Wednesday, April 8, 2026
Page 4
Ninth Circuit:
Arbitration by Non-Parties to Contract Can’t Be Compelled
Opinion Says Recent Supreme Court Decision Favoring Enforcement of Clauses Delegating to Arbitrator Question of Arbitrability Does Not Prevent Court From Declining to Follow Provision Where Defendant Is Not Party to Agreement
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that a motion to compel arbitration filed by a car manufacturer, in a certified class action asserting violations of California’s lemon law, was properly denied where the defendant was not a party to the dealership contract containing the agreement to arbitrate, with the panel declining to find that a “delegation clause” providing that an arbitrator is to decide questions of validity forecloses the result.
Circuit Judge Michelle T. Friedland wrote yesterday’s opinion, acknowledging that the 2019 U.S. Supreme Court decision in Henry Schein Inc. v. Archer & White Sales Inc. held that there is no “wholly groundless” exception to the enforcement of a clause delegating to an arbitrator the question of arbitrability. However, she opined:
“[C]ontrary to [the automaker’s] argument, Henry Schein does not create an exception to the general rule that only the parties to an arbitration agreement can enforce it….Because the Court in Henry Schein was not asked to consider whether a delegation clause requires delegating the arbitrability question to an arbitrator when there is not a valid arbitration agreement between the party moving to compel arbitration and the party it is seeking to compel to arbitrate, Henry Schein does not [govern].”
Senior Circuit Judge Mary M. Schroeder and Senior District Court Judge Karen E. Schreier of the District of South Dakota, sitting by designation, joined in the opinion.
Putative Class Action
Seeking to compel arbitration was FCA US LLC, a Michigan-based car manufacturer responsible for producing vehicles under the Chrysler, Dodge, Jeep, and Ram brands. In 2018, Shawn Alger filed a putative class action against the automaker, asserting claims under California consumer protection laws based on alleged defects in the headrests of certain vehicles that purportedly caused the spring-loaded components to deploy unexpectedly.
In 2020, then-Senior District Court Judge Morrison C. England Jr. (now serving as an arbitrator) certified a class of “all persons in California who…have owned or leased any Class Vehicle…that is equipped with an Automatic Head Restraint System.”
He defined “Class Vehicles” as “2010-2018 Dodge Journey; 2010-2011 Dodge Nitro; 2010-2012 Jeep Liberty; 2010-2017 Jeep Patriot or Compass; 2010-2012 Dodge Caliber; 2010-2018 Dodge Caravan; 2011-2018 Dodge Durango; 2011-2018 Jeep Grand Cherokee; and 2010-2014 Sebring/Avenger.”
In 2024, class member Jeffrey Olson, a resident of Placer County, substituted in as the named plaintiff. Olson had signed a contract with an Autonation Chrysler Dodge Jeep dealership when he leased an allegedly defective Jeep in 2017, agreeing to arbitrate “any dispute” between the parties and to submit to “binding arbitration” and question as to the “validity, scope, and interpretation” of the agreement.
FCA moved to compel Olson to arbitration, arguing that the delegation clause in the agreement required an arbitrator to decide whether the class members’ claims are arbitrable and, in the alternative, that the agreement plainly covers causes of action against the automaker. In September 2024, District Court Judge Daniel J. Calabretta of the Eastern District of California rejected the assertions and denied the request.
Matter of Contract
Noting that “[a]rbitration is a matter of contract,” Friedland said:
“A delegation clause is effectively a second arbitration agreement in which the parties agree to arbitrate threshold issues concerning the interpretation or scope of a primary arbitration agreement….Where it is clear that the parties have agreed to delegate questions of arbitrability to an arbitrator, the Federal Arbitration Act requires federal courts to enforce that delegation.”
However, she remarked:
“We agree with Olson that FCA may not compel him to arbitrate. With limited exceptions, non-parties to an arbitration agreement cannot enforce the agreement’s terms against a signatory. Olson never agreed to arbitrate with FCA, and no exceptions to the general rule that only parties to an arbitration agreement can enforce it apply here.”
Citing the 2013 Ninth Circuit opinion in Kramer v. Toyota Motor Corp., which held that a delegation clause in a dealership contract did not contain “clear and unmistakable evidence” that the plaintiffs agreed to arbitrate arbitrability with third parties such as Toyota, she rejected FCA’s assertion that Henry Schein effectively overruled the decision.
The jurist opined:
“Concluding otherwise would lead to absurd results. FCA’s reading of Henry Schein would mean that delegation clauses could be enforced even by third parties who have no connection whatsoever to the underlying arbitration agreement.”
Covered Claims
As to whether the agreement covers claims against the manufacturer, the defendant cited language in the contract indicating that “any claim” related to “any related transaction or relationship” is to be resolved in arbitration. Unpersuaded, the judge wrote:
“That argument ignores the rest of the text of the agreement, which limits its application to claims or disputes between ‘you’ (i.e., Olson) and ‘us or our employees, agents, successors or assigns’ (i.e., the dealership and its employees, agents, successors, or assigns). Again, FCA does not claim to be an employee, agent, successor, or assign of the dealership. The plain language of the agreement therefore does not require Olson to arbitrate any claims with FCA.”
Turning to FCA’s assertion that equitable estoppel principles demand that the company be allowed to compel arbitration, she commented:
“FCA’s argument for why it should be able to use equitable estoppel to enforce the arbitration agreement in Olson’s lease—that Olson would not have claims against FCA if he had not leased the car—is exactly the type of argument the California Supreme Court rejected [last year] in Ford Motor Warranty Cases. Like the plaintiffs in Ford Motor Warranty Cases, none of Olson’s claims are founded in or intertwined with the terms of the lease agreement. Rather, Olson’s claims rely on rights created by California statutes and by a warranty provided directly by FCA.”
She declared:
“[W]e affirm the district court’s denial of FCA’s motion to compel arbitration.”
The case is Olson v. FCA US LLC, 24-6527.
Copyright 2026, Metropolitan News Company