[00:00:01] Speaker 02:
All right, our next case this morning is Munoz versus Conduant State and Local Solutions, number 24, 2044.

[00:00:13] Speaker 02:
Counsel, you may proceed.

[00:00:18] Speaker 01:
Morning, Your Honor.

[00:00:18] Speaker 01:
May it please the Court, Fred Rowley, Jr., for the Conduant Appellants.

[00:00:23] Speaker 01:
The District Court fundamentally misapplied Renna Center's framework

[00:00:27] Speaker 01:
for analyzing arbitration agreements with delegation clauses.

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That case squarely holds that unless a plaintiff specifically challenges the delegation clause or mounts a genuine issue of formation, the delegation clause must be enforced in the matter left for the arbitrator.

[00:00:46] Speaker 02:
Well, counsel, counsel, I'm going to jump in right now because it seems to me that Section 2 of the FAA requires a court to be satisfied

[00:00:55] Speaker 02:
that the parties have consented to arbitration in the first place.

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Now, isn't that exactly what the appellees asked the district court to determine?

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That is, whether appellees and conduit consented to arbitration?

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No, Your Honor.

[00:01:12] Speaker 02:
They didn't ask for that in the opposition to the motion to compel?

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Because that's exactly what the district court did.

[00:01:18] Speaker 01:
Your Honor, the district court and the plaintiffs have tried to recast what is really

[00:01:23] Speaker 01:
a question of contract interpretation.

[00:01:25] Speaker 02:
Well, that's different.

[00:01:26] Speaker 02:
I didn't ask if they'd recast it.

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Sure.

[00:01:28] Speaker 02:
I asked if that's what they asked.

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Did they ask the court to address whether there was formation of an arbitration agreement?

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Did they ask the court to address that?

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They did, Your Honor.

[00:01:39] Speaker 01:
Yes, they did.

[00:01:39] Speaker 02:
And just a minute, Counsel.

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Sure.

[00:01:41] Speaker 02:
And did the court answer the question?

[00:01:44] Speaker 01:
The court answered the question wrongly.

[00:01:46] Speaker 02:
No.

[00:01:48] Speaker 02:
Counsel, did the court answer the question?

[00:01:50] Speaker 01:
It did.

[00:01:50] Speaker 02:
All right.

[00:01:51] Speaker 02:
What's wrong with that?

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Because it's not a genuine question of formation that the plaintiffs have raised here.

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And we know that from the positions taken in the plaintiffs' briefs on appeal, as well as the district court.

[00:02:03] Speaker 01:
And here's why.

[00:02:04] Speaker 01:
The plaintiffs don't dispute.

[00:02:05] Speaker 02:
But that was the position they took in district court.

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And we're reviewing what the district court did.

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Correct, Your Honor.

[00:02:12] Speaker 02:
If they asked the district court to do that, the district court did that.

[00:02:16] Speaker 02:
It seems to me your argument has to be that they had no business asking the district court to do that, right?

[00:02:22] Speaker 01:
No, Your Honor, they just misframed the question.

[00:02:24] Speaker 01:
So they can ask for all kinds of relief, but the- I'm back to section two.

[00:02:28] Speaker 01:
Sure.

[00:02:29] Speaker 02:
No one disputed there was an arbitration agreement around a center, correct?

[00:02:35] Speaker 01:
That's right, but- OK.

[00:02:36] Speaker 01:
The same is true here.

[00:02:38] Speaker 02:
No, it isn't.

[00:02:38] Speaker 01:
The same is, Your Honor, and here's why.

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So look at what the plaintiffs actually argue.

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They are not arguing that there was no contract formed here, that the terms weren't formed.

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They're not really arguing.

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that the arbitration agreement wasn't formed, and they're not even arguing that the delegation... No, they're arguing that there was no agreement formed between your client and them.

[00:03:01] Speaker 01:
Your Honor, that argument is really no different from the kind of challenge that was raised in Bremen.

[00:03:07] Speaker 01:
It's the same kind of issue.

[00:03:09] Speaker 01:
There the plaintiffs argued that the pending litigation exception was applicable, that that exception to an arbitration agreement was applicable, and that the court could just construe it because

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They didn't agree to have their disputes arbitrated.

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And this court said, no.

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The delegation clause, there was a broad delegation clause, just like the one here.

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And the court applied the delegation clause, notwithstanding the way that the plaintiff tried to frame the question.

[00:03:39] Speaker 01:
I do think it's worth looking at.

[00:03:41] Speaker 02:
Could I just jump in and ask you a question about this?

[00:03:44] Speaker 02:
Sure.

[00:03:45] Speaker 02:
So I think I understand that there is this

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You've got the overall agreement, the terms and conditions.

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That's right.

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What was given to the appellees.

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Right.

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And then within that, you have the arbitration, paragraph 20.

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Right.

[00:04:03] Speaker 02:
All right.

[00:04:04] Speaker 02:
And if you look at it from the standpoint of, well, there's an arbitration agreement because it's embedded in the overall terms and conditions.

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That's one way of looking at it.

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I mean, another way of looking at it is, well, wait a minute.

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You have Wells Fargo, and you have the appellees.

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You have the appellees, and you have conduit.

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And you've got this arbitration clause that doesn't mention conduit.

[00:04:32] Speaker 02:
All right?

