Charles L. Adler; Grant Adler; Cm Adler, LLC v. GRUMA CORPORATION, DBA Mission Foods

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 23-3177
CHARLES L. ADLER; GRANT ADLER;
CM ADLER, LLC,
Appellants
v.
GRUMA CORPORATION, DBA Mission
Foods; GUERRERO MEXICAN FOOD
PRODUCTS, Etc.
_____________________________________
On Appeal from the United States District Court
for the District of New Jersey
(District Court No. 3:22-cv-06598)
District Judge: Honorable Robert Kirsch
_____________________________________
Argued November 6, 2024
(Filed: April 16, 2025)
Before: KRAUSE, SCIRICA, and RENDELL, Circuit
Judges.

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Stephen J. Brown
David H. Chen
Susan E. Galvao
Bleakley Platt & Schmidt
One N Lexington Avenue
White Plains, NY 10601
Hannah M. Kieschnick [ARGUED]
Public Justice
475 14th Street
Suite 610
Oakland, CA 94612
Shelby H. Leighton
Public Justice
1620 L Street NW
Suite 630
Washington, DC 20036
Counsel for Appellants
Christopher B. Fontenelli
Richard J. Reibstein [ARGUED]
Troutman Pepper Locke
200 Vesey Street
Brookfield Place, 20th Floor
New York, NY 10281
Counsel for Appellees
_________
OPINION OF THE COURT
_________

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RENDELL, Circuit Judge.
Plaintiffs Charles and Grant Adler, through their
business entity, Plaintiff CM Adler LLC, distributed tortillas
and other food products of Defendant Gruma Corporation to
grocery stores in the central New Jersey area pursuant to a
“Store Door Distributor Agreement” (SDDA). When
Defendant terminated the relationship, Plaintiffs brought this
lawsuit. �e District Court dismissed the case, concluding that
under the SDDA, Texas law governed and the case should
proceed to arbitration.
Plaintiffs urge the District Court should have first
considered the applicability of the Federal Arbitration Act
(FAA) and conclude that it did not apply to their contract
because it was a “contract[] of employment” and, as
distributors, they belong to a “class of workers engaged in . . .
interstate commerce.” 9 U.S.C. § 1. Plaintiffs also dispute the
District Court’s decision to apply Texas rather than New Jersey
law and raise objections to its interpretation of the contract as
well as its decision to bind two non-signatories under an
estoppel theory.
We agree with Plaintiffs that the District Court’s choice-
of-law analysis was flawed because it failed to consider the
impact of three New Jersey public policies on its arbitrability
ruling. Before considering that aspect of the District Court’s
ruling, however, and based on our opinion in Harper v.
Amazon.com Servs., Inc., 12 F.4th 287 (3d Cir. 2021), we will
address the applicability of the FAA. Because the record on
that issue is fully developed, and the question it presents is a
purely legal one, we can conclude on appeal that the FAA does
not apply to the SDDA. We will then remand for the District
Court to consider the arbitrability analysis anew under state

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law. We will also instruct the District Court on remand to
reevaluate, if necessary, whether the individual Plaintiffs, who
did not sign the arbitration agreement, are bound by its terms.
I.
Plaintiffs allege that in March 2014, CM Adler LLC
entered into the SDDA with Defendant Gruma Corporation to
distribute Defendant’s tortillas and other food products to
stores in Trenton and surrounding areas of central New Jersey.
�e SDDA was signed on behalf of CM Adler LLC by non-
party Mary Adler. Plaintiffs Charles and Grant Adler, not
themselves signatories to the contract, performed the LLC’s
work for the next eight years, until Defendant terminated
Plaintiffs’ distributorship “without cause” in June 2022. Appx
033, ¶ 10.
Plaintiffs then brought this lawsuit. �ey alleged
Defendant’s termination was retaliatory because Plaintiffs had
begun organizing with other distributors to discuss their legal
rights. Plaintiffs alleged that Defendant’s actions violated state
and federal labor laws, including failing to pay minimum
wages and making unlawful deductions. �ey urged that their
relationship was governed by these labor laws based on the
degree of control Defendant exerted over Plaintiffs’ day-to-day
work. Plaintiffs also urged that the SDDA was in substance a
“franchise” agreement subject to New Jersey’s Franchise
Practices Act, N.J. Stat. § 56:10-1 et seq., and that, therefore,
termination without cause was forbidden. Appx 069–072.
Defendant moved to dismiss and compel arbitration
based on a provision in the SDDA, which stated that, with
certain exceptions not relevant here:

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[A]ll . . . claims and causes of action arising out
of or relating to this Agreement (including,
without limitation, matters relating to this
Subsection 15(i) regarding arbitration, matters
relating to performance, breach, interpretation,
meaning, construction, or enforceability of all or
any part of this Agreement, and all claims for
rescission or fraud in the inducement of this
Agreement) shall be resolved by arbitration
through J·A·M·S/Endispute (“JAMS”) as
provided in Subsection 15(i)(iii) [sic] below.
Appx 096, § 15.i.ii.
Defendant’s motion invoked both the FAA, 9 U.S.C. § 1
et seq., and the Texas Arbitration Act (TAA), Tex. Civ. Prac. &
Rem. Code, ch. 171. As support for the application of Texas
law, Defendant pointed to the choice-of-law provision in the
SDDA, which states:
�is Agreement shall be governed by and
construed in accordance with the laws of the
State of Texas. �e Federal Arbitration Act, 9
U.S.C. § 1 et seq. shall also apply as needed to
uphold the validity or enforceability of the
arbitration provisions of this Agreement.
Appx 098, § 15.k. Defendant also attached a declaration listing
its contacts with Texas, including that Texas was the location
of its headquarters and the state where it performed many of its
business operations.
Plaintiffs opposed arbitration. �ey contended the FAA
does not apply due to its exemption for “contracts of

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employment of seamen, railroad employees, or any other class
of workers engaged in foreign or interstate commerce.” 9
U.S.C. § 1. Charles Adler submitted a declaration recounting
Plaintiffs’ transportation work, including “receiv[ing]
shipments of Gruma product,” “load[ing] the Gruma product
on to . . . trucks,” and “transport[ing] the product to the Gruma
accounts.” Appx 123–24, ¶ 24. Plaintiffs also urged that,
notwithstanding the parties’ selection of Texas law, New Jersey
law should apply to bar arbitration based on various aspects of
New Jersey public policy.
�e District Court granted Defendant’s motion and
compelled arbitration. Adler v. Gruma Corp., No. 22-cv-6598,
2023 WL 7490006, at *10 (D.N.J. Nov. 13, 2023). It did not
address whether the FAA applied or evaluate Plaintiffs’
exemption argument.1 It found the parties had contracted for
Texas law, under which the arbitration agreement was
enforceable, and rejected Plaintiffs’ bid to apply New Jersey
law instead. Id. at *6–7. In conducting the choice-of-law
analysis, the District Court focused on the parties’ respective
contacts with Texas and New Jersey but did not weigh the New
1 In its opinion, the District Court included a footnote stating:
Plaintiffs also argue that they should be exempt
from arbitration under the FAA because they are
interstate transportation workers under the
exception found in 9 U.S.C. § 1. As noted above,
the parties have entered into a valid arbitration
agreement which contains a delegation clause;
therefore, issues pertaining to arbitrability must
be decided by an arbitrator.
Adler, 2023 WL 7490006, at *10 n.8 (citation omitted).

