Hogan v. SPAR Group, Inc.
Opinion
SPAR Group, Inc. ("SPAR") appeals from the district court's denial of its motion to compel arbitration. SPAR, a retail services provider, obtains most of its personnel from a staffing company named SPAR Business Services, Inc. ("SBS"). SBS engaged plaintiff-appellee Paradise Hogan ("Hogan") as an independent contractor and assigned him to perform services for SPAR. Hogan and SBS entered into an "Independent Contractor Master Agreement" to which SPAR was not a party. Subsequently, Hogan sued SBS and SPAR, and both sought to compel arbitration invoking an arbitration clause in the Independent Contractor Master Agreement. The district court compelled arbitration as to Hogan's claims against SBS, but found that SPAR had no legal basis to compel Hogan to arbitration.
SPAR appealed, pressing two alternate theories for why it can compel Hogan to arbitrate despite not being a party to the agreement containing the arbitration clause. A review of the facts here mandates the conclusion that "the obvious bar to arbitrability is the abecedarian tenet that a party cannot be forced to arbitrate if it has not agreed to do so."
InterGen N.V.
v.
Grina
,
I. Background
Because SPAR's request "to compel arbitration was made in connection with a motion to dismiss or stay, we draw the relevant facts from the operative complaint and the documents submitted to the district court in support of the motion to compel arbitration."
Cullinane
v.
Uber Techs., Inc.
,
A. Factual Background
SBS is a staffing company that provides personnel to various retail services providers, including SPAR. SPAR executes field merchandising, auditing, and assembly services for retailers through personnel referred to as "Field Specialists," substantially all of whom are supplied by SBS. SBS is "affiliate[d]" to SPAR "but is not a subsidiary of or controlled by SPAR." 1 SBS classifies the Field Specialists it provides to SPAR as independent contractors.
Paradise Hogan entered into an "Independent Contractor Master Agreement" (the "Master Agreement") with SBS, which SBS requires all Field Specialists to *37 sign. 2 Paragraph twenty of the Master Agreement requires its parties to resolve disputes through arbitration:
Any dispute between the Parties relating to this Master Agreement or otherwise arising out of their relationship under its terms, including but not limited to any disputes over rights provided by federal, state, or local statutes, regulations, ordinances, and/or common law, shall be determined by arbitration.... The Parties acknowledge the Master Agreement evidences a transaction involving interstate commerce, and the arbitration shall be governed by the United States Federal Arbitration Act ( 9 U.S.C., Sections 1 - 16 ) ("FAA").
Paragraph twenty of the Master Agreement also states that "[t]he Parties agree that any claim shall be brought solely in the individual capacity of SBS or the Independent Contractor, and not as a representative of any other persons or any class." SPAR is not a party to the Master Agreement.
In or about May 2015, SBS assigned Hogan to perform Field Specialist duties for SPAR. Neither SBS nor SPAR reimbursed Hogan or other Field Specialists for costs or expenses incurred in the performance of their assignments. While SBS required Hogan and other Field Specialists to acquire general liability and workers' compensation insurance, neither SBS nor SPAR paid for or contributed to these expenses. Hogan's regular hourly rate for performing services as a Field Specialist was minimum wage.
B. Procedural Background
On January 6, 2017, Hogan filed a putative class action complaint against both SBS and SPAR essentially alleging that they misclassified him and other Field Specialists as independent contractors rather than employees, such that they avoid paying mandated expenses and cause them to earn less than minimum wage. Hogan asserted various causes of action, including breach of contract, unjust enrichment, and violations to the Fair Labor Standards Act and Massachusetts wage and hour statutes.
On May 2, 2017, after SBS and SPAR moved to compel arbitration or dismiss for failure to state a claim, Hogan requested to amend the complaint to "narrow the scope of his claims." The district court allowed Hogan's request and denied as moot defendants' motion to compel arbitration. On May 17, 2017, Hogan filed "Plaintiff's First Amended Class Action Complaint and Demand for Jury Trial" (the "Amended Complaint"), abandoning all but his claims pursuant to the Massachusetts Wage Act,
In response, SBS and SPAR renewed their request to compel arbitration. In essence, they argued that both were shielded by the Master Agreement's arbitration provision (although SPAR was not a signatory) and that Hogan's consent to waive class and representative actions was valid and enforceable. In the alternative, they moved to dismiss the Amended Complaint under Fed. R. Civ. P. 12(b)(6).
On March 12, 2018, the district court denied the motion to compel arbitration as to SPAR, finding that it had no legal basis
*38
to compel Hogan to arbitration. As to SBS, the district court noted that Hogan was not contesting that his claims were subject to arbitration, but rather that the court was barred from enforcing the arbitration agreement pursuant to the National Labor Relations Act because it precluded him from pursuing class remedies in legal proceedings. Because a similar issue was before the U.S. Supreme Court at the time, the district court stayed Hogan's case as to SBS to await the ruling in
Lewis
v.
