Nonsignatory Cannot Invoke a Delegation Clause Absent Clear Assent; Texas Direct-Benefits Estoppel May Still Compel Arbitration of Warranty Claims

Introduction

In Greg Kerr v. General Motors LLC (3d Cir. Aug. 18, 2026) (nonprecedential), the Third Circuit addressed a recurring arbitration problem: whether a non-signatory manufacturer (General Motors LLC, “GM”) can compel arbitration—including forcing an arbitrator to decide “arbitrability” via a delegation clause—based on an arbitration provision contained in a retail installment sales contract between a consumer (Robert Knowles) and a dealership (Bruner Motors).

Knowles, a Texas citizen, purchased a new GM vehicle from Bruner Motors and signed a Retail Installment Sales Contract containing a broad arbitration provision and an explicit delegation clause (covering “the interpretation and scope” and “the arbitrability of the claim or dispute”). After fuel-pump problems surfaced, Knowles filed a putative class action against GM in the District of Delaware alleging, among other claims, fraud by omission, unjust enrichment, Magnuson-Moss Warranty Act violations, and breach of express and implied warranties—while not suing the dealership and not relying on the sales contract as the source of the warranty obligations he invoked.

The central issues on appeal were (1) who decides arbitrability when the movant is a nonsignatory and (2) whether Texas equitable-estoppel doctrines permit GM to compel arbitration despite its nonsignatory status.

Summary of the Opinion

The panel held that Knowles and GM did not form a valid agreement to arbitrate, and that GM—being neither a signatory nor an assignee—could not invoke the sales contract’s delegation clause to force an arbitrator to decide arbitrability. The court further held that Texas “intertwined-claims estoppel” should not be applied because the Texas Supreme Court has not recognized it. However, because Texas does recognize “direct-benefits estoppel,” and because Knowles’s implied-warranty theory might arguably depend on the sales contract, the panel vacated the denial of arbitration and remanded for the District Court to decide whether direct-benefits estoppel applies.

Judge Matey dissented, reasoning that the existence of a delegation clause in the Knowles–Bruner Motors arbitration agreement should be enough to require arbitration of the arbitrability question, given allegations about GM’s dealership network and agency-like relationships.

