Archives for August 28, 2024

In a recent legal dispute, Mahram v. The Kroger Co., a California Court of Appeal delivered a decision that may have implications for employment arbitration agreements. Although the case at hand involved a consumer transaction, the reasoning used by the court could influence how employment arbitration agreements are interpreted.

The Case at a Glance

Payam Mahram used Instacart, an online grocery delivery service, to purchase groceries from The Kroger Co. d/b/a Ralphs Grocery Company (“Ralphs”), a grocery store. In signing up to use Instacart (online), Mahram agreed to Instacart’s terms of service, which included an arbitration agreement. After using Instacart to order groceries from Ralphs, Mahram sued Ralphs – but not Instacart – claiming false advertising and unfair competition. Mahram alleged that Ralphs raised its advertised prices once he applied a coupon to his Instacart purchase. Ralphs, however, moved to compel arbitration based on the arbitration agreement between Mahram and Instacart. The crux of Ralphs’ argument was that, as a retailer working with Instacart, it should be considered a third-party beneficiary of the arbitration agreement. In other words, Ralphs argued it should be permitted to enforce the arbitration agreement between Mahram and Instacart even though Ralphs was not a party or signatory to the agreement.

The Court of Appeal ultimately affirmed the denial of Ralphs’ motion, affirming that Mahram had agreed to arbitrate disputes solely with Instacart, not with Ralphs or any other third party. The ruling emphasized that, under California law, third-party beneficiaries to a contract can only enforce that contract if the contracting parties had a clear, “motivating purpose” to benefit the third party.