Court Opinion

ID: 5289385
Source: CourtListenerOpinion
Date Created: 2022-01-08 01:00:39.414999+00
Date Added: 2024-06-11T08:59:49.855456
License: Public Domain

Case: 21-50253     Document: 00516158616         Page: 1    Date Filed: 01/07/2022

           United States Court of Appeals
                for the Fifth Circuit
                                                                    United States Court of Appeals
                                                                             Fifth Circuit

                                                                           FILED
                                                                     January 7, 2022
                                  No. 21-50253                        Lyle W. Cayce
                                                                           Clerk

   Kenneth Newman, individually and, on behalf of All Others
   Similarly Situated,

                                                            Plaintiff—Appellee,

   Cypress Environmental Management-TIR, L.L.C.,

                                                           Intervenor—Appellee,

                                      versus

   Plains All American Pipeline, L.P.,

                                                         Defendant—Appellant.

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 7:19-CV-244

   Before King, Costa, and Willett, Circuit Judges.
   Don R. Willett, Circuit Judge:
          A pipeline-inspection firm hired some inspectors. Their employment
   agreement contained an arbitration provision. The firm sent the inspectors
   off to work for a client company. The inspectors eventually sued the client
   for alleged Fair Labor Standards Act violations. They did not sue their firm.
   The client moved to compel arbitration. The district court denied its motion,
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   reasoning that the client could not enforce the arbitration agreement between
   the inspectors and their firm. The firm intervened, and the client company
   appealed. For the reasons below, we AFFIRM.
                                                 I
           Cypress Environmental Management-TIR, L.L.C. (“Cypress”),
   staffs pipeline inspectors to various client-company projects. It hired
   Newman and his co-plaintiffs—who we will collectively refer to as Newman,
   for simplicity’s sake—to work as independent pipeline inspectors for Plains
   All American Pipeline (“Plains”). As part of his job, Newman signed an
   Employment Agreement with Cypress. The Employment Agreement
   contained an arbitration agreement. Newman and Cypress agreed “that the
   Federal Arbitration Act (‘FAA’) applie[d]”; “to arbitrate all claims that
   have arisen or will arise out of [his] employment with or termination from
   [Cypress]”; and that any “[a]rbitration [would] be conducted in accordance
   with the American Arbitration Association Employment Arbitration Rules,”
   the AAA Rules. 1
           Newman’s Employment Agreement did not expressly mention Plains.
   But it did specify that Cypress had hired Newman “based on a specific
   project” and “for a designated customer.” It also incorporated by reference
   a certain Pay Letter. This Pay Letter named Plains as the designated
   customer that Newman was to work for.
           Newman never signed any agreement with Plains. But a Cypress
   subsidiary did. That subsidiary, Tulsa Inspection Resources, LLC (“TIR”),
   signed the contract that governed Cypress’s business relationship with

           1
             All but one other plaintiff entered into the same Employment Agreement. The
   other plaintiff, John Smith, signed a substantively identical arbitration provision as part of
   his Employment Agreement.

                                                 2
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   Plains. As part of that contract, TIR agreed to indemnify Plains for any
   claims relating to “any violation or alleged violation of state or federal law
   related to the payment, employment, or employment status of any of
   [Cypress’s] employees.”
          Newman eventually brought a collective action against Plains. He
   alleged that Plains owes him unpaid overtime under the FLSA.
   Conspicuously absent from his complaint were any claims against Cypress.
   After Newman filed suit, Plains moved to compel arbitration. The district
   court did not compel arbitration, and in a detailed order it reasoned that our
   prior decision in Brittania-U Nigeria, Ltd. v. Chevron USA, Inc. 2 was
   distinguishable; that Plains was not a third-party beneficiary to the Newman–
   Cypress Employment Agreement under Texas law; and that it would not
   allow Plains to enforce the arbitration agreement using intertwined-claims
   estoppel.
          After the district court denied Plains’s motion to compel arbitration,
   Cypress moved to intervene. The district court granted its motion. 3 Plains
   then appealed the district court’s denial of its motion to compel arbitration.

          2
              866 F.3d 709 (5th Cir. 2017).
          3
           The district court denied Cypress’s motion to compel. Cypress has appealed, but
   we denied Plains and Cypress’s motion to consolidate that appeal with this one.

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                                                  II
           We review the denial of a motion to compel arbitration de novo 4—as
   we do contract-interpretation issues generally. 5 As for whether the district
   court properly refused to equitably enforce a contract, we review that for
   abuse of discretion. 6
                                                 III
           The parties vigorously dispute whether the district court should have
   decided whether Plains can enforce the Newman–Cypress arbitration
   agreement. Cypress admits that deciding whether an arbitration agreement
   exists between the parties is “always for the court.” 7 But both it and Plains
   see a distinction between deciding whether an arbitration agreement exists (a
   question for the court) and deciding who it is enforceable against (a question
   they say is delegable to the arbitrator). Newman sees no distinction. Under
   controlling caselaw, says Newman, we must decide whether Plains can
   enforce the Newman–Cypress arbitration agreement; not an arbitrator.
           We agree with Newman. When a court decides whether an arbitration
   agreement exists, it necessarily decides its enforceability between parties.
   Therefore, deciding an arbitration agreement’s enforceability between
   parties remains a question for courts.