[00:04:33] Speaker 02:
Why is it that the court can't look at that and say, is there consent to arbitration between

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conduit and the appellees.

[00:04:43] Speaker 01:
Here's why.

[00:04:44] Speaker 02:
And what I'd like to know is, have you got a case, because I've been looking for one, that matches up with that scenario?

[00:04:53] Speaker 01:
Your Honor, I do think Brehman says a lot about the question that you just framed.

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Think of it this way.

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And I think noting that the arbitration agreement here is nested within this broader agreement is important, and here's why.

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There's no dispute but that all three parties

[00:05:10] Speaker 01:
agreed to the terms as a whole.

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We know that because the plaintiffs have asked the court to enforce language in the terms and conditions as a whole against conduit.

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So there's no question of mutual assent to the terms as a whole.

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What the plaintiffs are arguing about is language within the terms and conditions, language in the preamble.

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So what do the plaintiffs want?

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And how are they characterizing this dispute as one of formation?

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Well, they're saying, despite

[00:05:40] Speaker 01:
the fact that all three parties mutually agreed to the terms and conditions, there's actually a bilateral contract that's embedded within the terms and conditions.

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And there's really only two parties that agreed to the arbitration.

[00:05:54] Speaker 01:
But Your Honor, this is important.

[00:05:56] Speaker 01:
There's no language in this agreement that carves out conduit as a party to the arbitration agreement.

[00:06:04] Speaker 01:
And this is important because under black letter law... What do you mean by carves out?

[00:06:09] Speaker 02:
You mean, does it need to be explicit?

[00:06:11] Speaker 01:
It would.

[00:06:12] Speaker 02:
It would, and here's why.

[00:06:13] Speaker 02:
Again, because... Hey, I'm trying not to interrupt you, so please don't interrupt me.

[00:06:18] Speaker 02:
Yes, Your Honor.

[00:06:19] Speaker 02:
All right.

[00:06:20] Speaker 02:
Does the language need to say expressly that conduit is carved out, that this provision in the arbitration, that the arbitration provision doesn't apply to conduit?

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Does there need to be language to that effect?

[00:06:37] Speaker 01:
Yes.

[00:06:38] Speaker 01:
Here's why.

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Because again, there's no dispute that there's mutual assent to the terms as a whole among all three parties.

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Plaintiffs don't dispute that.

[00:06:47] Speaker 01:
They're focusing on the arbitration agreement and basically saying conduit is ousted.

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But we know as a matter of black letter law, and I'll just quote South Dakota law here, one who accepts a written contract is conclusively presumed to know its contents and to assent to them.

[00:07:07] Speaker 01:
We know that by mutually assenting to the terms as a whole, there's a presumption that the parties agreed to all the terms within that contract.

[00:07:14] Speaker 01:
So they have to have some kind of evidence, some textual basis to say, actually, as to the arbitration agreement, Conduant is ousted and we're carving up the rights as between Conduant and Wells Fargo.

[00:07:26] Speaker 01:
There's no language like that.

[00:07:28] Speaker 01:
And there is an illustration in Bremen of what that language would look like.

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In contrasting the pending litigation clause

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in Brehman, this court said, well, look at the next sentence after the delegation clause in the agreement there.

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And I'll quote the language.

[00:07:47] Speaker 01:
However, the preceding sentence, that was the delegation clause, shall not apply to the class action waiver described below.

[00:07:56] Speaker 01:
There was an express carve out from the delegation clause.

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And this court said that language, quote, is everything a carve out should be.

[00:08:05] Speaker 01:
There's no language like that here.

[00:08:08] Speaker 04:
I think you'd better.

[00:08:11] Speaker 04:
I just want to follow up on this argument about a textual basis.

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And I want to understand your argument.

[00:08:17] Speaker 01:
Sure.

[00:08:18] Speaker 04:
So in paragraph 20, do you agree or disagree with the proposition that the arbitration agreement applies only to a dispute?

[00:08:29] Speaker 01:
Oh, the plain language of the agreement says a dispute includes.

[00:08:34] Speaker 01:
No.

[00:08:35] Speaker 01:
Sure.

[00:08:36] Speaker 04:
I'm not talking in B yet.

[00:08:39] Speaker 04:
I'm in A, binding arbitration.

[00:08:41] Speaker 04:
The dispute will be resolved by the arbitration process.

[00:08:44] Speaker 04:
I know what you're anticipating, but I want to take it in baby steps.

[00:08:51] Speaker 04:
Binding arbitration applies only if there is the dispute.

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That's right.

[00:08:57] Speaker 04:
There's three relevant clauses, the definition clause and two inclusive clauses.

[00:09:04] Speaker 01:
That's right.

[00:09:04] Speaker 04:
You were wanting to jump to the second inclusive clause.

[00:09:07] Speaker 04:
The definition clause is a dispute is any unresolved disagreement between you, the customer, and bank.

[00:09:16] Speaker 04:
Right.

[00:09:17] Speaker 04:
Okay?

[00:09:18] Speaker 04:
And then there's the second, the next sentence and then the last sentence

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refers to what a dispute between you and the bank includes, correct?

[00:09:29] Speaker 04:
Right.

[00:09:30] Speaker 04:
And so if you have a definition, it's sort of like a pronoun with an antecedent.

[00:09:34] Speaker 04:
Don't you just substitute what the antecedent is?

