Filed: Dec. 27, 2012
Latest Update: Mar. 26, 2017
Summary: assert a variety of state-law claims against Coverall. The district court's resolution of, plaintiffs' motion to expand the class relied not on whether, transferees had signed Transfer Agreements, but on whether they had, received copies of the Franchise Agreement. St. Fleur, 879 N.E.2d at 35.
United States Court of Appeals
For the First Circuit
No. 12-1301
PIUS AWUAH; DENISSE PINEDA; JAI PREM;
RICHARD BARRIENTOS; ANTHONY GRAFFEO; MANUEL DA SILVA;
and all others similarly situated,
Plaintiffs, Appellees,
ALDIVAR BRANDAO; NILTON DOS SANTOS; GERALDO CORREIA; PHILLIP
BEITZ; MARIAN LEWIS; STANLEY STEWART; BENECIRA CAVALCANTE,
Plaintiffs,
v.
COVERALL NORTH AMERICA, INC.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Howard, Circuit Judges.
Norman M. Leon, with whom Michael D. Vhay, Matthew J. Iverson,
and DLA Piper LLP were on brief, for appellant.
Hillary Schwab, with whom Shannon Liss-Riordan, Claret Vargas,
and Lichten & Liss-Riordan, P.C. were on brief, for appellees.
December 27, 2012
LYNCH, Chief Judge. This appeal is the latest
development in long-running litigation1 between Coverall North
America, Inc., a company which contracts to provide commercial
janitorial cleaning services to building owners or operators in the
United States, and its "franchisees," who do the cleaning.
Proceeding under federal diversity jurisdiction, the franchisees
assert a variety of state-law claims against Coverall. The
plaintiffs assert claims for breach of contract, misrepresentation,
deceptive and unfair business practices, misclassification as
independent contractors, and failure to pay wages due to them
under, inter alia, Mass. Gen. Laws ch. 149, § 148.
Which of the various plaintiffs are subject to the
arbitration provisions of the Franchise Agreement has been a
continuing source of dispute. See, e.g., Awuah v. Coverall N. Am.,
Inc. (Awuah I), 554 F.3d 7, 11-13 (1st Cir. 2009) (where plaintiffs
signed franchise agreements containing arbitration clauses,
unconscionability of arbitration agreement should be decided by an
arbitrator, but whether arbitration remedy is illusory should be
decided by court). A class has been certified of franchisees who
1
This case has an extensive history set forth in a number of
opinions. See Awuah v. Coverall N. Am., Inc., 563 F. Supp. 2d 312
(D. Mass. 2008); Awuah v. Coverall N. Am., Inc. (Awuah I),
554 F.3d
7 (1st Cir. 2009); Awuah v. Coverall N. Am., Inc.,
585 F.3d 479
(1st Cir. 2009); Awuah v. Coverall N. Am., Inc.,
707 F. Supp. 2d 80
(D. Mass. 2010); Awuah v. Coverall N. Am., Inc.,
740 F. Supp. 2d
240 (D. Mass. 2010); Awuah v. Coverall N. Am., Inc.,
791 F. Supp.
2d 284 (D. Mass. 2011); Awuah v. Coverall N. Am., Inc.,
952 N.E.2d
890 (Mass. 2011).
-2-
were not subject to arbitration, a portion of the much larger group
of plaintiffs.
Appellees, who have been referred to as "Unbound
Owners,"2 are a subgroup of the plaintiffs who became Coverall
franchisees by signing Consent to Transfer Agreements, or
Guaranties to Coverall Janitorial Franchise Agreements, which did
not themselves contain arbitration clauses, but which by reference
incorporated obligations under Franchise Agreements that did
contain such clauses. These appellees never received copies of the
Franchise Agreement, but there is no suggestion in the record that
they ever asked for copies or were denied copies of this agreement.
On February 10, 2012, the district court determined, in
the course of ruling on a motion to expand the class of plaintiffs
who could proceed in district court, that these plaintiff-appellees
did not have to arbitrate their claims against Coverall. That was
because, in its view, as a matter of contract construction, they
did not have adequate notice of the arbitration clauses contained
in the Franchise Agreements and so were not obligated to arbitrate.