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Jersey policies Plaintiffs urged would undermine the
arbitration agreement. Id. at *3–6.
Next, the District Court decided that Charles and Grant
Adler, who did not sign the contract, were estopped from
challenging its arbitration provision because they “acted as
parties to” the contract when they performed the LLC’s work.
Adler, 2023 WL 7490006, at *8. It then construed the
arbitration provision to contain a “delegation clause,” whereby
the arbitrator, rather than a court, should interpret the scope of
the arbitration provision. Id. It thus declined to determine
which of Plaintiffs’ claims “ar[ose] out of or relat[ed] to” the
contract. Id.; Appx 096. Finally, the District Court dismissed
the case so it could proceed to arbitration under Texas law.
Plaintiffs then filed the instant appeal.
II.
�e District Court had jurisdiction under 28 U.S.C.
§§ 1331, 1367(a), and 1332(a). We have jurisdiction under 28
U.S.C. § 1291.
We review the grant of a motion to compel arbitration
de novo, applying the same standard that “should have been
applied” in the District Court. Singh v. Uber Techs. Inc. (Sing
I), 939 F.3d 210, 217 (3d Cir. 2019). If the motion can be
decided “based on the face of a complaint, and documents
relied upon in the complaint, ” a motion-to-dismiss standard
should be used; otherwise, the summary judgment standard
should be applied. Guidotti v. Legal Helpers Debt Resol., LLC,
716 F.3d 764, 776 (3d Cir. 2013) (quotation marks omitted).
�e District Court here stated it would employ the motion-to-
dismiss standard, but its opinion cites facts from the parties’

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declarations submitted in connection with the motion. Adler,
2023 WL 7490006, at *2, *4 & n.4. We therefore will use the
summary judgment standard and ask whether Defendant, as the
moving party, has “show[n] that there is no genuine dispute as
to any material fact and [Defendant] is entitled to” an order
compelling arbitration “as a matter of law.” Guidotti, 716 F.3d
at 772 (quoting Fed. R. Civ. P. 56(a)).
We review the District Court’s decision to sua sponte
conclude that the contract contained a “delegation clause” for
abuse of discretion. See United States v. Dowdell, 70 F.4th 134,
140 (3d Cir. 2023) (existence of waiver and decision to excuse
waiver reviewed for abuse of discretion). �e interpretation of
unambiguous contractual language is reviewed de novo. Sköld
v. Galderma Lab’ys L.P., 917 F.3d 186, 191 n.9 (3d Cir. 2019).
III.
�e District Court was presented with a fairly
straightforward question: whether the parties had an
enforceable agreement to arbitrate and under what law.
However, the answer to that question lies in the sometimes not
so straightforward principles of federalism, choice of law, and
contract interpretation. See Harper, 12 F.4th at 294.
A. Sources of Arbitration Law
When a district court is presented with a request to
enforce an agreement to arbitrate, it must determine whether
that agreement is enforceable under applicable law. Harper, 12
F.4th at 295. Based on the principles of federalism set out in
Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), federal courts will
enforce both federal and state arbitration law, Bernhardt v.
Polygraphic Co. of Am., 350 U.S. 198, 202–03 (1956), but will

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give precedence to federal law where the two conflict, Volt Info.
Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ.,
489 U.S. 468, 477 (1989). Here, the potentially applicable
federal law is the FAA, whose “ ‘principal purpose’ . . . is to
‘ensure that private arbitration agreements are enforced
according to their terms.’ ” AT&T Mobility LLC v. Concepcion,
563 U.S. 333, 344 (2011) (alterations omitted) (quoting Volt,
489 U.S. at 478). �e FAA declares most written arbitration
agreements “valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of
any contract,” and enacts procedures for sending parties to
arbitration and staying pending litigation. See 9 U.S.C. §§ 2–4.
But the FAA does not apply to all contracts, since it exempts,
as relevant here, “contracts of employment of seamen, railroad
employees, or any other class of workers engaged in foreign or
interstate commerce” (the “§ 1 exemption”). 9 U.S.C. § 1.
Where the request is to enforce an arbitration agreement
under state law, and a question arises as to which state’s law
applies, the court will use the choice-of-law rules of the forum
state, even where the parties have contracted for application of
a particular state’s law. Harper, 12 F.4th at 295 (citing Collins
v. Mary Kay, Inc., 874 F.3d 176, 183 (3d Cir. 2017)). It may
also need to consider whether the FAA preempts any state laws
that would otherwise govern. If the parties’ contract is within
the scope of the FAA, state laws that conflict with the FAA or
would “stand as an obstacle to the accomplishment of the
FAA’s objectives” will be preempted. Concepcion, 563 U.S. at
343. �us, where the FAA would require the court to enforce
the agreement, a state law that would prevent its enforcement
will usually be preempted. See Southland Corp. v. Keating, 465
U.S. 1, 15–16 (1984) (holding preempted a California
franchise statute to the extent it would preclude enforcement of

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an agreement to arbitrate). But pro-arbitration state laws—i.e.
laws that would enforce the agreement—generally remain in
force. Harper, 12 F.4th at 293–94. And, of course, if the parties’
agreement is outside the scope of the FAA altogether, the FAA
will not preempt any state laws that may apply to it, including
laws that may render the agreement unenforceable. Cf. Lewis
v. Cir. City Stores, Inc., 500 F.3d 1140, 1152 (10th Cir. 2007)
(“[W]hen the FAA applies to an arbitration agreement, the
FAA preempts conflicting state law . . . .” (emphasis added)).
Importantly, under both federal and state arbitration law,
the starting place is typically the parties’ agreement, and that
will usually dictate whether, and under what law, arbitration
should take place. See Harper, 12 F.4th at 294. “[P]arties are
generally free to structure their arbitration agreements as they
see fit,” and where they “have agreed to abide by state rules of
arbitration, enforcing those rules according to the terms of the
agreement is fully consistent with the goals of the FAA.” Volt,
489 U.S. at 479. �e forum state here, New Jersey, generally
allows parties to choose the state’s law that will govern their
contracts, but choice-of-law principles may override that
selection under certain circumstances. See Arafa v. Health
Express Corp., 233 A.3d 495, 506 (N.J. 2020) (conducting a
choice-of-law analysis before deciding to apply New Jersey
arbitration law as selected by the parties); Grandvue Manor,
LLC v. Cornerstone Contracting Corp., 272 A.3d 36, 44 (N.J.
Super. Ct. App. Div. 2022) (conducting a choice-of-law
analysis before enforcing parties’ selection of New York
arbitration law).

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B. When a Party Seeks Enforcement Under
Either Federal or State Arbitration Law
Defendant’s motion to compel arbitration urged that the
District Court had authority to issue such an order under either
the FAA or Texas law, both of which favor arbitration. Plaintiffs
countered that the FAA did not apply, and the Court should
decline to enforce the parties’ selection of Texas law pursuant
to New Jersey’s choice-of-law rules because three New Jersey
policies disfavored arbitration: (1) a policy against forum-
selection clauses in franchise agreements; (2) a policy
requiring arbitration provisions in employment contracts to be
clear about the difference between arbitration and litigation;
and (3) a policy requiring arbitration provisions in employment
contracts to be clear about their coverage of statutory claims.
In Harper, we advised, where arbitration is sought
under both the FAA and state law, and the parties contest the
FAA’s applicability under 9 U.S.C. § 1, district courts must
follow a three-part inquiry:
At step one, . . . a court must consider whether
[the § 1 exemption applies]. . . . If that analysis
leads to murky answers, a court moves to step
two and assumes [the] § 1 [exemption] applies,
taking the FAA out of the agreement. But the
court then considers whether the contract still
requires arbitration under any applicable state
law. . . . If the arbitration clause is also
unenforceable under state law, then the court
reaches step three, and must return to federal law
and decide whether § 1 applies . . . .

