1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Fidel Bernard Davis, No. CV-25-00203-TUC-RM (BGM)
10 Plaintiff, ORDER
11 v.
12 Hilton Resorts Corporation,
13 Defendant. 14 15 On February 26, 2026, Magistrate Judge Bruce G. Macdonald issued a Report and 16 Recommendation (“R&R”) (Doc. 34), recommending that this Court deny Defendant’s 17 Motion to Compel Arbitration (Doc. 25). Defendant filed an Objection (Doc. 35) and 18 Plaintiff filed a Response (Doc. 36). The Court will adopt the R&R in part and modify it 19 in part as set forth herein, and deny Defendant’s Motion to Compel Arbitration. 20 I. Background 21 Plaintiff was hired by Diamond Resorts International (“Diamond”) in 2013. (Doc. 22 25 at 2.) On August 20, 2018, Plaintiff and Diamond entered into an Arbitration 23 Agreement, which provided that Diamond and Plaintiff would “utilize binding arbitration 24 to resolve all disputes that have arisen or that may arise out of the employment context[.]” 25 (Doc. 25-1 at 2.) The Arbitration Agreement further provided that Diamond, and “its 26 parents, subsidiaries, affiliates, predecessors, successors and assigns” would have the right 27 to enforce the Arbitration Agreement. (Id.) The Hilton Resorts Corporation, d.b.a. Hilton 28 Grand Vacations (“Hilton”), acquired Diamond in 2021. (Doc. 25 at 2.) Plaintiff asserts 1 that he was subject to retaliation after voicing concerns to Hilton management about 2 workplace safety and other workers, and after requesting disability accommodation and 3 taking leave under the Family and Medical Leave Act. (Doc. 16 at 3-4.) Plaintiff’s 4 employment with Hilton ended in 2024. (Id.) 5 Plaintiff initiated this action against Hilton on April 30, 2025. (Doc. 1.) Plaintiff 6 filed the operative First Amended Complaint (“FAC”) on August 8, 2025. (Doc. 16.) He 7 asserts thirteen causes of action arising from his employment with Hilton, including: (i) 8 discrimination under the Americans with Disabilities Act; (ii) interference and retaliation 9 under the Family and Medical Leave Act; (iii) discrimination and retaliation under Title 10 VII of the Civil Rights Act of 1964; (iv) age discrimination under the Age Discrimination 11 in Employment Act; (v) discrimination under the Civil Rights Act of 1866; (vi) wrongful 12 discharge under the Arizona Employment Protection Act; (vii) constructive discharge 13 under A.R.S. § 23-1502; (viii) retaliation under the Americans with Disabilities Act; (ix) 14 duplicate interference and retaliation claims under 29 C.F.R. § 825.220; (x) civil 15 conspiracy under 42 U.S.C. § 1985; (xi) invasion of privacy under Arizona law; (xii) 16 negligent supervision under Arizona law; and (xiii) defamation under Arizona law. (Doc. 17 16 at 5-7.) 18 Defendant Hilton filed its Motion to Compel Arbitration on September 5, 2026. 19 (Doc. 25.) In the Motion to Compel Arbitration, Hilton contends that the Arbitration 20 Agreement entered into between Diamond and Plaintiff is enforceable, that Hilton may 21 enforce the Agreement as Diamond’s successor, and that the Agreement covers all claims 22 set forth in Plaintiff’s FAC. (Id.) In his R&R, Judge Macdonald rejected several arguments 23 Plaintiff made in response to the Motion to Compel Arbitration, finding a declaration 24 submitted to authenticate the Agreement was valid, that the Agreement was neither 25 procedurally nor substantively unconscionable, that matters of public policy did not affect 26 the validity of the Agreement, and that Plaintiff had failed to show waiver of the right to 27 arbitration. (Doc. 34.) 