See Awuah v. Coverall N. Am., Inc. (Awuah II), 843 F. Supp. 2d 172
(D. Mass. 2012). Coverall has appealed this determination and the
2
Because Coverall uses the term "Unbound Owners" to refer to
these plaintiff-appellees, we will also use this term, though we
ultimately conclude that these plaintiffs are bound by the
Franchise Agreement's arbitration clause.
-3-
court's refusal to stay proceedings as to these plaintiff-appellees
pending arbitration.
We conclude that the district court erred. Massachusetts
law, which governs this dispute, does not impose any such special
notice requirement upon these commercial contractual provisions.
Such a requirement, in any event, would be preempted by the Federal
Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., which requires
courts to place such arbitral agreements upon the same footing as
other contracts.
I.
A. Agreements Between Coverall and the Plaintiffs
Many (but not all) of the plaintiffs signed Franchise
Agreements with Coverall providing that, with certain exceptions
not implicated here,
all controversies, disputes or claims between Coverall,
its officers, directors, agents and/or employees (in
their respective capacities) and Franchisee (and
Franchisee's owners, officers, directors and/or any
guarantors of this Agreement) arising out of or related
to the relationship of the parties, this Agreement, any
related agreement between the parties, and/or any
specification, standard or operating procedure of
Coverall, including those set forth in the Coverall
Policy and Procedure Manual, which controversies,
disputes or claims are not resolved in accordance with
Paragraph 20 [concerning informal dispute resolution],
shall be submitted promptly for arbitration.
Thirty-one other plaintiffs, including the appellees
here, became Coverall franchisees either by signing Consent to
Transfer Agreements ("Transfer Agreements") and Guaranties to
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Coverall Janitorial Franchise Agreements ("Guaranties"), or by
signing only the latter Guaranties. The Franchise Agreements
permitted franchisees to "assign this Agreement to a person ('the
assignee') meeting the qualifications then established by Coverall
for granting new franchises, provided: . . . (ii) the assignee
enters into the franchise agreement then used by Coverall for
granting new franchises[.]" These thirty-one plaintiffs, however,
did not sign the Franchise Agreements. Moreover, sixteen of these
plaintiff-appellees, the Unbound Owners, never received a copy of
the Franchise Agreement, but did execute the Transfer Agreements
and/or the Guaranties.
The Transfer Agreements were each signed by Coverall, the
(prior) franchisee, and the transferee. The terms of the Transfer
Agreements, by which these plaintiffs became franchisees, varied.
Of the fifteen plaintiffs who signed Transfer Agreements but did
not receive copies of the Franchise Agreement, four plaintiffs --
Porfirio Aguilar, Marcelo Cardoso, Jose Santos, and Raimundo Lima
-- signed Transfer Agreements stating that
Transferee acknowledges that upon execution of the
Guaranty as required by ¶ 1(A) of this Consent that
Transferee shall become personally liable to Coverall for
the amount stated in ¶ [7 or 9] of this Consent, and
shall succeed to all of Franchisee's rights and
obligations under Franchisee's Janitorial Franchise
Agreement.
-5-
Another Unbound Owner, Givaldo Maltaroli, signed a Transfer
Agreement which transferred to him only a 50% interest in a
Coverall franchise, and provided that
Transferee further acknowledges that upon execution of
the Guarantee as required by ¶ 1(A) of this Consent, that
Transferee shall likewise become personally liable to
Coverall for the amount stated in ¶ 6(C) of this Consent,
and shall become liable with the Franchisee for all of
the obligations imposed by the Janitorial Franchise
Agreement.
Ten other Unbound Owners signed Transfer Agreements stating that
Transferee acknowledges that upon execution of the
Guaranty as required by ¶ 1(A) of this Consent that
Transferee shall become personally liable to Coverall for
the amount stated in ¶ [6 or 8] of this Consent.
