Court Opinion

ID: 9949425
Source: CourtListenerOpinion
Date Created: 2024-03-11 17:01:27.492509+00
Date Added: 2024-06-11T14:25:50.591326
License: Public Domain

FOR PUBLICATION

     UNITED STATES COURT OF APPEALS
          FOR THE NINTH CIRCUIT

WINIFREDO HERRERA;                                 No. 21-16083
MACARIA HERRERA,
                                                 D.C. No. 3:20-cv-
                 Plaintiffs-Appellees,              03019-JCS

    v.
                                                     OPINION
CATHAY PACIFIC AIRWAYS
LIMITED,

                 Defendant-Appellant.

         Appeal from the United States District Court
            for the Northern District of California
         Joseph C. Spero, Magistrate Judge, Presiding

         Argued and Submitted September 13, 2023
                 San Francisco, California

                      Filed March 11, 2024

Before: J. Clifford Wallace, Danny J. Boggs, * and Danielle
                 J. Forrest, Circuit Judges.

*
 The Honorable Danny J. Boggs, United States Circuit Judge for the U.S.
Court of Appeals for the Sixth Circuit, sitting by designation.
2           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

                   Opinion by Judge Wallace;
                    Dissent by Judge Forrest

                          SUMMARY **

                           Arbitration

    The panel reversed the district court’s denial of Cathay
Pacific Airways Limited’s motion to compel arbitration in
plaintiffs’ putative class action alleging that Cathay Pacific
breached their contract by not issuing a refund following
flight cancellations for tickets that they purchased through a
third-party vendor.
    Plaintiffs purchased international flights on Cathay
Pacific through a third-party booking website, ASAP
Tickets, which had Terms and Conditions that included an
arbitration clause. Cathay Pacific cancelled plaintiffs’
return flight, and they alleged that Cathay Pacific’s failure to
provide a refund was a breach of contract under the airline’s
General Conditions of Carriage for Passengers and Baggage
(“GCC”).
    The panel held that, when a nonsignatory seeks to
enforce an arbitration provision, an order denying a motion
to compel arbitration based on the doctrine of equitable
estoppel is reviewed de novo.
    As a threshold issue, the panel held that 14 C.F.R.
§ 253.10 did not bar Cathay Pacific’s motion to compel

**
  This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.          3

arbitration on equitable estoppel grounds. Section 253.10
clearly and unambiguously regulates a carrier’s ability to
impose a choice-of-forum clause in contracts of
carriage. However, nothing in the plain language of section
253.10 prohibits airline carriers from enforcing arbitration
agreements between passengers and third parties if the
applicable law permits them to do so.
    Applying California contract law, the panel held that
because plaintiffs’ allegations that Cathay Pacific breached
the GCC was intimately intertwined with ASAP’s alleged
conduct under the Terms and Conditions, it was appropriate
to enforce the arbitration clause contained in the Terms and
Conditions. Plaintiffs’ contention—that it would be unfair
to apply equitable estoppel against them because the refund
process was not clear under ASAP’s Terms and Condition
and      Cathay       Pacific’s      GCC—was          without
merit. Accordingly, the panel reversed the district court’s
denial of Cathay Pacific’s motion to compel arbitration and
remanded with instructions to either dismiss or stay the
action pending arbitration of plaintiffs’ breach-of-contract
claim.
    Dissenting, Judge Forrest would affirm the district
court’s denial of Cathay Pacific’s motion to compel
arbitration because plaintiffs’ claim against Cathay
Pacific—as they presented it—did not rely or depend on the
terms of their ASAP Tickets contract.
4          HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

                       COUNSEL

Benedict Idemundia (argued), Clyde & Co US LLP, Los
Angeles, California; Kevin R. Sutherland, Clyde & Co US
LLP, San Francisco, California; for Defendant-Appellant.
Matthew Z. Robb (argued) and Nicholas A. Coulson, Liddle
Sheets Coulson PC, Detroit, Michigan; Bradley K. King,
Ahdoot & Wolfson PC, New York, New York; Tina
Wolfson, Ahdoot & Wolfson PC, Burbank, California; for
Plaintiffs-Appellees.

                        OPINION

WALLACE, Circuit Judge:

    Cathay Pacific Airways Limited (Cathay Pacific)
appeals from the district court’s denial of its motion to
compel arbitration in a putative class action brought by
Winifredo and Macaria Herrera (Herreras) alleging that
Cathay Pacific breached their contract by not issuing a
refund following flight cancellations for tickets that the
Herreras purchased through a third-party vendor. We have
jurisdiction over this timely appeal pursuant to 9 U.S.C.
§ 16. We reverse and remand.
                             I.
    “We usually review a district court’s decision about the
arbitrability of claims de novo.” Franklin v. Cmty. Reg’l
Med. Ctr., 998 F.3d 867, 870 (9th Cir. 2021). “When the
arbitrability decision concerns equitable estoppel, however,
our caselaw has been inconsistent on whether we review the
             HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                    5