28 Judge Macdonald did conclude, however, that Hilton lacks the ability to enforce the 1 Agreement because Hilton is a nonsignatory to it. (Id. at 12-16.) Judge Macdonald 2 discussed Henderson v. Moskowitz, 579 P.3d 869, 871 (Ariz. 2025), citing its statement 3 that “[i]n Arizona, ‘[a]bsent some exception to the usual rule, a non-signatory may not 4 enforce contract provisions.’” (Id. at 14.) Judge Macdonald highlighted the lack of any 5 Arizona cases in which a nonsignatory to an employment-related arbitration agreement has 6 been permitted to enforce the terms of the agreement against a plaintiff signatory where 7 the plaintiff’s claims did not arise from the underlying agreement. (Id.) Furthermore, Judge 8 Macdonald rejected Hilton’s arguments that it assumed Diamond’s contractual rights by 9 acquiring Diamond, that Hilton was a third-party beneficiary to the contract, or that Hilton 10 became a successor in interest to the contract by acquiring Diamond. (Id. at 15-16.) In its 11 Objection, Hilton argues that Judge Macdonald misapplied Henderson and incorrectly 12 failed to find that it is a successor to Diamond. (Doc. 35.) 13 II. Standard of Review 14 A district judge must “make a de novo determination of those portions” of a 15 magistrate judge’s “report or specified proposed findings or recommendations to which 16 objection is made.” 28 U.S.C. § 636(b)(1). The district judge “may accept, reject, or 17 modify, in whole or in part, the findings or recommendations made by the magistrate 18 judge.” Id. The advisory committee’s notes to Rule 72(b) of the Federal Rules of Civil 19 Procedure state that, “[w]hen no timely objection is filed, the court need only satisfy itself 20 that there is no clear error on the face of the record in order to accept the recommendation” 21 of a magistrate judge. Fed. R. Civ. P. 72(b) advisory committee’s note to 1983 addition. 22 See also Johnson v. Zema Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999) (“If no objection 23 or only partial objection is made, the district court judge reviews those unobjected portions 24 for clear error.”); Prior v. Ryan, CV 10-225-TUC-RCC, 2012 WL 1344286, at *1 (D. Ariz. 25 Apr. 18, 2012) (reviewing for clear error unobjected-to portions of Report and 26 Recommendation). 27 III. Unobjected-to Portions of R&R 28 The Court has reviewed the unobjected-to portions of the R&R, and finds no error. 1 Accordingly, those portions of the R&R will be adopted. 2 IV. Defendant’s Objection 3 In its Objection to the R&R, Hilton challenges Judge Macdonald’s reading of 4 Henderson v. Moskowitz, contending that Judge Macdonald incorrectly interpreted 5 Henderson as categorically barring all nonsignatory contract enforcement under Arizona 6 law, and that Henderson applies only in the forum selection clause context. (Doc. 35.) 7 Hilton further argues that since the Agreement provides that successors may enforce it, and 8 Hilton acquired Diamond, Hilton is a successor to Diamond and may enforce the 9 Agreement. (Id.) In his Response, Plaintiff urges that the R&R was a correct application of 10 the law. (Doc. 36.) 11 “Generally, the contractual right to compel arbitration may not be invoked by one 12 who is not a party to the agreement and does not otherwise possess the right to compel 13 arbitration. But a litigant who is not a party to a contract containing an arbitration 14 agreement may compel arbitration under that agreement if contract law in the relevant 15 jurisdiction would allow the litigant to enforce the contract.” Olson v. FCA US, LLC, No. 16 24-6527, ___ F.4th___, 2026 WL 934267 at *2 (9th Cir. Apr. 7, 2026) (internal citations 17 and quotation marks omitted).
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Fidel Bernard Davis, No. CV-25-00203-TUC-RM (BGM)
10 Plaintiff, ORDER
11 v.
