Arbitration, Nonsignatories, Employment: In A Case Of First Impression, Court Of Appeal Holds That Successor Company Can Enforce Arbitration Agreement

By Suing DirectTV For Unpaid Wages, Employee Acknowledged Existence Of An Employment Relationship With Entity That Survived Merger.

     May a nonsignatory defendant enforce an arbitration agreement between a signatory plaintiff and a corporation that was acquired by the nonsignatory defendant, which assumed all rights and obligations of the acquired corporation?  “We have found no California cases on this point,” says the Court of Appeal, which then answers the question presented with a YES.  Marenco v. DirectTV LLC, No. B238421 (2/4 Feb. 5, 2015) (Epstein, Willhite, Manella).

     COMMENT:  The Court of Appeal said that whether or not the corporation that originally signed the agreement had ceased to exist did not matter to the outcome.  The employee’s continued employment “provided implied consent to maintaining the existing terms of employment,” explained the Court, also invoking “the established principle that ‘[a] voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.’”

    If you are interested in reading a strong arbitration provision in an employment agreement, check out footnote 1 of the opinion.