Franklin v. Cmty. Reg'l Med. Ctr.

• Decision Date: 21 May 2021
• Docket Number: No. 19-17570,19-17570
• Citation: 998 F.3d 867
• Parties: Isabelle FRANKLIN, Plaintiff-Appellant, v. COMMUNITY REGIONAL MEDICAL CENTER, fka Fresno Community Hospital and Medical Center, Defendant-Appellee, and Community Medical Centers, Inc., Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

998 F.3d 867

Isabelle FRANKLIN, Plaintiff-Appellant,

v. COMMUNITY REGIONAL MEDICAL CENTER, fka Fresno Community Hospital and Medical Center, Defendant-Appellee,andCommunity Medical Centers, Inc., Defendant.

No. 19-17570

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 22, 2020 Honolulu, Hawaii

Filed May 21, 2021

David C. Leimbach (argued) and Carolyn H. Cottrell, Schneider Wallace Cottrell Konecky LLP, Emeryville, California, for Plaintiff-Appellant.

Andrew M. Paley (argued), Kiran Aftab Seldon and Geoffrey C. Westbrook, Seyfarth Shaw LLP, Los Angeles, California, for Defendant-Appellee.

Before: J. Clifford Wallace, Carlos T. Bea, and Mark J. Bennett, Circuit Judges.

OPINION

BENNETT, Circuit Judge:

Plaintiff Isabelle Franklin appeals from the district court's order granting defendant Community Regional Medical Center's motion to compel arbitration of Franklin's claims for statutory hour and wage violations. We have jurisdiction pursuant to 9 U.S.C. § 16(a)(3), and we affirm.

I.

Franklin is a nurse who works on assignment. She was employed by a staffing agency, United Staffing Solutions, Inc. (USSI), with whom she signed a Mediation and Arbitration Policy and Agreement (Arbitration Agreement). The Arbitration Agreement requires Franklin and USSI to arbitrate "all disputes that may arise out of or be related to [Franklin's] employment, including but not limited to the termination of [Franklin's] employment and [Franklin's] compensation."¹

In late 2017, USSI assigned Franklin to work at Community Regional Medical Center's hospital (the Hospital) in Fresno, California. Franklin signed a Travel Nurse Assignment Contract (Assignment Contract) with USSI establishing the terms of her assignment. The Assignment Contract sets Franklin's hourly wages, her overtime rate, the length of her shifts, and USSI's reimbursement policies. It explains that overtime will be paid "as dictated by Hospital policy and/or State Law," but any overtime "must be approved by USSI prior to working." The Assignment Contract also includes an arbitration provision for "any controversy or claim arising under federal, state, and local statutory or common or contract law between United Staffing Solutions, Inc. and [Franklin] involving the construction or application of any of the terms, provisions, or conditions of the [Assignment Contract]."

The Hospital is not a signatory to either the Arbitration Agreement or the Assignment Contract, and there is no contract between Franklin and the Hospital. There is also no contract between the Hospital and USSI. Instead, the Hospital contracts with a managed service provider, Comforce Technical Services, Inc. ("RightSourcing") to source contingent nursing staff like Franklin. RightSourcing, in turn, contracts with USSI to provide the contingent nursing staff for the Hospital.

Under this arrangement, the Hospital retains supervision over the contingent nursing staff's provision of clinical services. RightSourcing bills the Hospital and remits payment to USSI for time worked by contingent nursing staff. USSI sets the wages of the nursing staff and pays them accordingly. The contract between RightSourcing and USSI requires that nursing staff use the Hospital's timekeeping system but allows USSI to review the records for any discrepancies. In that contract, USSI agreed to pay its employees for any missed meal periods, but also agreed it would try to collect waivers of second meal periods from its employees.²

Franklin worked at the Hospital from December 2017 to January 2018. Franklin then brought a class and collective action against the Hospital, alleging violations of the Fair Labor Standards Act (FLSA), the California Labor Code, and the California Business and Professions Code. The FLSA claims allege that the Hospital required Franklin to work during meal breaks and off the clock but failed to pay her for that work. The California Labor Code claims are substantially similar to the FLSA claims and, in addition, allege that the Hospital failed to provide accurate itemized wage statements to Franklin or reimburse her for travel expenses incurred during orientation at the Hospital. The California Business and Professions Code claim alleges unfair business practices based on the California Labor Code violations.

The district court granted the Hospital's motion to compel arbitration and dismissed Franklin's claims without prejudice. The district court held that the Hospital could compel arbitration as a nonsignatory because Franklin's statutory claims against the Hospital were "intimately founded in and intertwined with" her contracts with USSI. Thus, under California law, Franklin was equitably estopped from avoiding the arbitration provisions of her employment contracts. Franklin timely appealed.

II.

