United States Court of Appeals For the First Circuit
No. 25-1254
ABDULKADIR ABDISALAM, individually and for all others similarly situated,
Plaintiff, Appellee,
v.
STRATEGIC DELIVERY SOLUTIONS, LLC,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Barron, Chief Judge, Kayatta and Rikelman, Circuit Judges.
James A. Eckhart, with whom Andrew J. Butcher and Scopelitis, Garvin, Light, Hanson & Feary, P.C. were on brief, for appellant.
Brant Casavant, with whom Brook Lane and Fair Work P.C. were on brief, for appellee.
March 17, 2026 RIKELMAN, Circuit Judge. For several years, Abdulkadir
Abdisalam provided courier services for Strategic Delivery
Solutions, LLC ("SDS"), a healthcare delivery company.
Eventually, he sued SDS, alleging that it misclassified its
couriers as independent contractors and failed to pay them
appropriate wages, all in violation of Massachusetts law. In
response, SDS filed a motion to stay the case and compel
arbitration of Abdisalam's claims. SDS pointed to an arbitration
provision in an agreement between it and Abdul Courier, LLC, a
corporation that SDS had required Abdisalam to form in order to
provide it with courier services. The district court determined
that Abdisalam was not a signatory to that agreement and could not
be bound by its arbitration provision as a matter of contract law
or under principles of equitable estoppel; it then denied SDS's
motion. We agree with the district court's ruling and thus affirm.
I. BACKGROUND
A. Relevant Facts
SDS transports medication and medical supplies for
pharmacies, hospitals, and laboratories and operates in several
states, including Massachusetts.1 To provide these healthcare
delivery services, SDS retains individuals to act as couriers.
1 We draw the relevant facts from the operative complaint and the parties' submissions related to SDS's motion to compel arbitration. See Cullinane v. Uber Techs., Inc., 893 F.3d 53, 55 (1st Cir. 2018).
- 2 - But SDS does not hire the couriers directly; instead, it requires
prospective couriers to form "their own corporations" and then
contracts with those corporations to provide courier services for
SDS. SDS classifies its couriers as independent contractors,
rather than employees.
Consistent with its usual practice, SDS required
Abdisalam to form his own corporation before he could provide
deliveries for the company.2 So, Abdisalam created Abdul Courier,
LLC, which he registered with the Secretary of the Commonwealth of
Massachusetts.
Abdul Courier, LLC and SDS entered into an Independent
Vendor Agreement for Transportation Services (the "Vendor
Agreement") in April 2019. The Vendor Agreement is a form contract
that SDS prepared; neither Abdul Courier, LLC nor Abdisalam drafted
or negotiated any portion of it. Abdisalam signed the Vendor
Agreement as the "Owner" of Abdul Courier, LLC.
In its first sentence, the Vendor Agreement states that
it was "entered into . . . by and between ABDUL COURIER
LLC . . . (the 'Vendor') and Strategic Delivery Solutions,
LLC . . . ('SDS')." The agreement sets out that Abdul Courier,
To the extent SDS disputes Abdisalam's affidavit testimony 2
that SDS required him to form his own corporation, we construe that fact in the light most favorable to Abdisalam as the party opposing the motion to compel arbitration. See Air-Con, Inc. v. Daikin Applied Latin Am., LLC, 21 F.4th 168, 175 (1st Cir. 2021).
- 3 - LLC has agreed to provide courier services for SDS. It also
includes an arbitration provision, which indicates, in relevant
part:
The parties agree to comply and be bound by The Federal Arbitration Act. The parties agree that any dispute, difference, question, or claim arising out of or in any way relating to this Agreement or the transportation services provided hereunder shall be subject to binding arbitration in accordance with the Rules for Commercial Arbitration of the American Arbitration Association . . . in effect at the time such arbitration is initiated. The parties agree that the issue of arbitrability shall be determined by the arbitrator applying the law of the state of residence of the Vendor.
Under Section 19 of the Vendor Agreement, the "Governing
Law" provision, the entire agreement must be interpreted based on
the law of the Vendor's state of residence. The parties agree
that Massachusetts law applies per this provision.3
Abdisalam started performing courier services for SDS in
May 2019. Typically, he worked fourteen to sixteen hours per day,
five or six days per week. He used his personal vehicle to deliver
prescription medication and other medical supplies. According to
Abdisalam, SDS has not reimbursed him for transportation costs
3 Abdul Courier, LLC was a Massachusetts business formed by a Massachusetts resident, Abdisalam, so there is no dispute that Massachusetts law governs the Vendor Agreement. See BRT Mgmt. LLC v. Malden Storage LLC, 68 F.4th 691, 696 (1st Cir. 2023) (finding that an LLC was a citizen of Massachusetts for diversity purposes "because its sole member [was] a natural person who [was] a resident of Massachusetts").
