Third-Party Non-Signatory Owed Duties Under Labor Code To Plaintiff, Independent Of Plaintiff’s Contract.
Zepeda v. Paramount Citrus Packing Company LLC, F071593 (5th Dist. 7/14/16) (Pena, Levy, Smith) (unpublished) distinguishes two situations: (1) a plaintiff whose relationship with a third-party non-signatory merely presumes the existence of a contract; and (2) a plaintiff whose rights against a third-party non-signatory rely on the existence of a contract. In the first situation – which is the situation in Zepeda – the non-signatory might not be able to use the arbitration provision in the contract to compel arbitration. In the second situation, which is not the situation in Zepeda, the plaintiff relies on the contract to sue the third party, and the third party can take advantage of the arbitration provision to compel arbitration.
Ranstad, in the business of providing temporary workers to its client companies, provided workers, including Zepeda, to Paramount, a grower and processor of citrus crops. Ranstad had an arbitration clause with Zepeda, and Paramount unsuccessfully invoked the arbitration clause after Zepeda sued alleging class-wide labor violations resulting from uncompensated time for donning and doffing, and interrupted meal and rest break periods. Paramount argued that Zepeda was equitably estopped to deny the right to arbitrate, and alternatively, that Paramount was the third-party beneficiary of the arbitration agreement.
Paramount relied on a federal district court case, Lucas v. Hertz Corp., 875 F.Supp.2d 991 (N.D. Cal. 2012), for the proposition that, because the relationship with Paramount presumed the existence of the contract with Zepeda, Paramount could rely on the arbitration clause in the Rantstad/Zepeda contract. However, the Court of Appeal found the district court case to be non-persuasive and non-binding authority.
Instead, the Court of Appeal found Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) to be better reasoned. Kramer held that equitable estoppel was inapplicable where the plaintiff’s claims against the third party non-signatory are not founded on any provision in the plaintiff’s contract, but instead arise from independent duties owed by the third party to the plaintiff. In Zepeda, the independent duties owed by the third party Paramount were owed under the Labor Code, not under the contract with Ranstad.
The Court of Appeal also concluded that a third-party beneficiary argument was not supported by the contractual language.
COMMENT: Too bad the case is unpublished. Cases involving non-signatory third parties seeking to compel arbitration arise with some frequency, and it would be helpful to have more guidance in this area.