Analysis

Precedents Cited

  • Zirpoli v. Midland Funding, LLC, 48 F.4th 136 (3d Cir. 2022): Framed the “arbitration about arbitration” problem and supplied the “clear and unmistakable” delegation framework the panel applied—while distinguishing this case because GM was a nonsignatory.
  • Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985): Cited for the FAA’s mandate that courts compel arbitration when an agreement covers the dispute.
  • Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019): Used for the rule that, when delegation is valid, courts cannot decide arbitrability—even if the argument for arbitration seems “wholly groundless.” The majority relied on Henry Schein but emphasized that delegation cannot bind parties who never agreed with each other to delegate.
  • Lamps Plus, Inc. v. Varela, 587 U.S. 176 (2019): Quoted for the general rule resolving scope ambiguities in favor of arbitration, while treating that presumption as limited by consent principles.
  • Coinbase, Inc. v. Suski, 602 U.S. 143 (2024): Anchored the opinion’s consent-based limit: arbitration applies “if, and only if, the parties actually agreed.”
  • MZM Constr. Co., Inc. v. N.J. Bldg. Laborers Statewide Benefit Funds, 974 F.3d 386 (3d Cir. 2020): Supported the court’s authority to decide contract formation/existence questions even when a contract includes arbitration language.
  • Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009): Provided the key bridge: nonsignatories may enforce arbitration agreements through “traditional principles of state law” such as estoppel.
  • First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995): Confirmed that ordinary state-law contract-formation principles govern whether parties agreed to arbitrate.
  • Griswold v. Coventry First LLC, 762 F.3d 264 (3d Cir. 2014): Supplied two important propositions: appellate jurisdiction under FAA § 16, and the limitation that the presumption favoring arbitration does not extend to nonsignatories.
  • Gov't Emps. Ins. v. Mount Prospect Chiropractic Ctr., P.A., 98 F.4th 463 (3d Cir. 2024) and Gay v. Creditform, 511 F.3d 369 (3d Cir. 2007): Cited for de novo/plenary review standards over motions to compel and arbitration-scope questions.
  • Newman v. Plains All Am. Pipeline, L.P., 23 F.4th 393 (5th Cir. 2022): Used for Texas’s two-step approach: first contract terms (who is bound), then equitable theories (like estoppel) for nonsignatories.
  • Koppers Co., Inc. v. Aetna Cas. & Sur. Co., 98 F.3d 1440 (3d Cir. 2021): (As quoted) constrained the federal court’s role to predicting, not reshaping, state law on estoppel doctrines.
  • Van Zanten v. Energy Transfer Partners, L.P., 320 S.W.3d 845 (Tex. App. 2010) and Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260 (5th Cir. 2004): Cited for the basic equitable-estoppel principle: a party cannot accept contract benefits while avoiding burdens.
  • Lennar Homes of Tex. Land & Constr., Ltd. v. Whiteley, 672 S.W.3d 367 (Tex. 2023): Central to the remand: articulated the direct-benefits estoppel standard (“arises from the contract or must be determined by reference to it”) and suggested implied-warranty claims may arise from an underlying sales contract.
  • Meyer v. WMCO-GP, LLC, 211 S.W.3d 302 (Tex. 2006) and Grigson v. Creative Artists Agency LLC, 210 F.3d 524 (5th Cir. 2000): Supported Texas’s recognition of direct-benefits estoppel in the arbitration context and the “reference to or presumes the existence of” formulation.
  • G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015): Quoted (via Lennar Homes) for the requirement that the claim be unable to stand independently without the contract.
  • Hays v. HCA Holdings Inc., 838 F.3d 605 (5th Cir. 2016); Glassell Producing Co. v. Jared Res., Ltd., 422 S.W.3d 68 (Tex. App. 2014); Black v. Diamond Offshore Drilling, Inc., 551 S.W.3d 346 (Tex. App. 2018); and Signal Ridge Owners Assn., Inc. v. Landmark Am. Ins. Co., 657 F. Supp. 3d 866 (N.D. Tex. 2023): These authorities framed the contested status of “intertwined-claims estoppel” under Texas law. The panel sided with the view that Texas has not embraced it.
  • Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624 (Tex. 2018): Provided a limiting principle for direct-benefits estoppel: it is harder to bind a nonsignatory when the contract imposes no duties on that nonsignatory.
  • MAN Engines & Components, Inc. v. Shows, 434 S.W.3d 132 (Tex. 2014): Cited for Texas warranty law propositions—warranties may “move with” goods and privity may not be required for implied warranty claims against manufacturers.
  • Forestal Guarani S.A. v. Daros Int'l, Inc., 613 F.3d 395 (3d Cir. 2010): Justified remanding because the District Court had not addressed direct-benefits estoppel in the first instance.
  • KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026): Cited for the appellate principle permitting affirmance on any ground supported by the record.
  • Barron v. GM LLC, No. 25-5696, 2026 WL 1383769 (E.D. Pa. May 18, 2026): Offered persuasive support for the proposition that there was no agreement between plaintiffs and GM and that this conclusion is consistent with Zirpoli.