           4
               Kubala v. Supreme Prod. Svcs., Inc., 830 F.3d 199, 201 (5th Cir. 2016).
           5
            Sanchez Oil & Gas Corp. v. Crescent Drilling & Prod., Inc., 7 F.4th 301, 309 (5th
   Cir. 2021).
           6
             See Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000)
   (“[W]hether to utilize equitable estoppel in this fashion is within the district court’s
   discretion; we review to determine only whether it has been abused.”).
           7
               Plains never squarely admits as much.

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                                                  A
           We have explained before that courts must decide “at the outset”
   whether an enforceable arbitration agreement exists at all. 8 The parties
   cannot delegate disputes over “the very existence of an[] [arbitration]
   agreement.” 9 The Supreme Court recently “reaffirmed” this rule. 10 It
   explained in Henry Schein, Inc. v. Archer and White Sales, Inc. that the FAA
   requires courts to first “determine[] whether a valid arbitration agreement
   exists” before granting motions to compel arbitration. 11
           To that end, deciding enforceability between the parties and an
   arbitration agreement’s existence are two sides of the same coin. We said as
   much in Sherer v. Green Tree Servicing LLC. 12 Under “the first step in
   determining whether a valid agreement to arbitrate exists,” we look first to
   “the ‘terms of the agreement,’” which “dictate ‘[w]ho is actually bound by
   an arbitration agreement.’” 13 Then, “[i]f that fails,” we “look to theories
   such as equitable estoppel to determine whether a nonsignatory may compel
   arbitration.” 14 Under both the Supreme Court’s and our caselaw, then,

           8
            Lloyd’s Syndicate 457 v. FloaTEC, L.L.C., 921 F.3d 508, 514 (5th Cir. 2019)
   (quoting Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir. 2003)).
           9
                Id. (quoting Will-Drill, 352 F.3d at 218) (emphasis added).
           10
                Id. at 515 n.4.
           11
              139 S. Ct. 524, 530 (2019) (citing 9 U.S.C. § 2). At oral argument, Newman’s
   counsel contended that state law governs whether enforceability between the parties is a
   first-step formation question, for the courts, or a second-step arbitrability question,
   potentially for arbitrators. As Henry Schein makes plain, though, it is federal law—the FAA,
   itself—that governs. See id. (pointing to the FAA’s text as what compels courts to decide
   whether a valid arbitration agreement exists).
           12
                548 F.3d 379 (5th Cir. 2008) (per curiam).
           13
                Id. at 382.
           14
            Id.; see also Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 356 (5th Cir.
   2003) (“Six theories for binding a nonsignatory to an arbitration agreement have been

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   Newman has the better view. It is up to us—not an arbitrator—to decide
   whether Plains can enforce the Newman–Cypress arbitration agreement.
                                               B
           Still, Plains and Cypress disagree. They contend that part of our
   decision in Brittania-U supports that deciding an arbitration agreement’s
   enforceability between the parties is an arbitrability question, which would
   make it delegable to an arbitrator. We disagree and, in any event, find that
   Brittania-U addressed a distinguishable situation.
           In Brittania-U, a disappointed bidder for some oil leases sued the
   seller and two of its agents involved in the bidding process. As part of the
   bidding process, the bidder and seller had signed an arbitration agreement.
   That arbitration agreement contained a delegation clause: a clause that
   delegates arbitrability questions to the arbitrator. The seller’s agents never
   signed the bidder–seller arbitration agreement. Nonetheless, both the seller
   and its nonsignatory agents moved to compel arbitration based on it. 15
           We held that they could. 16 We noted that before we could reach
   whether the delegation clause was valid, we had to decide the first-step,
   formation question. 17 Specific to the agents, that meant looking to
   “‘background principles’ of state contract law,” like equitable estoppel, to
   see if they could enforce the bidder–seller arbitration agreement as

   recognized: (a) incorporation by reference; (b) assumption; (c) agency; (d) veil-
   piercing/alter ego; (e) estoppel; and (f) third-party beneficiary.”).
           15
              See 866 F.3d at 711–12; see also id. at 714 (explaining that “a delegation clause
   giv[es] the arbitrator the primary power to rule on the arbitrability [question]” (quoting
   Kubala, 830 F.3d at 201)).
           16
                Id. at 715.
           17
                Id. at 714.

