Ninth Circuit Finds That Party was a Third-Party Beneficiary of Arbitration Agreement, and Affirms Order Compelling Arbitration of Putative Class Action
Three delivery drivers sued a transportation broker for failure to pay overtime and minimum wages, failure to provide rest and meal breaks, failure to timely pay wages upon termination, and willful refusal to pay wages on behalf of a proposed class of current and former drivers. The transportation broker moved to dismiss or stay the proceedings and compel arbitration, asserting that the plaintiffs were required to submit their claims to arbitration because the broker was a third-party beneficiary to arbitration agreements between the delivery drivers and a third party administrator. The district court granted the motion, concluding that the broker was a third-party beneficiary, that the claims were arbitrable, and that arbitration was the proper forum. The individual plaintiffs appealed, but the Ninth Circuit affirmed, holding that, under the applicable state law, the agreements containing the arbitration provisions intended to create a third-party beneficiary contract for the benefit of the broker. The drivers’ “work under the agreement–delivering parcels–was an integral part of [the broker’s] business, and the agreements obligated [the drivers] to indemnify logistics company customers, grant customers the right to subrogate claims and notify customers within four hours of any accidents.” The Ninth Circuit rejected the drivers’ argument that the agreements contained substantively unconscionable provisions, since they were not raised below. Ege v. Express Messenger Systems Inc., Case No. 17-35123 (9th Cir. Dec. 7, 2018).