Waymo LLC v. Uber Technologies, Inc. , 870 F.3d 1342 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
WAYMO LLC,
Plaintiff-Appellee
v.
UBER TECHNOLOGIES, INC., OTTOMOTTO LLC,
Defendants-Appellants
OTTO TRUCKING LLC,
Defendant
ANTHONY LEVANDOWSKI,
Intervenor
______________________
2017-2130
______________________
Appeal from the United States District Court for the
Northern District of California in No. 3:17-cv-00939-
WHA, Judge William H. Alsup.
______________________
Decided: September 13, 2017
______________________
CHARLES KRAMER VERHOEVEN, Quinn Emanuel Ur-
quhart & Sullivan, LLP, San Francisco, CA, argued for
plaintiff-appellee. Also represented by JOHN WILLIAM
MCCAULEY, IV, DAVID ANDREW PERLSON; DAVID MICHAEL
COOPER, New York, NY.
2 WAYMO LLC v. UBER TECHS., INC.
HAMISH HUME, Boies Schiller & Flexner LLP, Wash-
ington, DC, argued for defendants-appellants. Also
represented by KAREN L. DUNN; SHIRA LIU, DAVID
LAURENCE ZIFKIN, Santa Monica, CA; MICHAEL ALLEN
JACOBS, Morrison & Foerster LLP, San Francisco, CA.
______________________
Before NEWMAN, WALLACH, and STOLL, Circuit Judges.
NEWMAN, Circuit Judge.
This appeal is from the Order of the United States
District Court for the Northern District of California,
denying the Defendants’ motion to compel arbitration of
their pending litigation with Waymo LLC. 1 The Defend-
ants are Uber Technologies, Inc., Ottomotto LLC, and
Otto Trucking LLC. The Appellants are Uber Technolo-
gies, Inc. and Ottomotto LLC (collectively “Uber” or
“Appellants”). Anthony Levandowski is an Intervenor in
this case.
The Appellants do not assert that an arbitration
agreement exists between any of the Defendants and
Waymo. The Appellants instead argue that Waymo
should be compelled to arbitrate its dispute with the
Defendants because of the arbitration agreement between
Waymo and Intervenor Levandowski. The district court
received Waymo’s representation that it “expressly for-
swore reliance on its 2009 and 2012 agreements with
Levandowski to prove up its claims,” Dist. Ct. Order at *4,
unless the agreements are raised by the Defendants, and
the court ruled that compulsory arbitration is not appro-
1 Waymo LLC v. Uber Techs., Inc., No. C 17-00939
WHA, 2017 WL 1957010 (N.D. Cal. May 11, 2017) (“Dist.
Ct. Order”).
WAYMO LLC v. UBER TECHS., INC. 3
priate. On review of the principles and precedent, we
affirm the district court’s holding.
BACKGROUND
Waymo’s complaint against the Defendants includes
counts of violation of the California Uniform Trade Se-
crets Act, the Federal Defend Trade Secrets Act, the
California Business and Professional Code, and the pa-
tent statute. Relevant background is set forth in the
district court’s Order, and is repeated only to explain our
affirmance of the denial of arbitration.
The two employment agreements between Waymo
and its then-employee Levandowski, entered in 2009 and
2012, each contain a similar arbitration clause. The 2012
agreement includes the following clause:
In consideration of my employment with the
Company, its promise to arbitrate all employ-
ment-related disputes, and my receipt of the
Compensation, pay raises and other benefits paid
to me by the Company, at present and in the fu-
ture, I agree that any and all controversies,
claims, or disputes with anyone (including the
Company and any employee, officer, director,
shareholder or benefit plan of the Company in
their capacity as such or otherwise), whether
brought on an individual, group, or class basis,
arising out of, relating to, or resulting from my
employment with the Company or the termination
of my employment with the Company, including
any breach of this Agreement, shall be subject to
binding arbitration under the arbitration rules set
forth in California Code of Civil Procedure Section
1280 through 1294.2, including Section 1283.05
(the “Rules”) and pursuant to California law. Dis-
putes which I agree to arbitrate, and thereby
agree to waive any right to a trial by jury, include
any statutory claims under State or Federal law,
4 WAYMO LLC v. UBER TECHS., INC.
including, but not limited to, claims under Title
VII of the Civil Rights Act of 1964, the Americans
with Disabilities Act of 1990, the Age Discrimina-
tion in Employment Act of 1967, the Older Work-
ers Benefit Protection Act, the Sarbanes-Oxley
Act, the Worker Adjustment and Retraining Noti-
fication Act, the California Fair Employment and
Housing Act, the Family and Medical Leave Act,
the Fair Labor Standards Act, the California Fam-
ily Rights Act, the California Labor Code, claims
of harassment, discrimination, wrongful termina-
tion and any other contractual, tort or statutory
claims under Federal, California and local laws, to
the extent allowed by law. I further understand
that this agreement to arbitrate also applies to
any disputes that the Company may have with
me.
J.A. 319–20. The briefs state that arbitration between
Waymo and Levandowski is ongoing.
In the district court, the Defendants argued, inter
alia, that equitable estoppel applies to compel arbitration
between them and Waymo because Waymo contended
that “Levandowski was able to misappropriate Waymo’s
information by virtue of his job at Waymo,” and that
Levandowski downloaded 14,000 Waymo documents and
used this information for the benefit of Uber. J.A. 264.
At a hearing on this aspect, the district court asked
Waymo if it would forgo “any reliance in this case on any
employment or other agreement with Levandowski con-
taining an arbitration clause,” and “forgo any claims in
any forum against Levandowski similar to those asserted
herein that rely on any agreement containing an arbitra-
tion clause.” J.A. 5737–4. Waymo agreed, “provided that
Uber does not open the door by reference to these agree-
ments or lack thereof of those agreements, which is some-
thing that we would just have to address down the road.”
J.A. 579.
WAYMO LLC v. UBER TECHS., INC. 5
The district court, discussing California law and prec-
edent, explained its denial of the motions to compel arbi-
tration:
At bottom, defendants have not shown that Way-
mo relies on the 2009 or 2012 agreements to as-
sert its claims against defendants while
simultaneously seeking to avoid the arbitration
clauses of those agreements. The inequities that
equitable estoppel is designed to address are
simply not present. Accordingly, equitable estop-
pel does not apply.
Dist. Ct. Order at *3.
DISCUSSION
On appellate review, we apply the applicable law of
California and the Ninth Circuit, since “the issues of
arbitrability are not intimately involved in the substance
of enforcement of a patent right.” Promega Corp. v. Life
Techs. Corp., 674 F.3d 1352, 1356 (Fed. Cir. 2012).
California law governs the question of whether Way-
mo should be compelled to arbitrate its claims against the
Defendants in view of the arbitration agreements with
Levandowski, which specify that California law applies.
The Ninth Circuit generally reviews a district court’s
order granting or denying a motion to compel arbitration
de novo. See, e.g., Murphy v. DirecTV, Inc., 724 F.3d
1218, 1224 (9th Cir. 2013); Kramer v. Toyota Motor Corp.,
705 F.3d 1122, 1126 (9th Cir. 2013); Bushley v. Credit
Suisse First Bos., 360 F.3d 1149, 1152 (9th Cir. 2004).
The Ninth Circuit has also applied the abuse of discretion
standard when considering a party’s contention that “the
district court erroneously rejected its argument that [the
other party] should be equitably estopped from avoiding
arbitration,” Ngyuen v. Barnes & Noble Inc., 763 F.3d
1171, 1179 (9th. Cir. 2014), even though it “review[ed] the
denial of the motion to compel arbitration de novo,” id. at
6 WAYMO LLC v. UBER TECHS., INC.
1175 (internal quotation marks and citation omitted).
Whether on the basis of de novo review or for abuse of
discretion, we affirm the district court’s holding that
arbitration should not be compelled in this case.
A
Agreements to arbitrate are subject to contract law
Contract law principles hold that non-parties to a con-
tract are generally not bound by the contract. A contract
to arbitrate is not an exception. See Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (“[A] party
cannot be required to submit to arbitration any dispute
which [it] has not agreed so to submit.”). In turn, when
parties have contracted to arbitrate, the courts have
enforced such agreements. See Armendariz v. Found.