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   nonsignatories. 18 When we looked to those background principles, we found
   the Second Circuit’s decision in Contec v. Remote Solution, Co.
   “instructive.” 19 In that case the Second Circuit held that a nonsignatory—a
   corporation’s successor in interest—could enforce an arbitration agreement
   since it had a “sufficient relationship” with both the predecessor-in-interest
   signatory “and to the rights created under the agreement.” 20 We found
   Contec indistinguishable in Brittania-U: “Like in Contec, the [seller and its
   agents]—a signatory and two nonsignatories—are attempting to enforce the
   arbitration provision against [the signatory bidder].” 21 Since we also held that
   the delegation clause was valid, the seller’s agents could therefore compel
   arbitration. 22
           But we are not faced today with the same situation we confronted in
   Brittania-U. The district court below correctly explained what made
   Brittania-U different: in that case, an “agency relationship” existed between
   the agents and the seller, and “estoppel principles were at play.” As we
   explain more thoroughly below, those facts are not present here. And, even
   more unlike Brittania-U, Cypress was not even a party to this suit until it
   intervened. Newman has still brought no claims against it.
           But to the principal thrust of Plains and Cypress’s argument—that
   Brittania-U held that enforceability between the parties is a second-step,
   arbitrability question—we cannot agree. We already highlighted above how

           18
             Id. at 715 (quoting Crawford Prof’l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d
   249, 257 (5th Cir. 2014)).
           19
                Id. (citing 398 F.3d 205, 211 (2d Cir. 2005)).
           20
                See 398 F.3d at 209–211.
           21
                Brittania-U, 866 F.3d at 715.
           22
                Id. at 714–15.

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   Brittania-U supports that we decide that issue as part of the first-step,
   formation question. What supports Plains and Cypress’s argument is nothing
   more than some imprecise language. True, we did say in Brittania-U that we
   had to “first determine whether claims against [the agents] were . . . clearly
   and unmistakably delegated to the arbitrator” before we could address
   whether the agents could enforce the bidder–seller arbitration agreement as
   nonsignatories. 23 But in holding that they could, we explicitly relied on
   Contec. 24 And in Contec, the Second Circuit plainly reasoned that
   enforceability goes to the first-step, formation question that is determined by
   the courts. 25
           But even if Brittania-U could not be reconciled with our decision
   today, we would still be bound to disagree with Plains and Cypress. In
   general, the rule of orderliness binds us to follow a prior panel’s decision on
   an issue. 26 But when two published panel decisions conflict, we must follow
   the earlier. 27 Plains and Cypress’s reading of Brittania-U would create just
   such a conflict between it and our earlier decision in Sherer. 28 So, we are

           23
                See id. at 709.
           24
                Id. at 715.
           25
               398 F.3d at 209 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944–
   45 (1995)); see also id. (“[J]ust because a signatory has agreed to arbitrate issues of
   arbitrability with another party does not mean that it must arbitrate with any non-
   signatory.”).
           26
              See, e.g., McClain v. Lufkin Indus., Inc., 649 F.3d 374, 385 (5th Cir. 2011) (“[Our]
   rule of orderliness prevents one panel from overruling the decision of a prior panel.”).
           27
                GlobeRanger Corp. v. Software AG USA, Inc., 836 F.3d 477, 497 (5th Cir. 2016).
           28
              See Sherer, 548 F.3d at 382 (explaining that “whether a valid agreement to
   arbitrate exists” turns on whether it can be enforced in either law or equity). The rule of
   orderliness applies as equally to a panel’s implicit reasoning as it does to its express
   holdings. See Arnold v. U.S. Dep’t of Interior, 213 F.3d 193, 196 n.4 (5th Cir. 2000) (“[T]o

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   hemmed in. We could not read Brittania-U as Plains and Cypress invite us to
   even if we were so inclined.
                                                   IV
          Still, our work is far from done. We explained in Kubala v. Supreme
   Production Services, Inc. that the first step to decide a motion to compel
   arbitration is to ask a state-law, contract-formation question: Did “the parties
   enter[] into any arbitration agreement at all.” 29 In cases like Kubala, where
   Texas law deemed that both parties accepted the same arbitration agreement
   at issue, that ends our first-step inquiry. 30 But sometimes an arbitration
   agreement’s enforceability can reach “strangers to the contract.” 31 In these
   so-called “nonsignatory,” 32 “third party,” or “nonpart[y]” cases, 33 we must
   inquire further.
          In making that further inquiry, the Supreme Court’s decision in
   Arthur Andersen LLP v. Carlisle is instructive. There, the Supreme Court
   explained that “background principles of state contract law” govern “who is
   bound” by an arbitration agreement. 34 And those principles can expand the
   arbitration agreement’s enforceability beyond its signatory parties through
   “traditional” doctrines; doctrines like “assumption, piercing the corporate

   the extent that a more recent case contradicts an older case, the newer language has no
   effect.” (citing Teague v. City of Flower Mound, 179 F.3d 377, 383 (5th Cir. 1999))).
          29
               830 F.3d at 201–02 (first emphasis added, second emphasis original).
          30
            See id. at 202–03 (explaining that the employee was “deemed” to have accepted
   the employer’s arbitration agreement as a contract modification under Texas law).
          31
               Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (2009).
          32
               Crawford Prof’l, 748 F.3d at 257.
          33
               Arthur Andersen, 556 U.S. at 631.
          34
               Id. at 630 (emphasis added).

