FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JACOB BENSON, an individual; No. 19-16686
JOSEPH BENSON; DEBORAH BENSON,
husband and wife; K. B., a minor, by D.C. No.
and through Jacob Benson, guardian 2:18-cv-00006-
ad litem, DWL
Plaintiffs-Appellants,
v. ORDER
CERTIFYING
CASA DE CAPRI ENTERPRISES, LLC, QUESTIONS
an Arizona limited liability TO ARIZONA
company; UNKNOWN PARTIES, SUPREME
named as John Does 1–20; ABC COURT
CORPORATIONS I–X; XYZ
PARTNERSHIPS I–X,
Defendants-Appellees,
CONTINUING CARE RISK RETENTION
GROUP, INC., Garnishee,
Real-Party-In-Interest-Appellee.
Appeal from the United States District Court
for the District of Arizona
Dominic Lanza, District Judge, Presiding
Argued and Submitted October 5, 2020
Pasadena, California
Filed November 23, 2020
2 BENSON V. CASA DE CAPRI ENTERPRISES
Before: Andrew J. Kleinfeld, Andrew D. Hurwitz, and
Daniel A. Bress, Circuit Judges.
Order
SUMMARY *
Certification to Arizona Supreme Court
The panel certified to the Arizona Supreme Court the
following questions:
1. In a garnishment action by a judgment
creditor against the judgment debtor’s
insurer claiming that coverage is owed
under an insurance policy, where the
judgment creditor is not proceeding on an
assignment of rights, can the insurer
invoke the doctrine of direct benefits
estoppel to bind the judgment creditor to
the terms of the insurance contract?
2. If yes, does direct benefits estoppel also
bind the judgment creditor to the
arbitration clause contained in the
insurance policy?
*
This summary constitutes no part of the opinion of the court.
It has been prepared by court staff for the convenience of the reader.
BENSON V. CASA DE CAPRI ENTERPRISES 3
ORDER
This case involves the potential application of Arizona’s
doctrine of direct benefits estoppel in a garnishment action
brought by a judgment creditor against a judgment debtor’s
insurer. The issues of Arizona law presented in this appeal
are important and appear unresolved. Pursuant to Arizona
Revised Statutes (“A.R.S.”) § 12-1861 and Arizona
Supreme Court Rule 27, we respectfully certify two
questions of law to the Arizona Supreme Court, as set forth
in Part III below. The answers to these questions “may be
determinative of” this appeal, and it appears there is “no
controlling precedent” in the decisions of the Arizona
Supreme Court or the Arizona Court of Appeals. A.R.S.
§ 12-1861.
I
Appellee Continuing Care Risk Retention Group
(“CCRRG”) provides liability insurance to skilled nursing
facilities. From January 2012 to August 2013, CCRRG
insured Casa De Capri Enterprises (“Capri”), a skilled
nursing facility, under a “Claims Paid” insurance policy that
provided up to $1,000,000 in liability coverage. The policy
had an arbitration provision, which states:
Any dispute or controversy arising under, out
of, in connection with or in relation to this
Policy shall be submitted to, and determined
and settled by, arbitration in Sonoma County,
California[.] . . . Any demand for arbitration
by a CCRRG Member under this Policy must
be made within twelve (12) months of any
dispute arising out of this “Policy”,
including, but not limited to any denial by
CCRRG of defense or reimbursement,
4 BENSON V. CASA DE CAPRI ENTERPRISES
whether in whole or in part, of any “Claim”
dispute or controversy that arises. . . . The
parties agree that any such award shall also
be final and binding in a direct action against
CCRRG by any judgment creditor of a
CCRRG Member. 1
On December 10, 2012, Appellants Jacob Benson and
his family (“the Bensons”) sued Capri in Maricopa County
Superior Court, alleging negligence and abuse of Jacob.