All sixteen plaintiffs who did not receive copies of the
Franchise Agreement -- including Marildo Eloi, who did not sign a
Transfer Agreement or a Franchise Agreement -- signed Guaranties
providing in part that
In consideration of, and as an inducement to Coverall
North America, Inc. dba Coverall of . . . ("Coverall"),
entering into a Janitorial Franchise Agreement ("the
Agreement") dated . . . with [plaintiff] ("Franchisee"),
the undersigned ("the Guarantor(s)") does hereby
unconditionally guaranty, personally, the obligations of
the Franchisee under the Agreement, as follows:
1. Guarantor(s) jointly, severally and unconditionally
guaranties to Coverall performance of all
responsibilities, duties, indebtedness and
obligations of the Franchisee under the Agreement,
including, but not limited to (a) payment of any
fees due under the Agreement, including, but not
limited to, initial fee, royalties, management
fees, assignment fees, interest or late fees,
training fees (if any) and fees for products,
supplies or services furnished by Coverall to
Franchisee; (b) obligations to hold harmless,
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defend and indemnify Coverall and related parties;
and (c) any and all advances, debts, obligations,
notes and liabilities of the Franchisee incurred in
connection with or as a result of the Agreement,
previously, now, or hereafter made, incurred, or
created, voluntary or involuntary and, however
arising.
B. The District Court's Certification of a Class
On September 22, 2011, the district court certified a
class consisting of "all individuals who have owned a Coverall
franchise and performed work for Coverall customers in
Massachusetts at any time since February 15, 2004, who have not
signed an arbitration agreement or had their claims previously
adjudicated." See Awuah II, 843 F. Supp. 2d at 174. The effect of
this was to separate out those franchisees who were not subject to
arbitration "for the purposes . . . of calculating the . . .
damages for members of the class." Status Conf. Tr. 3 (D. Mass.
Sep. 22, 2011) (Civ. No. 07-10287).
On November 29, 2011, plaintiffs filed a motion for a
court ruling on the scope of the class, arguing that "those who
purchased their Coverall franchises through certain 'Consent to
Transfer' agreements[3] that do not contain arbitration clauses"
should be added to the class. Citing to federal cases brought
under federal employment statutes, plaintiffs argued that "it is
black-letter law in the First Circuit that an individual may not be
3
Plaintiffs apparently did not realize at this time that
transferee plaintiff Eloi had signed neither a Franchise Agreement
nor a Transfer Agreement.
-7-
bound to an arbitration clause if he does not have notice of it,"
and that "Coverall . . . has not produced any evidence that the
transferees were ever themselves shown the transferors' franchise
agreements or that they were in any other way informed about the
existence of an arbitration clause." Coverall responded that
"[p]laintiffs' assertion that some specific level of notice is
required before the Transferee-Owners may be bound by their
agreements to arbitrate is contrary to settled law."
On February 10, 2012, the district court granted
plaintiffs' motion in part and denied it in part. See Awuah II,
843 F. Supp. 2d at 181-82. The court stated that "[t]he First
Circuit has repeatedly held that an individual may not be bound to
an arbitration clause if he does not have notice of it." Id. at
179. As we discuss later, the cases that the court cited do not
support that broad proposition. The court found that some of the
transferee plaintiffs had received copies of the Franchise
Agreement and therefore had notice of the arbitration clause. Id.
at 180-81. With respect to "Transferees who signed the Consent to
Transfer Agreements[4] and did not obtain a copy of Coverall's
4
The district court apparently also did not recognize at this
time that one transferee plaintiff, Eloi, had signed a Guaranty but
not a Transfer Agreement. The district court's resolution of
plaintiffs' motion to expand the class relied not on whether
transferees had signed Transfer Agreements, but on whether they had
received copies of the Franchise Agreement. We will thus treat
Eloi, who did not receive a copy of the Franchise Agreement, as
included within the court's class expansion.
-8-
Franchise Offering Circular," the court concluded that "Coverall
did not give the Transferees information sufficient to put a
reasonably prudent employee on adequate notice of the agreement to
arbitrate." Id. at 180. The court expanded the class to include
these new plaintiffs who had not been given copies of the Franchise
Agreement, referred to in the documents they did receive. Id. at
181-82.