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   veil, alter ego, incorporation by reference, third-party beneficiary theories,
   waiver and estoppel.” 35 So in third-party cases we must ask an additional
   question: Does “a written arbitration provision” exist that “is made
   enforceable against (or for the benefit of) a third party under state contract
   law”? 36
          The parties agree that Texas law governs our first-step analysis.
   Neither Plains nor Cypress contends that Newman actually entered into an
   arbitration agreement with Plains. 37 What Plains and Cypress do contend,
   though, is that Plains can enforce the Newman–Cypress arbitration
   agreement. Newman adamantly disagrees. We agree with Newman.
                                                  A
          Plains contends that it is a third-party beneficiary to the Newman–
   Cypress Employment Agreement. Newman disagrees. As he points out, the
   Supreme Court of Texas has explained that Texas law presumes that
   noncontracting parties are not third-party beneficiaries. 38 To overcome that
   presumption, “the parties to the contract”—Newman and Cypress—must
   have “intended to secure a benefit to [a] third party”—Plains—“and
   entered into the contract directly for the third party’s benefit.” 39

          35
               Id.
          36
               Id.; Crawford Prof’l, 748 F.3d at 257.
          37
              Cypress, for its part, apparently concedes that Newman never entered into an
   arbitration agreement with Plains. And Newman, naturally, emphatically denies that he
   ever agreed to an arbitration agreement with Plains.
          38
               Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 420 (Tex. 2011).
          39
            Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 635 (Tex. 2018)
   (emphasis added) (quoting In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex.
   2006)).

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           Still, as Plains accurately notes, we must decide if Newman and
   Cypress intended to secure a benefit to it by looking at the “entire”
   Employment Agreement, and “giv[ing] effect to all its provisions.” 40 To
   secure a benefit to Plains, the Employment Agreement must have “clearly
   and fully spelled [it] out.” 41 And the benefit, itself, “must be more than
   incidental.” 42 Only a benefit that would confer Plains the status of a
   “claimant[]” in the event of breach will do. 43 Whatever Plains’s expectations
   were, they are “irrelevant.” 44 Without Newman and Cypress clearly and
   fully spelling it out in the contract, whatever benefit Plains hoped it had
   “must be denied.” 45 And where third-party-beneficiary status is
   “doubt[ful],” it too must be denied. 46 Applying that standard, Plains cannot
   overcome the presumption against third-party-beneficiary status for two
   reasons. 47

           40
                City of Houston v. Williams, 353 S.W.3d 128, 145 (Tex. 2011).
           41
                Jody James, 547 S.W.3d at 635.
           42
                Id.
           43
              See Corpus Christi Bank & Tr. v. Smith, 525 S.W.2d 501, 505 (Tex. 1975) (“In our
   opinion, it appears that the City intended to protect the materialmen and subcontractors
   by its contractual requirement for an Article 5160 payment bond, but it does not ‘clearly
   appear,’ as required by Citizens that the City intended to make them claimants against the
   City on the contract.”).
           44
                Jody James, 547 S.W.3d at 635.
           45
                Id.
           46
                Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011).
           47
               A third reason exists, too. In its Reply brief, Plains argues for the first time that
   TIR’s separate agreement to indemnify it clearly and fully spelled out a benefit under the
   Newman–Cypress Employment agreement. But it did not raise that argument before the
   district court in its motion to compel arbitration. And it did not raise that argument before
   us in its opening brief. But “we have consistently held [that] ‘arguments not raised before
   the district court are waived and cannot be raised for the first time on appeal.’” Sindhi v.
   Raina, 905 F.3d 327, 333 (5th Cir. 2018) (quoting LeMaire v. La. Dep’t of Transp. & Dev.,

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           First, Newman’s incorporated-by-reference Pay Letter did not clearly
   and fully spell out that Plains could take legal action if either Newman or
   Cypress breached its terms. To the extent that it named Plains at all, the Pay
   Letter merely list “Plains-Pipeline” as the “Client.” 48 Further, the Pay
   Letter expressly provided that Cypress—not Plains—controlled Newman’s
   pay. Cypress only “based” Newman’s pay on his job “classification” and a
   separate “agreement” that it had with Plains. And, as the Employment
   Agreement makes plain, Newman’s pay could “be changed over time at the
   discretion of [Cypress] whether based on changes in job classification or
   assignment, changes in [Cypress’s] agreement with [Plains], or otherwise.”
   Cypress agrees that it alone controlled Newman’s pay: “Plains paid Cypress
   an all-inclusive rate to compensate it for the services it provided; from that
   amount, Cypress, in its sole discretion, determined how much to pay each of
   its inspectors.” All that is to say, if Cypress unilaterally decided to pay
   Newman more or less, or if Newman, for example, failed to submit “a
   mileage log” for reimbursement purposes, Plains had no clearly and fully
   spelled out right to sue under the Pay Letter.
           Second, the Employment Agreement itself did not clearly and fully
   spell out that Plains could take legal action if Newman decided to breach its
   other terms. For instance, Newman agreed to protect both Cypress’s and
   Plains’s “confidential business and trade secrets.” But if he breached that
   agreement, the Employment Agreement did not expressly provide Plains the