district court’s decision de novo or for abuse of discretion.”
Id. (collecting cases). 1
    The line of cases in our circuit applying the abuse-of-
discretion standard rely on our decision in Hoefler v. Babbitt,
where we reasoned that the standard was appropriate
“[b]ecause estoppel is an equitable concept that is invoked
by the court in its discretion.” 139 F.3d 726, 727 (9th Cir.
1998). 2    However, such is not the case here where a
nonsignatory to the contract containing the arbitration
provision seeks to compel enforcement of the arbitration
provision against a signatory. Moreover, our review of the
district court’s order denying the motion to compel
arbitration presents mixed questions of law and fact. We
review such mixed questions de novo. Disability L. Ctr. of
Alaska, Inc. v. Anchorage Sch. Dist., 581 F.3d 936, 938 (9th
Cir. 2009). Accordingly, we hold that, when a nonsignatory
seeks to enforce an arbitration provision, an order denying a
motion to compel arbitration based on the doctrine of
equitable estoppel is reviewed de novo.
    “The validity and scope of an arbitration clause are
reviewed de novo.” Nagrampa v. MailCoups, Inc., 469 F.3d
1257, 1267 (9th Cir. 2006).
    At this stage of the litigation, we assume that all
allegations in the complaint are true. Brown v. Dillard’s,
Inc., 430 F.3d 1004, 1006 (9th Cir. 2005). “In reviewing

1
 Our sister circuits are split on the issue of which standard of review
applies. See e.g., Reeves v. Enter. Prods. Partners, LP, 17 F.4th 1008,
1011 (10th Cir. 2021) (collecting cases).
2
 See, e.g., Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1179 (9th Cir.
2014), citing Kingman Reef Atoll Invs., L.L.C. v. United States, 541 F.3d
1189, 1195 (9th Cir. 2008); Setty v. Shrinivas Sugandhalaya LLP, 3 F.4th
1166, 1167–68 (9th Cir. 2021), citing Nguyen, 763 F.3d at 1175, 1179.
6          HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

motions to compel arbitration . . . a court must ‘consider all
relevant, admissible evidence submitted by the parties and
contained in pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits.’” Barrows v. Brinker Rest. Corp., 36 F.4th 45, 50
(2d Cir. 2022), quoting Nicosia v. Amazon.com, Inc., 834
F.3d 220, 229 (2d Cir. 2016) (emphasis removed).
                              II.
    Around July 2019, the Herreras purchased international
round-trip flights on Cathay Pacific through a third-party
booking website, ASAP Tickets (ASAP), which is operated
by International Travel Network, LLC (ITN). The Herreras
agreed to ASAP’s Terms & Conditions, which provided:

       If fare rules allow refunds and/or exchanges,
       a $250.00 [ ] fee per ticket will be charged to
       process any refund and/or exchange request
       . . . . After the tickets are issued, any changes
       or refunds are subject to the restrictions on
       the fares used . . . . The airlines determine the
       restrictions of the fares, and [ASAP] has no
       power to override these restrictions.

ASAP’s Terms & Conditions also included an arbitration
clause, which stated that, except for small-claims court,
“[t]he exclusive means of resolving any dispute or claim
arising out of or relating to this Agreement (including any
alleged breach thereof), the Service, or the Website shall be
BINDING ARBITRATION administered by the American
Arbitration Association.”
    The tickets issued by Cathay Pacific for the Herreras’
flights incorporated Cathay Pacific’s General Conditions of
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.           7

Carriage for Passengers and Baggage (GCC). Article 10.2
of the GCC in relevant part stated that “[e]xcept as otherwise
provided by the Warsaw Convention or the Montreal
Convention or applicable law, if [Cathay Pacific] cancel[s] a
flight . . . [Cathay Pacific] shall . . . make a refund in
accordance with the provisions of Article 11[.]” In turn,
Article 11.1.1 of the GCC stated:

       Except as otherwise provided in this Article,
       [Cathay Pacific] shall be entitled to make
       refund either to the person named in the
       Ticket, or to the person who has paid for the
       Ticket upon presentation of satisfactory proof
       of such payment.

    While the Herreras were on their trip, Cathay Pacific
cancelled their return flight due to “operational reasons.”
After the cancellation, the Herreras spoke with a Cathay
Pacific agent at the airport who recommended that the
Herreras purchase a return flight on another airline and
“expressly assured [them] that they would receive a refund
for the unused portion of their Cathay Pacific tickets.” The
Herreras followed the agent’s recommendation and
purchased a return flight on another airline.
    In the email notifying the Herreras of their flight
cancellation, Cathay Pacific instructed them to “contact
[their] travel agent” to request a refund. The Herreras
reached out to ASAP and made “multiple requests” to
receive a refund. After the Herreras returned home, an
ASAP agent communicated to them that Cathay Pacific
would only offer them travel vouchers that would expire a
handful of months later, an offer which the Herreras rejected
due to travel restrictions related to the ongoing COVID-19
8            HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