On February 23, 2012, Coverall filed a motion to stay
proceedings as to the new class members pending arbitration
pursuant to 9 U.S.C. § 3. The district court denied this motion
the next day. Coverall timely appealed the court's February 10,
2012 and February 24, 2012 rulings on March 7, 2012. Proceedings
have continued in the district court during the pendency of this
appeal.
II.
The FAA provides that "[a]n appeal may be taken from
. . . an order . . . refusing a stay of any action under section 3
of this title[.]" 9 U.S.C. § 16(a)(1)(A). "The arbitrability of
this dispute turns on the interpretation of contractual terms, a
question of law which we can determine in the first instance."
Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386, 388
(1st Cir. 1993). We do so de novo. See Shank/Balfour Beatty v.
Int'l Bhd. of Elec. Workers Local 99,
497 F.3d 83, 89 (1st Cir.
2007).
-9-
A. The Threshold Question of Arbitrability
The FAA provides that "upon being satisfied that the
making of the agreement for arbitration or the failure to comply
therewith is not in issue, the court shall make an order directing
the parties to proceed to arbitration in accordance with the terms
of the agreement." 9 U.S.C. § 4. "[A] gateway dispute about
whether the parties are bound by a given arbitration clause raises
a 'question of arbitrability' for a court to decide." Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002). Parties may
delegate questions of arbitrability to the arbitrator, but
"[u]nless the parties clearly and unmistakably provide otherwise,
the question of whether the parties agreed to arbitrate is to be
decided by the court, not the arbitrator." AT&T Techs., Inc. v.
Commc'ns Workers of Am.,
475 U.S. 643, 649 (1986).
This case is different from the prior appeal to us in
Awuah I, where a different group of plaintiffs conceded that they
"had franchise agreements containing arbitration clauses," and
those arbitration clauses incorporated by reference rules
delegating certain issues to the arbitrator. 554 F.3d at 9. In
Awuah I, we held that the arbitrator should decide whether the
arbitration clause was unconscionable, id. at 12, but that the
court should determine whether the arbitration remedy in this case
was illusory. Id. at 13. Here the district court was correct, as
to this different group of plaintiffs, to address the "predecessor
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question of whether there was an agreement at all to arbitrate."
Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d
1, 19 (1st Cir. 1999); see also Fantastic Sams Franchise Corp. v.
FSRO Ass'n Ltd.,
683 F.3d 18, 25 (1st Cir. 2012) ("There is no
dispute here that the district court, quite appropriately, first
looked for whether there was a valid, contractual agreement to
arbitrate."). The question of whether the Unbound Owners assumed
obligations under the arbitration clause of the Franchise
Agreements is for the court. See McCarthy v. Azure, 22 F.3d 351,
354-55 (1st Cir. 1994) ("[A] party seeking to substitute an
arbitral forum for a judicial forum must show, at a bare minimum,
that the protagonists have agreed to arbitrate some claims. . . .
The federal policy presumes proof of a preexisting agreement to
arbitrate disputes arising between the protagonists.") (emphasis
omitted). Nonetheless, the district court got the answer to the
question wrong, as a matter of both state and federal law.
B. Incorporation by Reference of the Arbitration Clause
"When deciding whether the parties agreed under the FAA
to arbitrate a certain matter, courts 'generally . . . should apply
ordinary state-law principles that govern the formation of
contracts.'" Rosenberg, 170 F.3d at 19 (alteration in original)
(quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944
(1995)). The district court determined, and the parties do not
-11-
dispute, that Massachusetts law governs this controversy. See
Awuah II, 843 F. Supp. 2d at 175.
