Greg Kerr , individually v. General Motors LLC

* This is not an opinion of the full Court and, under I.O.P. 5.7, is not binding precedent.
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 25-2610
G REG K ERR , individually and on behalf of all others similarly situated;
TWILA K ERR , individually and on behalf of all others similarly situated;
R OBERT KNOWLES , individually and on behalf of all others similarly situated
v.
G ENERAL MOTORS LLC,
Appellant
_____________________________
On Appeal from the U.S. District Court, D. Del.
Judge Richard G. Andrews, No. 1:24-cv-00582
Before: P ORTER , MATEY , and A MBRO , Circuit Judges
Argued: June 3, 2026; Filed: Aug. 18, 2026
_____________________________
N ONPRECEDENTIAL O PINION*
P ORTER , Circuit Judge.
Robert Knowles bought a General Motors (“GM”) car from Bruner Motors, a local
dealership. Knowles and Bruner Motors agreed to arbitrate disputes arising from the
transaction. But when issues with the car surfaced, Knowles sued GM. He neither named
Bruner Motors in the lawsuit nor invoked the sales contract in the operative complaint. GM
moved to compel arbitration under the sales contract, but because it was not a signatory,
the District Court denied the request. “We are once again confronted with the ‘mind-
bending issue’ of arbitration about arbitration.” Zirpoli v. Midland Funding, LLC, 48 F.4th
136, 140 (3d Cir. 2022). While we agree with the District Court that Knowles and GM did

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not form a valid agreement to arbitrate, we will vacate and remand for the District Court to
apply Texas law on direct-benefits estoppel.
I
Knowles is a Texas citizen who bought a new car from Bruner Motors, a GM-
authorized Texas dealership. He signed a Retail Installment Sales Contract (“the sales
contract”) containing an arbitration provision:
Any claim or dispute, whether in contract, tort, statute or otherwise
(including the interpretation and scope of this Arbitration Provision, and the
arbitrability of the claim or dispute), between you and us or our employees,
agents, successors or assigns, which arises out of or relates to your credit
application, purchase or condition of this vehicle, this contract or any
resulting transaction or relationship (including any such relationship with
third parties who do not sign this contract) shall, at your or our election, be
resolved by neutral, binding arbitration and not by a court action.
Joint Appendix (“J.A.”) at 202. Knowles also signed a provision agreeing to arbitrate with
Bruner Motors:
By signing below, you agree that, pursuant to the Arbitration Provision on
page 5 of this contract, you or we may elect to resolve any dispute by neutral,
binding arbitration and not by a court action. See the Arbitration Provision
for additional information concerning the agreement to arbitrate.
J.A. at 199. The sales contract defines “ ‘we’ or ‘us’ ” as Bruner Motors and “ ‘you’ or
‘your’ ” as the purchaser. J.A. at 198. It also expressly disclaims all express and implied
warranties. GM is not a signatory to the sales contract.
Three months after buying the car, Knowles took it into the dealership for repairs
associated with the fuel pump. According to Knowles, despite Bruner Motors’s efforts, the
problems persisted.

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II
Knowles (together with other plaintiffs) filed a putative class action against GM in
the United States District Court for the District of Delaware, asserting claims for fraud by
omission or concealment, unjust enrichment, violation of the Magnuson-Moss Warranty
Act, breach of consumer protection laws, and breach of express and implied warranties.1
The lawsuit is based on the alleged manufacture of the vehicles using faulty fuel pumps; it
quoted GM’s “New Vehicle Limited Warranty” provision, which does not appear in the
sales contract.
The District Court granted in part GM’s motion to dismiss. It gave Knowles leave
to file an amended complaint, which he did. GM moved to compel arbitration. The District
Court denied GM’s motion because it was not a signatory to the sales contract. GM timely
appealed.
III
The District Court had jurisdiction under the Class Action Fairness Act because the
amount in controversy “exceeds the sum or value of $5,000,000, exclusive of interest and
costs, and is a class action in which . . . any member of a class of plaintiffs is a citizen of a
State different from any defendant.” 28 U.S.C. § 1332(d)(2). We have jurisdiction under
9 U.S.C. § 1291 and the Federal Arbitration Act (“FAA”), 9 U.S.C. § 16(a)(1)(B), which
1 Only Knowles’s claims are at issue in this appeal. His state-law claims arise
under Texas law.

