montana's broad six part equitable stoppel test to the question of whether a non signatory can be bound by an arbitration clause we don't believe that the court needs to decide whether arthur andersen completely abrogated the application of federal subsidy of law yes no i understand i just mean in terms of pure federal subsidy of lot the test was always that a no one signatory could be bound even arthur andersen itself speaks to enforcing contracts by or against known parties under arbitrate so so let's talk about whether montana law gets you where you want to go yes your honor under the recent decision in peeler vs rocky mountain log homes i think that the court confirmed that it will not apply the six part test to this question of course that case involved a little bit of the reverse it was a non signatory trying to compel a signatory to the so it's not just a little bit of the reverse is completely different right because the person being compelled to arbitrate had actually signed the arbitration agreement agreed but we know that the montana supreme court will play a direct benefits to stoppel in a situation like we have here because of the unpublished decision in stewart versus hoffman that case involved a non signatory being compelled to arbitrate after not signing a participation farm agreement and the montana supreme court held that because the non signatory had accepted the benefits of that contract he was bound by it including including all of his burdens to the point where they held that the participation farm out agreement that he had signed trumps an operating agreement the had signed i think it's also telling that the montana supreme court cited a statute there twenty eight to five zero three said to that it's the effectively codifies direct benefit the sokal it says in so many words that if a party voluntarily except the benefits of a contract is bound by the burdens so even though there's not a published case directly on point for this situation in montana there is a lot of predictive points out there stuart and the statute i think it's also telling that as for the reverse situation from california law complexes have to interject here and say you know i'm a former top court judge and part of me is just so distracted by it seems to me that you've changed your position advanced different positions on appeal i think that there is no waiver here under the nicholson case because the positions that we've argued on appeal are all arguments for direct benefits are taught to stop which is the test that we've been advocating for all along although in the trial court you didn't argue that montana law should apply and we did not at that time we didn't have the benefit appeal or we had we had an argument that the six part test applied montana six part test that your team wins you know that is true our position all along has been that this is the six part test does not apply and the direct benefits of stoppel does i would also say to the extent that honor thinks that we might have waived that argument we would ask the court to exercise its discretion to consider it because this is a purely legal issue it doesn't involve the development of any facts both parties have fully briefed it and now we have peeler  which was decided after the case was fully briefed that tells us for sure that montana is not going to apply the six part test to decide whether non signatory is bound by or can compel arbitration would you say for sure tells us for sure i think it does and you don't have binding controlling thirty you want to pick up there and yet peeler is not on fours in terms of the sense that it doesn't involve a signatory trying to compel a non signatory it involves the reverse situation but i think it is telling the the court there did not even look to montana six part test when it talked about ordinary contract and agency principles of stoppel being one of them the that applies to the question of whether an on signatory can compel arbitration it went straight to the same test california so why goldman so apply california's test in california has as have a different test for compelling non signatory to arbitrat that seems to require that there be a agency relationship between the non signatory and the signatory so that that issue was waived allow if i understand correctly well i agree the california law applies an agent see well let me back up by agree that california law has found that a non signatory can be bound to arbitrate under agency type principle and it is true that we're not advocating not argument on appeal so if the montana supreme court says we think california got it right which is very odd to me as a californian but we've adopted goldman and so if we get a situation where there is  compelling non signatory is to arbitrate that it wouldn't help you in this situation because of the waiver of the agency claim as a right that i don't think the agency cases would help us but i do think that california law would help us and i would point the court to the nor cal decision cited in the briefs that was a case that involved binding a non signatory to an insurance policy that was a preexisting relationship cases well looking at agency agency or similar relationship between the non signatory on one of the parties to the arbitration agreement i agree that the court discussed that but i think that it ultimately decided the case on direct benefits of stoppel principle the court at the conclusion was the fundamental point is that the respondent was not entitled to make use of the policy as long as it worked to her advantage then attempt to avoid its application in defining the forum in which her dispute with nortel should be resolved and i think that is just a recitation of the direct benefits of stoppel test they held her to that contract that insurance policy because she accepted the benefit of having a defense provided for her and so when it came time to arbitrate the court didn't let her avoid arbitration not because of the agency relationship because she had accepted that fans and i think that's the same situation we have here the individual plaintiffs are trying to take advantage of the benefits of the master services agreements while simultaneously avoiding arbitration the benefits here or the work that they perform in the services that they perform for iron gate and the payment