Epic Sys. Corp.
,
After SPAR filed its notice of appeal, the Supreme Court decided in
Epic Sys. Corp.
v.
Lewis
, --- U.S. ----,
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."
Ouadani
v.
TF Final Mile LLC
,
"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit."
McCarthy
v.
Azure
,
While SPAR invokes the "federal policy favoring arbitration," such policy "presumes proof of a preexisting agreement to arbitrate disputes arising between the protagonists."
McCarthy
,
Here, SPAR faces a steep climb, as it concedes that it is not a party to the Master Agreement it invokes. Indeed, the Master Agreement's first sentence clearly establishes Hogan and SBS (not SPAR) as the only parties: "[t]his Independent Contractor Master Agreement ('Master Agreement') is entered into between Hogan Paradise ('Independent Contractor') and SPAR Business Services, Inc. ('SBS')." Most crucially, the Master Agreement's arbitration clause specifically limits its applicability to "the Parties." It states that: "[a]ny dispute between the Parties relating to this Master Agreement or otherwise arising out of their relationship under its terms ... shall be determined by arbitration." (Emphasis added).
*39
Nonetheless, SPAR claims that despite not being a party to the Master Agreement, it is "entitled to invoke the arbitration clause." It posits that: (1) it is a third-party beneficiary of the agreement between Hogan and SBS; and (2) Hogan is equitably estopped from avoiding arbitration of his claims against SPAR.
4
This Circuit has recognized that in certain exceptional situations, a nonsignatory to an agreement may invoke an arbitration clause.
See
Grand Wireless, Inc.
v.
Verizon Wireless, Inc.
,
A. SPAR is not a third-party beneficiary of the Independent Contractor Master Agreement
"As is generally the case in matters of contract interpretation, '[t]he crux in third-party beneficiary analysis ... is the intent of the parties.' "
McCarthy
,
SPAR concedes that it is not named in the Master Agreement, but essentially argues that it is a third-party beneficiary because the Master Agreement confers upon it, "as a customer of SBS," the right to dictate certain work requirements to the independent contractor. We gather that SPAR refers to paragraph nine of the Master Agreement, yet that clause merely states that SBS would convey to Hogan scheduling and assignment requirements, if any, that it received from its customers, which include SPAR. At best, this is a tenuous grant of a vague benefit. It does not come close to showing the requisite "special clarity." Moreover, even if SPAR could be said to benefit from the clause, "a mere benefit to the nonsignatory
*40
resulting from a signatory's exercise of its contractual rights is not enough."
Ouadani
,
Finally, even if SPAR could show an intent of the parties to confer upon it some benefit unrelated to arbitration, the language of the arbitration clause would still be dispositive. As mentioned earlier, the arbitration clause limits its applicability to the signatories by only covering disputes "between the Parties," so it is clear that it does not confer arbitration rights to SPAR or any third party.
Our conclusion is reinforced by the fact that the Master Agreement references SBS's "customers" in other sections, yet omits that reference in the arbitration clause. SBS could have easily modified the arbitration clause to make it applicable to "[a]ny dispute between the Parties [and/or any SBS customer] relating to this Master Agreement," but it did not.
See
Mowbray
,
Finally, the Agreement has an integration clause that reads:
This Master Agreement constitutes the complete, integrated agreement of Independent Contractor and SBS and supersedes all prior written and oral agreements, negotiations, promises, and representations, if any. Nothing contained in this Master Agreement may be modified in any way except through a written agreement signed by Independent Contractor and Mr. Robert Brown of SBS.
This language accentuates the parties' intent to confine to its signatories the right to invoke the Master Agreement's arbitration clause.
See
McCarthy
v.
Azure
,
Thus, a review of the language of the Master Agreement, and more particularly its arbitration clause, shows that SPAR was not an intended third-party beneficiary of the signatories' agreement to arbitrate.
See
InterGen
,
B. Hogan is not equitably estopped from avoiding arbitration of his claims against SPAR
SPAR propounds that, even if it is not a signatory to the Agreement, Hogan is nevertheless equitably estopped from avoiding arbitration because his claims against SPAR are "intertwined" with the Master Agreement and because SPAR and SBS, which is a signatory to the Agreement, are "closely related." SPAR primarily relies on
Sourcing Unlimited, Inc.
v.
Asimco Int'l, Inc.
,
"[E]quitable estoppel precludes a party from enjoying rights and benefits under a contract while at the same time avoiding its burdens and obligations."