- 4 - that he incurred in connection with his courier work, including
fuel, tolls, maintenance, insurance, or mileage on his personal
vehicle.
The Secretary of the Commonwealth of Massachusetts
involuntarily dissolved Abdul Courier, LLC at the end of 2023.4
Nevertheless, Abdisalam continued performing deliveries for SDS
through October 2024.
B. Procedural History
In July 2024, Abdisalam filed this lawsuit against SDS
in the Massachusetts Superior Court, alleging violations of two
Massachusetts statutes: the Massachusetts independent contractor
statute, Mass. Gen. Laws ch. 149, § 148B, and the Massachusetts
Wage Act, Mass. Gen. Laws ch. 149, § 148. He sought multiple forms
of relief, including a declaratory judgment that SDS's couriers
are, as a matter of law, employees, not independent contractors;
restitution of "all unpaid wages, including for all improper
deductions taken from the medical couriers' wages"; and
restitution "at the annual IRS reimbursement rate for all miles
driven in connection with [the couriers'] work for SDS." Abdisalam
sued on his own behalf and on behalf of a putative class of
similarly situated couriers.
4 The parties have not pointed to anything in the record that indicates the reason for the involuntary dissolution.
- 5 - SDS removed the case to federal court based on diversity
jurisdiction. See 28 U.S.C. §§ 1332, 1441(a). It then filed a
motion to compel arbitration and stay the case. The district court
denied SDS's motion, concluding that Abdisalam was not a signatory
to the Vendor Agreement and thus could not be bound by its
arbitration provision as a matter of contract law. It also
rejected SDS's argument that Abdisalam could be required to
arbitrate as a nonsignatory under various estoppel theories.
SDS timely appealed.
II. STANDARD OF REVIEW
We review de novo the district court's denial of a motion
to compel arbitration. See Morales-Posada v. Cultural Care, Inc.,
141 F.4th 301, 307 (1st Cir. 2025). We may affirm the court's
order "on any independent ground made manifest by the record."
Barbosa v. Midland Credit Mgmt., Inc., 981 F.3d 82, 86 (1st Cir.
2020) (quoting Nat'l Fed'n of the Blind v. The Container Store,
Inc., 904 F.3d 70, 78 (1st Cir. 2018)).
III. DISCUSSION
The parties' dispute focuses on three central questions.
First, who should have decided whether Abdisalam was bound by the
Vendor Agreement's arbitration provision: the district court or an
arbitrator? Second, assuming that the district court should have
decided the first question, did the court correctly determine that
Abdisalam did not sign the Vendor Agreement in his personal
- 6 - capacity, and thus was not bound by its arbitration provision?
And third, even if Abdisalam did not sign the Vendor Agreement in
his personal capacity, could SDS nevertheless compel him to
arbitrate his claims based on various theories of equitable
estoppel? We conclude that the district court correctly resolved
all these issues in Abdisalam's favor.
In conducting our review, we focus on the Vendor
Agreement, which we must interpret based on Massachusetts law under
its "Governing Law" provision. "As a federal court sitting in
diversity jurisdiction, . . . 'we endeavor to predict how the
Commonwealth's highest court would' rule on the" state-law issues
presented. Blakesley v. Marcus, 158 F.4th 90, 95 (1st Cir. 2025)
(quoting Lawrence Gen. Hosp. v. Cont'l Cas. Co., 90 F.4th 593, 598
(1st Cir. 2024)). In doing so, we bear in mind that we "are not
free to extend the reach of state law." Doe v. Trs. of Bos. Coll.,
942 F.3d 527, 535 (1st Cir. 2019).
A. The Question of Arbitrability
Under the Federal Arbitration Act, which was
incorporated into the Vendor Agreement's arbitration provision,
courts must "treat arbitration as 'a matter of contract' and
enforce agreements to arbitrate 'according to their terms.'"