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So the second sentence, for example, would be it, a dispute.

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comma, which is any unresolved disagreement between you and the bank, includes any dispute relating in any way to the corridor, right?

[00:09:54] Speaker 04:
That's how it should be interpreted.

[00:09:56] Speaker 04:
And the same for the last sentence.

[00:09:57] Speaker 01:
But Judge Becker, that language, the way that the plaintiffs are trying to construe it, to use the reference of Wells Fargo also to Mean Bank, that's the language and the preamble that they're trying to use, it's not expressed enough.

[00:10:13] Speaker 01:
And it's not an express carve-out.

[00:10:15] Speaker 01:
It's not a sentence in the delegation clause, but it's more than that.

[00:10:18] Speaker 01:
Consider the way that the plaintiffs are using that language.

[00:10:21] Speaker 01:
They think that bank refers to conduit with respect to every other part of this agreement.

[00:10:26] Speaker 01:
They think that, yes, Your Honor, they think that conduit steps in for Wells Fargo.

[00:10:31] Speaker 01:
And so they are treating the word bank as though it refers to conduit

[00:10:35] Speaker 01:
For every other part of this agreement except the arbitration provision, there's no carve out the way that there was in Bremen.

[00:10:42] Speaker 04:
I'm not talking about your adverse.

[00:10:43] Speaker 04:
I'm just talking about how I would read this contract.

[00:10:49] Speaker 01:
Sure.

[00:10:50] Speaker 04:
And so what's wrong with the way I'm, you know, when I read a pronoun and I mentally substitute the antecedent.

[00:10:58] Speaker 04:
So when I get to the word dispute, what it includes, I substitute the antecedent.

[00:11:03] Speaker 01:
Your Honor, here's why.

[00:11:04] Speaker 01:
First, look, it's a merits issue, right?

[00:11:07] Speaker 04:
I don't know that it's a merits issue, because I think we're talking about whether or not this clearly and unmistakably delegates arbitrability to the arbitrator.

[00:11:19] Speaker 04:
And you started with Renness Center, where you have an express standalone delegation clause.

[00:11:24] Speaker 04:
I'm just wondering if this is really a standalone delegation clause, because it's only the second including clause.

[00:11:31] Speaker 01:
Look, we think that the best reading is that it's a standalone delegation clause.

[00:11:35] Speaker 01:
But whether you read the word bank or the word Wells Fargo referring to bank, that clause in the way that the plaintiff does doesn't change the analysis.

[00:11:46] Speaker 01:
And here's why.

[00:11:47] Speaker 01:
Because it's still not an express carve out.

[00:11:50] Speaker 01:
And we know that from Bremen.

[00:11:52] Speaker 01:
This construction argument that the plaintiffs are advancing is very similar to the one that was advanced in Bremen, where they said, well, this pending

[00:12:00] Speaker 01:
litigation exception, carves out this dispute.

[00:12:04] Speaker 01:
And so it's not subject to the delegation clause.

[00:12:07] Speaker 01:
And this court said, wait a second, let's look in the language in the delegation clause, and it's not expressed.

[00:12:13] Speaker 01:
It's particularly important that the court apply that analysis in a disciplined way here for a couple reasons.

[00:12:21] Speaker 01:
One, again, this is a situation where there's no dispute that the parties mutually ascended to the terms as a whole.

[00:12:28] Speaker 01:
So what you have to conclude is, actually, as to this part of the contract, one party is ousted and the rights are carved up.

[00:12:36] Speaker 01:
And so you would need some express language to show that.

[00:12:40] Speaker 01:
And we submit it's not present here.

[00:12:43] Speaker 01:
Think of it this way.

[00:12:44] Speaker 01:
Two other points.

[00:12:45] Speaker 01:
One, if a party were able to re-characterize a scope issue, and we think this is a scope issue, just what does the arbitration agreement encompass?

[00:12:55] Speaker 01:
Does it encompass this dispute?

[00:12:56] Speaker 01:
or this party as a formation issue, Renna Center would be dead letter, and the courts would never apply delegation clause, because you could always say, well, wait a second.

[00:13:06] Speaker 02:
Council, we don't have much time left, and we haven't talked at all about equitable estoppel.

[00:13:11] Speaker 01:
Sure.

[00:13:11] Speaker 02:
Could we go over a couple of things there?

[00:13:13] Speaker 02:
Yes, Your Honor.

[00:13:14] Speaker 02:
OK.

[00:13:15] Speaker 02:
And I appreciate your argument, and I need to look at Brehm and some more.

[00:13:18] Speaker 02:
Sure.

[00:13:18] Speaker 02:
So I appreciate your pushing that case.

[00:13:21] Speaker 02:
But on equitable estoppel,

[00:13:26] Speaker 02:
The amended complaint, and this is that first step, the interdependent piece of it.

[00:13:35] Speaker 02:
The complaint talks about subcontracting the conduit and conduit handles all customer service issues, conduit is supposed to take care of the situation that arose here.

[00:13:48] Speaker 02:
Doesn't that cut against interdependence?

[00:13:52] Speaker 02:
It kind of pushes everything over on conduit.