We usually review a district court's decision about the arbitrability of claims de novo. Kramer v. Toyota Motor Corp. , 705 F.3d 1122, 1126 (9th Cir. 2013). When the arbitrability decision concerns equitable estoppel, however, our caselaw has been inconsistent on whether we review the district court's decision de novo or for abuse of discretion. Compare Setty v. Shrinivas Sugandhalaya LLP , 986 F.3d 1139, 1141 (9th Cir. 2021) (reviewing for abuse of discretion), and Nguyen v. Barnes & Noble Inc. , 763 F.3d 1171, 1179 (9th Cir. 2014) (same), with Namisnak v. Uber Techs., Inc. , 971 F.3d 1088, 1094 (9th Cir. 2020) (reviewing de novo), and Kramer , 705 F.3d at 1126 (same). Because we reach the same result here under both de novo and abuse of discretion review, we need not resolve that inconsistency today and analyze this issue de novo.

III.

"Generally, parties who have not assented to an arbitration agreement cannot be compelled to arbitrate under its terms." Namisnak , 971 F.3d at 1094. But "[t]he United States Supreme Court has held that a litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement." Kramer , 705 F.3d at 1128 (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) ). California law applies here, and it allows a nonsignatory to invoke arbitration under the doctrine of equitable estoppel even when a signatory "attempts to avoid arbitration by suing nonsignatory defendants for claims that are based on the same facts and are inherently inseparable from arbitrable claims against signatory defendants." Metalclad Corp. v. Ventana Env't Organizational P'ship , 109 Cal.App.4th 1705, 1 Cal. Rptr. 3d 328, 334 (2003) (quotation marks and citation omitted). We look to "the relationships of persons, wrongs and issues," and in particular, whether the claims are "intimately founded in and intertwined with the underlying contract obligations." Id. (citation omitted); see also Kramer , 705 F.3d at 1128. We do this because, as the court in Metalclad found:

The doctrine [of equitable estoppel] prevents a party from playing fast and loose with its commitment to arbitrate, honoring it when advantageous and circumventing it to gain undue advantage. ... [W]here a party to an arbitration agreement attempts to avoid that agreement by suing a "related party with which it has no arbitration agreement, in the hope that the claim against the other party will be adjudicated first and have preclusive effect in the arbitration[,] [s]uch a maneuver should not be allowed to succeed ...."

1 Cal. Rptr. 3d at 335 (quoting IDS Life Ins. Co. v. SunAmerica, Inc. , 103 F.3d 524, 530 (7th Cir. 1996) ); see also Boucher v. All. Title Co. , 127 Cal.App.4th 262, 25 Cal. Rptr. 3d 440, 447 (2005) ("The fundamental point [of equitable estoppel] is that a party may not make use of a contract containing an arbitration clause and then attempt to avoid the duty to arbitrate by defining the forum in which the dispute will be resolved."); Turtle Ridge Media Grp., Inc. v. Pac. Bell Directory , 140 Cal.App.4th 828, 44 Cal. Rptr. 3d 817, 822 (2006). Thus, the question is whether Franklin's claims against the Hospital are "intimately founded in and intertwined with" her employment contract with USSI.

A.

We begin by determining the relevant California law for analyzing whether a signatory employee's claim against a nonsignatory client of the staffing agency is "intimately founded in and intertwined with" the employment contract. When the California Supreme Court has not spoken on an issue, we are "obligated to follow the decisions of the state's intermediate appellate courts," unless there is "convincing evidence" that the California Supreme Court would decide differently. Beeman v. Anthem Prescription Mgmt., LLC , 689 F.3d 1002, 1008 (9th Cir. 2012) (en banc) (citation omitted). "This is especially true when the supreme court has refused to review the lower court's decision." State Farm Fire & Cas. Co. v. Abraio , 874 F.2d 619, 621 (9th Cir. 1989).

Here, in the absence of a California Supreme Court case on point, we must decide whether we are bound to follow the California Court of Appeal's published decision in Garcia v. Pexco, LLC , 11 Cal.App.5th 782, 217 Cal. Rptr. 3d 793 (2017). In Garcia , the California Court of Appeal held that an employee's California Labor Code claims against the staffing agency's nonsignatory client were "intimately founded in and intertwined with" his employment contract with the staffing agency. Id. at 796–97. The California Supreme Court denied review. Id. at 797. But Franklin contends that Garcia is an "outlier" case that was wrongly decided, and thus its holding is not binding on us. We disagree.

Our review of California law shows that Garcia is not an "outlier" case. A recent published California Court of Appeal decision on equitable estoppel in the employment context, Jarboe v. Hanlees Auto Group , 53 Cal.App.5th 539, 267 Cal. Rptr. 3d 640 (2020), discussed Garcia and its holding that a "nonsignatory[ ] could compel arbitration based on equitable...