In Lubin v. Starbucks Corp., 2024 WL 5113125 (11th Cir. Dec. 16, 2024), the Eleventh Circuit rejected an employer’s attempt to compel arbitration of claims brought by a former employee’s husband, where he had not signed an agreement with the employer and his claims were not sufficiently related to his wife’s employment agreement.
The decision arose from a putative class action brought by a former Starbucks employee, Ariel Torres, alleging that Starbucks did not provide adequate health-insurance notices under the Consolidated Omnibus Budget Reconciliation Act (COBRA). After Starbucks moved to compel arbitration based on Torres’s employment agreement, Torres amended the complaint to add Raphyr Lubin as a named plaintiff. Lubin had never been employed by Starbucks, but his wife had, and he had been covered under Starbucks’s benefit plan as the spouse of an employee.
Lubin’s wife, like Torres, had signed an employment agreement that provided, among other things that “Starbucks and I agree” to individual arbitration of disputes, including those related to compensation or termination. The arbitration agreement also had a delegation provision, stating that “any dispute regarding the formation, interpretation, applicability, enforceability, or implementation of” the agreement had to be decided by an arbitrator. Finally, the agreement specifically excluded from arbitration “actions to enforce this Agreement, compel arbitration, or enforce or vacate an arbitrator’s award under this Agreement.”
Starbucks again moved to compel arbitration. Torres consented to arbitration, but Lubin did not. He never had an employment agreement with Starbucks and therefore, he argued, could not be bound by an arbitration agreement that he never signed.
Both the district court and the Eleventh Circuit agreed with Lubin. Opening with the oft-quoted “presumption in favor of arbitration,” the Eleventh Circuit clarified that this presumption does not apply to disputes about whether an agreement to arbitrate was made in the first place. That question must be decided based on state contract law.
And, the court concluded, Lubin correctly argued that he never made an agreement to arbitrate. He had not signed any agreement with Starbucks, and his claims were not based on his wife’s employment agreement but instead on his statutory right to receive adequate COBRA notice.
In concluding that Lubin indeed could not be forced to arbitrate, the Eleventh Circuit rejected Starbucks’s argument that this result would allow employees to do an “end run” around the arbitration agreement by having a beneficiary sue instead. That was not what happened here, because Lubin’s wife was not a party to the case. If she were, then she would have to arbitrate.
The court also rejected Starbucks’s argument that the delegation provision precluded the court from deciding Lubin’s challenge. Although a court will enforce an agreement to have threshold issues of arbitrability decided by an arbitrator, there must be “clear and unmistakable evidence” of such an agreement. Lubin argued, and the court agreed, that the agreement here was at least ambiguous, because it also stated that any “action to enforce this Agreement” or to “compel arbitration” is excluded from arbitration. Moreover, Lubin was not a party to the agreement at all, so he could not have agreed to the delegation provision.
Finally, Starbucks argued that the agreement must nevertheless be enforced based on various doctrines of Florida contract law. The Eleventh Circuit rejected all of these arguments for essentially the same reason: Lubin’s claims did not derive from the employment agreement but instead from his independent statutory right to receive adequate COBRA notice as a “qualified beneficiary” under 29 U.S.C. § 1166(a)(4).
- First, Starbucks argued for application of equitable estoppel, which dictates that a party cannot take advantage of part of a contract while disclaiming others. A party cannot, for example, claim coverage under an insurance policy while at the same time disclaiming an arbitration agreement contained within the policy. Here, however, Lubin did not sue on the contract; he sued under COBRA.
- Second, Starbucks argued that the arbitration agreement must be enforced against Lubin because he was a third-party beneficiary under his wife’s contract. This doctrine also was of no help to Starbucks, because it allows a third party to enforce benefits under a contract, not the other way around. Although Lubin could be bound to arbitrate if seeking to enforce contract rights as a third-party beneficiary, that is not what he did here.
- Third, Starbucks argued that Lubin’s claims were derivative of the contract and therefore subject to arbitration. Under this derivative-claim doctrine, a non-signatory to an arbitration agreement may be bound to arbitrate where his claims are derivative of a wrong committed against the contracting party. But this doctrine applies only when the plaintiff’s right to recovery is predicated on another’s right to recovery—e.g., a claim for wrongful death, which flows from the tortious act against the decedent. Putting aside whether Starbucks had waived this argument as the district court found, the Eleventh Circuit concluded that it still would fail. Lubin’s statutory claim was his own claim as a qualified beneficiary under COBRA and did not depend on any claim his wife might have. The fact that he would not have been a qualified beneficiary “but for” his wife’s employment does not make his statutory claim derivative of her contract.
Judge Tjoflat concurred in the result but did not join the court’s conclusions as to various principles of state and federal law. He would have affirmed denial of the motion to compel because Lubin was not a party to the arbitration agreement and brought claims under federal statute, not the contract.