[00:13:55] Speaker 01:
Your Honor, I want to pause for a second because I was just going to say that before you even get to the merits of the equitable estoppel argument, the fact that we have asserted equitable estoppel as an independent basis to enforce the arbitration agreement, that is also an arbitrable issue that is subject to the delegation clause, and Casa Arena Blanca teaches that.

[00:14:18] Speaker 01:
So even if the court were to construe the

[00:14:21] Speaker 01:
delegation clause in the arbitration agreement in a way that plaintiffs suggest, the availability of this equitable estoppel ground as a basis to enforce the arbitration agreement, that also has to go to the arbitrator.

[00:14:33] Speaker 02:
Okay, so now... Okay, wait a minute.

[00:14:35] Speaker 02:
Does that mean you're saying we shouldn't even address the merits?

[00:14:39] Speaker 01:
We're saying that the delegation clause would apply

[00:14:43] Speaker 01:
to our equitable estoppel ground.

[00:14:46] Speaker 02:
Well, that's what I mean.

[00:14:47] Speaker 02:
Yes.

[00:14:48] Speaker 02:
That we shouldn't even be addressing the merits of the equitable estoppel arguments, even though you've laid them all out there.

[00:14:54] Speaker 01:
That's right.

[00:14:54] Speaker 01:
But if the court reaches it, now to get to your question, the answer is no.

[00:15:02] Speaker 01:
What the plaintiffs are alleging here is not just parallel misconduct.

[00:15:07] Speaker 01:
They're alleging joint misconduct.

[00:15:09] Speaker 01:
And we know that from the allegations in the complaint.

[00:15:12] Speaker 01:
They allege, for example, that Conduint, and I'm quoting from paragraph 60, opens Epicard accounts in conjunction with Wells Fargo.

[00:15:20] Speaker 01:
So this is joint activity.

[00:15:21] Speaker 01:
They allege in paragraph 77, Wells Fargo refers any such complaints along with all other customer services issues with the Epicard to Conduint.

[00:15:29] Speaker 01:
So there is this joint misconduct.

[00:15:31] Speaker 01:
But the more fundamental point, and I think Reeve speaks to this, is you don't need allegations of a conspiracy.

[00:15:38] Speaker 01:
or that the defendants work together, it is sufficient to say that the claims are inherently inseparable and that they're integrally related.

[00:15:49] Speaker 02:
I understand your argument.

[00:15:51] Speaker 02:
What's the standard of review if we evaluate equitable estoppel?

[00:15:58] Speaker 02:
analyze the district courts.

[00:16:00] Speaker 02:
Given that it's an equitable issue, don't we usually apply abusive discretion or deference?

[00:16:08] Speaker 01:
Yes, your honor, although we think that the district court made errors of law, and those would of course be reviewed de novo.

[00:16:14] Speaker 02:
I understand, but you're saying abusive discretion.

[00:16:17] Speaker 01:
Yes, your honor.

[00:16:18] Speaker 01:
OK.

[00:16:19] Speaker 01:
But the errors that I want to be clear about this.

[00:16:22] Speaker 01:
I want you to be clear.

[00:16:23] Speaker 01:
Yeah, the errors that we advance here are legal in nature.

[00:16:27] Speaker 01:
And so we think that those would be subject to de novo review.

[00:16:31] Speaker 01:
I had intended to, until Your Honor got to equitable estoppel, to reserve a couple minutes.

[00:16:37] Speaker 02:
No, you've packed a lot in this morning and in your briefs and appreciate that, but your time's up.

[00:16:42] Speaker 04:
Okay.

[00:16:43] Speaker 04:
I think we can risk it.

[00:16:50] Speaker 04:
I just, I don't want to dwell on this, but I just wonder if you may have just talked yourself out of a book to reverse for me.

[00:17:00] Speaker 04:
What if I hypothetically disagreed with you on the scope of the delegation clause?

[00:17:07] Speaker 04:
Right.

[00:17:08] Speaker 04:
And I agreed with you on the first theory of equitable stopple, that it was interconnected and concerted.

[00:17:18] Speaker 04:
Now, I think, based on what you just said, that your view is that is subject to the delegation clause.

[00:17:28] Speaker 04:
That has to be decided by the arbitrator.

[00:17:31] Speaker 04:
I can only decide things that the district court would have been suited to decide, not the arbitrator.

[00:17:38] Speaker 04:
So I'm wondering if we can reverse on the first equitable estoppel theory and probably the second, if we reject

[00:17:48] Speaker 04:
your first argument on the scope of the delegation clause?

[00:17:52] Speaker 01:
Yes, you could.

[00:17:52] Speaker 01:
I mean, so we have two positions.

[00:17:54] Speaker 01:
Our top line position, of course, is that the delegation clause applies here, and it applies both to this scope question.

[00:18:01] Speaker 01:
We think it's a scope question about whether the arbitration clause includes disputes with conduit, also that it includes

[00:18:10] Speaker 01:
or that the delegation clause applies to the equitable estoppel argument.

[00:18:13] Speaker 01:
So that's our top line position, but we argue that even if the court reaches those issues, the district court got it wrong on both, got the scope issue wrong because actually the best reading of the contract is that bank includes conduit and also that it got the equitable estoppel analysis wrong.

[00:18:30] Speaker 04:
I see.

[00:18:31] Speaker 04:
Thank you.

[00:18:35] Speaker 03:
May it please the court, Daniel Schlanger.

