Mars, Inc. v. Szarzynski, No. 20-01344, (D.D.C. July 5, 2021) [click for opinion]

Plaintiff Mars, Inc. ("Mars") sued its former executive Jacek Szarzynski, and two companies in the corporate family of Szarzynski's current employer, for theft of trade secrets and fraudulent reimbursement of business expenses that allegedly occurred during Szarzynski's departure from Mars.

During his employment, Szarzynski executed several contracts with Mars and its subsidiaries. Szarzynski's last general employment contract (the "Employment Contract"), was executed with Mars Belgium, and was governed by Belgian law. The Employment Contract contained a provision that "[a]ny disputes arising out of or in relation with this Agreement and its termination shall be finally settled by arbitration in Brussels under the CEPANI Rules of Arbitration." Defendants accordingly filed a motion to dismiss, arguing that Mars must arbitrate its claims against Szarzynski.

The district court first considered whether it or an arbitrator should determine whether the claims against Szarzynski were arbitrable. The court noted that the arbitration provision in the Employment Contract utilized broad language regarding arbitration and incorporated the CEPANI Rules, which explicitly reserved questions of arbitrability for the arbitrator. However, the court explained that where the party resisting arbitration is a non-signatory to the agreement, courts generally independently assess gateway questions of arbitrability. The court therefore chose to independently assess whether Mars was bound to arbitrate its claims against Szarzynski.

The district court determined that Mars was bound to arbitrate under the Employment Contract as a third-party beneficiary to the contract. The court explained that the Employment Contract contained numerous provisions that explicitly benefitted Mars, including prohibiting Szarzynski from joining Mars' competitors, soliciting its clients, misappropriating its intellectual property, or divulging its confidential information. These explicit protections inuring to Mars' benefit—along with the fact that Mars did not dispute that Szarzynski functioned as a Mars employee who worked on global Mars brands not limited to specific subsidiaries—rendered Mars a beneficiary under Belgian law.

The court rejected, however, Defendants' arguments that arbitration was required under equitable estoppel principles. The court explained that a non-signatory may be compelled to arbitrate under the doctrine of equitable estoppel "if he or she knowingly seeks and obtains direct benefits from a contract, seeks to enforce the terms of that contract, or asserts claims that must be determined by reference to that contract." Here, Mars was not advancing claims for breach of the Employment Contract, but statutory and tort theories of liability against Szarzynski. Accordingly, there was no equitable estoppel basis on which to compel arbitration.

Finally, the court rejected Mars' argument that certain bonus incentive agreements with Szarzynski (the "Incentive Agreements") allowed Mars to bring its claims in court. The court acknowledged that, although the Incentive Agreements did not require arbitration, and indeed permitted Mars to seek remedies in court in limited circumstances, the agreements solely concerned the employee bonus program in which Szarzynski was enrolled, did not govern Szarzynski's day to day employment from which Mars' claims arose, and were not applicable to the claims Mars brought in the suit.

The court therefore dismissed the claims against Szarzynski in favor of arbitration, based on Mars' status as a third-party beneficiary of the Employment Contract, and stayed the case with respect to the remaining Defendants pending the outcome of the arbitration proceedings.

Lindsay Wright Brett of the Houston office contributed to this summary.