   480 F.3d 383, 387 (5th Cir. 2007)). Further, we “do[] not entertain arguments raised for
   the first time in a reply brief [unless] a new issue is raised in the appellee’s brief and the
   appellant responds in his reply brief.” United States v. Ramirez, 557 F.3d 200, 203 (5th Cir.
   2009). Because Newman did not raise a new issue in his brief warranting this new argument,
   we need not address this argument by Plains.
           48
             Smith’s Pay Letter similarly named “Plains All American” as the “Client”
   without further express reference to Plains.

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   right to sue Newman. Rather, it provided that such a breach would
   “irreparably injure” Cypress by causing it to “violate the confidentiality
   provisions [it had] with its customers.” And if Newman so injured Cypress,
   then the Employment Agreement expressly contemplated only Cypress, as
   the “Employer,” suing Newman in court on “claims for injunctive relief.” 49
   Further, Newman and Cypress both agreed that, although Newman’s
   “employment [was] based on a specific project to be performed for [Plains],”
   Newman’s employment was “at will.” 50 Newman could have walked off the
   job “at any time for any reason,” and Cypress could likewise have fired him.
   Nowhere did Newman’s Employment Agreement give Plains a clear and
   fully spelled out say in any of that.
           For those two reasons, Plains was not a third-party beneficiary under
   Newman’s Employment Agreement with Cypress. Plains’s contrary
   arguments are unpersuasive. Although it reads Newman’s Employment
   Agreement like we do, 51 Plains draws a different conclusion from that
   reading. It concludes that its express designation as the specific project client
   in Newman’s Employment agreement entitled it to third-party-beneficiary
   status. Not so.
          Plains hangs its hat here on the Texas Supreme Court’s decision in
   City of Houston v. Williams. 52 In that case, firefighters sued their city for not

           49
               Smith’s Employment Agreement similarly provides that Plains as his
   “Employer” could “restrain” him from releasing “any trade secrets or confidential
   business information.”
           50
              Smith’s Employment Agreement is substantively identical, providing for an “at
   will” relationship that was terminable “with or without cause and for any reason.”
           51
             Plains also reads Newman’s Employment Agreement to “explicitly state[] that
   [his] employment [was] ‘based on a specific project’ and ‘for a designated customer,’”
   with the Pay Letter “identifying Plains as that very customer.”
           52
                353 S.W.3d 128 (Tex. 2011).

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   properly paying “lump sums due upon termination of their employment.” 53
   In support, the firefighters pointed to two contracts that their union had
   negotiated with the city on their behalf. 54 These contracts expressly stated
   that one purpose was “to provide certain wages, hours, and conditions of
   employment” to the firefighters as the city’s “employee[s].” 55 Though the
   firefighters themselves did not sign these agreements, the Supreme Court of
   Texas held that the firefighters had standing to sue the city on them as third-
   party beneficiaries. 56 Said the Court, the contracts “reflect[ed] an intent to
   benefit the firefighters” because the union had a duty to represent and seek
   benefits for them; the contracts’ express purpose was to benefit them; and
   the contracts limited pay-related benefits to them, as opposed to offering pay
   benefits “to the world at large.” 57
          This case is not City of Houston. The City of Houston firefighters sued
   to enforce specific “guarantees of compensation . . . not promised to the
   [c]ity or to the [u]nion,” but to them. 58 In other words, a right was clearly and
   fully spelled out for them in the contract. True, the Pay Letter did identify
   Plains as the designated customer that Cypress hired Newman to do work
   for. But as we already explained, Newman could have literally walked off the
   job at any point. If he had, his Employment Agreement with Cypress did not
   provide Plains with any clearly and fully spelled out right to recourse.
   Newman’s Employment Agreement, at most, conferred a benefit to Cypress

          53
               Id. at 131.
          54
               Id.
          55
               Id. at 146.
          56
               Id.
          57
               Id.
          58
               Id.