pandemic. Cathay Pacific attests that the airline never
received a refund request either from the Herreras or from
ASAP on behalf of the Herreras.
    The Herreras filed a First Amended Class Action
Complaint (FAC), asserting a breach-of-contract claim
against Cathay Pacific for failing to provide a refund under
the GCC. In response, Cathay Pacific moved to dismiss or,
in the alternative, to compel arbitration based on the doctrine
of equitable estoppel, relying on the arbitration clause in
ASAP’s Terms & Conditions. The district court denied
Cathay Pacific’s motion to compel, reasoning that the
Herreras “base[d] their breach of contract claim on Cathay
Pacific’s obligations under its own GCC, not on any
obligation contained in ASAP’s Terms and Conditions[,]”
and the Herreras “d[id] not assert that ASAP engaged in any
misconduct or breached its contractual obligations to them
under the Terms and Conditions.” Cathay Pacific appealed
from the order under 9 U.S.C. § 16(a)(1)(c), which provides
for interlocutory appellate review of orders denying motions
to compel arbitration. On appeal, Cathay Pacific seeks
reversal of the district court’s denial of its motion to compel
arbitration, and either dismissal or a stay of the action
pending arbitration of the Herreras’ breach-of-contract
claim.
                                   III.
    As a threshold issue, the Herreras contend that 14 C.F.R.
§ 253.10 bars Cathay Pacific’s motion to compel
arbitration. 3 “[T]he plain meaning of a regulation governs

3
  Cathay Pacific contends that the Herreras forfeited this issue by raising
it for the first time on appeal. “Absent exceptional circumstances, we
generally will not consider arguments raised for the first time on appeal,
although we have discretion to do so.” In re Am. W. Airlines, Inc., 217
             HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                    9

and deference to an agency’s interpretation of its regulation
is warranted only when the regulation’s language is
ambiguous.” Wards Cove Packing Corp. v. Nat’l Marine
Fisheries Serv., 307 F.3d 1214, 1219 (9th Cir. 2002), citing
Christensen v. Harris County, 529 U.S. 576, 588 (2000).
“Therefore, the starting point of our analysis must begin with
the language of the regulation.” Id. Section 253.10 reads:

         No carrier may impose any contract of
         carriage provision containing a choice-of-
         forum clause that attempts to preclude a
         passenger, or a person who purchases a ticket
         for air transportation on behalf of a
         passenger, from bringing a claim against a
         carrier in any court of competent jurisdiction,
         including a court within the jurisdiction of
         that passenger’s residence in the United
         States (provided that the carrier does business
         within that jurisdiction).

14 C.F.R. § 253.10.
    Section 253.10 clearly and unambiguously regulates a
carrier’s ability to impose a choice-of-forum clause in
contracts of carriage. However, nothing in the plain
language of section 253.10 prohibits airline carriers from
enforcing arbitration agreements between passengers and
third parties if the applicable law permits them to do so.

F.3d 1161, 1165 (9th Cir. 2000). “One exceptional circumstance is when
the issue is one of law and either does not depend on the factual record,
or the record has been fully developed.” Id. (internal quotation marks
omitted). Given that the Herreras’ argument with respect to section
253.10 is a matter of statutory construction and the record is developed
as to this issue, we exercise our discretion to address it.
10           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

Accordingly, section 253.10 does not bar Cathay Pacific’s
motion to compel arbitration on equitable-estoppel grounds.
                                 IV.
    “[T]he Federal Arbitration Act (FAA) governs the
enforceability of arbitration agreements in contracts
involving interstate commerce,” including the purchase of
airfare. Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126
(9th Cir. 2013), citing 9 U.S.C. § 1 et seq. “The FAA states
that ‘[a] written provision in any . . . contract evidencing a
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract . . . shall
be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.’” Id., quoting 9 U.S.C. § 2. “The United States
Supreme Court has held that a litigant who is not a party to
an arbitration agreement may invoke arbitration under the
FAA if the relevant state contract law allows the litigant to
enforce the agreement.” Id. at 1128, citing Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 632 (2009).
    We turn to California contact law—which neither party
disputes applies—to determine whether Cathay Pacific, as a
nonsignatory to ASAP’s Terms & Conditions, may compel
arbitration under the agreement based on equitable
estoppel. 4 Under California law, a nonsignatory to a
contract may enforce an arbitration provision under the
doctrine of equitable estoppel when “the claims [against the
nonsignatory] are ‘intimately founded in and intertwined

4
   Neither party disputes that ASAP’s Terms & Conditions is an
enforceable clickwrap agreement between the Herreras and ASAP that
the Herreras agreed to when purchasing their flight tickets through the
third-party booking website.
             HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                  11

with’ the underlying contract.” 5 Id. at 1128–29, quoting
Goldman, 173 Cal. App. 4th at 221.
    We focus our inquiry on whether the Herreras’ breach-
of-contract claim against Cathay Pacific is “intimately
founded in and intertwined with” ASAP’s Terms &
Conditions containing the arbitration clause. In determining
whether equitable estoppel applies to the Herreras’ claim, we
“look[] at the relationship between the parties and their
connection to the alleged violations.” Franklin, 998 F.3d at
875, citing Metalclad Corp. v. Ventana Env’t
Organizational P’ship, 109 Cal. App. 4th 1705, 1713
(2003). Cathay Pacific’s records show that the airline issued
the Herreras’ tickets to ITN, and received ASAP’s customer-
support contact information along with the Herreras’
passenger details. Our dissenting colleague faults Cathay
Pacific for not presenting its agreement with ASAP or other
evidence to support that ASAP purchased the Herreras’
tickets in the first instance. Dissent at 24. However, we find
sufficient the Herreras’ electronic-ticket history: Cathay
Pacific issued the tickets to the International Air Transport
Association numeric code—a unique code identifying a
travel agency—associated with ITN, the entity that operates
ASAP. 6 In “review[ing] the record as a whole” we “may