Health Psychcare Servs., Inc., 6 P.3d 669, 678 (Cal. 2000)
(“California law, like federal law, favors enforcement of
valid arbitration agreements.”), abrogated on other
grounds by AT&T Mobility LLC v. Concepcion, 563 U.S.
333, 340 (2011); Ericksen, Arbuthnot, McCarthy, Kearney
& Walsh, Inc. v. 100 Oak St., 673 P.2d 251, 257 (Cal.
1983) (noting the “state’s strong public policy in favor of
arbitration as a speedy and relatively inexpensive means
of dispute resolution”).
The issue in this case is whether the circumstances
are such that Waymo can be compelled to arbitrate on
equitable grounds, in Waymo’s suit against Uber, Ot-
tomotto, and Otto Trucking, where there is no agreement
to arbitrate. The California courts have, in a few situa-
tions, compelled arbitration against an entity that was
not a party to an arbitration agreement. The district
court explored this precedent, and concluded that the
present case did not warrant compulsion to arbitrate.
WAYMO LLC v. UBER TECHS., INC. 7
B
Equitable estoppel to compel arbitration has been
limited to narrow situations
Courts have applied equitable estoppel to compel arbi-
tration when necessary “to prevent a party from using the
terms or obligations of an agreement as the basis for his
claims against a non-signatory, while at the same time
refusing to arbitrate with the non-signatory under anoth-
er clause of that same agreement.” Goldman v. KPMG
LLP, 92 Cal. Rptr. 3d 534, 543–44 (Cal. Ct. App. 2009);
see also Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th
Cir. 2006) (“Equitable estoppel precludes a party from
claiming the benefits of a contract while simultaneously
attempting to avoid the burdens that contract imposes.”
(internal quotation marks and citation omitted)). A non-
signatory may compel arbitration where the “relevant
state contract law allows him to enforce the agreement.”
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632
(2009).
California law establishes that reliance on the con-
tract bearing the arbitration clause is fundamental to
compulsion by a non-party to arbitrate. In Kramer, cited
supra, the Ninth Circuit set forth a two-prong test derived
from California law, which the district court relied on
here. A class of car owners sued Toyota for brake failures,
and Toyota sought to compel arbitration based on the
agreements between the car owners and their dealerships,
where arbitration of disputes was required. The car
owners objected to arbitration, and the court held that
equitable estoppel did not apply to compel arbitration,
stating:
Where a nonsignatory seeks to enforce an arbitra-
tion clause, the doctrine of equitable estoppel ap-
plies in two circumstances: (1) when a signatory
must rely on the terms of the written agreement
in asserting its claims against the nonsignatory or
8 WAYMO LLC v. UBER TECHS., INC.
the claims are intimately founded in and inter-
twined with the underlying contract, and (2) when
the signatory alleges substantially interdependent
and concerted misconduct by the nonsignatory
and another signatory and the allegations of in-
terdependent misconduct [are] founded in or inti-
mately connected with the obligations of the
underlying agreement.
705 F.3d at 1128–29 (citing Goldman, 92 Cal. Rptr. 3d at
541–43) (internal quotation marks and citations omitted);
see also Murphy, 724 F.3d at 1229 (referring to the two-
part framework articulated in Kramer “as a controlling
statement of California law [on] the equitable estoppel
rule set forth in Goldman”). These principles are embod-
ied in the district court’s analysis.
The Kramer court relied on Goldman, where the Cali-
fornia Court of Appeal explained that reliance on a con-
tract containing an arbitration requirement is the key
element in the equitable estoppel inquiry. In Goldman,
the plaintiffs sought to sue their accountants who had
allegedly set up fraudulent tax shelters, and the account-
ants had advised on the formation of limited liability
companies, whose operating agreements specified arbitra-
tion. The court denied the accountants’ motion to compel
arbitration, stating that the plaintiffs’ claims “do not rely
or depend on, and are not founded in or inextricably
bound up with, the terms of the operating agreements.”