Air-Con, Inc. v. Daikin Applied Latin Am., LLC, 21 F.4th 168, 174
(1st Cir. 2021) (quoting Henry Schein, Inc. v. Archer & White
Sales, Inc., 586 U.S. 63, 67 (2019)). In seeking to compel
- 7 - Abdisalam to arbitrate his claims, SDS had the burden to establish
"that a valid agreement to arbitrate exist[ed]" between it and
Abdisalam. Id. (quoting Soto-Fonalledas v. Ritz-Carlton San Juan
Hotel Spa & Casino, 640 F.3d 471, 474 (1st Cir. 2011)). "Courts
apply state contract law to determine whether a valid arbitration
agreement exists." Id.
As we previewed above, the Vendor Agreement is governed
by Massachusetts law. And under Massachusetts law, "[t]he question
[of] whether [Abdisalam] is bound by the arbitration agreement
between [SDS and Abdul Courier, LLC] is a 'gateway dispute' that
[is] an issue for the court, and not the arbitrator, to decide in
the first instance." Walker v. Collyer, 9 N.E.3d 854, 859-60
(Mass. App. Ct. 2014) (quoting Mass. Highway Dep't v. Perini Corp.,
828 N.E.2d 34, 41 (Mass. 2005)). Indeed, given that Abdisalam
"attacks the very existence of an agreement" between him and SDS,
"a court must resolve the question of arbitrability." Id. at 860
(quoting DK Joint Venture 1 v. Weyand, 649 F.3d 310, 317 (5th Cir.
2011)). The district court was therefore correct to rule that it
was obligated to decide this "gateway dispute."
SDS resists this conclusion, pointing to language in the
Vendor Agreement's arbitration provision indicating that
arbitrability issues should be decided by an arbitrator (the
so-called "delegation clause"). But in making this argument, SDS
- 8 - begs the critical question of whether Abdisalam is bound by the
Vendor Agreement at all.
Notably, the arbitration provision in the Vendor
Agreement, including its delegation clause, applies only to "the
parties" to that agreement. And, under Massachusetts law, because
Abdisalam contends that he was not a party to the Vendor Agreement,
it was up to the court, not an arbitrator, to resolve this
threshold dispute. See id.; see also Morales-Posada, 141 F.4th at
309 (rejecting a nonsignatory defendant's "request that we enforce
the delegation agreement in the [contract at issue]" because it
"[was] not a request that we 'respect the parties' decision as
embodied in the contract'" (quoting Bossé v. N.Y. Life Ins. Co.,
992 F.3d 20, 27 (1st Cir. 2021))).
SDS's arguments to the contrary are not persuasive. The
cases it cites do not support its claim that a nonsignatory to a
contract can be hauled into arbitration merely because the parties
to that contract agreed to an arbitration provision with a
delegation clause. Indeed, as with several of its arguments on
appeal, SDS overlooks the legal distinction between a nonsignatory
voluntarily opting into arbitration by invoking an arbitration
clause against a signatory and the very different situation of a
signatory attempting to force a nonsignatory to arbitrate.
For example, SDS points to Arthur Andersen LLP v.
Carlisle, 556 U.S. 624 (2009), but that case does not help its
- 9 - position. Arthur Andersen stated that the Federal Arbitration Act
does not "purport[] to alter background principles of state
contract law regarding the scope of agreements (including the
question of who is bound by them)." Id. at 630. It then held
that nonsignatories are not categorically barred from seeking to
compel arbitration where "traditional principles of state law
allow a contract to be enforced by . . . nonparties to the
contract." Id. at 631 (internal quotation marks omitted). Thus,
Arthur Andersen does not broadly support imposition of a delegation
clause against a nonsignatory, at least absent some equitable
exception. And the other cases SDS relies on concern the
enforcement of delegation provisions against signatories to an
arbitration agreement or else against third-party beneficiaries
specifically identified in the underlying agreement. See, e.g.,
Apollo Comput., Inc. v. Berg, 886 F.2d 469, 470-73 (1st Cir. 1989)
(allowing a nonsignatory who had been assigned a signatory's
contractual rights to enforce an arbitration provision against
another signatory); Bossé, 992 F.3d at 28-30 (addressing the
enforceability of a delegation provision between signatories);
Casa Arena Blanca LLC v. Rainwater by Est. of Green, No. 21-2037,
2022 WL 839800, at *3–5 (10th Cir. Mar. 22, 2022) (holding that
the delegation provision bound the estate of a third-party
beneficiary identified in the relevant agreement).
- 10 - SDS also suggests that, before the district court,
Abdisalam was obligated to challenge the delegation clause itself
if he wanted to avoid arbitration. To support this argument, SDS
cites Becker v. Delek US Energy, Inc., 39 F.4th 351 (6th Cir.
