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White v. Sunoco, Inc.

United States Court of Appeals, Third Circuit

September 5, 2017

DONALD WHITE, On behalf of himself and all others similarly situated
v.
SUNOCO, INC., Appellant

          Argued: January 24, 2017

         On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:15-cv-04595) District Judge: Honorable Paul S. Diamond

          Seamus C. Duffy (ARGUED) Kathryn E. Deal Meredith C. Slawe Katherine L. Villanueva Drinker Biddle & Reath 18th & Cherry Streets Counsel for Appellant

          David J. Stanoch (ARGUED) Richard M. Golomb Ruben Honik Kenneth J. Grunfeld Golomb & HonikCounsel for Appellee

          Before: CHAGARES, RESTREPO, and ROTH, Circuit Judges.

          OPINION

          CHAGARES, Circuit Judge.

         Sunoco, Inc. appeals from the District Court's denial of its motion to compel arbitration, arguing that Donald White, who brought this lawsuit against Sunoco alleging fraud on behalf of a putative class, must arbitrate his claims pursuant to a credit card agreement that White signed with a third party who is not named in the lawsuit. At issue in this appeal is whether Sunoco, a non-signatory to the credit card agreement and who is not mentioned in the agreement, can compel White to arbitrate. After examining the relevant state law and applying it to the facts here, we will affirm the District Court's judgment.

         I.

         Appellant Sunoco is a Pennsylvania corporation that markets and sells gasoline through approximately 4, 900 retail operations in 26 states. This lawsuit involves the "Sunoco Rewards Program, " which Sunoco advertised through various promotional materials. The Sunoco Rewards Program offered customers who buy gas at Sunoco locations using a Citibank-issued credit card (the "Sunoco Rewards Card") a 5-cent per gallon discount either at the pump or on their monthly billing statements. The promotional materials included a "Terms and Conditions of Offer" sheet, indicating that Citibank, N.A. is the issuer of the Sunoco Rewards Card. Joint Appendix ("J.A.") 45, 52. They also stated that approval for the card was dependent on meeting Citibank's creditworthiness criteria and that by applying for the card, the applicant authorized Citibank to "share with Sunoco® and its affiliates experiential and transactional information regarding your activity with us." J.A. 52. Finally, the promotion explained, "When you become a cardmember, you will receive the full Sunoco Rewards Card Program Terms and Conditions, which may change at any time for any reason upon thirty (30) days prior written notice." Id. Although Sunoco and White disagree as to whether Sunoco and Citibank jointly marketed the credit card, it is undisputed that Sunoco was not a corporate affiliate of and had no ownership interest in Citibank and vice versa.

         Appellant White is a Florida resident who applied for and obtained a Sunoco Rewards Card from Citibank in 2013. He made fuel purchases with the card at various Sunoco-branded gas station locations. White alleges that "[c]ontrary to its clear and express representations, Sunoco does not apply a 5¢/gallon discount on all fuel purchases made by cardholders at every Sunoco location. Sunoco omits this material information to induce customers to sign-up for the Sunoco Rewards Credit Card so they frequent Sunoco locations." J.A. 31. White avers that but for the representations regarding the 5-cent per gallon discount, he "would not have become [a] Sunoco Credit Card cardholder[] and/or would have purchased gasoline at cheaper prices and/or elsewhere." J.A. 37. He brings claims of fraud and fraudulent inducement, negligent misrepresentation, unjust enrichment, and violation of the Florida Deceptive and Unfair Trade Practices Act. White's claims are against Sunoco only, and he alleges no misconduct by Citibank.[1]

         White's Sunoco Rewards Card is governed by a Card Agreement, which he received when he first obtained the card from Citibank and again when he requested additional copies of the agreement from Citibank on April 30, 2014 and June 1, 2015. The Card Agreement explicitly states that "we, us, and our mean Citibank, N.A., the issuer of your account" and that "you, your, and yours mean the person who applied to open this account." J.A. 88.