5
  A nonsignatory may also enforce an arbitration provision under the
doctrine of equitable estoppel “when the signatory alleges substantially
interdependent and concerted misconduct by the nonsignatory and
another signatory and ‘the allegations of interdependent misconduct
[are] founded in or intimately connected with the obligations of the
underlying agreement.’” Kramer, 705 F.3d at 1126, quoting Goldman v.
KPMG, LLP, 173 Cal. App. 4th 209, 219 (2009). We do not reach this
second scenario here.
6
 In briefing and at oral argument, Cathay Pacific maintained that ASAP
purchased the Herreras’ tickets from Cathay Pacific. In the FAC and at
12            HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

accept uncontested facts found therein.” Fortyune v. Am.
Multi-Cinema, Inc., 364 F.3d 1075, 1083 (9th Cir. 2004),
overruled on other grounds by L.A. Cty. v. Humphries, 562
U.S. 29 (2010).
    Article 11.1.1 of the GCC entitles Cathay Pacific to pay
any refund owed for canceling the flight to either “the person
named in the Ticket, or to the person who has paid for the
Ticket.” 7 In other words, although Cathay Pacific was not
required to provide the refund for the Herreras’ unused flight
to ASAP as the travel agent, Article 11.1.1 entitled Cathay
Pacific to do so. 8 Cathay Pacific’s instruction to the Herreras
to make their refund request to ASAP effectively made
ASAP a “middleman” for refund-processing purposes.

oral argument, the Herreras alleged that they bought the Cathay Pacific
tickets from ASAP. Thus, the parties’ positions are not inconsistent:
ASAP purchased the tickets from Cathay Pacific and sold the tickets to
the Herreras.
7
 The GCC does not define “person.” However, an ASAP customer must
work with an ASAP travel agent to select the desired flight itinerary, and,
as we already found, Cathay Pacific issued the Herreras’ tickets to a
“travel agent.” Further, Cathay Pacific instructed the Herreras to contact
their travel agent to request a refund. For purposes of the motion to
compel, we conclude that “person” as referenced in Article 11.1.1 of the
GCC includes the travel agent to which Cathay Pacific issued the
Herreras’ tickets.
8
  Our dissenting colleague understands Cathay Pacific’s position to be
that it was contractually obligated to pay any refund owed to the Herreras
to ASAP. Dissent at 23. We disagree. Cathay Pacific asserted that, as
a practical matter, it could not refund the Herreras directly because it did
not possess the Herreras’ credit card information. That position is
consistent with our finding that ASAP purchased the Herreras’ tickets
from Cathay Pacific. We need not make any findings as to whether
restrictions exist on the refunds.
             HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                    13

    As alleged in the FAC, when the Herreras requested a
refund from ASAP, ASAP informed them that Cathay
Pacific would only provide an expiring travel voucher rather
than a monetary refund. Such communication by ASAP
would be consistent with its Terms & Conditions, which
provided that ASAP has no power to override any fare
restrictions set by the airline, if the offer for the expiring
travel voucher originated with Cathay Pacific. Cathay
Pacific’s position is that ASAP never communicated a
refund request on behalf of the Herreras, and that the offer
of expiring travel vouchers did not come from Cathay
Pacific. In short, Cathay Pacific has placed ASAP’s conduct
at issue by asserting that ASAP violated its own Terms &
Conditions by creating refund restrictions—restrictions that
form a basis for the Herreras’ claim. 9 Because the Herreras’
allegations that Cathay Pacific breached the GCC is
“intimately founded in and intertwined with” ASAP’s
alleged conduct under the Terms & Conditions, it is
appropriate to enforce the arbitration clause contained in the
Terms & Conditions.
    Franklin is instructive on this issue. Franklin involved
our review of a district court’s order granting a defendant’s
motion to compel arbitration based on equitable estoppel.
998 F.3d at 869. In that case, a nurse and a staffing agency
entered into a written travel-nurse-assignment contract,

9
  The dissent insists that the Herreras “narrowly” claim that they are
entitled to a refund from Cathay Pacific, and not ASAP. Dissent at 25.
This position is mistaken because in matters of equity, it does not matter
against whom the complaint was leveled. See Franklin, 998 F.3d at 875
(“[L]itigants and their lawyers cannot . . . plead around equitable
estoppel.”) As we already observed, the Herreras alleged that ASAP
represented to them that refunds were not available from Cathay Pacific,
implicating both ASAP and Cathay Pacific.
14         HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