2022). But again, the party seeking to avoid arbitration in Becker
was a signatory to the relevant agreement. See id. at 354-56.
And Becker held that "[w]e can decide the question whether the
delegation clause is enforceable by a [nonsignatory] only if [the
signatory] challenged the enforceability of that clause
specifically." Id. at 356 (internal quotation marks omitted).
Given that the signatory in Becker was bound by the delegation
clause to which it agreed, Becker has little application here,
where Abdisalam contends that he never entered into an arbitration
agreement with SDS. For that reason, Abdisalam need not have
challenged the delegation clause specifically, and SDS remains
stuck at the doorstep to arbitration: it must establish that a
valid agreement to arbitrate exists between it and Abdisalam.
B. The Signatories to the Vendor Agreement
Moving to the substantive question of whether Abdisalam
was a party to the Vendor Agreement, SDS relies on two primary
arguments in challenging the district court's decision that he was
not. It points to Abdisalam's signature as the "Owner" of Abdul
Courier, LLC in several places in the agreement, and it highlights
that Abdisalam continued to provide courier services even after
- 11 - Abdul Courier, LLC was dissolved. We hold that neither of these
arguments can prevail given the agreement's text.
As required by Massachusetts law, we start with the plain
language of the Vendor Agreement. See Holyoke Mut. Ins. Co. in
Salem v. Vibram USA, Inc., 106 N.E.3d 572, 577 (Mass. 2018). The
first sentence of the agreement states that it was "entered
into . . . by and between ABDUL COURIER LLC . . . (the 'Vendor')
and Strategic Delivery Solutions, LLC . . . ('SDS')." The text of
the Vendor Agreement does not refer to Abdisalam by name at all.
Rather, the Vendor Agreement repeatedly refers to the
"Vendor" -- that is, Abdul Courier, LLC -- and SDS as "the
parties."
To be sure, Abdisalam did sign the Vendor Agreement, but
he did so only as the "Owner" of Abdul Courier, LLC and not in his
personal capacity. Under Massachusetts law, "[u]nless otherwise
agreed, a person making or purporting to make a contract for a
disclosed principal does not become a party to the contract."
Marshall v. Stratus Pharms., Inc., 749 N.E.2d 698, 705 (Mass. App.
Ct. 2001) (quoting Porshin v. Snider, 212 N.E.2d 216, 217 (Mass.
1965)); see also id. (explaining that the signature of a
corporation's president "ma[de] clear that [the president] was
contracting on behalf of [the corporation]"); Brennan v. Carvel
Corp., 929 F.2d 801, 810 (1st Cir. 1991) (applying Massachusetts
law and reversing the district court's entry of judgment against
- 12 - a corporation's vice president because "there [was] no evidence in
the record that the parties intended to make [him] individually
liable on the contract" with the defendant).
Further, as Abdisalam points out, the Vendor Agreement
specifically distinguishes between the "Vendor" -- that is, Abdul
Courier, LLC -- and "Vendor Support Personnel," which includes the
"Vendor's officers, directors, agents, subcontractors, substitute
drivers, employees, helpers or servants." Presumably, "Vendor
Support Personnel" would encompass Abdisalam as the "Owner" of
Abdul Courier, LLC. Although certain provisions in the Vendor
Agreement reference both the "Vendor" and "Vendor Support
Personnel," the arbitration provision does not. It exclusively
refers to "[t]he parties," making no mention of "Vendor Support
Personnel." Cf. Hogan v. SPAR Grp., Inc., 914 F.3d 34, 41 (1st
Cir. 2019) (observing that "the arbitration
provision . . . cabin[ed] its scope to disputes 'between the
Parties' to the Master Agreement, with the 'Parties' unambiguously
defined"). Given the "probable sophistication" of SDS as the
drafter of the Vendor Agreement, such an "omission . . . from the
arbitration [provision] must be regarded as purposeful." Mowbray
v. Moseley, Hallgarten, Estabrook & Weeden, Inc., 795 F.2d 1111,
1118 (1st Cir. 1986).
SDS insists that the text of at least one section of the
Vendor Agreement does treat Abdisalam as a signatory in his
- 13 - personal capacity, pointing to Schedule B, which concerns
equipment rental. The first sentence of Schedule B provides: "I,
ABDULKADIR MOHAMMED ABDISALAM, an independent vendor, under
contract with SDS, elect to rent the equipment specifically
identified below from SDS if the customer of SDS requires an
electronic signature from the consignee."