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   that was incidental and borderline doubtful. That is not enough to confer
   third-party-beneficiary status in Texas. 59
                                                    B
             Plains and Cypress also contend that intertwined-claims estoppel
   allows Plains to enforce the Newman–Cypress arbitration agreement.
   Newman denies that intertwined-claims estoppel even exists under Texas
   law. He argues that the Texas Supreme Court has repeatedly refused to
   recognize intertwined-claims estoppel.
             Newman does have some support. In In re Merrill Lynch Trust Co.
   FSB, the Supreme Court of Texas acknowledged that federal courts had
   applied the theory to allow nonsignatories to enforce arbitration
   agreements. 60 But it did not decide if the theory existed in Texas. 61 Over a
   decade later, the Texas Supreme Court in Jody James Farms, JV v. Altman
   Group, Inc. again acknowledged its existence, as well as our Erie-guess that
   intertwined-claims estoppel exists in Texas. 62 Yet the Jody James Court again
   declined to decide the question since, even if intertwined-claims estoppel did
   exist in Texas, the facts did not support its application. 63
             Still, our hands are tied. We already made our Erie-guess, 64 and the
   Texas Supreme Court has not changed Texas law since. So, the rule of

             59
                  Tawes, 340 S.W.3d at 425.
             60
                  235 S.W.3d 185, 193–94 (Tex. 2007).
             61
            Cf. id.; see also Jody James, 547 S.W.3d at 639 (“In In re Merrill Lynch Trust Co.,
   we acknowledged the existence of this theory without deciding its validity in Texas.”).
             62
                  547 S.W.3d at 639 (citing Hays v. HCA Holdings, Inc., 838 F.3d 605, 612 (5th Cir.
   2016)).
             63
                  Id.
             64
                  Hays, 838 F.3d at 612.

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   orderliness binds us to assume that intertwined-claims estoppel exists in
   Texas. 65 Under our Erie-guess, intertwined-claims estoppel applies when:
   (1) “a nonsignatory has a ‘close relationship’ with one of the signatories,”
   and (2) “the claims are ‘intimately founded in and intertwined with the
   underlying contract obligations.’” 66 But that only gets Plains and Cypress so
   far. That is because Plains and Cypress do not have a close relationship.
   Therefore, Newman is ultimately right that intertwined-claims estoppel does
   not apply.
           Newman denies that Plains has a close relationship with Cypress. 67 He
   points out that, under Texas law, a close relationship is a term of art, generally
   requiring formal corporate affiliation. 68 The relationship between a typical
   insurance agency and an “independent broker or salesman,” for instance, is
   not close enough in Texas. 69 The relationship “must be closer than merely
   independent participants in a business transaction.” 70 The test is one of
   “consent, not coercion.” 71 Would a reasonable signatory to the arbitration
   agreement anticipate being forced to arbitrate claims against the

           65
              Jacobs v. Nat’l Drug Intelligence Center, 548 F.3d 375, 378 (5th Cir. 2008) (“It is
   a well-settled Fifth Circuit rule of orderliness that one panel of our court may not overturn
   another panel’s decision, absent an intervening change in the law . . . .”).
           66
              Hays, 838 F.3d at 612 (quoting Cotton Com. USA, Inc. v. Clear Creek Indep. Sch.
   Dist., 387 S.W.3d 99, 105 (Tex. Ct. App. 2012)); Jody James, 547 S.W.3d at 639.
           67
                Neither Cypress nor Plains contends that Plains has a close relationship with
   Newman.
           68
             See Jody James, 547 S.W.3d at 640 (“The Second Circuit’s [intertwined-claims-
   estoppel] cases compelling arbitration typically involve some corporate affiliation between
   a signatory and non-signatory, not just a working relationship.”).
           69
                Id.
           70
                Id.
           71
                Id. at 639.

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   nonsignatory? 72 On the other hand, we have said that when plaintiffs treat
   multiple defendants “as a single unit” in their pleadings, “raising virtually
   indistinguishable factual allegations” against them, then that cuts in favor of
   a close relationship. 73
          Applying that standard here, Cypress and Plains do not have a close
   relationship. Cypress and Plains admit they are independent business
   entities. And Newman has not treated Cypress and Plains as a “single unit”
   in his pleading. In fact, Newman has not even sued Cypress; it intervened.
   Still, Cypress and Plains contend that they have a close relationship under
   three different theories. None persuade.
          First, Plains theorizes that two facts created a close relationship with
   Cypress: “Cypress utilized [Newman] specifically to provide services to
   Plains” and Newman has “alleged Plains is liable for [his] FLSA claims
   based on [the] allegation that Plains is [his] joint employer, along with
   Cypress.” Plains relies on a Second Circuit case—Ragone v. Atlantic Video at
   Manhattan Center—in support. 74 Because intertwined-claims estoppel
   apparently differs between the Second Circuit and Texas law, though, Ragone
   does not change our analysis.
          In Ragone, a makeup artist worked as an employee for a digital
   broadcaster and signed an arbitration agreement with it. 75 The digital
   broadcaster provided the makeup artist to one of its clients, a major sports

          72
               See id. at 640 (“A reasonable consumer would not anticipate being forced to
   litigate complains against an independent insurance agent in the same manner they agreed
   to litigate disputes with the insurer.”).
          73
               Hays, 838 F.3d at 612–613.
          74
               595 F.3d 115 (2d Cir. 2010).
          75
               Id. at 118.