         It is undisputed that Sunoco is not a signatory to the Card Agreement, to which White and Citibank are the only parties. The Card Agreement does not mention the word "Sunoco"; it also makes no mention of the 5-cent per gallon discount. However, the account statements mailed to White bear the Sunoco logo and include e-mail and mailing information for Sunoco. The Card Agreement also contains a "Governing Law and Enforcing Our Rights" section that states that the "terms and enforcement" of the agreement are governed by "[f]ederal law and the law of South Dakota, where [Citibank is] located." J.A. 92.

         Sunoco filed a motion to compel arbitration based on the arbitration clause contained in the Card Agreement. The arbitration clause provides in relevant part,

PLEASE READ THIS PROVISION OF THE AGREEMENT CAREFULLY. IT PROVIDES THAT ANY DISPUTE MAY BE RESOLVED BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO TO COURT, INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO INITIATE OR PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY. ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN COURT PROCEDURES.
Agreement to Arbitrate: Either you or we may, without the other's consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us (called "Claims").

J.A. 91. The arbitration clause also defined the claims that are subject to arbitration as those "relating to your account, a prior related account, or our relationship . . . including Claims regarding the application, enforceability, or interpretation of this Agreement and this arbitration provision." Id. The provision adds that relevant claims are subject to arbitration "no matter what legal theory they are based on or what remedy . . . they seek." Id. Finally, a paragraph titled "Whose Claims are subject to arbitration?" states, "[n]ot only ours and yours, but also claims made by or against anyone connected with us or you or claiming through us or you, such as a co-applicant or authorized user of your account, an employee, agent, representative, affiliated company, predecessor or successor, heir, assignee, or trustee in bankruptcy" are subject to arbitration. Id. The arbitration provision also sets forth the steps for invoking arbitration: "At any time you or we may ask an appropriate court to compel arbitration of Claims, or to stay the litigation of Claims pending arbitration, even if such Claims are part of a lawsuit, unless a trial has begun or a final judgment has been entered."[2] Id.

         The District Court denied Sunoco's motion to compel arbitration. The court began its analysis by noting that "traditional principles of state law allow a contract to be enforced by or against nonparties to the contract" and that such principles apply to arbitration agreements. J.A. 11 (quoting Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d Cir. 2014)). It determined that it would apply Third Circuit authority on compelling arbitration, explaining that neither party raised choice-of-law issues, and that it believed the outcome would be the same regardless of which law the court applied.

         Examining the arbitration provision itself, the District Court observed that there was no dispute as to the validity of the provision and that the provision could only be enforced by signatories to it unless contract, agency, or estoppel principles dictated otherwise. The District Court examined all three and determined that none applied. It concluded that as to contract and agency law, Sunoco was not a third-party beneficiary of the Cardholder Agreement and its arbitration provision, and that Sunoco was not an agent, owner, or subsidiary of Citibank or vice versa. As to estoppel, the District Court concluded that the two-part "alternative estoppel" test discussed in E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001), was not met because 1) there was no close relationship between Sunoco and Citibank, and 2) the claims alleged against Sunoco did not relate to the terms or obligations in the Cardholder Agreement. Finally, the District Court rejected Sunoco's argument that because White had benefitted from the Cardholder Agreement, he should be estopped from bypassing its arbitration clause in this suit. The District Court reasoned that because a dispute that arises under the Cardholder Agreement is distinct from any dispute arising from a separate agreement with Sunoco, the estoppel principle does not apply to White.

         Sunoco timely appealed.

         II.

         The District Court had jurisdiction pursuant to 28 U.S.C. § 1332(d). Our appellate jurisdiction over the District Court's denial of Sunoco's motion to compel arbitration derives from 28 U.S.C. § 1291 and the Federal Arbitration Act ("FAA"), 9 U.S.C. § 16(a)(1)(B). See Griswold, 762 F.3d at 268. "We exercise plenary review over the District Court's order on a motion to compel arbitration." Flintkote Co. v. Aviva PLC, 769 F.3d 215, 219 (3d Cir. 2014). We use the standard for summary judgment under Federal Rule of Civil Procedure 56(a) when reviewing the underlying motion "because the district court's order compelling arbitration is in effect a summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate." Id. (quoting Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 528 (3d Cir. 2009)). Thus, a motion to compel arbitration should only be granted if there is no genuine dispute as to any material fact and, after viewing facts and drawing inferences in favor of the non-moving party, the party moving to compel is entitled to judgment as a matter of law. Id. We note that under the FAA, "the presumption of arbitrability applies only where an arbitration agreement is ambiguous about whether it covers the dispute at hand. Otherwise, the plain language of the contract holds." CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 173 (3d Cir. 2014) (citation omitted).