Goldman, 92 Cal. Rptr. 3d at 555. The court explained
that, in prior cases, equitable estoppel had been applied
only “when the signatory must rely on the terms of the
written agreement in asserting its claims against the
nonsignatory, and when the signatory raises allegations
of substantially interdependent and concerted misconduct
by the nonsignatory and a signatory.” Id. at 544 (footnote
omitted).
WAYMO LLC v. UBER TECHS., INC. 9
The court in Goldman stressed that the basis for equi-
table estoppel is reliance on the contract containing the
arbitration provision. The court stated that reliance “is
the only basis upon which [a party to the agreement] may
be equitably estopped from refusing to arbitrate [with a
non-signatory] when they have not agreed to do so.” Id. at
553. The Goldman court found that the plaintiffs’ com-
plaint did not rely on the limited liability companies’
operating agreements, and ruled that the arbitration
provisions of those agreements did not invoke equitable
estoppel. See id. at 555.
C
The first Kramer/Goldman circumstance is not
satisfied
Uber argues that Waymo should be compelled to arbi-
trate this dispute because Waymo’s trade secret claims
against the Defendants relate to actions by Levandowski
in purported violation of his employment agreements with
Waymo. Thus Uber argues that the arbitration clauses of
the employment agreements between Waymo and Levan-
dowski should also apply to Waymo’s suit against Uber.
Waymo again states that it is not relying on the Levan-
dowski employment agreements in this suit.
We start the analysis with the complaint. See Gold-
man, 92 Cal. Rptr. 3d at 550 (stating that, when consider-
ing reliance, “we examine the facts alleged in the
complaint[]”); see also Murphy, 724 F.3d at 1229 (stating
that the first Goldman circumstance applies “when a
signatory must rely on the terms of the written agreement
in asserting its claims against the nonsignatory, or the
claims are intimately founded in and intertwined with the
underlying contract” (internal quotation marks and
citation omitted)); Goldman, 92 Cal. Rptr. 3d at 546 (“It is
the relationship of the claims . . . that is key.”). Although
Waymo’s complaint states that Levandowski “downloaded
more than 14,000 highly confidential and proprietary files
10 WAYMO LLC v. UBER TECHS., INC.
shortly before his resignation,” J.A. 186, and that Uber
then misappropriated and infringed Waymo’s technology
using this information, see id. at 184–88, the complaint
neither alleges breach of nor cites to any provision of the
Waymo-Levandowski employment agreements, see id.
184–207. As in Goldman, “[t]he complaint[] do[es] not
rely on or use any terms or obligations of the [Waymo-
Levandowski employment] agreements as a foundation
for [its] claims.” 92 Cal. Rptr. 3d at 540.
First, Uber argues that the use of “or” in the first
Kramer/Goldman circumstance creates a separate stand-
ard, such that Uber need not show that Waymo must rely
on the Waymo-Levandowski employment agreements.
See Appellants’ Br. 30–35. However, California courts
define reliance on an agreement as raising claims that are
intimately founded in or intertwined with that agree-
ment. See Kramer, 705 F.3d at 1129 (“To determine
whether the plaintiffs’ claims relied on the agreement, the
Goldman court looked to whether the claims that the
nonsignatory sought to arbitrate were intimately founded
in and intertwined with the underlying contract obliga-
tions.” (internal quotation marks and citation omitted)).
Goldman held that “the necessary central core of the
[equitable estoppel] standard” is that “the plaintiff's
allegations must rely on or depend upon the terms of the
written agreement.” 92 Cal. Rptr. 3d at 551 (internal
quotation marks and citation omitted); see id. (“[T]he
underlying principle, stated in all cases” is “actual reli-
ance on the terms of the agreement to impose liability on
the nonsignatory.”). The district court herein did not
conflate two distinct bases for compelling arbitration as
Uber charges; the court applied the governing legal
standard and determined that the Defendants had not
satisfied it.
