First District Division 1 Explains What Will And What Will Not Result In Equitable Estoppel Requiring Non-Signatory To Arbitrate.
After plaintiffs in coordinated cases hired the Fertility Center (Pacific) to provide fertility-related services, a tank used by Pacific to freeze eggs failed. The tank was manufactured by Chart, Inc., (Chart), and sold to Pacific by Praxair, which also helped with installation. Plaintiffs' contract with Pacific included an arbitration provision, and thus plaintiffs agreed to arbitrate claims with Pacific. Naturally, defendants Chart and Praxair tried to piggyback onto Pacific's arbitration agreement. Though Chart and Praxair were non-signatories to the arbitration agreement, they argued that plaintiffs were equitably estopped from refusing to arbitrate. Both the trial court and the Court of Appeal rejected Chart's and Praxair's effort to compel arbitration. Pacific Fertility Cases, A158155 (1/1 pub. 12/1/22) (Banke, Margulies, Devine).
Chart and Praxair argued that but for plaintiffs' contract with Pacific, their claim against Chart and Praxair would never have arisen. The case is helpful because it explains that this "but-for test" is insufficient to establish equitable estoppel. In explaining why the "but-for test" was insufficient, Justice Banke distinguished the situation from that in a case in which consumers had sued Apple and AT&T for allegedly conniving to get consumers to subscribe to a network and buy an Apple phone that could not be used properly with the network. In the case involving Apple, the court had found that the consumers were equitably estopped from refusing to arbitrate.
Here, however, the situation was different: "[A]s the court correctly stated, the analysis is not a simple 'but for' test, but whether plaintiffs’ claims demonstrate ' "actual reliance on the terms of the [Pacific] agreement[s] to impose liability." ' Plaintiffs’ claims against Chart and Praxair do not rely on the terms of their agreements with Pacific. Nor do plaintiffs allege concerted action or an ongoing relationship among Pacific, Praxair, and Chart. Thus, the circumstances here are distinguishable from those in Appel II."
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