"'[T]raditional principles' of state law allow a contract
to be enforced by or against nonparties to the contract through
'assumption,[5] piercing the corporate veil, alter ego,
incorporation by reference, third-party beneficiary theories,
waiver and estoppel[6] . . . .'" Arthur Andersen LLP v. Carlisle,
556 U.S. 624, 631 (2009) (quoting 21 R. Lord, Williston on
Contracts § 57:19, at 183 (4th ed. 2001)). Under Massachusetts
law, "'the language used in a contract to incorporate extrinsic
material by reference . . . must clearly communicate that the
purpose of the reference is to incorporate the referenced material
into the contract.'" NSTAR Elec. Co. v. Dep't of Pub. Utils., 968
5
Coverall argues that the Transfer Agreements should be read
as assignments, and that the Unbound Owners therefore assumed all
of the prior franchisees' obligations under their Franchise
Agreements. The Transfer Agreements merely state that "Franchisee
executed a Janitorial Franchise Agreement and related documents
(the 'Franchise Agreement') on [date], under which the Franchisee
was to operate a Coverall janitorial franchise (the 'Franchise'),"
and that "Franchisee desires to sell the following assets of his
Franchise to Transferee, and Transferee desires to purchase the
following assets of the Franchise." This language does not
accomplish an assignment of the prior franchisees' rights and
obligations under the Franchise Agreement.
6
Coverall also argues on appeal that because the Unbound
Owners enjoyed the benefits of the Franchise Agreement, they are
bound by the arbitration clause of this agreement under the
doctrine of equitable estoppel. Coverall did not make this
argument before the district court and we do not address it.
-12-
N.E.2d 895, 905 (Mass. 2012) (quoting Northrop Grumman Info. Tech.,
Inc. v. United States, 535 F.3d 1339, 1345 (Fed. Cir. 2008)).
The Transfer Agreements, as we have described, do not all
use the traditional language of "incorporating by reference" the
arbitration clause of the Franchise Agreement. But no such magic
terms are required. For some Transfer Agreements at issue, other
language in the agreements clearly communicated the purpose of
incorporating the arbitration clause. These agreements7 provided
that the transferees "succeed to all of Franchisee's rights and
obligations under Franchisee's Janitorial Franchise Agreement," or
"become liable with the Franchisee for all of the obligations
imposed by the Janitorial Franchise Agreement." Since the
arbitration clause of the Franchise Agreement creates a right and
an obligation to submit "all controversies, disputes or claims
between Coverall . . . and Franchisee" for arbitration, these
Transfer Agreements sufficiently incorporated by reference the
arbitration clause.
Moreover, the Transfer Agreements are not the only
pertinent documents executed by the parties. All of the Unbound
Owners also signed Guaranties under which they "jointly, severally
7
Other Transfer Agreements included no reference to the
arbitration clause or to general rights and obligations under the
Franchise Agreement, so those agreements do not of themselves
incorporate the arbitration clause and require referral to
arbitration. But the Transfer Agreements are not the only
agreements which require interpretation.
-13-
and unconditionally guarantie[d] to Coverall performance of all
responsibilities, duties, indebtedness and obligations of the
Franchisee under the [Franchise] Agreement" (emphasis added). By
like reasoning, they incorporate the responsibilities, duties, and
obligations with respect to arbitration.
Appellees argue, to the contrary, that:
This provision, which does not mention the arbitration
clause, cannot suffice to bind these workers to arbitrate
their claims with Coverall. Indeed, it is clear from the
examples that the Guaranty provides of what these
“responsibilities, duties, indebtedness and obligations”
are that they all relate to the workers’ substantive
obligations to pay money and/or otherwise be financially
indebted to Coverall in exchange for cleaning work.
We disagree. "'"All" means "all," or if that is not clear, all,
when used before a plural noun . . . means "[t]he entire or
unabated amount or quantity of, the whole extent, substance, or
compass of, the whole."'" Instrument Indus. Trust ex rel. Roach v.
Danaher Corp., No. 033960BLS, 2005 WL 3670416, at *6 (Mass. Super.
Nov. 28, 2005) (quoting Hollinger, Inc. v. Hollinger Int'l, Inc.,
858 A.2d 342, 377 (Del. Ch. 2004)). Moreover, the Guaranties'
explicit references to "responsibilities," "duties," and
"obligations" undercut appellees' claim that the Guaranties only
concerned "obligations to pay money." Massachusetts case law leads
to this result. See, e.g., Mass. Org. of State Eng'rs & Scientists
v. Labor Relations Comm'n,
452 N.E.2d 1117, 1122 (Mass. 1983)
(discussing "duty to arbitrate") (emphasis added); Norton v. Mass.