12 Hilton Resorts Corporation,
13 Defendant. 14 15 On February 26, 2026, Magistrate Judge Bruce G. Macdonald issued a Report and 16 Recommendation (“R&R”) (Doc. 34), recommending that this Court deny Defendant’s 17 Motion to Compel Arbitration (Doc. 25). Defendant filed an Objection (Doc. 35) and 18 Plaintiff filed a Response (Doc. 36). The Court will adopt the R&R in part and modify it 19 in part as set forth herein, and deny Defendant’s Motion to Compel Arbitration. 20 I. Background 21 Plaintiff was hired by Diamond Resorts International (“Diamond”) in 2013. (Doc. 22 25 at 2.) On August 20, 2018, Plaintiff and Diamond entered into an Arbitration 23 Agreement, which provided that Diamond and Plaintiff would “utilize binding arbitration 24 to resolve all disputes that have arisen or that may arise out of the employment context[.]” 25 (Doc. 25-1 at 2.) The Arbitration Agreement further provided that Diamond, and “its 26 parents, subsidiaries, affiliates, predecessors, successors and assigns” would have the right 27 to enforce the Arbitration Agreement. (Id.) The Hilton Resorts Corporation, d.b.a. Hilton 28 Grand Vacations (“Hilton”), acquired Diamond in 2021. (Doc. 25 at 2.) Plaintiff asserts 1 that he was subject to retaliation after voicing concerns to Hilton management about 2 workplace safety and other workers, and after requesting disability accommodation and 3 taking leave under the Family and Medical Leave Act. (Doc. 16 at 3-4.) Plaintiff’s 4 employment with Hilton ended in 2024. (Id.) 5 Plaintiff initiated this action against Hilton on April 30, 2025. (Doc. 1.) Plaintiff 6 filed the operative First Amended Complaint (“FAC”) on August 8, 2025. (Doc. 16.) He 7 asserts thirteen causes of action arising from his employment with Hilton, including: (i) 8 discrimination under the Americans with Disabilities Act; (ii) interference and retaliation 9 under the Family and Medical Leave Act; (iii) discrimination and retaliation under Title 10 VII of the Civil Rights Act of 1964; (iv) age discrimination under the Age Discrimination 11 in Employment Act; (v) discrimination under the Civil Rights Act of 1866; (vi) wrongful 12 discharge under the Arizona Employment Protection Act; (vii) constructive discharge 13 under A.R.S. § 23-1502; (viii) retaliation under the Americans with Disabilities Act; (ix) 14 duplicate interference and retaliation claims under 29 C.F.R. § 825.220; (x) civil 15 conspiracy under 42 U.S.C. § 1985; (xi) invasion of privacy under Arizona law; (xii) 16 negligent supervision under Arizona law; and (xiii) defamation under Arizona law. (Doc. 17 16 at 5-7.) 18 Defendant Hilton filed its Motion to Compel Arbitration on September 5, 2026. 19 (Doc. 25.) In the Motion to Compel Arbitration, Hilton contends that the Arbitration 20 Agreement entered into between Diamond and Plaintiff is enforceable, that Hilton may 21 enforce the Agreement as Diamond’s successor, and that the Agreement covers all claims 22 set forth in Plaintiff’s FAC. (Id.) In his R&R, Judge Macdonald rejected several arguments 23 Plaintiff made in response to the Motion to Compel Arbitration, finding a declaration 24 submitted to authenticate the Agreement was valid, that the Agreement was neither 25 procedurally nor substantively unconscionable, that matters of public policy did not affect 26 the validity of the Agreement, and that Plaintiff had failed to show waiver of the right to 27 arbitration. (Doc. 34.) 28 Judge Macdonald did conclude, however, that Hilton lacks the ability to enforce the 1 Agreement because Hilton is a nonsignatory to it. (Id. at 12-16.) Judge Macdonald 2 discussed Henderson v. Moskowitz, 579 P.3d 869, 871 (Ariz. 2025), citing its statement 3 that “[i]n Arizona, ‘[a]bsent some exception to the usual rule, a non-signatory may not 4 enforce contract provisions.’” (Id. at 14.) Judge Macdonald highlighted the lack of any 5 Arizona cases in which a nonsignatory to an employment-related arbitration agreement has 6 been permitted to enforce the terms of the agreement against a plaintiff signatory where 7 the plaintiff’s claims did not arise from the underlying agreement. (Id.) Furthermore, Judge 8 Macdonald rejected Hilton’s arguments that it assumed Diamond’s contractual rights by 9 acquiring Diamond, that Hilton was a third-party beneficiary to the contract, or that Hilton 10 became a successor in interest to the contract by acquiring Diamond. (Id. at 15-16.) In its 11 Objection, Hilton argues that Judge Macdonald misapplied Henderson and incorrectly 12 failed to find that it is a successor to Diamond. (Doc. 35.) 