         III.

         The key issue in this case is whether Sunoco, as a non-signatory to the Card Agreement and its arbitration clause, can compel White to arbitrate. The Supreme Court explained in Arthur Andersen LLP v. Carlisle that "'traditional principles' of state law allow a contract to be enforced by or against nonparties through 'assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel.'" 556 U.S. 624, 631 (2009) (quoting 21 R. Lord, Williston on Contracts § 57:19 (4th ed. 2001)); see also Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 261-62 (5th Cir. 2014) ("[P]rior decisions allowing non-signatories to compel arbitration based on federal common law, rather than state contract law . . . have been modified to conform with Arthur Andersen.").

         Sunoco argues that equitable estoppel prevents White from refusing arbitration against it as a non-signatory.[3] The Arthur Andersen Court held that a non-party to an arbitration agreement may invoke section 3 of the FAA for a stay in federal court if the relevant state law allows a non-signatory to enforce the arbitration agreement against a signatory. 556 U.S. at 632.[4]

         To choose which state law will apply, "a federal court sitting in diversity must apply the choice-of-law rules of the forum state." LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). The forum state is Pennsylvania because the action was brought in the Eastern District of Pennsylvania. However, neither Sunoco nor White argued in their briefs which state's law regarding equitable estoppel should apply under Pennsylvania choice-of-law provisions. At oral argument, they did agree that Pennsylvania law does not apply.[5] Sunoco's attorney took the position that South Dakota law applies, while White's attorney stated that Florida law applies.[6] Oral Arg. Tr. 11:40-45; 23:10-26. Under Pennsylvania's choice-of-law analysis, we examine whether "the laws of the two jurisdictions would produce the same result on the particular issue presented." Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). If the results would be the same, there is no actual conflict and we "should avoid the choice-of-law question." Id. We thus examine whether the laws of Florida and South Dakota regarding equitable estoppel would produce the same result in this case. We conclude that they do.

         Under South Dakota law, a signatory can be forced to arbitrate against a non-signatory under principles of equitable estoppel in either of two circumstances. The first is when "all the claims against the nonsignatory defendants are based on alleged substantially interdependent and concerted misconduct by both the nonsignatories and one or more of the signatories to the contract." Rossi Fine Jewelers, Inc. v. Gunderson, 648 N.W.2d 812, 815 (S.D. 2002) (citing MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999)). The reasoning behind this rule is that plaintiffs should not be able to "avoid the arbitration for which [they] had contracted simply by adding a nonsignatory defendant." Id. (alteration in original) (quoting Cosmotek Mumessillik Ve Ticaret Ltd. Sirkketi v. Cosmotek USA, Inc., 942 F.Supp. 757, 759 (D. Conn. 1996)). Second, a signatory can also be compelled to arbitrate against a non-signatory under South Dakota law when it asserts "claims arising out of agreements against nonsignatories to those agreements without allowing those defendants also to invoke the arbitration clause contained in the agreements." Id. (alterations omitted) (quoting A.L. Williams & Assocs., Inc. v. McMahon, 697 F.Supp. 488, 494 (N.D.Ga. 1988)); see also MS Dealer, 177 F.3d at 947. In other words, a plaintiff-signatory cannot have his cake (use the agreement against the non-signatory) and eat it too (avoid enforcement of the arbitration clause within the agreement).