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provides that “[a]n appeal may be taken” from an order denying a petition to compel
arbitration. Griswold v. Coventry First LLC, 762 F.3d 264, 268 (3d Cir. 2014).
“We review de novo rulings on motions to compel arbitration.” Gov’t Emps. Ins. v.
Mount Prospect Chiropractic Ctr., P.A., 98 F.4th 463, 467 (3d Cir. 2024). And “[w]e
exercise plenary review over legal questions concerning the application and scope of an
arbitration agreement.” Gay v. Creditform, 511 F.3d 369, 376 (3d Cir. 2007). So our review
of equitable estoppel arguments in the context of the applicability and scope of arbitration
agreements is de novo. See Griswold, 762 F.3d at 270; see also Reeves v. Enter. Prods.
Partners, LP, 17 F.4th 1008, 1011 (10th Cir. 2021) (collecting cases).
IV
A
Arbitration is a matter of contract governed by the FAA, which provides that
arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA “leaves
no place for the exercise of discretion by a district court, but instead mandates that district
courts shall direct the parties to proceed to arbitration on issues as to which an arbitration
agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985).
So “[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, a
court . . . possesses no power to decide the arbitrability issue. That is true even if the court
thinks that the argument that the arbitration agreement applies to a particular dispute is
wholly groundless.” Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 68
(2019) (emphasis added).

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A delegation clause is essentially a second arbitration agreement in which the parties
agree to arbitrate threshold issues concerning the interpretation or scope of a primary
arbitration agreement. Id. at 65. “[P]arties to a contract may delegate questions of
arbitrability to an arbitrator,” and if they “clearly and unmistakably make this choice, then
district courts generally must send threshold questions of arbitrability to arbitration.”
Zirpoli, 48 F.4th at 138. Typically, “ambiguities about the scope of an arbitration
agreement must be resolved in favor of arbitration.” Lamps Plus, Inc. v. Varela, 587 U.S.
176, 189 (2019). But that principle is not limitless: Because “[a]rbitration is a matter of
contract and consent,” “disputes are subject to arbitration if, and only if, the parties actually
agreed to arbitrate those disputes.” Coinbase, Inc. v. Suski, 602 U.S. 143, 145 (2024).
Courts ultimately make that determination. See MZM Constr. Co., Inc. v. N.J. Bldg.
Laborers Statewide Benefit Funds, 974 F.3d 386, 397 (3d Cir. 2020) (“The court must
resolve those questions even when the answer requires passing judgment on the formation
or existence of the . . . contract.”). To determine whether the parties agreed, we look to
“background principles of state contract law.” Arthur Andersen LLP v. Carlisle, 556 U.S.
624, 630 (2009).
The arbitration provision in the sales contract, which is governed by Texas law,
contains a delegation clause: “[T]he interpretation and scope of this Arbitration Provision,
and the arbitrability of the claim or dispute . . . shall, at your or our election, be resolved
by neutral, binding arbitration and not by a court action.” J.A. at 202. The parties to the
sales contract have “clearly and unmistakably ma[d]e this choice,” so normally we would
“send threshold questions of arbitrability to arbitration.” Zirpoli, 48 F.4th at 138. But this

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case is different from Zirpoli in a crucial way: The party seeking arbitration—GM—is
neither a signatory to the sales contract nor an assignee of a signatory. See Griswold, 762
F.3d at 271 (“The presumption in favor of arbitration does not extend, however, to non-
signatories to an agreement; it applies only when both parties have consented to and are
bound by the arbitration clause.”); Barron v. GM LLC, No. 25-5696, 2026 WL 1383769,
at *5 (E.D. Pa. May 18, 2026) (“There is no agreement between either of the named
plaintiffs and GM, and GM is not an assignee. Our conclusion squares with Zirpoli.”
(citation omitted)). There was no clear and unmistakable agreement on delegation between
Knowles and GM. And with no agreement between those parties, we need not delegate
arbitrability to an arbitrator.
B
So we turn to arbitrability and “apply ordinary state-law principles that govern the
formation of contracts.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995);
see also Arthur Andersen, 556 U.S. at 630. Here, Texas law applies a two-step inquiry that
first looks to “the terms of the agreement, which dictate who is actually bound by an
arbitration agreement,” and second, if that fails, looks to “theories such as equitable
estoppel to determine whether a nonsignatory may compel arbitration.” Newman v. Plains
All Am. Pipeline, L.P., 23 F.4th 393, 398–99 (5th Cir. 2022) (citation modified). The parties
do not dispute that GM is not a signatory, and the terms of the sales contract do not dictate
that GM is bound, so we turn our attention to equitable estoppel.