Jacob, a “vulnerable adult,” see A.R.S. § 46-451(A)(10),
was a resident at Casa De Capri. Capri tendered the
Bensons’ claim to CCRRG, which provided a defense. In
August 2013, Capri filed a Chapter 11 bankruptcy petition,
triggering an automatic stay of all litigation against it. Capri
then cancelled its insurance policy with CCRRG, effective
August 1, 2013. Citing the policy’s terms, CCRRG then
withdrew from its defense of the Bensons’ claims and
disclaimed any further coverage in the action.
Three years later, the Bensons obtained an order partially
lifting the bankruptcy stay so that their action against Capri
could proceed. As part of this order, the Bensons also
obtained an assignment of Capri’s potential bad faith
insurance claim against CCRRG. On December 1, 2017, the
state court entered an approximately $1.5 million
uncontested judgment in favor of the Bensons and against
Capri.
1
Capri and CCRRG also signed a Subscription Agreement
containing a substantially similar arbitration provision.
BENSON V. CASA DE CAPRI ENTERPRISES 5
After judgment entered, the Bensons filed a writ of
garnishment against CCRRG, seeking to obtain from
CCRRG the $1.5 million owed under the Bensons’ judgment
against Capri, plus interest. CCRRG removed the
garnishment action to federal court based on diversity of
citizenship, and then moved to compel arbitration under the
insurance policy’s arbitration clause. In response, the
Bensons maintained that they could not be required to
arbitrate because their garnishment action was not premised
on an assignment of Capri’s coverage claims under the
CCRRG policy, and the Bensons themselves were not
signatories to that policy. CCRRG maintained that the
Bensons sought to avail themselves of the benefits of the
CCRRG policy, and so should be bound by its terms—
including the arbitration clause. CCRRG also disputes that
it would owe any coverage to Capri because Capri cancelled
its policy.
Applying Arizona law, the district court granted
CCRRG’s motion to compel arbitration and dismissed the
action, holding that the Bensons, though non-signatories to
the policy, were bound to its arbitration clause under
Arizona’s doctrine of direct benefits estoppel. The Bensons
appealed.
II
The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et
seq., governs the arbitration clause. The FAA makes
“written arbitration agreements ‘valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of a contract.’” Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 629–30 (2009) (quoting
9 U.S.C. § 2). Generally, “as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.” Moses H. Cone Mem’l
6 BENSON V. CASA DE CAPRI ENTERPRISES
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983).
Here, there is no apparent dispute that the arbitration clause,
if applicable, covers the Bensons’ claims. Instead, the
threshold question is “whether a particular party,” the
Bensons, are “bound by the arbitration agreement.”
Rajagopalan v. NoteWorld, LLC, 718 F.3d 844, 847 (9th Cir.
2013). To answer that question, we turn to “[t]raditional
principles of state law,” in this case, Arizona’s. Id.
(quotations omitted).
Under Arizona law, “whether a nonparty is bound by a
contract term is properly resolved by the Court as a matter
of law.” JTF Aviation Holdings Inc. v. CliftonLarsonAllen
LLP, 472 P.3d 526, 529 (Ariz. 2020) (quoting Duenas v. Life
Care Ctrs. of Am., Inc., 336 P.3d 763, 771 (Ariz. Ct. App.
2014) (alterations omitted)). The Arizona Supreme Court
recently explained that “theories available to bind non-
signatories to the terms of a contract” include “incorporation
by reference, assumption, agency, veil-piercing or alter ego,
equitable estoppel, and third-party beneficiary.” Id. at 529–
30 (citing, inter alia, Duenas, 336 P.3d at 772).
Relevant here is a variant of equitable estoppel,
sometimes called “direct benefits estoppel,” which the
district court applied to bind the Bensons to the policy’s
arbitration clause. Under Arizona’s doctrine of direct
benefits estoppel, a non-signatory may be bound to the terms
of a contract when the non-signatory “(1) knowingly exploits
the benefits of an agreement . . . , or (2) seeks to enforce
terms of that agreement or asserts claims that must be
determined by reference to the agreement.” Austin v. Austin,
348 P.3d 897, 906 (Ariz. Ct. App. 2015).
In attempting to collect a judgment against the insured,
Arizona law permits a non-signatory judgment creditor to
use garnishment to litigate an insurer’s obligations to the
BENSON V. CASA DE CAPRI ENTERPRISES 7
judgment debtor under an insurance policy. See Sandoval v.