InterGen
,
In
Sourcing Unlimited
,
We find
Sourcing Unlimited
distinguishable from the case at hand. First, prior to considering the "intertwined" requirement, we must step back and once again recur to the language of the arbitration clauses. In
Sourcing Unlimited
, the "broadly-worded" arbitration clause stated: "[a]ny action to enforce, arising out of, or relating
in any way to
, any of the provisions of this agreement shall be brought in front of a P.R. China arbitration body."
Unlike Sourcing Unlimited , the arbitration provision here cabins its scope to disputes "between the Parties" to the Master Agreement, with the "Parties" unambiguously defined as SBS and Hogan. While one could say that arbitrating a dispute relating to the contract against an affiliated third-party was within the scope of what the plaintiff consented to in Sourcing Unlimited , the same cannot be said here. Hogan clearly and unambiguously consented to arbitrate only claims between him and SBS. 6
*42
And while SPAR alleges that its "close relationship"
7
with SBS should bind Hogan, we need not delve into the nature of their relationship, as irrespective of it, SPAR has not shown any intent on behalf of Hogan to arbitrate with any entity other than SBS.
See
Sokol Holdings, Inc.
v.
BMB Munai, Inc.
,
In any case, a review of the facts here shows that SPAR could not establish the "intertwined" requirement for purposes of applying equitable estoppel. In Sourcing Unlimited the court concluded that the plaintiff's claims were "sufficiently intertwined" with the agreement because they "either directly or indirectly invoke[d] the terms of the" agreement, id. at 47, and they "ultimately derive[d] from benefits" the plaintiff alleged were due under the agreement, id. at 48. Moreover, the court noted that if the agreement were to become void, the plaintiff's obligations under a side-contract with defendant "would be meaningless." Id.
Here, Hogan's claims against SPAR are premised upon Massachusetts wage and hour law, not the Master Agreement between SBS and Hogan: he seeks a remedy for "unpaid wages and benefits" which he alleges he has a right to pursuant to Massachusetts law. Moreover, Hogan's claims would exist even if the Master Agreement were declared void, as they are based on the nature of the services that Hogan provided to SPAR. Finally, as the Amended Complaint shows, Hogan does not claim any benefit or right from SPAR arising from the Master Agreement.
See
Sourcing Unlimited
,
III. Conclusion
We find no legal basis to compel Hogan to arbitration, as the clear terms of the Master Agreement show that he did not consent to arbitrate his claims against SPAR. The district court's judgment is therefore affirmed.
Affirmed .
The Amended Complaint does not specify the exact relationship between SBS and Spar.
The Agreement reflects an "[e]lectronic [a]cceptance by Independent Contractor" on April 19, 2016. Yet, the Amended Complaint states that SBS assigned Hogan to work for Spar "in or about May 2015" and that the Agreement was signed "[p]rior to commencing his employment with SBS and SPAR." In any case, the inconsistency is not material to the controversies at issue here.
Although generally, interlocutory orders are not immediately appealable,
see
Hogan argues that Spar waived its equitable estoppel and third-party beneficiary arguments because they were insufficiently raised at the district court level. Because the district court understood it had enough material to rule on those issues, we will not deem them waived.
See
Rodríguez-López
v.
Triple-S Vida, Inc.
,
The district court applied federal common law to evaluate whether a non-signatory can invoke an arbitration provision, "absent any contention from Hogan." On appeal, the parties do not contest this.
See
Sourcing Unlimited, Inc.
v.
Asimco Int'l, Inc.
,
Similarly, Spar cites
Herrera-Gollo
v.
Seaborne Puerto Rico, LLC
, Civil No. 15-1771(JAG),
In
Herrera-Gollo
, the plaintiff argued that defendant Seaborne Puerto Rico could not invoke the arbitration clause because the agreement was signed by Seaborne Virgin Islands, Inc., but the arbitration provision covered "all claims, controversies, or disputes ... against the Company,
its shareholders or subsidiary or parent or affiliated companies
... arising out of or in any way relating to [plaintiff's] application for employment."
Herrera-Gollo
,
In
Ragone
, the court compelled plaintiff Rita Ragone to arbitrate her employment discrimination claims against her direct employer, Atlantic Video ("AVI"), and ESPN, for whom she provided services through AVI, finding that she was equitably estopped from avoiding arbitration as to ESPN. Nevertheless, once again, the pertinent arbitration clause there was broader, as she had agreed to arbitrate "any and all claims or controversies arising out of [her] employment or its termination."
Ragone
,
Likewise, the other non-binding cases that Spar cites do not persuade us to alter our reasoning here.
According to the Amended Complaint, "SBS is an affiliate of SPAR but is not a subsidiary of or controlled by SPAR...."
Reference
- Full Case Name
- Paradise HOGAN, on Behalf of Himself and All Others Similarly Situated, Plaintiff, Appellee, v. SPAR GROUP, INC., Defendant, Appellant, SPAR Business Services, Inc., Defendant.
- Cited By
- 26 cases
- Status
- Published