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Even though Knowles and GM did not form an agreement to arbitrate, “traditional
principles of state law” may “allow a contract to be enforced by or against nonparties to
the contract through . . . estoppel.” Arthur Andersen, 556 U.S. at 631 (quotation marks
omitted). However, as federal courts applying traditional principles of state law, “we are
not free to impose our own view of what state law should be.” Koppers Co., Inc. v. Aetna
Cas. & Sur. Co., 98 F.3d 1440, 1445 (3d Cir. 2021). Our task is “to apply existing state
law as interpreted by the state’s highest court in an effort to predict how that court would
decide the precise legal issues before us.” Id. “In the absence of guidance from the state’s
highest court, we must look to decisions of state intermediate appellate courts, of federal
courts interpreting that state’s law, and of other state supreme courts that have addressed
the issue.” Id.
Under Texas law, equitable estoppel “precludes a party from claiming the benefits
of a contract while simultaneously attempting to avoid the burdens that contract imposes.”
Van Zanten v. Energy Transfer Partners, L.P., 320 S.W.3d 845, 848 (Tex. App. 2010)
(quoting Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 267 (5th Cir. 2004)); see also
Lennar Homes of Tex. Land & Constr., Ltd. v. Whiteley, 672 S.W.3d 367, 377–78 (Tex.
2023) (noting that a signatory cannot sue a nonsignatory under a contract, attempt to derive
a benefit, then avoid the terms of the contract). The parties dispute whether equitable
estoppel applies under two related theories: (1) intertwined-claims estoppel or (2) direct-
benefits estoppel. See Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 306 (Tex. 2006); Hays
v. HCA Holdings Inc., 838 F.3d 605, 609–10 (5th Cir. 2016).

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1
“[T]he Texas Supreme Court has not expressly adopted intertwined claims estoppel
as a valid theory of estoppel.” Hays, 838 F.3d at 610. And although Hays concluded “that
the Texas Supreme Court, if faced with the question, would adopt intertwined claims
estoppel,” id. at 611–12, Texas courts of appeal are less certain. See, e.g., Glassell
Producing Co. v. Jared Res., Ltd., 422 S.W.3d 68, 82 (Tex. App. 2014) (describing direct-
benefits estoppel as “the only form of equitable estoppel recognized in Texas”).
The District Court concluded that intertwined-claims estoppel did not apply because
Knowles’s claims against non-signatory GM are not “intimately founded in and intertwined
with the underlying contract obligations.” See Signal Ridge Owners Assn., Inc. v.
Landmark Am. Ins. Co., 657 F. Supp. 3d 866, 876 (N.D. Tex. 2023) (citation modified).
We will affirm on a different ground. See KalshiEX, LLC v. Flaherty, 172 F.4th 220, 229
(3d Cir. 2026) (“We may affirm on any ground supported by the record.” (citation
modified)). The Texas Supreme Court and an increasing number of Texas courts of appeal
have not recognized intertwined-claims estoppel. See Black v. Diamond Offshore Drilling,
Inc., 551 S.W.3d 346, 354 (Tex. App. 2018) (“The Texas Supreme Court has not expressly
adopted intertwined-claims estoppel as a valid theory of estoppel.”); Newman, 23 F.4th at
404 (noting that the Texas Supreme Court “declined to decide the question” and “has not
changed Texas law”). We will affirm the District Court’s conclusion that intertwined
claims estoppel does not apply because the Texas Supreme Court would not recognize that
form of estoppel if faced with the question.