But, again, it is clear from the face of Schedule B that
Abdisalam is renting the equipment as "an independent vendor" only
in his capacity as the "Owner" of Abdul Courier, LLC. In the
signature block for Schedule B, Abdul Courier, LLC is listed as
the "Vendor" and Abdisalam signed as its "Owner," with the word
"Owner" appearing directly below his signature. See Marshall, 749
N.E.2d at 705.
Further, SDS's practice of refusing to contract directly
with individual prospective couriers informs our conclusion that
Abdisalam is not a signatory to the Vendor Agreement. From the
outset, SDS required Abdisalam to establish a corporation so that
SDS could contract with Abdul Courier, LLC, as opposed to Abdisalam
himself, for delivery services. Thus, SDS's current argument that
Abdisalam qualifies as a signatory to that agreement is
inconsistent with the contracting arrangement that SDS imposed.
In sum, as the district court concluded, "nothing in the
plain text of the [Vendor Agreement] evinces an intent to
personally bind [Abdisalam] to its terms and conditions." That
- 14 - Abdisalam continued to provide delivery services to SDS after Abdul
Courier, LLC was dissolved cannot revise the plain text of the
Vendor Agreement. Because Abdisalam is not a signatory to the
Vendor Agreement, the Vendor Agreement's terms, including its
arbitration provision, do not bind him in his personal capacity.
C. Alternative Estoppel Theories
We now turn to SDS's alternative arguments that it can
compel Abdisalam to arbitrate, even as a nonsignatory to the Vendor
Agreement. SDS presses three theories in support of its position:
(1) direct benefits estoppel, (2) intertwined claims estoppel, and
(3) a successor-in-interest theory. According to SDS, each of
these theories independently compels Abdisalam to arbitrate his
claims. As we explain below, we disagree.
1. Direct Benefits Estoppel
Direct benefits estoppel "allows a signatory to compel
to arbitration a nonsignatory party receiving a direct benefit
from an arbitration agreement." Walker, 9 N.E.3d at 861. Under
this estoppel theory, a party "knowingly exploiting an agreement
with an arbitration clause can be estopped from avoiding
arbitration despite having never signed the agreement." Id. at
861-62 (quoting MAG Portfolio Consult, GMBH v. Merlin Biomed Grp.
LLC, 268 F.3d 58, 61 (2d Cir. 2001)). For the direct benefits
theory to apply, the nonsignatory must have "knowingly accepted
the benefits" of the agreement at issue, and those benefits must
- 15 - "flow[] directly from the agreement." Id. at 862 (quoting MAG,
268 F.3d at 61). It is not enough if "the nonsignatory exploits
the contractual relation of parties to an agreement, but does not
exploit (and thereby assume) the agreement itself." Id. (quoting
MAG, 268 F.3d at 61); see also Ribadeneira v. New Balance
Athletics, Inc., 65 F.4th 1, 21 (1st Cir. 2023) (applying
Massachusetts law and explaining when the direct benefits theory
applies).
The district court determined that "any benefit
[Abdisalam] may have received in his personal capacity for
performance of the contract was, at best, indirect." SDS has not
persuaded us that the district court erred in so concluding.
SDS argues that Abdisalam purportedly reaped numerous
direct benefits from the Vendor Agreement. These alleged benefits
include: "(1) accepting packages for delivery from SDS;
(2) operating under SDS's federal motor carrier authority instead
of procuring his own; and (3) procuring certain insurance coverage
and capping cargo liability at a discounted rate." According to
SDS, these "tangible benefits -- enabling business operations or
limited liability -- support equitable estoppel."
But all these purported benefits flowed to Abdul
Courier, LLC, at least prior to the LLC's dissolution, not to
Abdisalam. By its terms, the Vendor Agreement permitted Abdul
Courier, LLC -- not Abdisalam -- to do business with SDS and to
- 16 - operate under SDS's federal motor carrier authority. And SDS has
provided no evidence that Abdisalam procured insurance coverage in
his individual capacity instead of on behalf of Abdul Courier,
LLC.
Of course, it is undisputed that Abdisalam owned Abdul
Courier, LLC. But "limited liability companies are entities that
exist separate and distinct from the individuals who own them."