[00:18:38] Speaker 03:
for plaintiffs Apeliz, Ana Muñoz, and Michael Tilley.

[00:18:44] Speaker 03:
Arbitration is a matter of consent.

[00:18:47] Speaker 03:
Specifically, as the district court noted, quoting Granite Rock, a court cannot order arbitration of a particular dispute unless it is satisfied that the parties agreed to arbitrate that dispute.

[00:19:01] Speaker 03:
In first options, the Supreme Court similarly held,

[00:19:06] Speaker 03:
Arbitration is a way to resolve those disputes, but only those disputes, that the parties have agreed to submit to the arbitrator.

[00:19:16] Speaker 03:
In this case, there is no evidence of mutual assent between plaintiffs and conduit with regard to arbitrating their disputes.

[00:19:27] Speaker 03:
And you can see that by looking at the language of the arbitration clause itself.

[00:19:32] Speaker 02:
Well, counsel, I'm really going to

[00:19:35] Speaker 02:
flip the question that I asked to the opposing counsel, and that is if we have conduit being a party to the terms and conditions, which I think you've said conduit is a party to the terms and conditions.

[00:19:55] Speaker 03:
Of the overall agreement, sure.

[00:19:56] Speaker 02:
Yes, yes.

[00:19:57] Speaker 02:
And you have an arbitration clause within the terms and conditions

[00:20:05] Speaker 02:
then isn't that the right way to look at it, as counsel was arguing?

[00:20:10] Speaker 02:
That is, at that point, the question kicks over to the delegation clause.

[00:20:19] Speaker 02:
And from there, the question of whether your claims against the conduit, the question is whether those claims are arbitrable, right?

[00:20:32] Speaker 02:
Why wouldn't we start with the overall agreement?

[00:20:36] Speaker 02:
And we have the arbitration clause nested in there.

[00:20:40] Speaker 02:
And I understand your arguments about the language and refers to the bank and so forth and so on.

[00:20:45] Speaker 02:
But at that point, didn't your clients agree to the overall agreement?

[00:20:54] Speaker 03:
The answer to your question, Your Honor, is that

[00:20:59] Speaker 03:
Figuring out if a party is consented to arbitration has to be figuring out, particularly in the context of a multi-party contract, which parties agreed.

[00:21:09] Speaker 03:
It's who, not what.

[00:21:11] Speaker 03:
And so all of those cases that my adversary is citing say, look, A and B agreed to arbitrate.

[00:21:21] Speaker 03:
And now we have problems about what they agreed to arbitrate.

[00:21:26] Speaker 02:
All right, but have you got a case where

[00:21:29] Speaker 02:
Because now we have C, right?

[00:21:31] Speaker 02:
I mean, we don't just have A and B. We have C. And C's agreed to the overall terms and conditions.

[00:21:42] Speaker 02:
And then the question of whether the arbitration agreement, which it agreed to the overall terms and conditions,

[00:21:50] Speaker 02:
whether an issue is arbitrable then, why wouldn't that flow from the delegation clause at that point?

[00:21:59] Speaker 02:
And I guess the question I have is, is there a case out there where we have not just A and B, we had A and B in rent-a-center, but have we got a case with A, B, and C that helps answer this question?

[00:22:13] Speaker 02:
How are we supposed to look at this?

[00:22:14] Speaker 02:
I've referred to it leading up to argument.

[00:22:18] Speaker 02:
Which end of the telescope do you look through here?

[00:22:20] Speaker 02:
Do you look at the whole agreement, or do you zero in on the arbitration clause?

[00:22:25] Speaker 02:
You want to zero in on the arbitration clause, and Conduant wants to take the whole agreement.

[00:22:29] Speaker 02:
Who's right?

[00:22:30] Speaker 02:
And is there a case?

[00:22:33] Speaker 02:
Council cited Debrahman.

[00:22:35] Speaker 02:
Maybe you want to talk about that.

[00:22:39] Speaker 03:
Let me try to address.

[00:22:40] Speaker 03:
There's a couple of pieces of what Your Honor has asked me.

[00:22:43] Speaker 02:
I'm sorry.

[00:22:43] Speaker 03:
There were probably more than a couple.

[00:22:45] Speaker 02:
But go ahead.

[00:22:45] Speaker 03:
Address them in order.

[00:22:46] Speaker 03:
I think that with regard to delegation conduit is in even worse shape than it is with regard to agreements arbitrate generally, because the standard for enforcing delegation clauses is that there be clear and unmistakable evidence that the parties delegated that dispute to the arbitrator.

[00:23:11] Speaker 02:
But doesn't that presuppose that there's an arbitration agreement in the first place, and then the clear and unmistakable test kicks in?

[00:23:23] Speaker 03:
We don't think there's either, Your Honor.

[00:23:24] Speaker 03:
And did you even make that argument before?

[00:23:30] Speaker 03:
I don't think there's an arbitration clause, but I think the argument for the idea that conduit and plaintiffs clearly and unmistakably agreed to delegate is even weaker.

[00:23:41] Speaker 03:
Because so that would be the first part of my answer.

[00:23:48] Speaker 03:
There are a number of sister circuits that have talked specifically about looking at the actual language of an arbitration clause itself to figure out if a third party is covered.

[00:24:02] Speaker 03:
So I would refer the court to Newman, for example.

