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Digital EditionAppeals Court Blocks Starbucks Bid to Force Arbitration in COBRA Notice Case
The 11th U.S. Circuit Court of Appeals recently ruled that a spouse who receives health benefits through their partner’s employer cannot be forced to arbitrate COBRA notice disputes based solely on an arbitration agreement signed by the employed spouse.
The decision in Raphyr Lubin vs. Starbucks Corp. highlights important boundaries of arbitration enforcement in insurance matters and emphasizes the independent nature of statutory COBRA rights.
The dispute began when Raphyr Lubin, whose wife formerly worked at Starbucks, filed a putative class action against the company alongside another former employee, Ariel Torres. The plaintiffs alleged that Starbucks violated the Employee Retirement Income Security Act (ERISA), as amended by the Consolidated Omnibus Budget Reconciliation Act (COBRA), by sending inadequate health insurance continuation notices following employment termination.
When Starbucks moved to compel arbitration based on employment agreements, Torres consented to arbitration. However, Lubin opposed the motion, arguing that he never signed an arbitration agreement with Starbucks. The central question before the court was whether a non-employee spouse could be compelled to arbitrate based on their partner’s employment agreement.
Starbucks presented several arguments to bind Lubin to arbitration.
First, they contended that the arbitration agreement’s delegation clause granted an arbitrator—not the court—authority to decide arbitrability questions. Second, they argued that under equitable estoppel, Lubin couldn’t claim benefits from his wife’s employment while avoiding the arbitration provision. Third, they maintained that as a third-party beneficiary of his wife’s employment agreement, Lubin should be bound by its terms. Finally, they suggested Lubin’s claim was merely “derivative” of his wife’s rights.
Lubin countered that his claim stemmed from his own statutory rights as a qualified beneficiary under COBRA, not from his wife’s employment agreement. He emphasized that he was seeking to enforce federal law requiring adequate COBRA notices, not any contractual provision.
The court agreed with Lubin on all counts. It found the delegation clause ambiguous due to conflicting language in the agreement’s exclusion clause. More importantly, the court determined that Florida’s equitable estoppel doctrine didn’t apply because Lubin’s claim arose from statutory obligations, not the employment contract. Similarly, the third-party beneficiary doctrine couldn’t bind Lubin because he wasn’t suing to enforce the contract but rather asserting independent statutory rights.
The court rejected Starbucks’s derivative claim theory, emphasizing that Lubin’s claim was based on his own rights as a “qualified beneficiary” under COBRA. The mere fact that Lubin obtained coverage through his wife’s employment didn’t transform his statutory claim into a derivative one.
This ruling has significant implications for insurance matters, particularly regarding COBRA administration. It clarifies that plan beneficiaries possess independent statutory rights that cannot be circumvented through arbitration agreements they never signed. For insurance providers and administrators, the decision underscores the importance of proper COBRA notice compliance for all qualified beneficiaries, regardless of arbitration agreements with primary plan participants.
The court ultimately affirmed the district court’s denial of Starbucks’s motion to compel arbitration, holding that without Lubin’s agreement to arbitrate, he could not be forced into that forum.
View the 11th Circuit decision here. &