that they receive and we know that they receive payment and accepted the payment because they allege that in their complaint the corporate plaintiffs aren't making any claims here only the individual plaintiffs are elsie correct i believe that they did but they alleged in their complaint that the defendants including iron gate paid them a daily wage rate and paid them time and a half on some but not all holidays that they're not alleging here that they were paid that they were received no wages they're alleging that they were employees and they just didn't receive overtime what do we do about the provision the m s a saying that there's no nobody other than the parties have any benefit from the agreement first i'd emphasize that when the court gets to that analysis that is a matter of federal law and the most sage cone case says that any doubts concerning the scope of arbiter arbiter of all issues have to be resolved in favor of arbitration and so a point in that standard it's found that the exception to the general rule that arbitration is a matter of contract means that there is a valid agreement to arbitrate between parties by a stock of principles not contractual ones to you  well at that point i don't think that you were then back to the face of the contract and ask again in the second part of the analysis who can be bound because that question's already been answered in the first part by a stop will and at the second part of the test the question just becomes what types of disputes are encompassed in the arbitration clause here and the answer is any about interpretation or enforcement of the agreement and i think the plaintiff's claims fall squarely within that scope i could reserve the remainder of my time like good morning in may please the court my name is mike mcclain and i represent the corporate point of individual plaintiffs in this matter i want to begin by following up on that discussion that this court had regarding the recent supreme court case and  representation to this court that clearly now the montana supreme court is moving away from the equitable stoppel jurisprudence that we've had for one hundred years and are now seeking outside guidance on how to apply equitable stoppel to cases such as the one of our and i took this court's order very seriously and reviewed peter in depth and i think the question of courthouse and the question that's here is well why didn't the montana supreme court just simply apply the equitable stoppel law that it has on the books and the reason is because neither party and asked for that peeler the plaintive was arguing that rocky mountain homes did not have standing to even assert  is they clearly relied on goldman and applied california law in this context a completely different test so presumably they we at least have to presume that they knew what they were doing regardless of whether the toyota motor corp case where discord was applying california law even though there were a host of class action lawsuits from all over the country that were then centered in the central district of california the court here in kramer did exactly what the montana supreme court did in peeler and it applied the law that was requested by the parties but what is important to remember about peter is that the montana supreme court did not adopt a direct benefits of stop that wasn't the test the test that was used in peeler was discussed at length in murphy and as an income colmar and in those lines of cases this court has said there are two tests for equitable arguing for direct benefits of stoffel that's opposed to montana to test is there is no evidence whatsoever that the individual plaintiffs in this case knowingly exploited the contract issue here and that is the direct benefits of stop test what they did is they went to work they want to argue here for this court that the benefit that the individual plaintiffs received by virtue of the master services agreements are getting to go to work well if that's a benefit to the individual plaintiffs what's the benefit time kate they both can have the same benefit otherwise the contract lacks for consideration it isn't whether the employer employee with the contract is about the employer gets the benefit of the employee working for it and the employee gets the benefit of the job being paid for his or her work correct what iron gate is arguing is the benefit received by the individual plaintiffs here is the opportunity to in montana when winners like we have here little kids come up all the time asking shovel your sidewalk for money they they do it as a way to make spare change i can't imagine the look on many of those little kids faces if they rang the doorbell after the job was done  said you know what your benefit is your benefit was getting to perform the shoveling they're wanting payment similarly the individual plaintiffs here provided their personal services for payment that payment was made it too limited liability companies that's where the direct benefit was indirectly the individual plaintiffs were then paid from distributions after those limited liability companies had to pay for their expenses  montana state district court case stated in a partnership setting that payments made to a partnership is not a direct benefit for purposes of binding under equitable stoppel it is an indirect benefit that is precisely what is going on here these individuals if at all were indirectly benefited by the wages but more importantly montana has law dealing with equitable stoffel montana has these traditional contract principles that allow a party to be bound or contract in terms of a non secret signatory that issue has not been before but what i do know is that in applying montana six part equitable stoppel test in other contexts the montana supreme court has found for example in the boise cascade vs for security bank case it cited in the briefs that by that there was under montana's equitable stoppel test a valid contract formed it would seem to me that if you're going to be able to form a contract by equitable stoppel then a party is also going to be able to enforce it what do you think about the fact that your opponent has changed argument on appeal he says it's a pure question of law so we should not be deterred well i certainly can appreciate that but what we have to remember is this court is sitting