[00:24:07] Speaker 03:
Actually, second circuit, if we could

[00:24:11] Speaker 03:
I apologize.

[00:24:13] Speaker 03:
In the Second Circuit and in the Republic of Iraq case, the court said that evidence of intent to have an arbitrator determine its jurisdiction with regards to disputes referred by either party does not clearly and unmistakably demonstrate their intent if the arbitrator determine its jurisdiction with respect to any dispute raised by a non-party.

[00:24:36] Speaker 03:
Now, I suppose that formulation doesn't exactly get

[00:24:40] Speaker 03:
to Your Honor's question, which is, well, in this case, conduit is a party to the overall agreement.

[00:24:46] Speaker 03:
But you look to the language of the arbitration clause itself, I think, is really the point.

[00:24:53] Speaker 03:
Similarly, in Newman, in the Fifth Circuit, the court said that the first step in determining whether a valid agreement to arbitrate exists under the first step

[00:25:08] Speaker 03:
We look first to the terms of the agreement, which dictate who is actually bound by an arbitration agreement.

[00:25:16] Speaker 03:
And then if that fails, you go on to estoppel theories.

[00:25:21] Speaker 03:
In Tug Hill, which again, didn't have this nested problem, and I don't have a case that has the exact nested problem.

[00:25:33] Speaker 03:
But again, in Tug Hill, which is the Fourth Circuit,

[00:25:39] Speaker 03:
The court said, the relevant threshold question that a court must address when being asked to compel arbitration is whether an arbitration agreement exists between the parties, not whether an overall contract agrees, but whether an agreement to arbitrate exists within the parties.

[00:25:53] Speaker 03:
And then with regard, I'm jumping ahead a little bit, but with regard to any argument that the arbitrator can then figure that out, Tughill said, that that fails to address the contractual source of the arbitrator's authority.

[00:26:09] Speaker 03:
which, after all, is consent of, in this case, it would have to be consent of plaintiffs and conduit.

[00:26:18] Speaker 03:
Does that answer your honor's question?

[00:26:21] Speaker 03:
And with regard to Brehman, Rent-a-Center and Henry Schein and Brehman, in my view, for our purposes, they're all sort of the same thing, which is once you say, look, these two parties very clearly agreed to arbitrate their disputes,

[00:26:37] Speaker 03:
And these two parties very clearly agreed to delegate arbitrability.

[00:26:43] Speaker 03:
After that, they're stuck with it, meaning once A and B have agreed under rent to center, any argument you're going to make about enforceability of the contract as a whole goes to the arbitrator.

[00:26:56] Speaker 03:
Under Henry Schein, once those two parties have clearly agreed, excuse me,

[00:27:06] Speaker 03:
There's no carve out for exceptionally dumb arguments.

[00:27:10] Speaker 02:
Well, how would you respond to the argument, then, that given that you've got your clients, Wells Fargo and Conduant, all saying, we're all on board with the terms and conditions, there is this arbitration paragraph.

[00:27:33] Speaker 02:
If you want to take conduit out of the arbitration picture, doesn't the terms and conditions or the arbitration clause itself somewhat have to say conduit isn't part of the arbitration picture?

[00:27:53] Speaker 03:
I think the arbitration agreement would need to make clear that it is only between the plaintiffs and the bank.

[00:28:01] Speaker 03:
And it is hard for me to imagine a knot between plaintiffs and all the contract parties.

[00:28:07] Speaker 03:
And in this case, the language could not be clear just over and over again, as I won't belabor the point by reading through the whole thing.

[00:28:16] Speaker 03:
But over and over again, what it says is you or bank.

[00:28:23] Speaker 02:
Let me add a sidebar to this for you to include with your answer, which is this.

[00:28:31] Speaker 02:
Why is it that that isn't an argument that should be made to the arbitrator?

[00:28:39] Speaker 02:
In other words, you've agreed to the terms and conditions, maybe on the face of this it looks like conduit isn't there, but the delegation clause, well that's up to, so you make this argument to the arbitrator and you may end up being right.

[00:28:55] Speaker 02:
You may end up winning and saying, look, this isn't arbitrable,

[00:29:00] Speaker 02:
But why wouldn't the arbitrator be the place to go at this point, given the nesting of the arbitration agreement?

[00:29:08] Speaker 03:
Because there is no clear and unmistakable evidence that the plaintiffs and conduits agreed to send that issue to the arbitrator.

[00:29:17] Speaker 04:
But isn't that contrary to Bremen and Renison?

[00:29:21] Speaker 04:
Because in Bremen, did Bremen or Raymond

[00:29:27] Speaker 04:
You know, what we specifically said was that the issue was going to be delegated to the arbitrator because in relying on, in quoting the language of the delegation clause in Renna Center, that the arbitrator and not any court or agency shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this agreement.

[00:29:56] Speaker 04:
And in 20B,

[00:29:57] Speaker 04:
Our agreement says a dispute includes any discre... almost exactly the language in Renaissance that we relied on in Bremen about the meaning application or enforceability of the arbitration agreement.

[00:30:13] Speaker 04:
So if it unmistakably delegated arbitrability in Bremen, why doesn't it here?

[00:30:18] Speaker 03:
For two reasons.

[00:30:19] Speaker 03:
One is that the word dispute here has been defined

[00:30:25] Speaker 03:
by the contract to mean only disputes between you and the bank.

