Lubin v. Starbucks Corp., No. 21-11215, __ F.4th __, 2024 WL 5113125 (11th Cir. Dec. 16, 2024) (Before Circuit Judges Lagoa, Brasher, and Tjoflat)

Your ERISA Watch is celebrating the holidays, so this week’s edition is limited to the case of the week, which comes out of the Eleventh Circuit. As our loyal readers know, arbitration is a hot topic these days. Most arbitration cases have focused on whether and when a plan participant can be forced into arbitration. But what about plaintiffs who are merely beneficiaries under a plan, not participants? Do the same rules apply to them?

This week the Eleventh Circuit gave some answers to these questions in this case involving plaintiff Raphyr Lubin. Lubin is the husband of a former Starbucks employee and had health insurance coverage under Starbucks’ Welfare Benefits Plan through his wife’s employment. He and Ariel Torres, a former Starbucks employee, brought this putative class action against Starbucks in the Middle District of Florida, alleging that Starbucks sent them deficient health insurance notices under ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Lubin’s wife and Torres had both signed employment agreements that required them to arbitrate certain disputes, and thus Starbucks filed a motion to compel arbitration. Torres agreed to go to arbitration, but Lubin refused. Lubin contended that while his wife may have signed an employment agreement containing an arbitration provision, he did not sign it and thus it was unenforceable against him.

The district court agreed with Lubin and denied Starbucks’ motion. The court held that Lubin was not a party to the employment agreement and was not suing to enforce that agreement. Instead, he was suing to enforce his own statutory rights.

Starbucks was not pleased and appealed. However, the Eleventh Circuit affirmed in this published opinion, holding that “Lubin never signed or otherwise agreed to the arbitration agreement with Starbucks. Because he was not a party to the agreement, the Court cannot compel him to adhere to the terms of the agreement…he seeks to vindicates his rights, not his wife’s.”

Starbucks raised a number of arguments in opposition which the Eleventh Circuit serially dispatched. At the outset, Starbucks contended the federal courts should not even be ruling on the issue because “the arbitration agreement’s delegation clause grants exclusive jurisdiction to an arbitrator to determine whether Lubin must arbitrate.”

However, the Eleventh Circuit ruled that Lubin could not be bound by the delegation clause because he did not sign the agreement containing the clause and thus was not a party to it. Furthermore, the court noted that the agreement contained an exclusion clause, which provided that actions to “enforce” the agreement or “compel arbitration” are excluded from arbitration. This language was at odds with the agreement’s delegation clause, thus creating an ambiguity that had to be resolved in Lubin’s favor.

Starbucks also asserted three arguments under Florida law for why Lubin should be compelled to arbitrate. First, Starbucks argued that under equitable estoppel principles Lubin should not be able to simultaneously claim the benefits of his wife’s employment agreement (i.e., health insurance and COBRA protections), while disclaiming the burdens imposed by that agreement (i.e., arbitration). Lubin responded that this argument was irrelevant because he was not suing Starbucks based on the agreement, and the Eleventh Circuit agreed: “Lubin is not claiming the benefits of the agreement while simultaneously attempting to avoid its burdens… Rather, Lubin sues based on Starbucks’s failure to fulfill its notice duties under COBRA.”

Second, Starbucks asserted the third-party beneficiary doctrine. Starbucks argued that if Lubin, as a third party to the employment agreement, wanted the benefits of that agreement, he must be bound by the provisions in that agreement, including the arbitration provision. However, the Eleventh Circuit explained that the third-party beneficiary doctrine does not generally allow contracting parties to bind a non-contracting party simply by conferring a benefit on that party. In any event, the court noted once again that Lubin was not suing to enforce any contractual duty in the employment agreement and thus the doctrine was inapplicable. Instead, Lubin was suing “under federal law, alleging that Starbucks violated statutory duties that it owed him under COBRA.” Thus, “Lubin’s wife and Starbucks cannot bind Lubin to arbitrate merely by conferring spousal health coverage on him.”

Third, and finally, Starbucks contended that Lubin should be compelled to arbitrate because his claim was “derivative” of his wife’s rights. The Eleventh Circuit quickly dispensed with this argument: “Lubin’s claim is not derivative of his wife’s claim. Lubin’s claim is premised on an independent statutory right…the mere fact that Lubin was a beneficiary of his wife’s health plan does not mean that he sues to enforce his wife’s rights under her employment agreement[.]”

In short, the Eleventh Circuit concluded that because Lubin was not a party to his wife’s employment agreement, and because he had his own independent rights conferred on him by another source, i.e. federal law in the form of ERISA and COBRA, the agreement’s arbitration clause was unenforceable against him. As a result, his claims will proceed in federal court, even though his co-plaintiff’s identical claims ended up in arbitration.

The ruling was not unanimous, however. Judge Tjoflat penned a concurrence in which he agreed that Lubin’s claim “is not the product of any bargained-for exchange with Starbucks” and thus “Starbucks cannot compel him to arbitrate under an agreement that is not his own.”

However, Judge Tjofat “would not speculate on how the law would apply under different circumstances.” As a result, he did not join the majority’s discussion of the delegation clause or the third-party beneficiary doctrine. According to Judge Tjoflat, much of this discussion was “unnecessary to the resolution of this dispute.” Instead, “it suffices to hold that Lubin cannot be bound by an arbitration agreement he did not sign, particularly when he sues to enforce a statutory right rather than a benefit of the contract. I would leave other questions for a later, more appropriate dispute.”

And thus ends another year of ERISA jurisprudence. All of us at Your ERISA Watch hope you have a happy holiday season and a rewarding 2025.