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2
Unlike intertwined-claims estoppel, the Texas Supreme Court has recognized
direct-benefits estoppel in the arbitration context. See, e.g., Meyer, 211 S.W.3d at 306
(quoting Grigson v. Creative Artists Agency LLC, 210 F.3d 524, 527 (5th Cir. 2000)).
Direct-benefits estoppel applies when (1) the signatory to a contract containing an
arbitration clause asserts claims against a nonsignatory, and (2) “the alleged liability arises
from the contract or must be determined by reference to it.” Lennar Homes, 672 S.W.3d at
377. “When each of a signatory’s claims against a nonsignatory makes reference to or
presumes the existence of the written agreement, the signatory’s claims arise out of and
relate directly to the written agreement, and arbitration is appropriate.” Meyer, 211 S.W.3d
at 306. A claim that depends on the existence of the contract must “be unable to stand
independently without the contract.” Lennar Homes, 672 S.W.3d at 377 (quoting G.T.
Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 527–28 (Tex. 2015)).
Here, Knowles is a signatory to a contract containing an arbitration clause (i.e., the
sales contract) and he asserted claims against GM, a nonsignatory to that agreement. So
the first prong is satisfied. But it is less clear whether, under the second prong, the alleged
liability arises from the contract or must be determined by reference to it.
On one hand, Knowles’s allegations concerning an allegedly faulty fuel pump and
the manufacturer’s warranty do not appear to arise from or require determination by
reference to the sales contract. The sales contract does not place any obligations on GM,
GM did not sign it, and GM has no express rights or duties under it. See Jody James Farms,
JV v. Altman Grp., Inc., 547 S.W.3d 624, 638 (Tex. 2018) (rejecting direct-benefits

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arguments when the contract “does not impose any duties or obligations on the
[nonsignatory]”).
But on the other hand, the Texas Supreme Court has suggested that implied warranty
claims arise from an underlying sales contract. Lennar Homes, 672 S.W.3d at 379–80. The
sales contract “d[id] not affect any warranties covering the vehicle that the manufacturer
may provide.” J.A. at 198. Moreover, any warranties “move[d] with the [allegedly
defective vehicle Knowles purchased from middleman Bruner],” and secondary purchasers
like Knowles need not be in privity of contract to assert an implied warranty of
merchantability claim against an original manufacturer like GM. See MAN Engines &
Components, Inc. v. Shows, 434 S.W.3d 132, 137–38 (Tex. 2014). On that theory, it is
possible that Knowles’s implied warranty of merchantability claim against GM can be
determined by reference to the sales contract such that GM can compel Knowles to arbitrate
under the doctrine of direct-benefits estoppel.
The District Court did not address direct-benefits estoppel. “We ordinarily decline
to consider issues not decided by a district court, choosing instead to allow that court to
consider them in the first instance.” Forestal Guarani S.A. v. Daros Int’l, Inc., 613 F.3d
395, 401 (3d Cir. 2010). We will therefore vacate and remand for the District Court to
consider whether “the alleged liability arises from the contract or must be determined by
reference to it.” Lennar Homes, 672 S.W.3d at 377. If Knowles’s implied warranty of
merchantability claim against GM arises from the sales contract or must be determined by
reference to it, equitable estoppel applies. Otherwise, GM cannot avail itself of the doctrine.
* * *

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For the foregoing reasons, we will vacate and remand for further proceedings
consistent with this opinion.2
Counsel for Appellant
John Nadolenco
Carmen N. Longoria-Green [Argued]
M AYER BROWN
Jody C. Barillare
MORGAN L EWIS & BOCKIUS
Counsel for Appellees
Amey J. Park
Natalie Lesser
Russell D. Paul
BERGER MONTAGUE
Ryan H. Wu [Argued]
Tyler C. Anderson
CAPSTONE LAW
2 Judge Matey would reverse as the question of arbitrability must be decided in
arbitration. “Under the FAA, a court first ‘determines whether a valid arbitration
agreement exists.’ ” Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 69
(2019). All acknowledge an arbitration agreement exists between Knowles and Bruner
Motors, the GM dealership where Knowles bought his vehicle. And there is no dispute
the arbitration agreement also delegates questions surrounding arbitrability. That is all we
need to decide this matter. The plaintiffs allege that the defect was in the “exclusive and
superior possession of GM and its network of authorized dealerships,” Joint Appendix
(“J.A.”) at 232, entities alleged to “represent themselves to the public, as exclusive . . .
representatives and agents,” J.A. at 247. The only issue is whether those claims, and
GM’s relationship to Bruner Motors, trigger the delegation clause in the arbitration
agreement, and we must avoid “answering the very question needed to determine the
merits” of a motion to compel arbitration by deciding whether a delegation clause is
enforceable by a non-signatory. Zirpoli v. Midland Funding, LLC, 48 F.4th 136, 142–43
(3d Cir. 2022).

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