which, inter alia, set forth pay rates, explained that overtime
payment would be dictated by “Hospital policy and/or State
law” subject to the staffing agency’s pre-approval, and
contained an arbitration agreement. Id. The staffing agency
assigned the nurse to work at a hospital (a nonsignatory to
the arbitration agreement). Id. After several months of
work, the nurse brought a class and collective action alleging
statutory claims against the hospital to recover unpaid
wages. Id. at 870. The hospital moved to compel arbitration
under the agreement between the nurse and the staffing
agency. Id. In affirming the district court’s order granting
the motion, we found irrelevant that the nurse only brought
claims against the hospital and we held that the nurse’s
employment with the staffing agency was “central” to her
claims in part because the staffing agency was responsible
for reviewing the nurse’s timekeeping records, approaching
the hospital with any discrepancies, and paying the nurse her
wages and any overtime payment due. Id. at 875–76.
Further, we explained that even if the nurse had an
independent claim against the hospital, questions remained
as to how and whether the nurse had been paid by the staffing
agency under its contract containing the arbitration clause.
Id. at 876. Because the nurse’s claims against the hospital
turned on the staffing agency’s performance under its
contract, we held that the nurse’s claims against the hospital
were “intimately founded in and intertwined with” her
employment contract with the staffing agency and that the
nurse was “equitably estopped from avoiding arbitration of
her claims” against the hospital. Id.
    Similar to Franklin, where the agreement between the
nurse and the staffing agency set forth that the agency was
responsible for paying overtime as dictated by hospital
policy or state law, here, the Terms & Conditions provided
              HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                      15

that ASAP would process refunds consistent with Cathay
Pacific’s fare restrictions, subject to ASAP’s processing fee.
As in Franklin, it is of no moment that the Herreras did not
direct their claim against ASAP when the FAC alleges facts
that, in review of the full record, place ASAP’s conduct with
respect to the refund in question under its Terms &
Conditions. See id. at 875 (“In matters of equity, such as the
application of equitable estoppel, it is the substance of the
plaintiff’s claim that counts, not the form of its pleading.”).
Thus, whether the Herreras can maintain their breach-of-
contract claim against Cathay Pacific based on ASAP’s offer
of expiring travel vouchers turns on whether ASAP abided
by its Terms & Conditions in its role as “middleman.” 10
    Our dissenting colleague states that the Herreras’ breach-
of-contract claim under the GCC is not “intimately founded
in and intertwined with” ASAP’s Terms & Conditions
because there are “simply two different obligations, set out
in two different contracts, involving two different sets of
parties.” Dissent at 24. But the inquiry is not merely
whether the two sets of parties have independent obligations.
Rather, our focus must be on how the obligations interact as
a whole. For instance, in Franklin, although the hospital had
an independent statutory obligation to pay the nurse, we
“look[ed] at whether the substance of [the nurse’s] claims
against the [h]ospital [was] so intertwined with her
employment contract with [the staffing agency] that it would
be unfair for [her] to avoid arbitration.” 998 F.3d at 875.
There, we concluded that the fact that the nurse’s claims

10
  For that reason, we conclude that to the extent the breach-of-contract
claim is based on ASAP’s communications with the Herreras regarding
the refund, the claim falls within the scope of the arbitration clause in the
Terms & Conditions.
16            HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

against the hospital implicated the staffing agency’s
responsibilities under its contract containing the arbitration
clause and the fact that the necessary payment information
was in the staffing agency’s contract strongly favored
applying equitable estoppel. Id. at 875–76. Similarly, here,
the Herreras’ claim implicates ASAP’s responsibilities
under its Terms & Conditions to properly process refund
requests consistent with Cathay Pacific’s restrictions. 11
Further, if the Herreras are able to sustain their claim against
Cathay Pacific, they would be entitled to a refund. To
determine the appropriate refund amount, we would need to
know how much the Herreras paid ASAP for the tickets—a
transaction governed by ASAP’s Terms & Conditions. It is
this interconnectedness that makes equitable estoppel
appropriate here.
    To be sure, several of the Herreras’ allegations giving
rise to the breach-of-contract claim do not implicate ASAP’s
conduct or its Terms & Conditions. For instance, in addition
to the Herreras alleging that Cathay Pacific “deprived” them
of their refund by offering coupons or vouchers, the Herreras
allege that Cathay Pacific breached its GCC by referring
them to ASAP to seek the refund. However, California law
does not require that every allegation in the complaint be

11
   We disagree with our dissenting colleague that to reach ASAP’s
conduct under its Terms & Conditions, we must first conclude that
Cathay Pacific did not owe the Herreras a refund. Dissent at 25.
Although, under the GCC, Cathay Pacific is entitled to issue a refund for
a cancelled flight to either the passenger or to whoever paid for the ticket,
on the record before us Cathay Pacific has not provided a refund to either
the Herreras or ASAP. We make no determination as to the merits of the
Herreras’ breach-of-contract claim, only that it is necessary to resolve
whether ASAP violated its obligations under its Terms & Conditions by
misrepresenting Cathay Pacific’s fare restrictions to determine whether
Cathay Pacific breached its obligations under the GCC to issue a refund.
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.         17

