March 17, 2026|Franchise Frontlines
March 17, 2026 | United States Court of Appeals, First Circuit | Published Opinion
Executive Summary
In a published decision, the First Circuit affirmed the denial of a motion to compel arbitration in a misclassification and wage-and-hour action brought by a courier against a healthcare delivery company. The case, decided by Judge Rikelman, addressed whether an individual courier—who had been required to form an LLC through which he provided services—could be compelled to arbitrate under an agreement between the company and the LLC. The company argued that the courier was bound as a signatory, or alternatively under various estoppel and successor theories. The plaintiff countered that he was not a party to the agreement in his individual capacity and never agreed to arbitrate. The court agreed with the plaintiff, holding that the arbitration provision did not bind him personally and rejecting each of the company’s alternative theories for enforcement.
Relevant Background
The defendant, Strategic Delivery Solutions, LLC (“SDS”), provides healthcare delivery services and utilizes couriers to transport medical supplies. Rather than contracting directly with individuals, SDS required prospective couriers to form corporate entities and then entered into agreements with those entities. Consistent with this model, the plaintiff formed an LLC and entered into an “Independent Vendor Agreement” with SDS. The agreement included a broad arbitration provision governed by the Federal Arbitration Act.
The plaintiff performed delivery services for several years, working long hours and using his personal vehicle without reimbursement for expenses. After his LLC was involuntarily dissolved, he continued performing services for SDS. He later filed a putative class action alleging that SDS misclassified its couriers as independent contractors in violation of Massachusetts law and failed to pay wages and reimburse expenses.
SDS removed the case to federal court and moved to compel arbitration based on the agreement with the LLC. The district court denied the motion, concluding that the plaintiff was not a signatory in his individual capacity and could not be compelled to arbitrate under any equitable theory. SDS appealed.
Decision
The First Circuit affirmed, beginning with the threshold issue of who decides arbitrability. The court held that where a plaintiff “attacks the very existence of an agreement” binding him individually, that question is a gateway issue for the court—not the arbitrator—to resolve. The presence of a delegation clause did not alter that conclusion because the clause applied only to parties to the agreement, and the dispute centered on whether the plaintiff was such a party.
Turning to the contract itself, the court found that the agreement unambiguously bound only the LLC and SDS. Although the plaintiff signed the agreement, he did so solely in his capacity as “Owner” of the LLC. Under Massachusetts law, an individual signing on behalf of a disclosed principal does not become a party to the contract absent clear intent to bind the individual. The agreement consistently defined the “Vendor” as the LLC and referred to SDS and the LLC as the only “parties,” while separately identifying “vendor support personnel” without including them in the arbitration provision. The court treated this distinction as intentional, particularly given that SDS drafted the agreement and structured its business model to avoid contracting with individuals.
The court then rejected SDS’s effort to compel arbitration through direct benefits estoppel. That doctrine requires that the nonsignatory knowingly accept benefits flowing directly from the agreement itself. Here, any benefits flowed first to the LLC, not to the plaintiff individually. The court emphasized the legal separateness of the entity and declined to treat ownership alone as sufficient to collapse that distinction. The court also rejected intertwined claims estoppel, explaining that Massachusetts law generally applies that doctrine to allow nonsignatories to compel signatories—not the reverse—and declined to expand the doctrine beyond that established framework. Finally, the court dismissed the successor-in-interest argument, finding no evidence that the plaintiff personally assumed the LLC’s obligations or that the LLC’s dissolution resulted in any continuation that would justify imposing contractual liability on the individual.
Having rejected each theory advanced by SDS, the court affirmed the denial of the motion to compel arbitration.
Looking Forward
This decision underscores the importance of internal consistency in structuring service relationships, particularly in systems that rely on intermediary entities to define legal relationships. The court did not question the general enforceability of arbitration provisions or the use of independent contractor models. Instead, it focused on the disconnect between the company’s chosen contractual framework and its attempt to enforce that framework against a party it had deliberately excluded from the agreement. Where a system requires operators to conduct business through entities, courts may strictly enforce that separation when determining who is bound by contractual provisions, including arbitration clauses. Attempts to extend contractual obligations beyond the defined parties may face resistance unless supported by clear drafting or well-established legal doctrines. At the same time, the decision reinforces a principle favorable to franchisors and multi-unit operators: courts will enforce agreements as written. The outcome here reflects a failure to align contractual language with operational realities, rather than a broader limitation on arbitration or independent contractor structures. Careful drafting and disciplined adherence to the chosen structure remain the most effective tools for mitigating risk in comparable systems.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