Chenoweth, 428 P.2d 98, 102 (Ariz. 1967) (“[A]fter
recovering a judgment against an insured under a liability
policy, the injured third person may collect such judgment
by instituting garnishment proceedings against the liability
insurer.”); see also Holt v. Utica Mut. Ins. Co., 759 P.2d 623,
626 (Ariz. 1988); Kepner v. W. Fire Ins. Co., 509 P.2d 222,
225 (Ariz. 1973) (“Such a testing of the insurer’s liability
may take the form of . . . proceedings on garnishment
following the trial of the third party’s action . . . .”).
If Capri sought to litigate whether CCRRG was required
to cover its losses under the insurance policy, it seems quite
clear the arbitration clause would apply. The same would be
true if the Bensons were assigned Capri’s contractual rights
under the policy. See Farmers Ins. Exch. v. Udall, 424 P.3d
420, 425 (Ariz. Ct. App. 2018) (rejecting argument that the
assignee of an insured’s post-loss policy claim is “allow[ed]
. . . to pursue its claims unhampered by the policy’s
obligations”). But the Bensons maintain that Arizona’s
garnishment action is of a “special and limited nature,” and
emphasize that they are not proceeding under an assignment
of Capri’s rights to coverage under the insurance contract.
Neither we nor the parties have located any Arizona cases
applying direct benefits estoppel in a garnishment action
brought by a judgment creditor against the judgment
debtor’s insurer, seeking to obtain amounts under the policy
in satisfaction of the judgment.
In support of their position, the Bensons cite Able
Distributing Co. v. James Lampe, General Contractor, 773
P.2d 504 (Ariz. Ct. App. 1989). In that case, the plaintiff,
Able, obtained a default judgment against a subcontractor,
Master Mechanical. Id. at 506. Able then served a writ of
garnishment against the general contractor, Lampe, based on
8 BENSON V. CASA DE CAPRI ENTERPRISES
a debt that Lampe owed to Master Mechanical under a
contract to which Able was not a signatory. Id. The trial
court determined that Lampe was indebted to Master
Mechanical and entered judgment in favor of Able as
judgment creditor. Id. at 507. On appeal, Lampe argued that
its contract with Master Mechanical required all disputes to
be settled through arbitration, and thus its liability to Master
Mechanical could not be determined in a garnishment
proceeding. Id. at 515.
The Able court rejected this argument, stating that
“[p]arties to a contract which includes an arbitration clause
cannot control the rights of a non-party garnishing creditor
such as Able.” Id. Although Able also relied on the fact that
Lampe had unreasonably delayed pursuing arbitration, id.,
the Bensons maintain that in a garnishment action, Able
forecloses any attempt to bind a non-signatory judgment
creditor to the terms of the judgment debtor’s contract, at
least absent a formal assignment of rights under the contract.
For its part, CCRRG contends that Able did not purport
to announce a special rule for garnishment actions, but
instead only a “general rule” that a contract normally does
not bind non-signatories. That rule, CCRRG notes, is
subject to recognized exceptions. This argument finds
support in Duenas, where the court cited Able for the
proposition that a party “is not bound to arbitrate disputes it
has not specifically agreed to arbitrate,” before noting that
“[t]here are some exceptions to the general rule,” such as
equitable estoppel or third-party beneficiary theories.
336 P.3d at 772. In CCRRG’s view, the form of the
garnishment proceeding does not change the substance of
this action—a dispute over insurance coverage under a
contract—and thus the ordinary exceptions for binding non-
signatories to the terms of a contract apply.
BENSON V. CASA DE CAPRI ENTERPRISES 9
According to CCRRG, the district court correctly
applied the doctrine of direct benefits estoppel, as articulated
in Austin, 348 P.3d at 906, because the Bensons seek to
exploit the benefits of the CCRRG policy by collecting its
proceeds, and their claimed entitlement to those benefits
must be determined by reference to the policy’s terms, which
set the conditions of coverage.
