Eleventh Circuit Upholds Non-Signatory’s Right to Sue Under ERISA Despite Arbitration Agreement

In Lubin v. Starbucks Corp., No. 21-11215, __F.4th__, 2024 WL 5113125 (11th Cir. Dec. 16, 2024), a pivotal ruling that highlights the intricacies of arbitration agreements and their enforceability, the Eleventh Circuit Court of Appeals recently determined that a non-signatory to an arbitration agreement cannot be compelled to arbitrate claims under ERISA and COBRA if they did not expressly agree to such terms. In this case, the court was tasked with deciding whether Raphyr Lubin, the spouse of a former Starbucks employee, could be forced into arbitration based on his wife’s employment contract.

Lubin, who was covered under his wife’s Starbucks health plan, claimed that Starbucks sent him a deficient COBRA notice. The crux of the matter, however, was that while Lubin’s wife was bound by an arbitration agreement due to her employment, Lubin himself never agreed to arbitrate disputes with Starbucks. This distinction was foundational in the court’s decision to uphold the district court’s denial of Starbucks’s motion to compel arbitration.

A central question in this case was whether Lubin, as a non-signatory, could be held to the terms of an arbitration agreement that he did not enter. The court was guided by the fundamental principle that arbitration is a matter of contract. As established by the Federal Arbitration Act, arbitration agreements are enforceable according to their terms, yet this enforceability is contingent upon the involved parties having expressly agreed to arbitrate. In Lubin’s situation, he had not consented to any such agreement, and thus, the court could not mandate arbitration.

Starbucks contended that the arbitration agreement’s delegation clause provided an arbitrator with exclusive authority to resolve the issue of whether Lubin was obliged to arbitrate. Delegation clauses are typically used to assign the question of an agreement’s enforceability to an arbitrator rather than a court. However, the court found ambiguity in the agreement’s language. While the delegation clause seemed to provide the arbitrator with authority over disputes concerning the agreement’s applicability, there was an exclusion clause that specifically stated actions to enforce the agreement or compel arbitration were not subject to arbitration. This contradiction meant there was no “clear and unmistakable” evidence of the parties’ intent to arbitrate the issue of arbitrability itself.

This decision serves as a critical reminder of the boundaries of arbitration agreements, particularly concerning individuals who are not signatories to such contracts. By upholding Lubin’s right to pursue his statutory claims in court, the ruling reinforces the principle that arbitration is fundamentally a matter of consent and contract. This case underscores the necessity for employers and organizations to clearly delineate the parties bound by arbitration agreements and highlights the judiciary’s role in safeguarding individuals’ statutory rights against undue enforcement of arbitration clauses. As arbitration continues to be a favored mechanism for dispute resolution, this decision emphasizes the importance of precision and clarity in the drafting of arbitration agreements, ensuring they are enforceable only against those who have explicitly agreed to their terms.