Legal Reasoning

  1. Delegation requires agreement between the litigants. The sales contract contained a delegation clause, and Knowles clearly agreed to delegate arbitrability disputes with Bruner Motors. But the panel treated delegation as a distinct contractual commitment (a “second arbitration agreement”) and concluded there was no “clear and unmistakable” delegation agreement between Knowles and GM. Because GM was neither a signatory nor an assignee, the court refused to treat the dealership contract as automatically empowering GM to force an arbitrator to decide whether GM can enforce it.
  2. State contract law governs nonsignatory enforcement theories. Relying on Arthur Andersen LLP v. Carlisle, the court applied Texas contract principles. Under the Texas framework described in Newman v. Plains All Am. Pipeline, L.P., GM first failed at the “who is bound by the contract terms” step because the contract defined “we/us” as the dealership and did not bind GM.
  3. Intertwined-claims estoppel rejected as a matter of predicted Texas law. The panel affirmed the district court’s refusal to apply intertwined-claims estoppel, but on a different rationale: predicting the Texas Supreme Court would not recognize that doctrine given repeated statements that it has not adopted it and intermediate-court skepticism (e.g., Black v. Diamond Offshore Drilling, Inc.).
  4. Direct-benefits estoppel is viable and potentially dispositive. The opinion identified the controlling Texas test: whether the signatory’s claim against the nonsignatory “arises from the contract or must be determined by reference to it” (Lennar Homes of Tex. Land & Constr., Ltd. v. Whiteley). The panel noted competing considerations:
    • Against estoppel: the sales contract imposed no obligations on GM, and Knowles relied on GM’s “New Vehicle Limited Warranty,” not the sales contract.
    • For estoppel: Texas authorities suggest implied warranty claims may be connected to the underlying sales transaction/contract, and warranties can “move with” the goods (MAN Engines & Components, Inc. v. Shows), potentially requiring “reference to” the sales contract to determine liability.
    Because the district court never analyzed this, remand was necessary.

Impact

Although designated “not binding precedent,” the opinion has practical, near-term significance in automotive and consumer class litigation where manufacturers frequently seek to compel arbitration based on dealership sales contracts:

  • Delegation clause limits for nonsignatories. The decision underscores that a delegation clause does not automatically transfer to a nonsignatory; courts may first decide whether the nonsignatory has any right to invoke the arbitration agreement at all.
  • Texas estoppel doctrines narrowed. By refusing to extend Texas law to embrace intertwined-claims estoppel, the court channels nonsignatory efforts into the more demanding direct-benefits framework.
  • Warranty-claim drafting consequences. Plaintiffs who plead warranty theories (especially implied warranty of merchantability) may face increased arbitration risk under direct-benefits estoppel if adjudicating the claim requires reliance on the sales contract’s existence or terms.
  • District court focus on “reference to the contract.” The remand instructs district courts to make a claim-by-claim assessment of contractual dependence, rather than treating the existence of a broad arbitration clause as automatically sweeping in manufacturer disputes.

Complex Concepts Simplified

Arbitrability
The gateway question of whether a particular dispute must be arbitrated at all (as opposed to litigated in court).
Delegation clause
A clause saying the arbitrator—not the court—decides arbitrability. It functions like a separate agreement to arbitrate the gateway issue.
Nonsignatory
A person or entity that did not sign the contract containing the arbitration clause. Nonsignatories can sometimes enforce arbitration through state-law doctrines (e.g., estoppel), but not simply because arbitration is favored.
Equitable estoppel (arbitration context)
A fairness doctrine preventing a party from using a contract as a sword (to obtain benefits or assert contract-dependent claims) while using it as a shield (to avoid arbitration).
Intertwined-claims estoppel
A theory (not adopted by the Texas Supreme Court, as the panel predicted) that can bind a signatory to arbitrate with a nonsignatory when the claims are tightly intertwined with the contract and the contracting parties’ relationships.
Direct-benefits estoppel
A Texas-recognized doctrine requiring arbitration when a signatory’s claim against a nonsignatory depends on the contract—i.e., liability “arises from” the contract or must be determined by “reference to” it, such that the claim cannot stand independently without the contract.
Magnuson-Moss Warranty Act
A federal statute governing consumer product warranties. In practice, Magnuson-Moss claims often travel with state-law warranty theories and can raise arbitration issues depending on how warranty obligations are sourced and framed.

Conclusion

The Third Circuit’s decision draws a sharp procedural line: a dealership contract’s delegation clause does not, without more, allow a nonsignatory manufacturer to force an arbitrator to decide whether the manufacturer can compel arbitration. At the same time, the court emphasized that Texas direct-benefits estoppel remains a viable pathway for nonsignatories—especially where implied warranty theories might require reference to the underlying sales contract. The remand squarely places the next, dispositive question on the district court: whether Knowles’s implied warranty of merchantability claim “arises from” or must be determined by reference to the sales contract under Lennar Homes of Tex. Land & Constr., Ltd. v. Whiteley.