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                                           No. 21-50253

   network. There, the makeup artist allegedly experienced “pervasive and
   continuous sexual harassment.” 76 The sports network never signed the
   arbitration agreement. Nor did any document that the makeup artist signed
   ever mention the sports network. 77 Yet the Second Circuit held that the
   sports network could compel arbitration, under intertwined-claims estoppel,
   when the makeup artist sued it. 78 Said the Second Circuit, the digital
   broadcaster and the sports network had a close relationship because the
   makeup artist “understood [the sports network] to be, to a considerable
   extent, her co-employer.” 79
          Whatever Ragone’s persuasive force, though, it does not control here.
   Our inquiry is governed by Texas law. It is unclear from Ragone what law the
   Second Circuit was applying. Some language in the opinion suggests that it
   was applying New York law. 80 But when it came to intertwined-claims
   estoppel, the Second Circuit cited intra-circuit caselaw without reference to
   what New York law requires. 81 So to the extent the Second Circuit relied on
   either New York law or federal common law, we cannot follow its lead. The
   Supreme Court in Arthur Andersen was clear: State law governs whether an
   arbitration agreement is enforceable between parties, and the parties agree

          76
               Id. at 119.
          77
               Id.
          78
               Id. at 127.
          79
               Id.
          80
               See id. at 121 (discussing New York’s unconscionability doctrine).
          81
             See id. at 126–27 (citing Choctaw Generation Ltd. P’ship v. Am. Home Assurance
   Co., 271 F.3d 403, 406 (2d Cir. 2001)).

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                                            No. 21-50253

   that Texas law governs. 82 And when it comes to that state law, the Second
   Circuit is apparently at odds with Texas.
           Specifically, Texas law weighs the nonsignatory’s status as an
   independent business against finding a close relationship heavier than the
   Second Circuit does. In Merrill Lynch, which we discuss more below, the
   Texas Supreme Court explicitly rejected applying equitable estoppel to allow
   two nonsignatory subsidiaries to enforce an arbitration agreement their
   corporate parent had with the plaintiff. 83 And it did so even after it discussed
   intertwined-claims estoppel as a theory that federal courts had applied
   before. 84 That stands in contrast to Ragone, where the Second Circuit found
   a close relationship between two non-subsidiary, independent businesses.
   And here, no party contends that Plains and Cypress were anything but
   completely independent businesses, let alone subsidiaries.
           Second, Cypress theorizes that it has a close relationship with Plains
   based on Newman’s joint-employment theory alone. In support, it relies on
   our unpublished decision in Trujillo v. Volt Management Corp. 85 Yet even if
   Trujillo were binding, 86 it remains distinguishable.
           In Trujillo, a human-resources professional worked as an employee for
   a staffing company. The staffing company leased various employees to a
   client, with the human-resources professional providing on-site support for

           82
                556 U.S. at 630–31.
           83
                See 235 S.W.3d at 191–95.
           84
                Id. at 193–94.
           85
                846 F. App’x 233 (5th Cir. 2021) (per curiam).
           86
             See United States v. Weatherton, 567 F.3d 149, 153 n.2 (5th Cir. 2009) (“[A]n
   unpublished opinion issued after January 1, 1996 is not controlling precedent, [though] it
   may be considered as persuasive authority.” (citation omitted)).

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                                            No. 21-50253

   their human-resources needs. As part of her employment with the staffing
   company, the human-resources professional signed an arbitration agreement.
   She did not, however, ever sign one with the client company. When her
   request for a disability accommodation was denied, she sued the client
   company. 87 We affirmed the district court’s conclusion that the client
   company could compel arbitration. 88 In so doing, we necessarily held that a
   close relationship existed between the client company and either or both the
   human-resources professional and staffing company. 89
           Even so, a critical fact was present in Trujillo that is missing here. In
   Trujillo, the district court found that “the parties, contracts, and
   controversies” were “tight[ly] related.” 90 The district court did not do so
   here. Rather, it found that Plains “does not have any of those relationships
   with the signatory (Cypress)” that other courts have found to create a close
   relationship. As Newman points out, we must review the district court’s non-
   application of intertwined-claims estoppel for abuse of discretion. 91 Cypress
   points to no other facts that support the district court abused its discretion in
   making this finding. Therefore, Plains and Cypress’s second theory is also
   unpersuasive.
           Third, Plains theorizes that it has a close relationship with Cypress
   because TIR—a Cypress subsidiary—“contractually agreed to indemnify
   Plains in connection with [Newman’s] FLSA claims.” As an initial matter,

           87
                Trujillo, 846 F. App’x at 234–35.
           88
                Id. at 237.
           89
                See id.
           90
                Id.
           91
              See Grigson, 210 F.3d at 528 (“[W]hether to utilize equitable estoppel in this
   fashion is within the district court’s discretion; we review to determine only whether it has
   been abused.”).