here in a didn't overall review of the district court's decision this court is being asked to assign air to the district courts conclusions for arguments were never made to what i think i point and so my at hand his response is it is you know though it's a fair question of so what do you think we ought to do i think you should consider those arguments waived they made a choice in the district court to argue vehemently that federal law and not montana law applied that was a trial choice that they made the choice ended up in my opinion not being the correct choice we're all free to make whatever choices we want we're just not free escape the consequences of those choices tell you so you have an opportunity to respond in opposing counsel will as well even under novo review we really benefit from and are interested in the thoughts of the district court judges and we do a lot of you know overview we do it every time we have  dispositive motion and so if this were the case that it's ok to shift horses fifty years you see any time on appeal when we do you know if you we would always be deprived of the benefit of the district court's good work so i'm really troubled by michael my my response your honor is the district court after after two well written briefs by both parties applied montana six part test because the district court believed that that's the correct test to apply and that's the position of the plaintiffs in this case  what i want to talk to about now is i think under the first prong of the f a a is does a valid agreement exist they can of the admitted that the master services agreements by themselves do not create that agreement so they have to argue this exception to the general rule which is equitable stoppel but which is what we've been talking about i want to now talk about the second prong of this test whether or not the scope of the arbitration provisions encompasses disputed issue in our position is that answer that question is also no and it's no for two reasons and believe the court touched upon it during iron gates position here is that the arbitration dispute provision is facially limited to the parties of the agreement that's the contract that iron gate drafted and that's who they said the disputes are to be between but is also limited for another reason the disputes that are at issue here are wage claim disputes based on montana law and federal law these individual plaintiffs and not suing for breach of contract these claims do not arise out of the contract they arise out of statute so separate apart from being limited specifically to the to the signatory parties the dispute themselves are statutory disputes and that is a very similar result as to what this court reached in the rajagopal and case and i believe in monday as well as where they said you don't get to that they're basing these claims on washington statute and therefore they are not suing for breach of contract therefore the arbitration provision is not broad enough that is the precise situation we have here we're suing for statutory violations and that is not a dispute that is arising out of the master service agreement so we believe that we that both questions that are required to be asked by this court pursuant to the federal arbitration act have to be answered in the negative because they're answered in the negative on on either one the motion to compel was properly denied by the district court the court has no further questions that's all i have  first i'd like to say that other states a number of other states including states in the ninth circuit california and arizona and nevada have multipart tests just like one tanna does that apply  misrepresentation based situations but they also have other separate tests for equitable stoppel that apply when determining whether non signatory can compel or be compelled to arbitrate so there's nothing fundamentally inconsistent about the montana supreme court having a broad six part equitable stoppel test and applying a separate equitable stoppel test in this situation judge kristin you asked what the strongest indicators were about montana applying  the direct benefits of stoppel test in a situation like this we would say that it stuart and the statute on the waiver question our position is not that you should exercise your discretion to consider the issues here just because it's been over review it's i mean there's no review in a lot of situations like summary judgment that involve factual development and woe we appreciate it would have been helpful to have the district court way and on the erie analysis if the court  the legal issue here it's going to be sanctioning the application of the six part test which peeler stuart and the montana statute all strongly suggest are not going to apply here peeler also throws a little bit of  a loop in things this case this court case law say that an intervening change in the law could warrant a motion for reconsideration or even a renewed motion to compel arbitration which is exactly the reason we think this court should decide the legal issue on the point that the claims here don't involve interpretation or foresman of the contract i point out that the plaintiffs have alleged declaratory judgment action expressly asking the court to interpret and invalidate the agreement and that their statutory wage law claims can't succeed unless the provisions or at least the independent contractor provisions in the n s a s are interpretation invalidated why is that provided the services of their members it's sort of fundamentally inconsistent to have iron gate hire hoover and associates and pay hoover and associates for the work that hoover associates member craig arnold for the work that he does for iron gate and simultaneously say that craig arnold is an employee entitled to overtime and it has to be one of one or the other either iron gate contracted with independent contractors or it employs individual plaintiffs here and so if those independent contractor provisions are effective at completely undermines the individual point of claims that they were employees ok it doesn't it doesn't seem like it's necessarily it sounds like that's an argument that you make in the employee case that is i mean that is an argument that we will make on the merits and that i think is why those wage claims involve interpretation and enforcement