Ninth Circuit Agrees Non-Signatory Cannot Be Compelled to Arbitrate Under California Law

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Defendants appealed a California federal district court order denying their motion to compel arbitration of the plaintiff’s claims for trade secret misappropriation, common law misappropriation, and unfair competition. The issue was whether the plaintiff could be equitably compelled to arbitrate, despite there being no contract in which it agreed to do so. The Ninth Circuit held there was no basis for compelling arbitration. The court noted that under California law, a non-signatory to an arbitration agreement may be compelled to arbitrate under two circumstances: (i) if its claims are “dependent, on or inextricably intertwined” with the underlying contractual obligations of the agreement containing the arbitration clause; or (ii) if it receives a “direct benefit” from the contract containing the arbitration clause. Agreeing that neither circumstance was present here, the court affirmed the district court order denying the defendants’ motion to compel.

Thrasio, LLC v. Boosted Commerce, Inc., No. 21-55621 (9th Cir. Mar. 18, 2022).

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