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Harper, 12 F.4th at 296. �e parties here dispute whether,
under Harper, courts must always start with the FAA, or
whether they may “jump” to independent state law to compel
arbitration (i.e., Harper’s step two). We need not settle this
issue, however. Under either reading, the District Court erred
in relying on cases interpreting the FAA despite not having
determined that the FAA applied. See Adler, 2023 WL
7490006, at *7 (citing In re FirstMerit Bank, N.A., 52 S.W.3d
749 (Tex. 2001), as an authority on Texas arbitral law when, in
fact, the case applies the FAA). Without deciding whether
courts may “jump” to Harper’s step two, we will analyze these
issues anew, beginning with the parties’ dispute over whether
the FAA applies. �at question may be answered cleanly on the
present undisputed record, and it has the potential to obviate
the need for a murkier choice-of-law analysis—because, if the
FAA does apply, it would require us to “ ‘rigorously enforce’
[the] arbitration agreement[] according to [its] terms,” Am.
Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013), and
preempt any contrary New Jersey policies, Concepcion, 563
U.S. at 343.2
�e District Court’s opinion suggests it believed it
should bypass the determination as to the applicability of the
FAA because the SDDA contained a “delegation clause”—i.e.,
an agreement to delegate matters of arbitrability to an
arbitrator. See Adler, 2023 WL 7490006, at *10 n.8 (declining
to decide whether the FAA applied because “issues pertaining
to arbitrability must be decided by an arbitrator”). But,
notwithstanding the presence of a delegation clause, a court
2 Since Plaintiffs concede that the relevant New Jersey policies
would be preempted, see Reply Br. 8, we need not decide that
issue.

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still may not send a dispute to arbitration without first
determining that there is an agreement to arbitrate that is
enforceable under applicable law. See New Prime Inc. v.
Oliveira, 586 U.S. 105, 111 (2019). �at is because “[a]
delegation clause is merely a specialized type of arbitration
agreement,” which a court must evaluate in the same manner
as it would “any other” arbitration agreement. See id. at 112 (in
part quoting Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70
(2010)). Accordingly, New Prime instructs that there is an
“antecedent” statutory inquiry that the court should address
before enforcing a delegation clause. Id. It addressed the
question: whether the court must “leave disputes over the
application of [FAA] § 1’s exception for the arbitrator to
resolve?” Id. at 108. �e Court said no. Id. at 111. �at principle
is squarely implicated here.
We will thus proceed to address that issue.
IV.
�e FAA applies to most written agreements to arbitrate,
but exempts “contracts of employment of seamen, railroad
employees, or any other class of workers engaged in foreign or
interstate commerce” (the “§ 1 exemption”). 9 U.S.C. § 1.
Plaintiffs contend the SDDA was such a contract.
A. Standard for the § 1 Exemption
�e FAA’s exemption for “any . . . class of workers
engaged in . . . [interstate] commerce” is limited to
“transportation workers,” Circuit City Stores, Inc. v. Adams,
532 U.S. 105, 118–19 (2001)—i.e., those workers who are
“actively ‘engaged in transportation’ of . . . goods across
borders,” Sw. Airlines Co. v. Saxon, 596 U.S. 450, 458 (2022)

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(quoting Circuit City, 532 U.S. at 121). �at inquiry turns on
“the actual work” such workers “typically” perform. Id. at 456.
In assessing the nature of the employees’ work, the court may
look beyond individual employees to the “class” of workers,
thus considering such evidentiary sources as “the contents of
the parties’ agreement(s), information regarding the industry in
which the class of workers is engaged, information regarding
the work performed by those workers, and various texts—i.e.,
other laws, dictionaries, and documents—that discuss the
parties and the work.” Singh I, 939 F.3d at 227–28. But “[a]
transportation worker need not work in the transportation
industry” to fit the exemption. Bissonnette v. LePage Bakeries
Park St., LLC, 601 U.S. 246, 256 (2024); see also Brock v.
Flowers Foods, Inc., 121 F.4th 753, 761 (10th Cir. 2024)
(finding food distributors to be transportation workers).
Instead, the focus is “what [the worker] does [for the
employer], not what [the employer] does generally.” Saxon,
596 U.S. at 456.
In addition, a worker whose “work is ‘so closely related’
to interstate commerce ‘as to be in practical effect part of it’ ”
is an interstate transportation worker, even if that worker does
not personally cross state lines. Singh v. Uber Techs., Inc.
(Singh II), 67 F.4th 550, 558 (3d Cir. 2023) (quoting Singh I,
939 F.3d at 220). What matters is whether the work “is a
‘constituent part’ of the interstate movement of goods or people
rather than a ‘part of an independent and contingent intrastate
transaction.’ ” Id. (quoting Immediato v. Postmates, Inc., 54
F.4th 67, 77 (1st Cir. 2022)). “[R]are engagement” with
interstate commerce is not enough; instead, “interstate
movement of goods or passengers [must be] a central part of
the job description of the class” of workers. Id. at 557
(quotation marks omitted). And the exemption does not cover

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“workers who engage in primarily local economic activity with
only tangential interstate connections.” Id. at 558. “Food
delivery drivers, for example, can be distinguished from
Amazon delivery drivers, as the former deliver food only after
it has left the stream of interstate commerce. Similarly,
Chicago taxi drivers provide independent local service which
is not an integral part of interstate transportation.” Id. at 558–
59 (citations and quotation marks omitted) (citing Rittmann v.
Amazon.com, Inc., 971 F.3d 904, 916 (9th Cir. 2020); Wallace
v. Grubhub Holdings, Inc., 970 F.3d 798, 802–03 (7th Cir.
2020); United States v. Yellow Cab Co., 332 U.S. 218, 233
(1947)).
By way of illustration, in Saxon, the employee’s
primary duty was to manage other workers in the loading and
unloading of cargo planes, although the employee would
“frequently” move the cargo herself as well. Saxon, 596 U.S.
at 456. �e Supreme Court reasoned that, regardless of her
other duties, those who “physically load and unload cargo on
and off planes traveling in interstate commerce are, as a
practical matter, part of the interstate transportation of goods.”
Id. at 457. By contrast, in Singh, the plaintiffs, who drove for
Uber, were predominantly local, intrastate transporters. See
Singh II, 67 F.4th at 555 (quoting the district court’s finding
that “2% of all rides” were interstate and “likely occur[red] due
to the happenstance of geography”). �ese drivers’
“[i]ncidental border crossings [were] insufficient” to meet the
exemption given that the bulk of their work was “not typically
involved with the channels of interstate commerce.” Id. at 559.
And while Uber drivers would sometimes take passengers to
and from the airport, these did not count as interstate trips
because there was no “single ticket that includes both flight and
rideshare”; the latter was an “independent local service.” Singh

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II, 67 F.4th at 562 (in part quoting Yellow Cab, 332 U.S. at 232–
33).
B. Application to the Present Undisputed Facts
We turn to the parties’ declarations to see if the
exemption “fits” based on the undisputed facts.3 Defendant
shipped tortillas and other food products from Pennsylvania
into New Jersey and then tasked Plaintiffs with distributing
them to Defendant’s customers in Trenton and surrounding
areas. To that end, Plaintiffs received Defendant’s products at
their New Jersey warehouse, loaded the products onto trucks,
drove them to their buyers, unloaded and shelved the products,
and maintained the clients’ accounts. Transporting Defendant’s
goods constituted “[a] large component” of Plaintiffs’ day-to-
day work. Appx 124, ¶ 25. Defendant oversaw this work and
“coordinate[d] . . . the purchase and distribution of its
products” from its Texas headquarters, Appx 112, ¶ 6, and with
an “Area Manager” in New Jersey, Appx 122, ¶ 14. Plaintiffs
were Defendant’s exclusive distributors in the territory and
3 While neither the District Court nor the parties discuss this
aspect, we take the parties to not dispute the facts in their
declarations. �e District Court cited these facts
interchangeably with those in the complaint—without
objection then or before us on appeal—and no party asked for
discovery to controvert the other side’s account. See Fed. R.
Civ. P. 56(d) (specifying circumstances under which summary
judgment may be denied for discovery). Defendant also
conceded it was “not in a position . . . to dispute” Charles
Adler’s declaration. Tr. Oral Arg. 22:25-23:1. We thus take the
facts in the parties’ declarations as undisputed and examine
whether they give rise to the § 1 exemption.

