Independent Contractor Not Compelled to Arbitrate with Non-Signatory of Independent Contractor Agreement

Independent contractor agreement

The staff at Massachusetts Lawyers Weekly reports on a case by the First Circuit Court of Appeals in which the client of a staffing company was not able to compel arbitration based on the Independent Contractor Master Agreement between the staffing company and the independent contractor. They write:

“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, 344 F.3d 134, 137 (1st Cir. 2003). …

“… Most crucially, the Master Agreement’s arbitration clause specifically limits its applicability to ‘the Parties.’ …

“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. This Circuit has recognized that in certain exceptional situations, a nonsignatory to an agreement may invoke an arbitration clause. … This is not such a case. …

“… 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. …

“… 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. …

“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. …

“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., 526 F.3d 38 (1st Cir. 2008). …

“… 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.’ Id. at 41 (emphasis added). …

“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. …

“And while SPAR alleges that its ‘close relationship’ 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. … SBS and SPAR are sophisticated commercial players that chose to conduct their business as separate corporate structures, and we see no reason to ignore the legal scheme that they constructed. Hence, SPAR has not put forth any convincing argument or authority establishing that the equitable estoppel doctrine is applicable when the language of the contract is so clearly limiting, and we find no legal basis for forcing Hogan to arbitrate his claims against SPAR when he demonstrated no intent to do so. …

“In any case, a review of the facts here shows that SPAR could not establish the ‘intertwined’ requirement for purposes of applying equitable estoppel. …

“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. … There is therefore no cognizable basis for applying equitable estoppel here.”

Hogan v. SPAR Group, Inc., et al. (Lawyers Weekly No. 01-022-19) (18 pages) (Torruella, J.) Appealed from a decision by Sorokin, J., in the U.S. District Court for the District of Massachusetts. James M. Nicholas, with whom Jillian M. Collins and Foley & Lardner were on brief, for defendant-appellant SPAR Group; Brook S. Lane, with whom Hillary Schwab and Fair Work, P.C. were on brief, for the plaintiff-appellee (Docket No. 18-1286) (Jan. 25, 2019).

Source: Arbitration – Non-signatory – Massachusetts Lawyers Weekly

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