Bay Transp. Auth.,
336 N.E.2d 854, 855 (Mass. 1975) (discussing
-14-
"obligation to arbitrate") (emphasis added). The Guaranties
"clearly communicate[d] that the purpose of th[is] reference [was]
to incorporate" responsibilities, duties, and obligations under the
Franchise Agreement, NSTAR Elec. Co., 968 N.E.2d at 905, which
included those under the arbitration clause.
At oral argument, appellees belatedly raised a new
argument, citing Black's Law Dictionary to support the proposition
that "what the Guaranty says is, the franchisee has to do these
things, but if the franchisee doesn't do it, you're on the hook."
This is too late, so the argument is waived, see United States v.
Santiago-Pérez, 666 F.3d 57, 60 n.6 (1st Cir. 2012), but beyond
that, it does not work. The Guaranties expressly identify the
transferees as both the "Franchisees" and the "Guarantors."
Plaintiff-appellees are not just guarantors, they are also
franchisees. They are like the other franchisees who signed the
Franchise Agreement directly and it would be odd in these
circumstances to treat the two groups differently. The Guaranties
do not merely impose responsibilities upon transferees for the
obligations of other persons.
C. The District Court's Erroneous Adoption of a Special
Heightened Notice Requirement for Such Commercial
Arbitration Clauses
The district court's reasoning essentially adopted the
view that arbitration clauses cannot be enforced unless there is
heightened notice to the party sought to be bound. It did not
-15-
purport to find this heightened notice requirement in state law,
but rather in a series of cases from this court, cases where the
underlying claim was based, unlike here, on special provisions in
federal employment statutes.
Appellees argue not only that they did not enter into the
arbitration clause in the Franchise Agreement, but that "it would
be unconscionable to bind [them] to an arbitration clause that they
never even saw," citing Skirchak v. Dynamics Research Corp., 508
F.3d 49 (1st Cir. 2007). Skirchak is clearly distinguishable from
this case, since in Skirchak "the parties . . . affirmatively
stated their intention that the court decide the unconscionability
. . . question[]." Id. at 56. There is no such agreement between
the parties here. Instead, since we conclude that the Unbound
Owners effectively entered into an arbitration agreement with
Coverall, any claim of the unconscionability of this agreement is
for the arbitrator, as in Awuah I. See 554 F.3d at 12.
In Massachusetts courts, it has long been the rule that
"[t]ypically, one who signs a written agreement is bound by its
terms whether he reads and understands them or not." St. Fleur v.
WPI Cable Sys./Mutron, 879 N.E.2d 27, 35 (Mass. 2008); see also
Haufler v. Zotos,
845 N.E.2d 322, 333 (Mass. 2006); Cohen v.
Santoianni,
112 N.E.2d 267, 271 (Mass. 1953); Wilkisius v. Sheehan,
155 N.E. 5, 6 (Mass. 1927); Atlas Shoe Co. v. Bloom,
95 N.E. 952,
953 (Mass. 1911); Rice v. Dwight Mfg. Co.,
2 Cush. 80, 87 (Mass.
-16-
1848). Massachusetts law is explicit that it does not impose a
special notice requirement upon agreements containing arbitration
clauses. See St. Fleur, 879 N.E.2d at 34-35 (error to conclude
that party "bore the risk of [counter-party's] ignorance of the
nature and contents of the arbitration agreement").
Moreover, the FAA provides that arbitration agreements
"shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract." 9 U.S.C. § 2. This clause preempts state-law "defenses
that apply only to arbitration or that derive their meaning from
the fact that an agreement to arbitrate is at issue." AT&T
Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1746 (2011). Indeed,
the Supreme Court recently vacated a state supreme court decision
which applied a state law standard inconsistent with the FAA and
remanded for application of the FAA rule. Nitro-Lift Tech., LLC v.