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were prohibited from selling competing products. �us,
Plaintiffs reason, Defendant used distributors like them to
move products to customers across the state line, making them
“direct and necessary” to the interstate movement of goods.
Appellants’ Br. 21. And because Plaintiffs worked directly and
exclusively for Defendant rather than as “independent” local
resellers, they argue their delivery trips formed a “ ‘constituent
part’ of the interstate movement of [Defendant’s] goods” rather
than separate “intrastate transaction[s].” See Singh II, 67 F.4th
at 558.
Both before the District Court and on appeal, Defendant
offered little substantive argument that these facts do not
establish Plaintiffs as part of a class of transportation workers
engaged in interstate commerce. In particular, Defendant does
not dispute Plaintiffs’ contention that distributors who work
directly with an interstate manufacturer and move the
manufacturer’s goods along “the last mile of [their] interstate
journeys” qualify as interstate transportation workers despite
not personally crossing state lines. See Brock, 121 F.4th at 768
(quoting Rittmann, 971 F.3d at 916); Singh II, 67 F.4th at 558
(“Amazon delivery drivers who ‘locally transport[ed] goods on
the last legs of interstate journeys,’ fell under [the] § 1
[exemption] because their work occurred ‘within the flow of
interstate commerce.’ ” (quoting Waithaka v. Amazon.com,
Inc., 966 F.3d 10, 13 (1st Cir. 2020))).
Instead, Defendant’s principal contention is that
Plaintiffs did not spend a sufficient portion of their time on
transportation, since their other responsibilities included
“sell[ing], market[ing], and servic[ing] [Defendant’s]
products; servic[ing] and maintain[ing] [Defendant’s]
accounts; plac[ing] product orders; put[ting] the product on
supermarket shelves and displays; remov[ing] stale products;

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keep[ing] up the relationships with the accounts; and sell[ing]
displays and present[ing] sale items to [Defendant’s]
accounts.” Appellee’s Br. 41. But Defendant points to no facts
to controvert Plaintiffs’ assertion that “a large component” of
their work for Defendant “involved the transportation of goods
and product.” Appx 124, ¶ 25. And while Defendant’s brief
includes a passing reference to a need for discovery, Defendant
did not seek discovery before the District Court and does not
suggest what discovery it would conduct or how the results of
such discovery might contradict Plaintiffs’ assertion that
transportation was “a large component” of their work.
Moreover, many of what Defendant calls Plaintiffs’
non-transportation activities are really just the mechanics of
how Plaintiffs moved products manufactured in Pennsylvania
to stores in New Jersey. For example, “plac[ing] [a] product[]
order[]” or “put[ting] the product on supermarket shelves” are
steps in the transportation process, like loading or unloading a
truck. Appellee’s Br. 41. �ese responsibilities are not unlike
those of the ramp supervisor in Saxon who managed and
trained other ramp workers in addition to handling cargo
herself. See 596 U.S. at 454. Accordingly, we perceive no
genuine dispute that Plaintiffs were transportation workers
engaged in interstate commerce.
Defendant also urges that, if Plaintiffs are correct that
their contract was a “franchise agreement,” it could not also be
a “contract of employment.” We disagree. In New Prime, the
Supreme Court embraced a broad interpretation of the concept
of a “contract of employment,” concluding that a contract of
employment for purposes of the FAA is any “agreement to
perform work,” regardless of whether it is for an employee or
an independent contractor. 586 U.S. at 110, 114. Depending on
its terms, a franchise agreement may be an agreement to

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perform work. New Jersey’s definition of a “franchise” is any
“written arrangement . . . in which a person grants to another
person a license to use a trade name, trade mark, service mark,
or related characteristics, and in which there is a community of
interest in the marketing of goods or services.” N.J. Stat.
§ 56:10-3. A franchisor may contract for a franchisee to
“perform work” for the franchisor while using the franchisor’s
trademarks. Cf. Brock, 121 F.4th at 757, 767, 770 (finding the
§ 1 exemption applicable to a “direct-store-delivery”
distributorship agreement that, like the one here, included
terms for the protection of the seller’s “professional image”);
Brock v. Flowers Food, Inc., 673 F. Supp. 3d 1180, 1182 (D.
Colo. 2023) (describing the drivers as “independent distributor
franchisees”). Here, clearly, the SDDA and undisputed facts
show Plaintiffs contracted with Defendant to “perform work”
by distributing Defendant’s food products.
For these reasons, the FAA does not apply to the parties’
agreement to arbitrate.
V.
Because the FAA does not apply, the remaining
arbitration issues must be evaluated under state law. Harper,
12 F.4th at 296. �at begins with the forum state and its choice-
of-law rules. Id. at 295. New Jersey follows different choice-
of-law analyses depending on whether the contract selects a
specific state’s law. See Arafa, 233 A.3d at 506.
�e SDDA specified that Texas law would apply to the
parties’ “Agreement,” and the District Court interpreted that to
mean Texas law governed whether the arbitration provision of
the agreement was enforceable. On appeal, Plaintiffs disagree
with that contract interpretation. �ey urge the parties only

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20
agreed that Texas law would govern their substantive
obligations under the contract, not whether the arbitration
provision of that contract was enforceable.4
As noted above, the choice-of-law provision contains
two sentences: “�is Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
The Federal Arbitration Act, 9 U.S.C. § 1 et seq. shall also
apply as needed to uphold the validity or enforceability of the
arbitration provisions of this Agreement.” Appx 098, § 15.k
(emphasis added). �e first sentence by its terms applies to the
entire agreement, which does include the arbitration provision.
But even assuming, as Plaintiffs argue, that the first sentence
standing alone does not adopt Texas law as to matters of
arbitrability, the second sentence is more specific and bolsters
the argument that Texas arbitration law was contemplated.
Unless the words “also” and “as needed” are mere surplusage,
the parties must have anticipated that Texas law was to apply
to the arbitration provision, but, if necessary, the FAA would
“also” apply “as needed”—specifically, “as needed to uphold
the validity or enforceability of the arbitration provision[].” Id.
So, there is a clear directive that the FAA was not intended as
the sole source of arbitration law. Rather, it was intended to
prevent any doubt about the validity or enforceability of the
arbitration provision under Texas law. Read together, the
unambiguous meaning of the provision is that Texas law shall
apply to the SDDA’s arbitration provision, and if needed, the
4 Plaintiffs raise this specific issue for the first time on appeal,
having only disputed the choice of Texas versus New Jersey
law before the District Court. Nonetheless, we will address it
as it involves a matter of law that is easily resolved lest it be
raised again on remand.

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FAA may “also apply” to uphold the enforceability of this
specific provision. Cf. Carter v. Exxon Co. USA, a Div. of
Exxon Corp., 177 F.3d 197, 206 (3d Cir. 1999) (interpreting
contract to avoid superfluity); Grandvue Manor, 272 A.3d at
44 (interpreting a contractual selection of New York law to
govern whether an arbitration provision was enforceable).
�e SDDA’s language contrasts with the choice-of-law
provision in Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th
Cir. 2020), which specified that the contract would be
“governed by the law of the state of Washington . . . except for”
the contract’s arbitration provision. Id. at 920 (emphasis
added). �e Ninth Circuit read the transitional phrase “except
for” to exclude Washington law on matters of arbitrability. Id.
Here, the transitional term “also” indicates Texas law will
extend even to those parts of the contract where the FAA may
also play a role.
�e principal precedent Plaintiffs rely on is
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52
(1995). But that case was quite unique—it had nothing to do
with which state’s arbitration law should be applied. Instead, it
had to do with the authority of arbitrators to award punitive
damages in an arbitration conducted under the FAA, where the
parties had chosen New York law to govern the contract
generally. Id. at 56. New York law permitted punitive damages
to be awarded only by a court, and the issue was whether the
parties’ agreement to the application of New York state law
generally went so far as to limit the arbitrator’s remedial
authority—based on a New York law that did not even outlaw
punitive damages but allocated remedies to certain tribunals.
Id. �e Court, not surprisingly, said no. Id. at 63.