intertwined with the contract containing the arbitration
clause for equitable estoppel to apply. See Goldman, 173
Cal. App. 4th at 230 (considering whether the allegations
“are in any way founded in or bound up with the terms or
obligations in the operating agreement” (emphasis added)).
Moreover, the Herreras’ allegation that ASAP’s
communication offering travel vouchers purportedly on
behalf of Cathay Pacific breached the GCC is not incidental
to—but a central allegation of—the FAC.
    “The ‘linchpin’ for equitable estoppel is fairness.”
Kramer, 705 F.3d at 1133, quoting Goldman, 173 Cal. App.
4th at 220. The Herreras contend that it would be unfair to
apply equitable estoppel against them because the refund
process was not clear under ASAP’s Terms and Conditions
and Cathay Pacific’s GCC, leaving the Herreras “holding the
bag.” This position is without merit for several reasons.
    First, the Herreras ignore Article 11 of the GCC,
permitting Cathay Pacific to refund the third-party who
purchased the Herreras’ tickets; Cathay Pacific’s email,
directing the Herreras to contact ASAP to request the refund;
and ASAP’s Terms & Conditions, contemplating that ASAP
would process refund requests consistent with Cathay
Pacific’s fare restrictions. The Herreras were left “holding
the bag” because ASAP denied their refund request, a denial
that Cathay Pacific attests it did not direct ASAP to provide
on Cathay Pacific’s behalf.
   Second, the Herreras misconstrue the fairness inquiry.
The proper focus of the inquiry is not whether the refund
process under the agreements was unclear, but whether the
Herreras’ conduct, or even ASAP’s, renders it unfair for the
Herreras to circumvent the arbitration clause in ASAP’s
Terms & Conditions. With that framing in mind, the
18           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

Herreras presumably received, as advertised, the benefit of
purchasing discounted tickets from ASAP. As part of the
bargain, the Herreras agreed to ASAP’s Terms &
Conditions, in which ASAP explicitly stated that ASAP will
charge a $250 fee to process any refund request if permitted
by the airline. Now, the Herreras take issue with Cathay
Pacific directing them to deal with ASAP in the refund
process. Such a request cannot be characterized as Cathay
Pacific “pass[ing] the buck” to ASAP when the Herreras
purchased the tickets from ASAP with an understanding that
ASAP processed refunds to the extent allowed by the airline.
Enforcing a valid arbitration provision against a signatory
under these circumstances does not undermine notions of
fairness. 12
     Having determined that the district court erred in
denying Cathay Pacific’s motion to compel arbitration, we
must decide whether the case should be stayed or dismissed
in its entirety. “Section three of the FAA provides that, upon
determination by a court that an issue or issues are referable
to arbitration, the court, on application of a party, ‘shall’ stay
the trial of the action pending arbitration (provided the stay
applicant is not in default).” Forrest v. Spizzirri, 62 F.4th
1201, 1204 (9th Cir. 2023), citing 9 U.S.C. § 3. We have
“long carved out an exception if all claims are subject to
arbitration.” Id. “[N]otwithstanding the language of

12
   For similar reasons, the Herreras’ argument that applying equitable
estoppel in this case would “encourage” airlines to issue contracts that
keep passengers “in the dark” regarding the refund process and “erect”
barriers to obtain the refund is unpersuasive. Moreover, we make no
determination as to the merits of the Herreras’ breach-of-contract claim
against Cathay Pacific. We narrowly hold that the Herreras’ claim is
“intimately founded in and intertwined with” ASAP’s Terms &
Conditions.
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.           19

[section three], a district court may either stay the action or
dismiss it outright when, as here, the court determines that
all of the claims raised in the action are subject to
arbitration.” Id. at 1204–05, quoting Johnmohammadi v.
Bloomingdale’s, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014)
(alterations in original). On remand, the district court should
determine in the first instance whether to stay the case or
invoke our recognized exception allowing for dismissal.
                              V.
    For these reasons, we conclude that the district court
erred in denying Cathay Pacific’s motion to compel
arbitration based on the doctrine of equitable estoppel.
Accordingly, we reverse the district court’s order and
remand the case with instructions to either dismiss or stay
the action pending arbitration of the Herreras’ breach-of-
contract claim.
   REVERSED AND REMANDED.

FORREST, J., dissenting:

    When parties agree to arbitrate contract disputes, they
cannot skirt their agreement by suing a non-party to the
contract for conduct that is governed by or bound up with the
contract. This rule is an application of equitable estoppel.
Passengers Winifredo and Macaria Herrera did not have an
arbitration agreement with airline Cathay Pacific Airways
Limited (Cathay Pacific); they had an arbitration agreement
with the travel booking website where they bought their
tickets—ASAP Tickets. In this case, the Herreras challenge
Cathay Pacific’s failure to give them a refund after
cancelling their flight due to the COVID-19 pandemic.
20           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

Because the Herreras’ claim against Cathay Pacific—as they
presented it—does not rely or depend on the terms of their
ASAP Tickets contract, this is not a case where the Herreras
are unfairly trying to avoid their agreement to arbitrate.
Therefore, I would affirm the district court’s denial of
Cathay Pacific’s motion to compel arbitration, and I
respectfully dissent. 1
                      I. Equitable Estoppel
    A litigant who is not party to an arbitration agreement
can nonetheless enforce the agreement under the Federal
Arbitration Act to the extent allowed under state law. GE
Energy Power Conversion Fr. SAS, Corp. v. Outokumpu
Stainless USA, LLC, 140 S. Ct. 1637, 1644 (2020). Under
California law, equitable estoppel prevents a plaintiff from
avoiding an arbitration agreement entered into with a third
party where (1) the plaintiff’s claims asserted against a
nonparty to the arbitration agreement are “intimately
founded in and intertwined with” a contract that includes the