Howard,
133 S. Ct. 500 (2012) (per curiam). Even if the district
court had identified a principle of state law that imposed a
special notice requirement before parties such as these could enter
into an arbitration agreement, as it did not, such a principle
would be preempted by the FAA. See Doctor's Assocs., Inc. v.
Casarotto,
517 U.S. 681, 687 (1996) (holding that FAA displaces
Montana statute that "conditions the enforceability of arbitration
agreements on compliance with a special notice requirement not
applicable to contracts generally"); Morales v. Sun Constructors,
-17-
Inc., 541 F.3d 218, 224 (3d Cir. 2008) ("[A]pplying a heightened
'knowing and voluntary' standard to arbitration agreements would be
inconsistent with the FAA.").
In addition, the cases from which the district court
purported to find a special notice requirement for these contracts
do not impose such a requirement. To begin, the district court
erred in consulting cases arising under federal law rather than
Massachusetts law, which governs here. State law imposes no such
heightened notice requirement upon contracts, including arbitration
agreements. Moreover, two of the three cases from this court that
the district court cited -- McCarthy, 22 F.3d at 354-55, and
Brennan v. King, 139 F.3d 258, 264 (1st Cir. 1998) -- stood not for
the proposition that a special notice requirement applied to
arbitration agreements, but only for the unremarkable principle
that "a party seeking to substitute an arbitral forum for a
judicial forum must show, at a bare minimum, that the protagonists
have agreed to arbitrate some claims." McCarthy, 22 F.3d at 354-55
(emphasis omitted); see also Brennan, 139 F.3d at 264 (quoting
McCarthy, 22 F.3d at 354-55).
The district court also cited Campbell v. Gen. Dynamics
Gov't Sys. Corp., 407 F.3d 546 (1st Cir. 2005), which involved
claims of violation of federal statutes whose terms and language
provide particular protections for claimants. Campbell concerns
language in the ADA which provides that “[w]here appropriate and to
-18-
the extent authorized by law, the use of alternative means of
dispute resolution, including . . . arbitration, is encouraged to
resolve disputes arising under this chapter.” 42 U.S.C. § 12212.
Campbell interpreted this language, 407 F.3d at 553-55, as did
Rosenberg, a prior case addressing identical language in the Civil
Rights Act of 1991. 170 F.3d at 18-19. These cases construed this
language to require "minimally sufficient notice," Campbell, 407
F.3d at 559, or "some minimal level of notice," Rosenberg, 170 F.3d
at 21, that those statutory claims are subject to arbitration.
Campbell limited its holding to "purported waiver[s] of the right
to litigate ADA [Americans with Disabilities Act] claims." 407
F.3d at 559. In turn, Rosenberg expressly stated that "this case
does not implicate any broader questions of enforceability of the
arbitration clause when the 1991 CRA [Civil Rights Act] or ADEA
[Age Discrimination in Employment Act] are not involved." 170 F.3d
at 19.
The Supreme Judicial Court of Massachusetts has reached
the same conclusion that we do. It has stated that "[t]he
Rosenberg court explicitly limited its holding to claims brought
under Federal civil rights laws" and held that "the Rosenberg
holding does not apply" in the absence of "the precise wording of
Federal civil rights statutes." St. Fleur, 879 N.E.2d at 35. The
-19-
district court erred in applying the requirements of Campbell and
Rosenberg to appellees' state-law claims.8
III.
We reverse the district court's February 10, 2012 order
granting plaintiffs' motion for ruling on scope of class to the
extent it expanded the class certified on September 22, 2011 to
include the Unbound Owners, and its February 24, 2012 order denying
Coverall's motion to stay proceedings pending arbitration. We
remand for further proceedings consistent with this opinion,
including issuance of a stay of the Unbound Owners' claims pending
arbitration.
So ordered. No costs are awarded.
8
"The appropriateness analysis is case-specific" and
"fact-dependent." Campbell, 407 F.3d at 554. The circumstances of
this case differ markedly from those in Campbell and Rosenberg. If
the test described in those cases were applicable here -- which it
is not -- we do not suggest that Coverall failed to provide
minimally sufficient notice to the Unbound Owners.
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