Second, Uber argues that Waymo must necessarily re-
ly on its agreements with Levandowski in order to make
out its trade secret claims against the Defendants. How-
WAYMO LLC v. UBER TECHS., INC. 11
ever, Waymo stresses that its complaint does not rely on
Levandowski’s employment agreements, stating that the
references to the employment agreements are presented
to show that Waymo has taken reasonable measures to
safeguard its trade secrets. Uber argues that these
references should be construed as reliance on the agree-
ments sufficient to compel Waymo to arbitrate this dis-
pute with the Defendants. However, this is not how
California courts have viewed reliance in the context of
compelling arbitration by non-parties to an arbitration
agreement. As the Kramer court stated, “Plaintiffs’
claims themselves must intimately rely on the existence
of the Purchase Agreements, not merely reference them.”
Kramer, 705 F.3d at 1132.
The district court accepted Waymo’s position, stating,
“Waymo need not rely on the terms of its written agree-
ments merely because it makes reference to such agree-
ments . . . . Waymo has alleged and provided a sworn
record of how it takes reasonable measures to maintain
secrecy.” Dist. Ct. Order at *4; see id. (stating that “the
difference between reference . . . and reliance is signifi-
cant”). The District Court’s analysis is correct.
Third, Uber states that the district court erred by re-
lying on Waymo’s disclaimer of reliance on the Waymo-
Levandowski employment agreements because Waymo
conditioned its disclaimer, stating that it would not rely
upon the agreements, “provided that Uber does not open
the door by reference to these agreements or the lack
thereof of those agreements, which is something that we
would just have to address down the road if they tried to
inject them into the case, somehow.” J.A. 579. Such a
conditional representation does not demonstrate reliance
on the employment agreements. The district court did not
err in discounting this argument.
Uber offered a further theory at the oral argument of
this appeal, stating that Waymo’s litigation claims involve
12 WAYMO LLC v. UBER TECHS., INC.
the employment agreements because a Levandowski
exhibit to those agreements, in which he lists his previ-
ously-existing patents, sets limits to Waymo’s trade
secrets. Counsel for Uber stated, “In order to know
whether Mr. Levandowski breached a common law duty,
or breached a statutory trade secret law, you have to look
at whether or not the contract prohibited him from doing
this because it governs which inventions he owned and
which inventions Google owned.” Oral Arg. at 13:43–
14:03, http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2017-2130.mp3. This argument does not
change the applicability of precedent, as discussed by the
district court.
D
The second Kramer/Goldman circumstance is not
satisfied
Applying precedent, Uber’s contentions as to the sec-
ond Kramer/Goldman circumstance, concerted miscon-
duct, are subject to the same deficiencies we have
discussed. As stated in Murphy, “allegations of collusive
behavior by signatories and non-signatories, with no
relationship to the terms of the underlying contract, [do]
not justify application of equitable estoppel to compel
arbitration.” 724 F.3d at 1232 (citing Goldman, 92 Cal.
Rptr. 3d at 549 (internal quotation marks omitted)).
The inquiry under Kramer includes consideration of
the relationship between the underlying agreement and
the issues in dispute, in addition to the relationship
between the signatory and non-signatory to the arbitra-
tion agreement. The Kramer court explained that arbi-
tration against a non-party to the arbitration agreement
cannot be compelled where “the allegations of collusion
are not inextricably bound up with the obligations im-
posed by the agreement containing the arbitration
clause.” Id. at 1133.
WAYMO LLC v. UBER TECHS., INC. 13
Waymo states that it is not asserting, in its suit
against the Defendants, that Uber Technologies conspired
with Levandowski to breach his employment agreements
with Waymo. We agree with the district court that absent
a relationship between Waymo’s claims and any concerted
misconduct between Uber Technologies and Levandowski
involving the employment agreements, Waymo cannot be
compelled to arbitrate the dispute.
E
The remaining cases cited by Appellants do not
compel a different result
Uber directs us to Uptown Drug Co. v. CVS Caremark
Corp., 962 F. Supp. 2d 1172 (N.D. Cal. 2013), as showing
parties that were compelled to arbitrate with a non-
signatory. The facts in that case are distinguished from
the Waymo situation. Uptown Drug and CVS Caremark
had a provider agreement that contained an arbitration
clause, and Uptown Drug sued CVS Caremark and relat-
ed entities for trade secret misappropriation. The court
found that the suit was predicated on the provider agree-
ment and compelled arbitration of the relevant claims.