Dickey v. Inspectional Servs. Dep't of Bos., 120 N.E.3d 1179, 1181
(Mass. 2019). If ownership of a business entity receiving direct
benefits under a contract were enough to establish direct benefits
to its owner, then courts have been engaging in superfluous
analyses in direct benefits estoppel cases. See, e.g.,
Ribadeneira, 65 F.4th at 6-7, 26-27 (determining that the
controlling owner of a business entity was subject to direct
benefits estoppel "[b]ecause he sought to enforce the terms of
the . . . [a]greement" in a separate suit, not simply because of
his controlling ownership); Cavallaro v. Wilmer Cutler Pickering
Hale & Dorr, LLP, No. 1484CV03598BLS1, 2020 WL 2193633, at *1,
*4-6 (Mass. Super. Ct. Feb. 3, 2020) (determining that the owners
of a business entity were subject to direct benefits estoppel
because they relied on the underlying contract to bring claims in
their individual capacities and received other direct benefits,
not simply because they were owners). And we note, as the district
- 17 - court did, that SDS makes no argument for piercing the corporate
veil of Abdul Courier, LLC.
At oral argument, SDS relied heavily on a decision from
the U.S. Court of Appeals for the Seventh Circuit -- Everett v.
Paul Davis Restoration, Inc., 771 F.3d 380 (7th Cir. 2014) -- that
applied Wisconsin law. According to SDS, Everett stands for the
proposition that Abdisalam is a direct beneficiary of the Vendor
Agreement as the sole owner of Abdul Courier, LLC and is therefore
subject to the Vendor Agreement's arbitration provision.
To be sure, Massachusetts courts have "look[ed] to other
jurisdictions" in deciding thorny and novel questions of
arbitrability, Walker, 9 N.E.3d at 859, but even so, the facts in
Everett are just too different to support SDS's argument here. In
Everett, the Seventh Circuit found that the nonsignatory
plaintiff, a co-owner of a franchise with her husband, had directly
benefited from the franchise agreement that included an
arbitration clause. See 771 F.3d at 383-85. The court explained
that "[w]ithout the franchise agreement . . . [her] ownership
interest would not have existed." Id. at 385. Critically, the
franchise agreement had obligated the plaintiff to "sign [it] in
her personal capacity as an additional principal owner" of the
franchise, but she had steadfastly refused to do so. Id. at 382.
The Seventh Circuit also noted that, according to the facts found
by the district court, she then colluded with her husband to avoid
- 18 - the noncompetition requirements in the agreement after the
franchisor terminated their franchise. See id. at 382-83. Thus,
the Seventh Circuit held, she was estopped from avoiding
arbitration. See id. at 385.
We are mindful that "[e]quitable remedies are flexible
tools to be applied with the focus on fairness and justice."
Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d 244, 257 (Mass.
2008) (quoting Demoulas v. Demoulas, 703 N.E.2d 1149, 1169 (Mass.
1998)). In this case, SDS specifically avoided contracting with
Abdisalam in his personal capacity and instead signed an agreement
with Abdul Courier, LLC. The Seventh Circuit's decision to apply
direct benefits estoppel on the very different facts in Everett,
which demonstrated that an LLC member had colluded to take
advantage of the corporate form so that she could avoid the
constraints of a contract, does not point to the same outcome here.
We agree with the district court that, under
Massachusetts law, any benefit that Abdisalam received from the
Vendor Agreement was, "at best, indirect." That is, the benefit
flowed from Abdul Courier, LLC's relationship with SDS, which
permitted Abdisalam to act as a courier for the company, not from
the Vendor Agreement itself. See Walker, 9 N.E.3d at 862; see
also MAG, 268 F.3d at 62 (explaining that, in Thomson-CSF, S.A. v.
Am. Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995), "the agreement
was not the direct source of the benefit" because "the benefit
- 19 - flowed from the nonsignatory's exploitation of the contractual
relation created through the agreement").
SDS makes one last argument to the contrary,
highlighting Abdisalam's continued performance of courier services
following the dissolution of Abdul Courier, LLC. According to
SDS, once Abdul Courier, LLC dissolved, Abdisalam was the only
possible beneficiary of the Vendor Agreement. But SDS failed to
develop a record before the district court to support this
argument. If SDS were aware of the dissolution, it would be fair
to infer that the Vendor Agreement was simply superseded at that
point by a new implied-in-fact contract between SDS and Abdisalam
established by their course of conduct. In that situation,
Abdisalam still would not be reaping any direct benefits from the
Vendor Agreement. Simply put, as the party seeking to compel
arbitration, SDS has not carried its burden to demonstrate that
the dissolution of Abdul Courier, LLC supports its position.