We are unsure whether to read Able as announcing a
general rule, which is subject to the exceptions identified in
Duenas, 336 P.3d at 772, or a special rule for garnishment
actions, exempting judgment creditors from the Duenas
exceptions. See also Crawford Prof’l Drugs, Inc. v. CVS
Caremark Corp., 748 F.3d 249, 260 (5th Cir. 2014) (noting
a general “dearth of Arizona precedent” involving
“arbitration-by-estoppel” theories); United States v. Harkin
Builders, Inc., 45 F.3d 830, 835 (4th Cir. 1995) (describing
Able as “holding that [a] judgment creditor seeking under
Arizona law to attach a contract interest by way of
garnishment is not bound by [the] contract’s arbitration
clause”).
In the absence of any apparent controlling precedent, and
out of respect for Arizona courts and their preeminent role
in interpreting Arizona law, we believe it “most suitable” to
certify this issue to “the highest court of the state whose law
is in question.” Fast Trak Inv. Co., LLC v. Sax, 962 F.3d
455, 468 (9th Cir. 2020).
III
We therefore certify the following questions to the
Arizona Supreme Court:
1) In a garnishment action by a judgment
creditor against the judgment debtor’s
10 BENSON V. CASA DE CAPRI ENTERPRISES
insurer claiming that coverage is owed
under an insurance policy, where the
judgment creditor is not proceeding on an
assignment of rights, can the insurer
invoke the doctrine of direct benefits
estoppel to bind the judgment creditor to
the terms of the insurance contract?
2) If yes, does direct benefits estoppel also
bind the judgment creditor to the
arbitration clause contained in the
insurance policy?
We respectfully ask the Arizona Supreme Court to
exercise its discretionary authority to accept certification
under Ariz. Rev. Stat. § 12-1861. “Our phrasing of the
questions should not restrict the Court’s consideration of the
issues involved. We acknowledge that the Court may
reformulate the relevant state law questions as it perceives
them to be, in light of the contentions of the parties.” Raynor
v. United of Omaha Life Ins. Co., 858 F.3d 1268, 1273 (9th
Cir. 2017) (quotations and alterations omitted). If the
Arizona Supreme Court decides not to accept certification,
we will resolve these questions based on our best
understanding of Arizona law.
The Clerk will file a certified copy of this order with the
Arizona Supreme Court under Arizona Supreme Court Rule
27. This appeal is withdrawn from submission and will be
resubmitted following the conclusion of any proceedings in
the Arizona Supreme Court. The Clerk is directed to
administratively close this docket, pending further order.
We retain jurisdiction over any further proceedings in this
Court. The parties will notify the Clerk within one week
after the Arizona Supreme Court accepts or rejects
BENSON V. CASA DE CAPRI ENTERPRISES 11
certification and again within one week after an opinion is
rendered.
IV
Counsel for Appellants, the Bensons:
H. Michael Wright
David R. Schwartz
Udall Shumway, PLC
1138 North Alma School Road, Suite 101
Mesa, AZ 85201
(480) 461-5300
Steven S. Guy
The Guy Law Firm, PLLC
10105 E. Via Linda, Suite 103
Scottsdale, AZ 85258
(480) 767-3175
Counsel for Appellee CCRRG:
Steven G. Mesaros
Brian E. Cieniawski
Renaud Cook Drury Mesaros, PA
One North Central Avenue, Suite 900
Phoenix, AZ 85004
(602) 307-9900
Terri A. Sutton
Shauna Martin Ehlert
Cozen O’Connor
999 Third Avenue, Suite 1900
Seattle, WA 98104
(206) 340-1000
12 BENSON V. CASA DE CAPRI ENTERPRISES
IT IS SO ORDERED.
/s/ Andrew D. Hurwitz
Andrew D. Hurwitz,
United States Circuit Judge, Presiding