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Plaintiffs cite Oberwager v. McKechnie Ltd., 351 F.
App’x 708 (3d Cir. 2009) (not precedential), for the proposition
that an arbitration provision must evidence a “clear intent” that
the chosen state’s arbitration law is to apply. See id. at 710
(quoting Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287,
293 (3d Cir. 2001), abrogated on other grounds by Hall St.
Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008)). But
Oberwager and the other cases requiring “clear intent” are
addressing a different issue: whether a provision selecting a
particular state’s law should be read as “opt[ing] out” of the
FAA and replacing the FAA’s procedures with state procedures.
See id. Here, we have already decided that the FAA does not
apply. And we can easily conclude that the parties agreed that
Texas law should govern the arbitrability of their dispute.
�erefore, the District Court did not err in finding that
the parties agreed to the application of Texas law regarding the
enforceability of arbitration agreements.
VI.
Because we agree with the District Court that the parties
contracted for Texas arbitration law to apply, we turn to
whether the New Jersey federal court should have rejected that
provision under its choice-of-law rules. As explained below,
we conclude that the District Court erred in its analysis, and we
will vacate its order and remand for the District Court to apply
the analytical framework set out in this Opinion.
A. Enforcement of Contractual Choice-of-Law
Clauses in New Jersey
“Ordinarily, when parties to a contract have agreed to
be governed by the laws of a particular state, New Jersey courts

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will uphold the contractual choice if it does not violate New
Jersey’s public policy.” Instructional Sys., Inc. v. Computer
Curriculum Corp., 614 A.2d 124, 133 (N.J. 1992). But, as
relevant here, the choice-of-law clause may be invalidated on
policy grounds if three elements are met: (1) New Jersey has a
“materially greater interest” in the “determination of the
particular issue” in dispute; (2) application of Texas law
conflicts with a “fundamental” New Jersey policy; and (3) New
Jersey law would apply “in the absence of an effective choice
of law by the parties.” Id. (quoting Restatement (Second) of
Conflict of Laws § 187(b) (1969) [hereinafter Restatement
§ 187(b)]). Neither party disputes the third element, namely
that New Jersey law is the relevant law that would govern the
arbitrability dispute absent the parties’ selection of Texas, so
the focus is on the first two elements: whether New Jersey has
a “materially greater interest” in the arbitrability dispute and
whether any relevant “fundamental” policies of New Jersey
would be harmed by application of Texas law.
In moving to compel arbitration, Defendant provided a
certification from its Vice President of Retail Sales detailing
connections between its business and Texas. According to that
declaration, Defendant maintained a headquarters in Texas,
managed its business affairs there, and coordinated and paid
distributors such as Plaintiffs from that location, among other
activities. �e District Court took these facts as true in ruling
on Defendant’s motion, and, lacking Plaintiffs’ objection, we
will do the same.
Plaintiffs responded with three New Jersey policies that,
in their view, prohibited enforcement of the choice-of-law
clause on the issue of arbitrability. We describe them without
vouching for their correctness as statements of New Jersey law
or applicability here:

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First, Plaintiffs contended the parties’ contract was a
“franchise agreement” subject to New Jersey’s Franchise
Practices Act, under which a mandatory arbitration clause
would be presumptively invalid. N.J. Stat. § 56:10-7.3(a)(3)
(“It shall be a violation of the [Act] for a motor vehicle
franchisor to require a motor vehicle franchisee to agree to a
term or condition in a franchise . . . which . . . [r]equires that
disputes between the motor vehicle franchisor and motor
vehicle franchisee be submitted to arbitration.”). Plaintiffs
reasoned that the prohibition extends to all franchise
agreements covered by the Act, not just motor vehicle
franchises. In doing so, they relied on Kubis & Perszyk Assocs.,
Inc. v. Sun Microsystems, Inc., 680 A.2d 618 (N.J. 1996), in
which the Supreme Court of New Jersey concluded as much
when addressing the prohibition on forum-selection clauses
found in the same statutory section. Id. at 626. �us, Plaintiffs
argued, enforcing the SDDA’s arbitration clause under Texas
law would violate this New Jersey policy.
Second, Plaintiffs urged that New Jersey requires
arbitration agreements that waive a constitutional right, like the
right to a civil jury trial enshrined in the New Jersey
Constitution, art. I, to contain “clear and unambiguous
language that the plaintiff is waiving her right to sue or go to
court to secure relief.” Atalese v. U.S. Legal Servs. Grp., L.P.,
99 A.3d 306, 309, 315 (N.J. 2014). In Plaintiffs’ view, that rule
applied to the SDDA because it was effectively an employment
contract, given the level of control Defendant exerted over
Plaintiffs’ day-to-day work. Plaintiffs interpreted the SDDA’s
arbitration provision as not sufficiently clear about the
difference between arbitration and court proceedings.
Third, also related to New Jersey’s requirements for the
waiver of rights, Plaintiffs contended that to waive a statutory

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right, New Jersey requires an arbitration provision to “reflect
[an] employee’s general understanding of the type of claims”
it covers, including whether it covers “statutory claims arising
out of the employment relationship or its termination.” Moon
v. Breathless Inc., 868 F.3d 209, 214 (3d Cir. 2017) (quoting
Garfinkel v. Morristown Obstetrics & Gynecology Assocs.,
P.A., 773 A.2d 665, 672 (N.J. 2001)). Plaintiffs viewed the
SDDA’s specification of claims “relating to” the contract as
ambiguous about its coverage of statutory claims. �us
Plaintiffs argued to the District Court that enforcing the
arbitration clause under Texas law as to their franchise and
labor law claims would violate New Jersey public policy.
B. District Court’s Reasoning
In deciding to enforce the choice-of-law clause, the
District Court did not consider the policies just described in its
analysis. On the “materially greater interest” prong, the District
Court focused on the parties’ geographic contacts with New
Jersey and Texas, and determined that each state had an
interest, and New Jersey had no “greater interest” in the
arbitration issue. Adler, 2023 WL 7490006, at *5. In particular,
the District Court noted Defendant’s Texas activities—its
headquarters, management, and distributorship operations—
and reasoned these ties gave Texas “an interest in enforcing its
company’s rights,” while Plaintiffs’ geographic ties (“[t]he fact
that Plaintiffs are residents of New Jersey and performed work
under the SDDA in New Jersey”) did not “necessarily establish
that New Jersey has a materially greater interest than Texas.”
Id. And it rejected Plaintiffs’ “focus[] on whether the parties’
contractually chosen law violates New Jersey’s public policy.”
Id. �us, its opinion makes no mention of whether New
Jersey’s alleged policies against arbitrating certain types of

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26
disputes might give New Jersey an “interest” that would be
materially greater. See id. at *5–6.
�e District Court relied, inter alia, on several cases
from the District of New Jersey, illustrative of which is
Rosenberg v. Hotel Connections, Inc., No. 21-cv-4876, 2022
WL 7534445 (D.N.J. Oct. 13, 2022). �at case, like this one,
confronted the issue of whether a New Jersey court would
enforce an arbitration agreement under a foreign state’s law (as
chosen by the parties) over an objection that the language failed
the clarity requirement of New Jersey’s Atalese decision. 2022
WL 7534445 at *3. �e Rosenberg court, with little analysis,
concluded New Jersey lacked a “materially greater interest”
due to the fact that: (1) the parties had agreed to apply New
York law, (2) the defendant “service[d] clients in New York,”
and, (3) “[m]ost importantly,” the defendant “was incorporated
in New York at the time of the execution of the” agreement. Id.
at *5. Based on the reasoning of this case and similar
precedents, the District Court here found Defendant’s Texas
connections significant enough to require the application of
Texas law. See Adler, 2023 WL 7490006, at *5.
�e District Court alternatively concluded that, even if
New Jersey did have a materially greater interest, compelling
arbitration would not conflict with a fundamental New Jersey
policy. But the District Court evaluated only one potential New
Jersey policy and not the three Plaintiffs had offered. �e
District Court viewed the policy question as whether Plaintiffs
could “assert[] any [New Jersey] statutory claims” in an
arbitral forum. Adler, 2023 WL 7490006, at *6. Since they
concededly could, the District Court reasoned arbitration was
no obstacle to New Jersey’s fundamental policies. Id. �e
District Court did not consider whether, as Plaintiffs claimed,