13 II. Standard of Review 14 A district judge must “make a de novo determination of those portions” of a 15 magistrate judge’s “report or specified proposed findings or recommendations to which 16 objection is made.” 28 U.S.C. § 636(b)(1). The district judge “may accept, reject, or 17 modify, in whole or in part, the findings or recommendations made by the magistrate 18 judge.” Id. The advisory committee’s notes to Rule 72(b) of the Federal Rules of Civil 19 Procedure state that, “[w]hen no timely objection is filed, the court need only satisfy itself 20 that there is no clear error on the face of the record in order to accept the recommendation” 21 of a magistrate judge. Fed. R. Civ. P. 72(b) advisory committee’s note to 1983 addition. 22 See also Johnson v. Zema Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999) (“If no objection 23 or only partial objection is made, the district court judge reviews those unobjected portions 24 for clear error.”); Prior v. Ryan, CV 10-225-TUC-RCC, 2012 WL 1344286, at *1 (D. Ariz. 25 Apr. 18, 2012) (reviewing for clear error unobjected-to portions of Report and 26 Recommendation). 27 III. Unobjected-to Portions of R&R 28 The Court has reviewed the unobjected-to portions of the R&R, and finds no error. 1 Accordingly, those portions of the R&R will be adopted. 2 IV. Defendant’s Objection 3 In its Objection to the R&R, Hilton challenges Judge Macdonald’s reading of 4 Henderson v. Moskowitz, contending that Judge Macdonald incorrectly interpreted 5 Henderson as categorically barring all nonsignatory contract enforcement under Arizona 6 law, and that Henderson applies only in the forum selection clause context. (Doc. 35.) 7 Hilton further argues that since the Agreement provides that successors may enforce it, and 8 Hilton acquired Diamond, Hilton is a successor to Diamond and may enforce the 9 Agreement. (Id.) In his Response, Plaintiff urges that the R&R was a correct application of 10 the law. (Doc. 36.) 11 “Generally, the contractual right to compel arbitration may not be invoked by one 12 who is not a party to the agreement and does not otherwise possess the right to compel 13 arbitration. But a litigant who is not a party to a contract containing an arbitration 14 agreement may compel arbitration under that agreement if contract law in the relevant 15 jurisdiction would allow the litigant to enforce the contract.” Olson v. FCA US, LLC, No. 16 24-6527, ___ F.4th___, 2026 WL 934267 at *2 (9th Cir. Apr. 7, 2026) (internal citations 17 and quotation marks omitted). 18 The “closely related party” doctrine has developed in the federal courts to “permit 19 non-signatories to an agreement to be bound by, and to enforce, forum selection clauses 20 where, under the circumstances, the non-signatories enjoyed a sufficiently close nexus to 21 the dispute or to another signatory such that it was foreseeable that they would be bound.” 22 See Firexo, Inc. v. Firexo Group Ltd., 99 F.4th 304, 312 (6th Cir. 2024) (quoting Franlink 23 Inc. v. BACE Servs., Inc., 50 F.4th 432, 439 (5th Cir. 2022)). In the arbitration clause 24 context, this same theory has been applied under the name “alternative estoppel.” See, e.g., 25 Holder v. Bacus Foods Corp., No. CV-23-00763-PHX-JJT, 2023 WL 5671406 at *7 (D. 26 Ariz. Sept. 1, 2023) (citing CD Partners, LLC v. Grizzle, 424 F.3d 795, 798–99 (8th Cir. 27 2005)). 28 The Arizona Supreme Court has rejected the adoption of the closely related party 1 doctrine both in the context of forum selection clauses, where the doctrine is generally 2 applied, Henderson v. Moskowitz, 579 P.3d 869 (Ariz. 2025), and in the context of a 3 contractual limitation provision, JTF Aviation Holdings Inc. v. CliftonLarsonAllen LLP, 4 472 P.3d 526 (Ariz. 2020). In Henderson, the Court noted the distinction between the 5 closely related party doctrine and the alternative estoppel theory, and stated that in the 6 Henderson opinion it considered “only the closely related party doctrine.” 579 P.3d at 871 7 n.2. 8 Arizona courts have allowed nonsignatories to compel arbitration using the 9 alternative estoppel theory, but the circumstances under which this has been done are 10 limited. See Carey v. K & M Seafood Fin., LLC, No. 1 CA-CV 13-0357, 2014 WL 6778859 11 (Ariz. Ct. App. Dec. 2, 2014). First, enforcement of an arbitration clause against a 12 nonsignatory has been allowed where “the signatory’s claims arise out of and relate directly 13 to the written agreement.” Id. (citing Sun Valley Ranch 308 Ltd. P’ship ex rel. Englewood 14 Props., Inc. v. Robson, 294 P.3d 125 (Ct. App. 2012)). Second, enforcement of an 15 arbitration clause against a nonsignatory has been allowed where the plaintiff has invoked 16 an alter ego theory against the defendants, because the plaintiff has “essentially invited the 17 defendant to step into the shoes of the contracting parties.” Henderson, 579 P.3d at 872 18 (citing Sun Valley Ranch, 294 P.3d 125). 