Duane Morris Class Action Review - 2023 - Report - Page 79
In the third-party beneficiary context, a court found against plaintiffs who contended they
did not assent to arbitrate claims against a defendant that was not a party to the
underlying solar panel system contracts containing arbitration clauses, which plaintiffs
entered into with other entities. In James, et al. v. Venture Home Solar, LLC, 2022 U.S.
Dist. LEXIS 102615 (D. Conn. June 8, 2022), the plaintiffs filed a class action lawsuit
against a company that installed solar panels on their homes. They alleged that the
representations that they would see a significant reduction in their electricity bills once
the system was installed were false. The company that installed the system moved to
compel arbitration, even though it was not a signatory to the agreements that contained
arbitration clauses. One named plaintiff had signed a contract with a company for the
solar panels on her residence. That contract listed the defendant as
“subcontractor/installer” and further specified that the defendant would design the
system, and the company which entered into the contract with the named plaintiff would
review and approve the defendant’s design before installation proceeded. Another
named plaintiff signed a contract with a different company for the solar panels on his
residence. That contract provided that the defendant would be the “Dealer/Installer” of
the solar panel system. The defendant, however, was not a signatory to either contract.
The plaintiffs argued that since they contracted with non-parties, the arbitration clauses
contained in those contracts have nothing to do with their claims against the installer, so
it cannot compel them to arbitrate those claims. The defendant argued that pertinent
Second Circuit case law recognizes certain common law principles of contract law that
allow non-signatories to enforce agreements, including arbitration agreements. They
specifically invoked the doctrine of equitable estoppel against the plaintiffs. That
common law doctrine applies where the issues the non-signatory is seeking to arbitrate
are intertwined with the agreement that the estopped party has signed. The court
concluded that the plaintiffs were equitably estopped from avoiding arbitration of their
claims. It did so because the installer and the two contracting companies had
intertwining contractual obligations to the plaintiffs. Second, the installer was specifically
identified in the contracts as the originator and installer of the solar panel system
plaintiffs purchased. Therefore, the court made the inference that the plaintiffs had
knowledge of the installer, and extended their agreement to arbitrate to include the
installer.
While defendants at times seek to enforce arbitration agreements to which they are not
signatories, the California court of appeal addressed the opposite situation in People v.
Maplebear, Inc., 81 Cal. App. 5th 923 (2022), wherein the defendant sought to compel
the plaintiff, the City of San Diego, to arbitration on grounds that the lawsuit sought to
vindicate the rights of workers who had signed arbitration agreements. In Maplebear,
the City of San Diego sued Instacart, an app-based grocery delivery company that
classifies its “shoppers” as independent contractors, seeking an injunction under
California’s Unfair Competition Law, Business and Professions Code § 17200, et seq.,
requiring Instacart to reclassify its shoppers as employees. Instacart requires all
shoppers to sign arbitration agreements, and to bring all disputes in arbitration. Instacart
moved to compel arbitration, arguing that even though the City was not a signatory to
the arbitration agreements, it was nonetheless bound by them because it sought to
vindicate the individual employment law rights of the shoppers, who were the “real
parties in interest.” Id. at 929. The trial court rejected this argument, and the California
78
© Duane Morris LLP 2023
Duane Morris Class Action Review – 2023