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   Newman contends that Plains waived this argument by not making it below.
   It is true that we “will not consider arguments first raised on appeal.” 92
   However, Plains’s motion to compel arbitration plainly argued that one of
   the reasons it was entitled to intertwined-claims estoppel was because of the
   TIR–Plains indemnity agreement. We can, therefore, review this argument.
           That does not mean, though, that we are persuaded by it. The
   indemnity agreement in this case does not create a close relationship between
   Cypress and Plains for the purposes of estopping Newman. Again, a close
   relationship is about “consent, not coercion” in Texas. 93 Would a reasonable
   signatory to the arbitration agreement anticipate being forced to arbitrate
   claims against the nonsignatory? 94 The answer here is no. Between Newman
   and his six other co-plaintiffs, all seven signed their Employment Agreements
   directly with Cypress—not TIR. The only one of them that TIR even paid
   directly was Michael Crain. Cypress admits that it paid the rest. A reasonable
   signatory to an arbitration agreement would not foresee that a corporate
   subsidiary—with which he has no affiliation—can unilaterally change his
   arbitration rights merely by agreeing to indemnify a client. And even for
   Crain, who TIR directly paid, Plains cites no caselaw supporting that an
   employer can unilaterally expand the scope of its employee’s consent to
   arbitrate—especially in an agreement it is not even a party to—by agreeing
   to indemnify a third-party client. Therefore, Plains and Cypress’s third
   theory is unpersuasive as well.

           92
              E.g., Estate of Duncan v. Comm’r of Internal Revenue, 890 F.3d 192, 202 (5th Cir.
   2018) (citation omitted).
           93
                Jody James, 547 S.W.3d at 639.
           94
               See id. at 640 (“A reasonable consumer would not anticipate being forced to
   litigate complains against an independent insurance agent in the same manner they agreed
   to litigate disputes with the insurer.”).

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                                               C
           Finally, Cypress contends that artful-pleading estoppel applies to
   allow Plains to enforce the Newman–Cypress arbitration agreement. Its best
   case is the Texas Supreme Court’s decision in Merrill Lynch. 95 Newman
   disagrees, contending that decision supports him. Artful-pleading estoppel in
   Texas requires two things: (1) “naming individual agents of the party to the
   arbitration clause and suing them in their individual capacity”96; and (2)
   bringing a suit that in “substance” is against those agents’ principal. 97
   Neither element is present here. Newman has not named any individual
   agent of Cypress’s in his complaint as a defendant. Rather, he has named a
   separate business: Plains. Nor is his suit in substance against Plains as a
   principal. He is suing Plains directly for its alleged FLSA violations.
   Therefore, we agree with Newman: Artful-pleading estoppel does not apply.
           The Texas Supreme Court’s application of this rule in Merrill Lynch
   only bolsters our analysis. There the Court explicitly distinguished between
   suing a principal’s employees and suing its subsidiaries. 98 When it came to
   the former, the principal’s arbitration agreement would cover the employees
   so long as the suit’s substance covered actions within the course and scope
   of their employment. 99 But when it came to the latter, “a contract with one
   corporation—including a contract to arbitrate disputes—is generally not a

           95
                235 S.W.3d 185 (Tex. 2007).
           96
             Id. at 188 (quoting Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1318 (11th
   Cir. 2002) (internal quotations omitted)).
           97
                Id. at 189.
           98
               See id. at 194 (“As discussed above with reference to the employees, allowing
   litigation to proceed that is in substance against a signatory though in form against a
   nonsignatory would allow indirectly what cannot be done directly.”).
           99
                Id. at 190.

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                                              No. 21-50253

   contract with any other corporate affiliates.” 100 Although one separate
   business can, in theory, act as another’s agent, 101 merely acting as a corporate
   subsidiary is not enough to invoke artful-pleading estoppel. 102 Since acting as
   a corporate subsidiary is not enough to equitably invoke artful-pleading
   estoppel in Texas, then it is beyond doubtful that the Texas Supreme Court
   would allow a completely separate business do it.
                                                   V
           Arbitration under the FAA is “a matter of contract.” 103 But judges
   continue to play an important role. Where, as here, the parties dispute
   whether an enforceable arbitration agreement exists between them, it takes a
   court to decide. Applying Texas contract law and equitable doctrines to this
   case compels one conclusion: Plains cannot enforce the Newman–Cypress
   arbitration agreement. Accordingly, we AFFIRM the district court.

           100
                 Id. at 191 (citations omitted).
           101
              See id. at 189 (“The commission on this insurance transaction was paid directly
   to Merrill Lynch, not Medina; if the latter was acting as an agent for ML Life or ML Trust,
   then so was the former.”).
           102
              Cf. id. at 195 (holding that the subsidiaries could not enforce their parent
   corporation’s arbitration agreement with the plaintiff).
           103
              Henry Schein, 139 S. Ct. at 529 (citing Rent-A-Center, W., Inc. v. Jackson, 561
   U.S. 63, 67 (2010)).

                                                   23