19 Here, Hilton does not argue that the facts of this case are congruent with either of 20 the two circumstances in which Arizona courts have allowed a nonsignatory to use the 21 theory of alternative estoppel, nor could it; Plaintiff’s claims do not arise out of the 22 Agreement, and he does not invoke an alter ego theory. Hilton instead argues that the R&R 23 misinterpreted Henderson as standing for the proposition that nonsignatories are 24 categorically barred from enforcing an arbitration clause against a signatory. (Doc. 35 at 25 3-4.) The Court agrees with Hilton that the R&R is incorrect to the extent it asserts that 26 Henderson stands for the proposition that nonsignatories are categorically barred from 27 enforcing an arbitration clause against a signatory. Henderson merely declined to adopt the 28 closely related party doctrine in the context of forum selection clauses, and the Court 1 specifically pointed out that it was not addressing nonsignatory enforcement of arbitration 2 clauses. 3 Hilton does not need any common law theory of nonsignatory contract enforcement 4 in order to prevail on its Motion to Compel Arbitration, because the Arbitration Agreement 5 between Plaintiff and Hilton states that those who are empowered to enforce it include 6 Diamond, and “its parents, subsidiaries, affiliates,1 predecessors, successors and assigns.” 7 (Doc. 25-1 at 2.) Hilton argues that under the plain language of the contract it should be 8 considered a successor to Diamond since it acquired the company, and accordingly is 9 empowered to enforce the Agreement. (Doc. 35 at 5.) The Agreement does not define 10 “successor.” (See Doc. 25-1.) 11 In finding successorship, “courts consider such factors as: (1) whether the business 12 of both employers is essentially the same; (2) whether the employees of the new company 13 are doing the same jobs in the same working conditions under the same supervisors; and 14 (3) whether the new entity has the same production process, produces the same products, 15 and basically has the same body of customers. Another factor is whether the new company 16 has the same location and uses the same equipment.” Arizona State Carpenters Health & 17 Welfare Tr. Fund v. Sanders, 781 P.2d 594, 597 (1989) (citing Fall River Dyeing & 18 Finishing Corp. v. N.L.R.B., 482 U.S. 27 (1987)); see also Souza v. True N. Mgmt. Servs. 19 LLC, No. CV-23-02588-PHX-DWL, 2024 WL 2746967 (D. Ariz. May 29, 2024) (“[A]n 20 entity that has assumed control over another entity’s operations and employees should be 21 deemed a ‘successor’ for purposes of compelling arbitration.”). 22 Here, Hilton has not addressed the above factors, and provides no information that 23 is useful to the Court in evaluating the above factors. As such, Hilton has not met its burden 24 of establishing arbitrability.2 The Court will therefore modify the R&R as set forth herein,
25 1 While Hilton does not make this argument, is possible that Hilton could be considered a parent or affiliate of Diamond. However, absent express language to the contrary, an 26 arbitration agreement that encompasses affiliates and parents refers to companies having that status at the time the contract was signed. Revitch v. DIRECTV, LLC, 977 F.3d 713 27 (9th Cir. 2020) (applying California law). 2 In its Objection, another argument that Hilton advances in support of arbitration is that 28 “[u]nder A.R.S. § 29-2206(A), a merger automatically vests the surviving entity with ‘all property, rights, privileges, immunities, powers and purposes’ of the merged entity, and 1 || and deny Hilton’s Motion to Compel Arbitration without prejudice to refiling a Motion || that addresses the above deficiencies. 3 IT IS ORDERED that the Report and Recommendation (Doc. 34) 1s adopted in 4|| part and modified in part as set forth herein. 5 IT IS FURTHER ORDERED that Defendant’s Motion to Compel Arbitration || (Doc. 25) is denied without prejudice to refiling. 7 Dated this 20th day of May, 2026. 8
i a Honorable Rosemary □□□□□□□ 12 United States District □□□□□ 13 14 15 16 17 18 19 20 21 22 23 24 likewise transfers ‘all obligations’ to the successor.” (Doc. 35 at 5.) This argument is 25 unavailing, however, because § 29-2206(A) applies only to mergers, wherein the merging entity “ceases to exist,” and a surviving entity continues or comes into existence.” 26 § 29-2206(A)(1)-(2). This is a separate legal process from an acquisition, which occurs when one entity “acquires all of one or more classes or series of interests” of another. § 27 29-2102(2). Here, although Hilton has not specifically stated whether Diamond continues to exist as a corporate entity, Hilton repeatedly states that in 2021 it “acquired” Diamond, 28 suggesting that Diamond does continue to exist, and was not merged with Hilton. (Doc. 25 at 2, 11, 12; Doc. 35 at 1, 2, 5.) _7-