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27
New Jersey had expressed policies against arbitration itself in
franchise or employment contracts.
C. Parties’ Arguments on Appeal
Plaintiffs object to the District Court’s reasoning on
both prongs. On the materially greater interest prong, Plaintiffs
argue the District Court “engaged in an unduly narrow analysis
of the states’ respective interests by focusing solely on the
parties’ contacts with New Jersey and Texas.” Appellants’ Br.
28. In Plaintiffs’ view, the “policy reasons underlying the
state’s conflicting laws” may count as an “interest,” thereby
giving New Jersey a “materially greater interest” despite
Defendant’s presence in Texas. Id. at 37 (quoting Homa v. Am.
Express Co., 558 F.3d 225, 232 (3d Cir. 2009), abrogated on
other grounds by Concepcion, 563 U.S. 333). On the
fundamental policy prong, Plaintiffs fault the District Court for
considering only whether Plaintiffs could vindicate their
substantive rights in an arbitral forum, rather than the three
public policies Plaintiffs had offered.
Defendant mostly does not disagree with Plaintiffs on
the law. In particular, Defendant does not challenge Plaintiff’s
assertion that a state’s policies may count as an “interest”
favoring application of that state’s law under the “materially
greater interest” prong. �us, if, as Plaintiffs say, New Jersey
has a policy against arbitration clauses in contracts like the
SDDA, Defendant has not claimed a court should ignore that
policy in weighing New Jersey’s interests under the first prong.
And Defendant also does not contest Plaintiffs’
characterization that the District Court’s opinion failed to
mention the three policies Plaintiffs had advocated. See
Appellee’s Br. 20 (recounting the factors the District Court
relied on).

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28
Defendant urges, however, that the District Court’s
reasoning should be upheld because the policy interests, even
if relevant, are “not enough” to overcome the parties’
agreement to use Texas law. Appellee’s Br. 23 (quoting SKF
USA Inc. v. Okkerse, 992 F. Supp. 2d 432, 441 (E.D. Pa. 2014)).
�us, Defendant insists, because the District Court evaluated
the myriad contacts with Defendant’s Texas operations, its
conclusion that New Jersey lacked a “materially greater
interest” should be affirmed. Id. at 20. Defendant also endorses
the District Court’s reasoning that arbitration would not
conflict with a fundamental New Jersey policy because
Plaintiffs may still bring their state-law claims in an arbitral
forum.
D. New Jersey Contractual Choice-of-Law Rules
Require Consideration of Both Policies and
Geographic Ties
We conclude the District Court’s omission of
consideration of New Jersey’s alleged policies regarding
arbitration undermines its conclusion as to both aspects of the
choice-of-law analysis, and will offer guideposts for its
consideration of these issues on remand.
1. “Materially Greater Interest”
We begin with the “materially greater interest” prong.
To determine which state has a “materially greater interest” in
the application of its law to the issue in question, New Jersey’s
choice-of-law rules ask for more than counting contacts: they
call for an examination into whether New Jersey has expressed
a “policy interest” in enforcing the protections of its own law
regarding an issue over a contrary agreement by the parties.
See Instructional Sys., 614 A.2d at 134–35. Instructional

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29
Systems is illustrative of this approach. �e plaintiff there was
a New Jersey-based distributor of a software system sold by
the defendant, a California-based Delaware corporation, and
their contract selected the law of California to govern their
affairs. Id. at 126, 130. When the defendant sought to terminate
the distributorship, a dispute arose as to whether the plaintiff
could obtain the protection of New Jersey’s Franchise Practices
Act despite the contractual selection of California law. Id. at
133. Applying the test from Restatement § 187(b) set out
above, the New Jersey Supreme Court looked to the fact that
“New Jersey has a strong policy in favor of protecting its
franchisees.” Id. at 135. It also noted New Jersey’s “significant
‘contacts’ with the transaction,” including that the plaintiff was
“located” in New Jersey, its employees resided there, and it had
made “franchise-specific investments” there such as its
“assets” and “the goodwill developed for [the defendant] by
New Jersey residents.” Id. Looking more broadly, the Court
observed that the “protection [of the Franchise Practices Act]
may not be waived.” Id. at 134. Yet, if the choice-of-law clause
were enforced, “any large franchisor . . . could with a stroke of
a pen remove the beneficial effect of the franchisee’s state’s
remedial legislation” just by “insert[ing] . . . a choice of law
provision requiring the application of the franchisor’s home
state’s law.” Id. at 134–35 (quotation marks omitted). Based on
these considerations (and while deeming it a “close question”),
the Instructional Systems court declined to enforce the choice-
of-law clause. Id. at 134.
We followed a similar approach in Homa, 558 F.3d 225,
abrogated on other grounds by Concepcion, 563 U.S. 333. �e
question there was whether New Jersey would apply its policy
against certain class-action waivers (which, at the time, was
thought not to conflict with the FAA) despite the parties’

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30
selection of Utah law. Id. at 227. Following the test from
Restatement § 187(b), we “ ‘identif[ied] the governmental
policies underlying the law of each state and how those policies
[were] affected by each state’s contacts to the litigation and to
the parties’ so that we c[ould] determine which state ha[d] the
greater interest in resolving the issue of the class-arbitration
waiver’s validity.” Id. at 232 (nested quotation marks omitted)
(quoting Gantes v. Kason Corp., 679 A.2d 106, 109 (N.J.
1996), abrogated by McCarrell v. Hoffmann-La Roche, Inc.,
153 A.3d 207 (N.J. 2017)). �e New Jersey policy in question
existed to allow “consumers[] . . . to effectively pursue their
statutory rights under New Jersey’s consumer protection laws,”
whereas the contrary Utah policy served to “honor[] freedom-
of-contract principles and . . . protect Utah banks from
unwarranted class-action suits.” Id. (alterations omitted). We
then looked at the parties’ contacts with Utah and New Jersey.
On the Utah side, the defendant was a Utah bank, but it was a
“wholly owned subsidiary of . . . a New York corporation” and
the plaintiff would mail his payments to Florida. Id. On the
New Jersey side, the plaintiff resided there, his claims were
based on New Jersey’s Consumer Fraud Act, and New Jersey
had an “interest in protecting its consumers’ ability to enforce
their rights under” that statute. Id. We found the last two
contacts most significant, and thus “predict[ed] that the
Supreme Court of New Jersey would determine that New
Jersey has a materially greater interest than Utah in the
enforceability of a class-arbitration waiver that could operate
to preclude a New Jersey consumer from relief under the [New
Jersey Consumer Fraud Act].” Id. at 232–33. �us Homa, like
Instructional Systems, considered the in-state contracting
parties’ “ability to enforce their rights under” New Jersey law
to be an “interest” weighing in favor of New Jersey having a
“materially greater interest.” Id.