1
   I agree with the majority that 14 C.F.R. § 253.10 does not prevent
Cathay Pacific’s motion to compel arbitration, but for a different reason.
During the rulemaking process for this regulation, the Department of
Transportation stated that it applies only to domestic flights. See
Enhancing Airline Passenger Protections, 76 Fed. Reg. 23110, 23155
(April 25, 2011) (to be codified at 14 C.F.R. pts. 244, 250, 253, 259, 399)
(“As a point of clarification, the forum for consumer claims related to
travel on international flights to or from the United States is governed by
the Montreal Convention or Warsaw Convention, depending on the type
of flight and its origination/destination.”). Giving the agency’s
interpretation of its own regulation appropriate deference, I conclude that
the regulation does not apply to the Herreras’ international flight. See
Decker v. Nw. Envt’l. Def. Ctr., 568 U.S. 597, 613 (2013) (“When an
agency interprets its own regulation, the Court, as a general rule, defers
to it unless that interpretation is plainly erroneous or inconsistent with
the regulation.” (quotations and citations omitted)).
             HERRERA V. CATHAY PACIFIC AIRWAYS LTD.                     21

arbitration agreement, or (2) where the plaintiff “alleges
substantially interdependent and concerted misconduct” by
the defendant and the third party that is “founded in or
intimately connected with the obligations of the underlying
agreement [that contains the arbitration agreement].”
Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128–29 (9th
Cir. 2013) (citation omitted). 2
    The first circumstance (intertwined-with-contract
claims) applies when the claim asserted “must rely on the
terms of the [contract containing the arbitration agreement].”
Id. at 1129. “[M]ere reference to a term of the [contract
containing the arbitration agreement] is not enough.” Id. at
1132. It also does not apply where the plaintiff “would have
a claim independent of the existence of the [contract
containing the arbitration agreement].” Id. at 1131.
    For instance, in Kramer, the court concluded that
consumers’ product-defect claims against a manufacturer
were not intertwined with their retail purchase agreements.
Id. at 1131–32. Even though the claims depended on the
consumers having purchased the product, in many cases
their claims did not rely on the actual terms of the purchase
agreement. Id. By contrast, in Franklin v. Community
Regional Medical Center, a nurse brought claims for wages
and overtime pay for unrecorded time against the hospital
where she worked on assignment from a staffing agency. 998
F.3d 867, 875–76 (9th Cir. 2021). We concluded that
resolving her claim required “information about how and

2
  The majority holds that an order denying a nonsignatory’s motion to
compel arbitration based on the doctrine of equitable estoppel is
reviewed de novo, but it offers little support for that conclusion. I would
not address whether de novo or abuse of discretion review applies
because I would affirm the district court under either standard.
22         HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

whether [she] was paid by [the staffing agency].” Id. As a
result, her claims were “intertwined with the employment
relationship with the staffing agency” which “set her hourly
wage rate and overtime rate . . . the regular length of her
shifts, the time her shifts started and ended, and the number
of hours in her workweek.” Id.
    The second circumstance (concerted-misconduct claims)
applies when the claim alleges that a signatory and
nonsignatory to the contract containing the arbitration
agreement engaged in “substantially interdependent and
concerted misconduct.” Id. at 1132. Such misconduct,
“standing alone [is] not enough.” Id. (quoting Goldman, 173
Cal. App. 4th at 219). Rather, the misconduct “must be
founded in or intimately connected with the obligations of
the underlying agreement [containing the arbitration
provision].” Id. (quoting Goldman, 173 Cal. App. 4th at
219). Consistent with the party-presentation principle, how
the plaintiff frames her case governs the equitable estoppel
analysis. See Franklin, 998 F.3d at 875 (“[I]t is the substance
of the plaintiff’s claims that counts, not the form of its
pleadings”); Kramer, 705 F.3d at 1129–32 (focusing on how
plaintiffs pleaded their claims).
                 II. The Herreras’ Claims
    The Herreras advanced a simple theory: Cathay Pacific
breached its ticket contract with them by not issuing them a
refund after cancelling their flight. The contract alleged
between these parties is the terms of the ticket issued by
Cathay Pacific, governed by Cathay Pacific’s General
Conditions of Carriage. The facts alleged in the complaint
discuss ASAP Tickets’ actions following the flight
cancelation, but for the purpose of describing Cathay
Pacific’s breach. The Herreras allege that Cathay Pacific did
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.            23

