"
from any subcontractor it chooses to utilize attesting that the
subcontractor has agreed to comply with the terms of the Agreement.
Even assuming, arguendo, that Ouadani is a subcontractor of SBS,
Dynamex's reliance on this provision is misplaced. The provision
describes SBS's obligations to Dynamex. It does not say that SBS's
subcontracted drivers are third-party beneficiaries of the
Agreement. Moreover, to the extent that the provision evinces an
intent to bind subcontractors to the Agreement's terms, it
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contemplates a specific mechanism for doing so: SBS must obtain
from the subcontractor a "written agreement" to comply with the
Agreement's terms, and provide the written agreement to Dynamex.
Dynamex's and SBS's failure to obtain a written agreement from
Ouadani cuts against Dynamex's argument that Ouadani should be
bound by the Agreement.
Dynamex attempts to escape this conclusion by citing the
SuperShuttle cases. In Kairy, the district court found that the
nonsignatory drivers were intended third-party beneficiaries of
the franchise agreements by virtue of the agreements' express
language, which "contemplated and permitted that the franchisees
could hire secondary drivers," and thus gave the secondary drivers
"the right to enforce the agreements." 2012 WL 4343220, at *9.
And in Aysov, the state trial court found the nonsignatory drivers
to be intended third-party beneficiaries because the drivers would
never have been hired in the absence of the franchise agreement.
2015 WL 10388413, at *1.
The SuperShuttle cases are inapposite because they
concern drivers who were hired by intermediary franchisees rather
than SuperShuttle itself. Here, Dynamex -- not SBS, the
intermediary -- screened, hired, supervised, and determined the
compensation of its drivers. Ouadani's mandated association with
SBS for payment purposes does not alter the fact that Dynamex
ultimately controlled the terms and conditions of Ouadani's work
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as a delivery driver. Ouadani's claims do not depend on the
existence of a right guaranteed in the Agreement between Dynamex
and SBS; they are grounded in Ouadani's relationship with Dynamex.
In short, Dynamex's failure to show that the parties to
the Agreement intended to provide any legal rights to Ouadani is
fatal to its third-party beneficiary claim.
III. Conclusion
We affirm the decision of the district court. Dynamex
is ordered to show cause by written response within fifteen days
as to why the court should not assess double costs for "needlessly
consuming the time of the court and opposing counsel." D'Angelo
v. N.H. Supreme Court, 740 F.3d 802, 808 (1st Cir. 2014) (citing
In re Simply Media, Inc., 566 F.3d 234, 236 (1st Cir. 2009)); see
also Fed. R. App. P. 38; 1st Cir. R. 38.0.
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