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Defendant contends that reliance on Homa is
“misplaced” because the New Jersey policy at issue there—a
restriction on certain class-action waivers in consumer
contracts—was later held preempted by the FAA in
Concepcion, 563 U.S. 333. Appellee’s Br. at 24 n.9. But since
we have determined the FAA does not apply in this case,
preemption is not an issue. Lewis, 500 F.3d at 1152 (“[W]hen
the FAA applies to an arbitration agreement, the FAA preempts
conflicting state law . . . .” (emphasis added)). We do recognize
that Homa relied, in part, on Gantes, 679 A.2d 106, whose
specific holding (concerning statutes of limitations) has been
overruled. See McCarrell, 153 A.3d at 210. However, we do
not believe the overruling of Gantes affects the continued
validity of the approach taken in Homa—at least insofar as that
approach requires consideration of New Jersey policy interests
regarding the specific issue presented in a contractual choice-
of-law analysis. Homa looked to Gantes only to give content
to the phrase “materially greater interest,” which Restatement
§ 187(b) does not define, by analogy to New Jersey’s
“governmental-interest” test as then articulated by Gantes.
Homa, 558 F.3d at 232. While New Jersey no longer uses the
governmental-interest test for choosing statutes of limitations,
see McCarrell, 153 A.3d at 210, this change is unrelated to
Homa’s conclusion that a state policy preference counts as an
“interest” in deciding which state has a “materially greater
interest.”
For these reasons, it was incorrect for the District Court
to reject Plaintiffs’ “focus[] on whether the parties’
contractually chosen law violates New Jersey’s public policy”
regarding arbitration, Adler, 2023 WL 7490006, at *5, as that
indeed should have been considered as part of the “materially
greater interest” analysis. If Plaintiffs were correct that the

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SDDA was a franchise agreement and its arbitration provision
violated a statute designed to “protect[] [New Jersey]
franchisees,” an argument could follow that New Jersey would
not allow contracting parties to remove those protections
merely “by providing in their agreement that the laws of
another state will govern.” Instructional Sys., 614 A.2d at 135;
cf. also Restatement § 187, cmt. g (“[A] fundamental policy
may be embodied in a statute which makes one or more kinds
of contracts illegal or which is designed to protect a person
against the oppressive use of superior bargaining power.”).
�at is not to say the outcome would necessarily be that New
Jersey had the greater interest, see Instructional Sys., 614 A.2d
at 134 (calling the question “close”), but it does show that
narrowing the focus to the parties’ geographic ties, and not
focusing on the nature of the specific issue (i.e., arbitration),
missed the real question: whether New Jersey courts would
insist on subjecting an interstate contract to certain
requirements of New Jersey law regarding arbitration designed
for the protection of the in-state contracting parties despite an
agreement to use a different state’s law, see id. at 135.
As noted, Defendant does not disagree that New
Jersey’s policies were relevant, instead merely contending they
were “not enough” to tip the balance on the materially greater
interest prong. Appellee Br. 23 (quoting SKF, 992 F. Supp. 2d
at 441). Defendant quotes SKF for the proposition that “[i]t is
not enough to assert that [one state] has a greater interest
simply because application of [the other state’s] law runs
contrary to a fundamental . . . policy [of the first state].” 992 F.
Supp. 2d at 441. To the extent that statement simply means that
the “materially greater interest” prong won’t turn exclusively
on the policy aspect, we do not disagree. See Restatement
§ 187, cmt. g (“�e forum will not refrain from applying the

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33
chosen law merely because this would lead to a different result
than would be obtained under the local law of the state of the
otherwise applicable law.”). Certainly both the geographic ties
and the states’ policies regarding the issue in question are
important considerations, and it could be said that the stronger
a litigant’s ties to New Jersey, the more likely New Jersey is to
extend the protection of its fundamental policies. See id. But
the connection between New Jersey and the arbitration dispute
here was not so remote as to obviate the need for an analysis
into whether the parties’ contacts and the strength of New
Jersey’s policies were such as to give New Jersey the
“materially greater interest” in the arbitration issue.
2. “Fundamental Policy”
We also agree with Plaintiffs that the District Court
erred in its analysis of the “fundamental policy” prong of
Restatement § 187(b), because the District Court disregarded
the three New Jersey policies Plaintiffs had offered and
considered only whether arbitration would “preclude Plaintiffs
from asserting any statutory claims under New Jersey law.”
Adler, 2023 WL 7490006, at *6. If the question is whether
enforcement of Texas law would “violate New Jersey’s public
policy,” Instructional Sys., 614 A.2d at 133, the nature of the
policy itself and its relative importance must be considered.
And the New Jersey Supreme Court has held that a choice of
forum will sometimes violate public policy even where that
forum is capable of “faithfully and fairly apply[ing]” New
Jersey law and “afford[ing] identical relief” to that available in
a New Jersey court. Kubis, 680 A.2d at 628. �erefore,
Plaintiffs’ alleged policies needed to be evaluated to determine
whether they were correct statements of New Jersey law,
whether they applied on the facts of this case (i.e., whether the
SDDA was a franchise agreement, whether its arbitration

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34
clause was unclear, etc.), and whether those policies were
sufficiently “fundamental” to justify setting aside the parties’
selection of Texas law. See Restatement § 187, cmt. g.
✻ ✻ ✻
For these reasons, the District Court erred in its
reasoning on choice of law. While the issue presents a legal
question that could potentially be decided on appeal, Thabault
v. Chait, 541 F.3d 512, 535 (3d Cir. 2008), we think the better
course is to remand for the District Court to reconsider its
analysis in light of our discussion. We will therefore vacate the
District Court’s order and remand for it to complete the choice-
of-law analysis under the framework discussed above.
VII.
We briefly address two remaining issues Plaintiffs raise
on appeal: (1) whether the District Court erred in its sua sponte
reading of a “delegation clause” in the contract; and (2)
whether the individual, non-signatory Plaintiffs are bound to
arbitrate.
A. Delegation Clause
When Defendant moved to compel arbitration, it
asserted that all of Plaintiffs’ claims were within the scope of
the arbitration provision. Plaintiffs responded that their
statutory claims were outside the scope of the provision
because they did not relate to the SDDA. But the District Court
did not decide that issue. Instead, it pointed to a provision it
interpreted as a “delegation clause,” which would “have the
arbitrator decide whether a given claim must be arbitrated.”
Adler, 2023 WL 7490006, at *8. So it did not rule on whether

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Plaintiffs’ statutory claims were within the scope of the
arbitration provision.
Plaintiffs argue that by “brief[ing] the merits of
[Plaintiffs’] challenge to the enforceability of the arbitration
provision and ask[ing] the court to enforce the agreement over
that challenge,” Defendant “waived any right it had under the
SDDA to have enforceability issues decided by an arbitrator.”
Appellants’ Br. 47–48. We disagree.
Plaintiffs do not challenge the correctness of the District
Court’s reading of the SDDA, but assert that somehow
Defendant’s failure to raise the delegation clause constitutes
waiver of the provision. While a party can waive a contractual
right to arbitrate, White v. Samsung Elecs. Am., Inc., 61 F.4th
334, 340 (3d Cir. 2023), this rule does not speak to the
propriety of a court’s interpreting contractual language for
itself. Instead, the “waiver” cases Plaintiffs rely on involved, at
most, litigants changing positions: first asking a court to decide
an issue, then reversing course and demanding to arbitrate.
Morgan v. Sundance, Inc., 596 U.S. 411, 415 (2022); United
States ex rel Dorsa v. Miraca Life Scis., Inc., 33 F.4th 352, 357
(6th Cir. 2022); Bodine v. Cook’s Pest Control Inc., 830 F.3d
1320, 1325 (11th Cir. 2016); In re Checking Acct. Overdraft
Litig., 754 F.3d 1290, 1295 (11th Cir. 2014). �ey are of limited
value here.
Courts are permitted to disagree with litigants on
matters of law, In re Mintze, 434 F.3d 222, 228 (3d Cir. 2006),
which, in Texas, would include the interpretation of
unambiguous contracts, Coker v. Coker, 650 S.W.2d 391, 393
(Tex. 1983). We see no reason to depart from that practice in a
court’s consideration of a delegation clause in an arbitration
agreement.