[00:30:30] Speaker 03:
And the second reason is that also in that clause, it says that you may not consolidate or join anything else to that dispute between you and the bank.

[00:30:40] Speaker 04:
What if it were a third-party beneficiary of the contract?

[00:30:45] Speaker 04:
Would the third-party beneficiary be able to apply 20B because

[00:30:53] Speaker 04:
They were a beneficiary contractually of contractual rights that were enjoyed by a contracting party, Wells Fargo.

[00:31:03] Speaker 03:
The question with a third-party beneficiary is, if I haven't consented to the contract, can I be forced to go to the arbitrator anyways?

[00:31:17] Speaker 03:
That's how you get there.

[00:31:20] Speaker 03:
And so that inquiry as to whether somebody

[00:31:23] Speaker 03:
And that's generally because a court enforces arbitration where the party's agreed or where there's a generally available state law defense, which is a stop all or third party beneficiary or what have you.

[00:31:39] Speaker 03:
So I do not think, absent the delegation clause where the parties explicitly turn that issue as between them over to the arbitrator, if they want to do that, I suppose they could, but absent that,

[00:31:53] Speaker 03:
Third-party beneficiary is something the court needs to figure out, to figure out if even though there isn't consent of the parties, it can force the parties into arbitration.

[00:32:05] Speaker 04:
Is that a no or a yes?

[00:32:07] Speaker 04:
I just wasn't sure.

[00:32:09] Speaker 03:
I understood the question.

[00:32:12] Speaker 04:
Well, that question, you're saying that Conduit is not Wells Fargo.

[00:32:17] Speaker 04:
You're relying on the first sentence in 20B.

[00:32:19] Speaker 04:
My question, because they weren't a contracting party, they weren't Wells Fargo.

[00:32:23] Speaker 04:
They were a subcontractor to Wells Fargo.

[00:32:25] Speaker 04:
They inherited the contractual obligations that were thrust on Wells Fargo.

[00:32:32] Speaker 04:
And so I'm wondering if they were an obligor inheriting Wells Fargo's obligations.

[00:32:38] Speaker 04:
And on the flip side, if they were a third-party beneficiary, would they have been able to fit themselves into a dispute

[00:32:49] Speaker 03:
any unresolved disagreement between you and the third-party beneficiary of the bank?

[00:33:03] Speaker 03:
They're a subcontractor.

[00:33:04] Speaker 03:
I don't think they're a third party beneficiary.

[00:33:07] Speaker 04:
That's why I tried to say it was a hypothetical.

[00:33:11] Speaker 04:
I've just asked a question.

[00:33:13] Speaker 03:
The question is, that would not shoehorn them into the language you or bank, but it could have, given the district court, a state law, common law basis to force arbitration.

[00:33:27] Speaker 03:
Anyways, if I just might onestoppel at one point, because we didn't really get to it,

[00:33:32] Speaker 03:
at all.

[00:33:33] Speaker 03:
I think, as Judge Matheson pointed out, I think it was your honor, all of the action here really is by conduit.

[00:33:44] Speaker 03:
And so in these cases about joint mutual disconcerted action, hand in hand, that whole thing, you don't have any of those facts here.

[00:33:55] Speaker 03:
It's hard to imagine a case where you have fewer of them.

[00:33:57] Speaker 03:
But in addition, I just wanted to correct one thing that's

[00:34:01] Speaker 03:
my adversary's brief a few times, which is the following.

[00:34:05] Speaker 03:
The other ground for estoppel under state law is if your claims arise under the agreement.

[00:34:13] Speaker 03:
And my adversary has said a couple of times in the briefing that our claims arise under the contract.

[00:34:20] Speaker 03:
That isn't correct.

[00:34:21] Speaker 03:
The district court addressed this correctly.

[00:34:23] Speaker 03:
We're not bringing a contract claim, and all of the obligations here are statutory.

[00:34:29] Speaker 04:
And on top of that... Even the misrepresentation claims?

[00:34:34] Speaker 03:
Yes, Your Honor.

[00:34:35] Speaker 04:
And so were there any alleged misrepresentations other than the representations that conduit provided in the contract?

[00:34:43] Speaker 03:
That's what I'm trying to get at, Your Honor.

[00:34:45] Speaker 03:
The alleged misrepresentations are not in the contract.

[00:34:48] Speaker 03:
The alleged misrepresentations are set forth in the denial letters conduit sends when it denies claims, when it states

[00:34:57] Speaker 03:
a standard for denying claims that we think is unlawful.

[00:35:01] Speaker 03:
And they're not in the contract at all.

[00:35:03] Speaker 00:
Counsel, on estoppel, can you help me understand the substantial interdependence argument here?

[00:35:10] Speaker 00:
Because throughout the complaint, you label Conduit as being the subcontractor to Wells Fargo and to fulfill nearly all aspects of its contract with New Mexico.

[00:35:21] Speaker 00:
And as I read sort of the basis of liability that you've alleged, it seems to me most of the actions or inactions are focused at conduit.

[00:35:29] Speaker 00:
But what I'm having trouble understanding is how the theories of liability differ between Wells Fargo and conduit, and why those are not substantially interdependent.

[00:35:38] Speaker 03:
In order to make Wells Fargo's liable under the EFTA, we think, because it's a financial institution that indirectly offers accounts, and therefore it incurs all the obligations.