         Although the Florida Supreme Court has not opined on equitable estoppel in the arbitration enforcement context, we "predict how it would rule if faced with the issue." Spence v. ESAB Grp., Inc., 623 F.3d 212, 216 (3d Cir. 2010). We look to "'decisions of intermediate appellate courts, of federal courts interpreting that state's law, and of other state supreme courts that addressed the issue, ' as well as to 'analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue at hand.'" Id. at 216- 17 (quoting Norfolk S. Ry. Co. v. Basell USA Inc., 512 F.3d 86, 92 (3d Cir. 2008)). We are convinced that the Florida Supreme Court would adopt the same rules as South Dakota, as three of the five intermediate state appellate courts in Florida have had occasion to review the issue and adopted the same rules. See Heller v. Blue Aerospace, LLC, 112 So.3d 635, 637 (Fla. 4th Dist. Ct. App. 2013); Perdido Key Island Resort Dev., L.L.P. v. Regions Bank, 102 So.3d 1, 6 (Fla. 1st Dist. Ct. App. 2012); Armas v. Prudential Sec., Inc., 842 So.2d 210, 212 (Fla. 3d Dist. Ct. App. 2003).

         A non-signatory may enforce an arbitration clause against a signatory under Florida law in either of two circumstances. First, "[e]quitable estoppel is warranted when the signatory to the contract containing the arbitration clause raises allegations of concerted conduct by both the non-signatory and one or more of the signatories to the contract." Armas, 842 So.2d at 212 (adopting the rule set forth in MS Dealer, 177 F.3d at 947, as the South Dakota Supreme Court had done); see also Perdido, 102 So.3d at 6; Heller, 112 So.3d at 637. Second, a plaintiff may be "equitably estopped from avoiding arbitration with [a non-signatory defendant] when the claims stem from the same contractual obligation as [the plaintiff] is relying on . . . ." Armas, 842 So.2d at 212. The rationale behind this rule is to "prevent a plaintiff from relying on a contract when it works to his advantage and repudiating it when it works to his disadvantage by requiring arbitration." Id. (citing In re Humana Inc. Managed Care Litig., 285 F.3d 971 (11th Cir. 2002)).

         To summarize: both South Dakota and Florida courts would apply the doctrine of equitable estoppel to prevent a signatory from avoiding arbitration against a non-signatory in two circumstances. First, if a plaintiff-signatory alleges concerted conduct on the part of both the non-signatory and another signatory, that plaintiff may be equitably estopped from avoiding arbitration with the non-signatory. Second, if a plaintiff-signatory asserts a claim against a defendant based on an agreement, that plaintiff may be equitably estopped from avoiding arbitration on the basis that the defendant was not a signatory to that same agreement. Neither circumstance is applicable in this case.

         We hold that White cannot be forced to arbitrate under principles of equitable estoppel under either South Dakota or Florida law. First, there is no alleged "concerted conduct" or misconduct on the part of Sunoco and Citibank. See Armas, 842 So.2d at 212; Rossi, 648 N.W.2d at 815. While Sunoco contends that White strategically withheld allegations against Citibank, and that the "[p]laintiff artfully pleaded his claim to assert a fraudulent inducement theory against Sunoco alone" in order to connect the claims against Sunoco to the Cardholder Agreement, Sunoco Br. 34, 43-45, such assertions are unfounded. We decline to speculate as to whether White has some related grievance against Citibank and to compel White to arbitrate based on that speculation. Further, there is nothing in the record to suggest that Citibank engaged in any concerted misconduct with Sunoco regarding the 5-cent per gallon discount. Sunoco's suggestion that Citibank's participation in approving card applications and calculating statement credits somehow constitutes concerted misconduct is also unfounded. Moreover, the fact that Citibank provided credits to White after he complained does not establish concerted misconduct between Citibank and Sunoco.

         We also disagree with Sunoco's characterization of this case as akin to one alleging that the entire Card Agreement, including the arbitration agreement, is the product of fraud. See Sunoco Br. 34 (citing Merritt-Chapman & Scott Corp. v. Pa. Turnpike Comm'n, 387 F.2d 768, 771 (3d Cir. 1967)). This is not the case here because White is not launching a "general attack on a contract for fraud" or arguing that "if fraud is proven[, ] the entire contract, including the arbitration provision, would fall." Merritt-Chapman, 387 F.2d at 771. White's claims against Sunoco do not impinge on the integrity of the Card Agreement ...


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