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It is true courts should normally respect “the principle
of party presentation” by declining to “consider . . . on [their]
own initiative” defenses not raised by the parties, Wood v.
Milyard, 566 U.S. 463, 472 (2012), instead confining their
analysis to “only those issues argued by interested and
motivated litigants,” Dowdell, 70 F.4th at 145. But that
principle is not “absolute,” Wood, 566 U.S. at 473, and we do
not believe it was violated here. �e District Court was
presented with contractual language and asked to interpret it,
which led it to the conclusion that an arbitrator was to decide
matters of arbitrability. We find no abuse of discretion.5
B. Estoppel
Finally, the individual Plaintiffs (Charles and Grant
Adler) point out that they did not sign the contract and thus
never agreed to arbitrate. �ese Plaintiffs object to the District
Court’s determination that they were bound under an estoppel
theory.6
5 We note Defendant’s brief does not offer much in the way of
support for the District Court’s exercise of discretion.
Nevertheless, it is Plaintiffs, as the parties seeking reversal,
who must persuade us there was an abuse of that discretion,
and Plaintiffs have not done so. See Hart v. Elec. Arts, Inc., 717
F.3d 141, 148 (3d Cir. 2013) (“To demonstrate an abuse of
discretion, an appellant must show that the District Court’s
decision was arbitrary, fanciful or clearly unreasonable.”
(alterations omitted)).
6 Before the District Court, Plaintiffs offered only a cursory
opposition to Defendant’s estoppel argument. However, the
District Court addressed estoppel on the merits, and, on appeal,

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Normally, arbitration under Texas law is a matter of
consent: no agreement to arbitrate, no arbitration. Aerotek, Inc.
v. Boyd, 624 S.W.3d 199, 204 (Tex. 2021).7 But “under certain
circumstances, principles of contract law and agency may bind
a non-signatory to an arbitration agreement.” In re Kellogg
Brown & Root, Inc., 166 S.W.3d 732, 738 (Tex. 2005). �us “a
non-signatory plaintiff seeking the benefits of a contract is
estopped from simultaneously attempting to avoid the
contract’s burdens, such as the obligation to arbitrate disputes.”
Id. at 739. �at can happen if the non-signatory plaintiff’s
“claims are ‘based on a contract’ containing an agreement to
arbitrate.” Id. at 740. “For example, if a non-signatory’s
breach-of-warranty and breach-of-contract claims are based on
certain terms of a written contract, then the non-signatory
cannot avoid an arbitration provision within that contract.” Id.
Defendant does not contend Plaintiffs forfeited the issue
(except as to Plaintiffs’ reliance on Morgan v. Sundance, Inc.,
596 U.S. 411 (2022)). Accordingly, we will address estoppel
on the merits as well.
7 �e District Court applied Texas law to decide whether the
individual Plaintiffs were bound to the contract. While there
was a possible circularity to this reasoning (since presumably,
if the individual Plaintiffs were not bound to the contract, they
were also not bound to its choice-of-law clause), we need not
decide whether it was correct, since Plaintiffs never argued for
application of a different state’s estoppel law. We also do not
address whether, on remand, a revised choice-of-law analysis
might affect the estoppel issue as well. See Erny v. Est. of
Merola, 792 A.2d 1208, 1213 (N.J. 2002) (“Ordinarily, choice-
of-law determinations are made on an issue-by-issue basis,
with each issue receiving separate analysis.”).

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at 739. A non-signatory may also be bound if it “consistently
and knowingly insist[ed] that others treat it as a party to the
contract during the life of the contract.” ENGlobal U.S., Inc. v.
Gatlin, 449 S.W.3d 269, 275 (Tex. Ct. App. 2014).8
However, we do not believe the District Court’s analysis
was adequate to justify binding the individual Plaintiffs to a
contract they did not sign. Its reasoning consisted mainly of
noting the prominence of the SDDA in Plaintiffs’ allegations
regarding their work for Defendant. See Adler, 2023 WL
7490006, at *8. But “a non-signatory plaintiff cannot be
compelled to arbitrate on the sole ground that, but for the
contract containing the arbitration provision, it would have no
basis to sue.” Kellogg, 166 S.W.3d at 740. In Kellogg, for
example, a second-tier subcontractor was not bound by an
arbitration clause in the first-tier subcontract, despite having
been hired to supply parts for that contract, because it was not
8 We agree with Defendant that Morgan v. Sundance, Inc., 596
U.S. 411 (2022), did not undermine the foregoing articulation
of Texas estoppel law, and in any event Plaintiffs did not make
that argument to the District Court and have therefore forfeited
it. See Hickey v. Univ. of Pittsburgh, 77 F.4th 184, 191 n.5 (3d
Cir. 2023) (arguments raised for the first time on appeal are
forfeited). While Morgan clarified the FAA is not a font of
“special, arbitration-preferring procedural rules,” 596 U.S. at
418, Texas courts had long recognized that “the presumption
[favoring arbitration] arises only after the party seeking to
compel arbitration proves that a valid arbitration agreement
exists,” and thus refused to apply a pro-arbitration bent to their
estoppel inquiry, Kellogg, 166 S.W.3d at 737. Accordingly, the
authority cited by the District Court did not conflict with
Morgan.

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“seek[ing], through the claim, to derive a direct benefit from
the contract containing the arbitration provision.” Id. at 741.
Here, the individual Plaintiffs’ claims were based on multiple
theories, including federal and state labor laws and New
Jersey’s Franchise Practices Act. �e District Court needed to
consider not solely whether the individual Plaintiffs performed
work called for by the LLC’s contract, but whether their claims
“s[ought] the benefits of” it, id. at 739, as opposed to the
benefits of “obligations imposed by state law, including
statutes, torts and other common law duties, or federal law,”
ENGlobal, 449 S.W.3d at 275. We also question the District
Court’s conclusion that “the individual Plaintiffs acted as
parties to the SDDA” merely by working for the LLC on
business called for by the SDDA. See Adler, 2023 WL
7490006, at *8. Employees of a business are not necessarily
parties to all of the business’s contracts. See SDDA § 7, Appx
084 (providing for the LLC to hire non-signatory employees).
Moreover, Texas law contemplates a claim-by-claim
estoppel determination rather than wholesale application to an
entire lawsuit. See Kellog, 166 S.W.3d at 741 (analyzing
separate claims separately). Some of Defendant’s estoppel
arguments were specific to certain of Plaintiffs’ claims. For
example, Defendant argued Plaintiffs’ Franchise Practices Act
claim inherently sought the benefits of the SDDA because a
franchise must involve a “written arrangement.” N.J. Stat.
§ 56:10-3. �at argument may not extend (or might apply
differently) to Plaintiffs’ labor law claims. Similarly,
Defendant’s argument that Plaintiffs’ claim for breach of the
covenant of good faith and fair dealing was in reality a contract
claim based on the SDDA would not extend to Plaintiffs’
claims asserting violations of statutes.

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�e District Court also suggested that the estoppel
inquiry could be delegated to an arbitrator because it “relates
to the parties’ agreement as a whole, not specifically to the
parties’ agreement to arbitrate.” Adler, 2023 WL 7490006, at
*8. While that statement was harmless (as the District Court
proceeded to conduct the analysis itself rather than delegate it),
it was incorrect. If the individual Plaintiffs were not bound to
the arbitration provision, they were necessarily not bound to its
delegation clause. See Aerotek, 624 S.W.3d at 204 (arbitration
is a matter of “consent”); Coinbase, Inc. v. Suski, 602 U.S. 143,
151 (2024) (requiring a court to decide if a contract is in effect
before enforcing it).
We will not perform the estoppel analysis on appeal
since it may become moot if the outcome on choice-of-law
results in there being no arbitration. On remand, the District
Court should consider the estoppel analysis to the extent it is
relevant.
VIII.
Accordingly, we will vacate the order compelling
arbitration and remand for the District Court to complete the
choice-of-law analysis under the correct framework, as well as
evaluate, if necessary, whether the non-signatory Plaintiffs are
bound to the contract.

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