[00:35:50] Speaker 03:
it's chosen to give all those obligations to a subcontractor.

[00:35:53] Speaker 00:
Exactly.

[00:35:53] Speaker 00:
That's my point is.

[00:35:54] Speaker 00:
So because they've done that, their liability really springs from the inactions or actions of their subcontractor.

[00:36:00] Speaker 00:
So why aren't those two cases dependent upon each other?

[00:36:04] Speaker 03:
I think the short answer to your honor's question is the standard for a beg your pardon.

[00:36:15] Speaker 03:
Just a moment.

[00:36:15] Speaker 03:
Let me misquote the language.

[00:36:24] Speaker 03:
for substantially interdependent and concerted misconduct, which the district court went through.

[00:36:31] Speaker 03:
The case law in the Estrada case requires, and the Reeves case as well, all of those cases involve joint action ongoing to commit the violation.

[00:36:40] Speaker 03:
So a lot of those cases, Reeves included, are cases where you have a staffing agency and a business.

[00:36:48] Speaker 03:
And so the business says we're only going to pay a day rate, not an hourly rate.

[00:36:52] Speaker 03:
And then the staffing agency is the one who underpays them.

[00:36:54] Speaker 03:
And so working together, the allegation is that the two defendants violate the law.

[00:36:59] Speaker 00:
But is South Dakota law that clear as to what those terms mean?

[00:37:03] Speaker 00:
I mean, I read at least part of the district court's opinion to essentially make an eerie guess as to what it means to be substantially under dependent or concerted misconduct.

[00:37:13] Speaker 00:
I mean, Rossi comes up.

[00:37:16] Speaker 00:
But are there other cases of South Dakota law that will help us understand what substantial interdependence means?

[00:37:21] Speaker 03:
The cases that were cited in the district court and that I've looked at are all cases outside of South Dakota interpreting South Dakota law.

[00:37:30] Speaker 03:
And they're collected in the district.

[00:37:32] Speaker 03:
Estrada is one.

[00:37:33] Speaker 03:
There are several of them.

[00:37:34] Speaker 03:
They're collected in the district court's opinion.

[00:37:36] Speaker 03:
I would just also add that, and the district court covered this as well,

[00:37:43] Speaker 03:
Although under South Dakota law, we'd need to prove collateral estoppel and not just agency, it's clear that under South Dakota law, conduit isn't an agent as a subcontractor.

[00:37:54] Speaker 03:
Agency requires, under South Dakota law, and this is in the district court's opinion, the understanding of the parties that the principle is to be in control of the undertaking.

[00:38:02] Speaker 03:
And conduit never made that argument.

[00:38:07] Speaker 03:
And even if it had, it would still need to show the collateral estoppel standard, which it cannot do, we believe.

[00:38:12] Speaker 02:
Council, it might be helpful for you to respond on one other point about the equitable estoppel, and that was the argument we heard a little earlier that that issue itself is arbitrable.

[00:38:30] Speaker 03:
Do you agree with that?

[00:38:32] Speaker 03:
I do not, Your Honor, and the reason I don't agree with that is because

[00:38:39] Speaker 03:
There is no clear and unmistakable evidence that the parties agreed to that, that conduit and plaintiffs agreed to give that issue to the arbitrator.

[00:38:48] Speaker 03:
And I would just point the court not only to the Fifth Circuit's decision in Newman, where the court said that if they can't prove consent to arbitrate,

[00:39:08] Speaker 03:
We look to theories, we the court, look to theories such as equitable stop all to determine whether a non-signatory may compel arbitration.

[00:39:16] Speaker 03:
And so the whole thing swallows itself if you then give that to the arbitrator, because you can only get to the arbitrator once a court has determined that that's where you have to go, because it applies.

[00:39:26] Speaker 03:
And the court also, it's a district court case, but there's a discussion of that in Young v. Byte Dance.

[00:39:33] Speaker 02:
uh... in the northern district of california as well thank you thank you your honors so we've gone over on both sides quite a bit we're out of time thanks to both of you for the arguments they're very helpful and well presented and we appreciate it and uh... we've got some things to think about so we'll I'll give you twenty seconds how does that sound

[00:40:02] Speaker 01:
I just want to quote from the plaintiff's complaint on this issue of joint misconduct, because this is what they say at paragraph 101 of the complaint.

[00:40:12] Speaker 01:
Both defendants did not make a good faith investigation into their dispute.

[00:40:16] Speaker 01:
At paragraph 102, defendants did not have a reasonable basis for believing the epicard transfers were not an error.

[00:40:21] Speaker 01:
So again, the plaintiff is alleging that both defendants did these things.

[00:40:26] Speaker 01:
And I would just point to Reeves, because Reeves really rests on two

[00:40:29] Speaker 01:
different senses in which the conduct was joined.

[00:40:31] Speaker 02:
We'll look at that part of the complaint.

[00:40:33] Speaker 01:
Thank you, Your Honor.

[00:40:33] Speaker 02:
I appreciate your pointing that out to us.

[00:40:37] Speaker 02:
Any other questions?

[00:40:39] Speaker 02:
All right.

[00:40:40] Speaker 02:
Thanks very much.

[00:40:41] Speaker 02:
The case will be submitted and counsel are excused.