This was simply enforcement of an arbitration clause
between contracting parties; it has no relevance to the
facts herein.
Uber also directs us to Metalclad Corp. v. Ventana
Environmental Organizational Partnership, 1 Cal. Rptr.
3d 328 (2003). In that case, a subsidiary of Ventana
acquired Econsa, a subsidiary of Metalclad; the acquisi-
tion agreement had an arbitration clause. Econsa was
subsequently transferred to another company, and the
court held that the former owner was equitably estopped
from avoiding the arbitration provision, stating, “Estoppel
prevents Metalclad from avoiding arbitration by suing
only the parent corporation in these circumstances.” Id.
at 1718. This case bears no resemblance to the facts
before us.
14 WAYMO LLC v. UBER TECHS., INC.
Uber also cites Turtle Ridge Media Group, Inc. v. Pa-
cific Bell Directory, 44 Cal. Rptr. 3d 817 (2006), where the
court required the plaintiff subcontractor, Turtle Ridge, to
arbitrate with the defendant, based on an arbitration
agreement between the defendant and the prime contrac-
tor, where the arbitration agreement was expressly
incorporated into the subcontract between the prime
contractor and Turtle Ridge. There is no similar situation
here, where there is no alleged contractual relation be-
tween Uber Technologies and Waymo.
A close analogy appears in Torbit v Datanyze, Inc.,
No. 5:12–CV–05889–EJD, 2013 WL 572613 (N.D. Cal.
Feb. 13, 2013), where an employee left his employer,
Torbit, to work at Datanyze. Datanyze sought arbitration
of trade secret issues based on the employee’s contract
with Torbit, and the court compelled arbitration, stating
that the asserted employee misconduct “touch[ed] mat-
ters” covered by the employment agreement. Id. at *4.
The district court herein stated that this case did not
consider the Ninth Circuit’s holding in Kramer, which had
issued approximately two weeks prior to Torbit, or Cali-
fornia rulings such as Goldman. Instead, the case relied
on less relevant federal case law, particularly Simula, Inc.
v. Autoliv, Inc., 175 F.3d 716 (9th Cir. 1999), which did
not involve equitable estoppel or the compulsion of a non-
signatory to arbitrate.
To similar effect is CardioNet, LLC v. InfoBionic, Inc.,
No. 1:15-cv-11803-IT, 2017 WL 1115153 (D. Mass. Mar.
24, 2017) (applying California law), where the plaintiff
relied on an employee’s employment agreement to support
a claim against a new employer for trade secret misap-
propriation. The court remarked: “Importantly, Cardio-
Net does not allege that InfoBionic obtained the trade
secrets through any means other than Kuppuraj’s breach
of his contractual agreements.” Id. at *3. In contrast,
Waymo has disavowed reliance on the Waymo-
Levandowski employment agreements. See J.A. 579.
WAYMO LLC v. UBER TECHS., INC. 15
The district court herein did not err in its balance of
precedent, and in giving controlling weight to Kramer and
Goldman. We agree with the district court that precedent
does not compel arbitration of the case based on the
Waymo-Levandowski employment agreements.
CONCLUSION
The question before us is not whether Defendants or
Waymo will ultimately prevail in their dispute. The
question is whether Waymo should be compelled to arbi-
trate this dispute in view of the arbitration provision of
the employment agreements between Waymo and Levan-
dowski. The district court correctly concluded that arbi-
tration should not be compelled.
The general rule is that a contract applies only to the
parties to the contract. While equitable doctrines permit
departure from this principle when necessary to avoid
inequity, California precedent guides that unless the
issues of the complaint are intimately intertwined with
the non-party agreement containing an arbitration clause,
compulsion to arbitrate is inappropriate.
We have considered all of the Appellants’ arguments,
and affirm the district court’s holding.
AFFIRMED