Because Abdisalam neither directly benefited from nor
personally embraced the Vendor Agreement while it was in force,
SDS cannot rely on direct benefits estoppel to compel him to
arbitrate his claims.
2. Intertwined Claims Estoppel
Next, we consider SDS's argument that Abdisalam must
arbitrate his claims because they are "intertwined" with the Vendor
Agreement. The district court rejected this argument as well. It
- 20 - explained that "it [was] not clear to the court how SDS [could]
plausibly maintain that Abdisalam's individual employment-based
claims hinge on how his work was classified in a third-party
contract to which he was not personally a signatory." Again, we
agree with the district court's ruling.
Massachusetts courts primarily apply intertwined claims
estoppel to "allow[] a nonsignatory to compel a signatory to
arbitrate." Walker, 9 N.E.3d at 861; see also Machado v. System4
LLC, 28 N.E.3d 401, 409 (Mass. 2015) ("When the [plaintiff]
signatory's claims against a [defendant] nonsignatory refer to or
presume the existence of the written agreement that compels
arbitration, the [plaintiff] signatory's claims may be considered
to arise out of and be directly intertwined with that agreement,
rendering arbitration appropriate."). Similarly, under federal
common law, "federal courts generally 'have been willing to estop
a signatory from avoiding arbitration with a nonsignatory when the
issues the nonsignatory is seeking to resolve in arbitration are
intertwined with the agreement that the estopped party has
signed.'" InterGen N.V. v. Grina, 344 F.3d 134, 145 (1st Cir.
2003) (quoting Thomson-CSF, 64 F.3d at 779). But federal courts
"have been hesitant to estop a nonsignatory seeking to avoid
arbitration." Id. at 145-46.
We have not found any Massachusetts state court case, or
any case from our court for that matter, permitting a signatory to
- 21 - compel a nonsignatory to arbitrate based on intertwined claims
estoppel. SDS relies heavily on Machado, but it presented the
reverse situation: the Massachusetts Supreme Judicial Court (SJC)
applied intertwined claims estoppel to permit the defendant, a
nonsignatory to the arbitration agreement at issue, to compel the
signatory plaintiffs to arbitrate. See 28 N.E.3d at 409-12. In
Machado, the plaintiffs had sued the defendant for claims arising
from franchise agreements that they had executed. See id. at 404,
410. The SJC determined that the signatory plaintiffs "[could
not] avoid arbitration" with the nonsignatory defendant "when the
issues [the nonsignatory defendant] [was] seeking to resolve in
arbitration [were] intertwined with the agreements that the
plaintiffs [had] signed." Id. at 412.5
Similarly, one year earlier in Walker, the Massachusetts
Appeals Court highlighted the "significant distinction between
forcing a nonsignatory to arbitrate and allowing a nonsignatory to
compel a signatory to arbitrate." 9 N.E.3d at 863. As the Walker
court reasoned, "the nature of arbitration makes [this
distinction] important [because] [a]rbitration is strictly a
matter of contract." Id. (alterations in original) (quoting
To be sure, Machado involved four signatory plaintiffs and 5
two nonsignatory plaintiffs who were employees of the signatory plaintiffs. See 28 N.E.3d at 404 n.3. But in addressing the application of intertwined claims estoppel, the SJC framed the issue as the "[n]onsignatory compulsion of signator[ies] to arbitrate." Id. at 407.
- 22 - Thomson-CSF, 64 F.3d at 779). Given "traditional principles of
contract and agency law," the court explained, "the cases
establishing this form of estoppel limit the use of the form to
[compelling] signatories" into arbitration. Id. That makes good
sense because a signatory has willingly "entered into [a] written
arbitration agreement[]," even if not necessarily with the
nonsignatory seeking to compel arbitration. Thomson-CSF, 64 F.3d
at 779.
As a federal court sitting in diversity, we decline SDS's
invitation to apply intertwined claims estoppel to permit a
signatory to compel a nonsignatory to arbitrate when Massachusetts
courts have not clearly done so, especially when SDS has failed to
provide any persuasive justification for such a holding. See Hanna
v. Plumer, 380 U.S. 460, 467 (1965) ("The Erie rule is rooted in
part in a realization that it would be unfair for the character or
result of a litigation materially to differ because the suit had
been brought in a federal court."). Arbitration is a creature of
contract, based on the foundational "tenet that a party cannot be
forced to arbitrate if it has not agreed to do so." Hogan, 914
F.3d at 36 (quoting InterGen N.V., 344 F.3d at 137). And although
SDS asserts that Abdisalam's claims implicate the Vendor
Agreement, it does not explain how they do so in a way that tracks
the courts' analyses in Machado and Walker.