not deny their refund request outright, but referred them to
ASAP Tickets, which offered only an expiring travel
voucher on Cathay Pacific’s behalf. They also assert Cathay
Pacific deprived them “of the refunds to which they are
contractually entitled . . . by preventing customers who
purchased a ticket through a third-party booking site from
requesting a refund directly from Cathay . . . . [and] directing
all refund requests to those third-party agents instead.”
(Emphasis added) Thus, as the Herreras see their case,
Cathay Pacific breached its contractual obligations by
“erect[ing] numerous . . . bureaucratic barriers” that
prevented the Herreras from obtaining the refund to which
they were entitled.
    Cathay Pacific argues that this case must be arbitrated
because the Herreras’ refund claim is intertwined with their
purchase contract with ASAP Tickets. Specifically, Cathay
Pacific contends that it was contractually obligated to pay
any refund owed to the Herreras to ASAP Tickets, which
would then pass on the refund to the Herreras, subject to the
terms of its purchase contract. Indeed, Cathay Pacific’s
counsel expressly stated at oral argument that ASAP Tickets
was a necessary middleman for processing the refund.
    To support its position, Cathay Pacific relies on the
refund provision in its General Conditions of Carriage,
which provides in relevant part: “Except as otherwise
provided by the Warsaw Convention or the Montreal
Convention or applicable law, if we cancel a flight . . . we
shall . . . make a refund in accordance with the provisions of
Article 11.” Article 11.1 then provides that the refund will
be made “either to the person named in the Ticket, or to the
person who has paid for the Ticket upon presentation of
satisfactory proof of such payment. . . . If a Ticket has been
paid for by a person other than the Passenger named in the
24         HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

Ticket, and the Ticket indicates that there is a restriction on
refund, we shall make a refund only to the person who paid
for the Ticket, or to that person’s order.” (Emphasis added).
    Cathay Pacific’s assertion here—that Article 11.1
mandates that it pay to ASAP Tickets any refund owed (such
that the Herreras’ receipt of any refund was governed by
ASAP Tickets’ terms and conditions)—falls short because it
depends on unestablished facts. The provision in Article 11.1
on which Cathay Pacific relies applies only where the ticket
terms include a “restriction on refund.” The record is silent
as to what, if any, restrictions were indicated on the
Herreras’ tickets. Likewise, the record does not establish
“who has paid for the Ticket.” There is general support, as
well as intuitive appeal, for the conclusion that ASAP
Tickets purchased the tickets directly in a batch, but Cathay
Pacific did not present its agreement with ASAP Tickets or
otherwise present evidence on this point. With these
predicate facts unproven, Cathay Pacific has not shown that
ASAP Tickets’ contract terms with Herrera govern their
claim.
    But more important, the asserted claim that Cathay
Pacific failed to perform its obligations regarding issuing
refunds is not “intimately founded in and intertwined with”
the Herreras’ contract with ASAP Tickets. Kramer, 705 F.3d
at 1128. Say Cathay Pacific was required to issue any refund
owed to ASAP Tickets instead of to the Herreras directly.
Even then, Cathay Pacific’s obligation to ASAP Tickets
would be independent from any downstream obligation that
ASAP Tickets owed the Herreras. Id. at 1131. There are
simply two different obligations, set out in two different
contracts, involving two different sets of parties.
           HERRERA V. CATHAY PACIFIC AIRWAYS LTD.           25

    The majority says the two obligations are intertwined
because Cathay Pacific asserts “that ASAP violated its own
Terms & Conditions by creating refund restrictions—
restrictions that form a basis for the Herreras’ claim.” Maj.
Op. at 13. I disagree. In analyzing intertwined-with-contract
claims, the question is not what defendants assert, but what
plaintiffs plead in their complaint. Franklin, 998 F.3d at 875.
And here the Herreras narrowly claim that they were entitled
to a refund from Cathay Pacific.
    A factfinder could not reach the outcome the majority
relies on—that Cathay Pacific’s refund obligation ran to
ASAP Tickets, but ASAP Tickets violated its own Terms &
Conditions by denying the Herreras a refund—without first
concluding that Cathay Pacific did not owe the Herreras a
refund. A court would have to adjudicate the merits of the
asserted claim to even reach the issue of ASAP Tickets’s
obligations to the Herreras. In this regard, the Herreras’ case
differs from Franklin, where we concluded that the
plaintiff’s unpaid-work claims were inextricably intertwined
with the third-party contract because the merits of her claims
could not be resolved without information about her pay rate
and terms of employment set out in the third-party contract.
998 F.3d at 875. In contrast, here, a factfinder can resolve
the Herreras’ claim that Cathay Pacific owes them a refund
without any information about their relationship to ASAP
Tickets.
    Nor has Cathay Pacific shown that the other basis for
equitable estoppel applies. No interdependent misconduct
“inextricably bound up with the obligations imposed by the
agreement containing the arbitration clause”—such as
ASAP Tickets offering only vouchers on Cathay Pacific’s
behalf—is alleged. Kramer, 705 F.3d at 1133 (quoting
Goldman v. KPMG LLP, 173 Cal. App. 4th 209, 219 (2009).
26          HERRERA V. CATHAY PACIFIC AIRWAYS LTD.

Rather, as in Kramer, the “allegations alone cannot trigger
equitable estoppel under California contract law” because
they specifically concern Cathay Pacific’s—and not
ASAP’s—obligation to provide a refund under the terms of
the contract with the Herreras. Id.
     I respectfully dissent.