- 23 - 3. Successor-in-Interest Theory
Finally, SDS relies on a successor-in-interest theory to
require Abdisalam to arbitrate his claims. In short, SDS argues
that Abdisalam assumed Abdul Courier, LLC's obligations under the
Vendor Agreement as its successor in interest. The district court
rejected SDS's argument, reasoning that SDS had "offer[ed] no
evidence that Abdisalam personally assumed" Abdul Courier, LLC's
obligations or acted as the "mere continuation" of Abdul Courier,
LLC. We agree that Abdisalam does not qualify as a successor in
interest to Abdul Courier, LLC.
"As a general rule, Massachusetts law counsels against
imposing the liabilities of a corporation on its successor."
Ribadeneira, 65 F.4th at 23. But an exception to the general rule
arises when "there is a 'reorganization transforming a single
company from one corporate entity into another.'" Id. (quoting
Milliken, 887 N.E.2d at 255). In such circumstances, "successor
liability may be imposed if 'the entity remains essentially the
same, despite a formalistic change of name or of corporate form,'
such that the successor entity is a 'mere continuation of its
predecessor.'" Id. (quoting Smith v. Kelley, 139 N.E.3d 314, 323
(Mass. 2020)). To determine whether the successor entity is a
"mere continuation of its predecessor," "Massachusetts courts
examine 'the continuity or discontinuity of the ownership,
officers, directors, stockholders, management, personnel, assets,
- 24 - and operations of the two entities.'" Id. (quoting Kelley, 139
N.E.3d at 323).
Based on our review of Massachusetts law, a
successor-in-interest theory does not map onto the undisputed
facts of this case. To the extent Massachusetts courts have
applied the theory, they have done so primarily when one business
entity has reorganized into another to avoid paying its debts.
See Milliken, 887 N.E.2d at 254.
Nonetheless, SDS relies on the SJC's holding in Kelley
to argue that even an individual like Abdisalam can operate as the
mere continuation of a preexisting business entity. Kelley,
however, does not help SDS. In Kelley, the SJC imposed successor
liability on a sole proprietorship but only because it was "a mere
continuation of its predecessor and the purpose of the change [was]
to eliminate . . . debt." 139 N.E.3d at 324 (emphasis added). As
the SJC reasoned, "the record plainly reflect[ed] that the purpose
of dissolving the [former corporation] and establishing the sole
proprietorship was to avoid payment of the liabilities at issue."
Id. at 326 (emphasis added). Notably, the SJC also repeatedly
emphasized "the very unique circumstances of [the] case," which
involved an attorney taking advantage of an intellectually
disabled veteran, and "caution[ed] that the application of
successor liability is fact-specific." Id. at 317, 327.
- 25 - Here, following its involuntary dissolution at the end
of 2023, Abdul Courier, LLC did not reorganize into or continue as
another business entity. Rather, Abdul Courier, LLC remained
defunct, and no other business entity assumed its obligations under
the Vendor Agreement. And there is no suggestion in the record
that Abdul Courier, LLC acquired any debt during its existence or
that its involuntary dissolution related to any such debt.
Although Abdisalam continued to perform deliveries for SDS through
October 2024, his performance, without more, does not render him
a successor in interest to Abdul Courier, LLC under Massachusetts
law.
In urging us to conclude otherwise, SDS points to
Ribadeneira, in which we held that one business entity "assumed
[another business entity's] obligation to arbitrate under the
arbitration clause" at issue. 65 F.4th at 24. But our decision
to impose successor liability in that case was based on "[t]he
continuity of operations between" two entities. Id. at 23. We
did not designate an individual as the successor in interest who
thereby assumed the entity's obligation to arbitrate. Although we
also compelled an individual -- namely, the owner of the
predecessor and successor entities -- to arbitrate, we relied on
direct benefits estoppel to do so. See id. at 26-27 (concluding
that direct benefits estoppel supported compelling the entities'
- 26 - owner to arbitrate). As a result, Ribadeneira does not support
SDS either.
Thus, we reject SDS's alternative theories for
compelling Abdisalam, a nonsignatory, to arbitrate under the
Vendor Agreement.
IV. CONCLUSION
For all these reasons, we affirm the district court's
order.
- 27 -