Morales Posada v. Cultural Care, Inc.

Case summary

At a glance

Parties: Karen Morales-Posada, Amanda Sarmento, Ferreira Guimaraes, Williana Rocha and Sara Barrientos, individually and on behalf of all others similarly situated (plaintiffs-appellees), v. Cultural Care, Inc. (defendant-appellant)
Case no.: United States Court of Appeals for the First Circuit, No. 24-1248
Court: United States Court of Appeals for the First Circuit, on appeal from the United States District Court for the District of Massachusetts (Hon. Indira Talwani, U.S. District Judge)
Forum and rules: Motion to compel arbitration under the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and the New York Convention (9 U.S.C. §§ 201-208)
Treaty: Arbitration clause in the au pairs' contract with International Care Ltd. (ICL), referring disputes to the arbitral tribunals of Switzerland; New York Convention
Court: Barron, Chief Judge (author), Howard and Gelpí, Circuit Judges
Sector: Au pair placement; wage and hour claims
Outcome: The First Circuit affirmed the District Court's denial of Cultural Care's motion to compel arbitration (18 June 2025).

The dispute

Cultural Care, Inc., a Massachusetts company and a State Department-designated sponsor of the au pair exchange program, places foreign nationals as au pairs with U.S. host families. Former au pairs sued it in a putative class action for unpaid wages under the Fair Labor Standards Act and state wage and hour laws, and for deceptive trade practices. After an earlier appeal on derivative sovereign immunity, Cultural Care moved to compel arbitration. It relied on a contract the au pairs had signed with International Care Ltd. (ICL), a separate Swiss company that provided recruiting, screening and pre-departure services, which referred disputes to the arbitral tribunals of Switzerland. Cultural Care argued that arbitrability had been delegated to the arbitrator, that it could enforce the clause as a third-party beneficiary under federal and Swiss law, and that equitable estoppel applied; the plaintiffs answered that Cultural Care was a nonsignatory without enforceable rights and that it had waived arbitration by litigating.

Key holdings

Even assuming the ICL Contract contains a delegation clause, a nonsignatory must first show that it is entitled to enforce that clause. Cultural Care offered no developed argument for overcoming the rule that a contract binds and benefits only its parties. Apollo Computer v. Berg did not help it, so the question of arbitrability stayed with the court. pp. 13–18
No third-party beneficiary status. The six provisions Cultural Care cited refer only to ICL, and ICL was not shown to derive no benefit from them. A party that merely benefits from a contract is not necessarily a third-party beneficiary. pp. 19–24
The decisive question is whether the signatories intended to confer arbitration rights on the nonsignatory, not just any right under the contract (Hogan v. SPAR Grp.). This must be shown with "special clarity". The arbitration clause refers only to the "parties" and ICL's successors and assignees, while other provisions mention "affiliates" and "staff in the United States". That omission shows no intent to give Cultural Care arbitration rights, including under the Release Clause. pp. 24–37
Swiss law does not change the result. Cultural Care conceded that Swiss law is equivalent to federal common law here, and its expert's declaration and the Swiss Federal Supreme Court decision it cited (4A_310/2016) did not support a different outcome. Requiring the arbitration clause itself to show intent does not discriminate against arbitration. pp. 31–34
No equitable estoppel. The plaintiffs' statutory wage and hour claims do not rely on the ICL Contract and would exist without it. Whether Cultural Care is their employer turns on the control it actually exercises, as in Hogan. pp. 38–42
The Court assumed, in Cultural Care's favour, that the New York Convention applies. It did not reach the District Court's alternative finding of waiver by litigation conduct or the plaintiffs' public policy argument. pp. 10–12, n. 3

Procedural history

February 2021The plaintiffs file the operative Second Amended Complaint in the District of Massachusetts.
2023In a first interlocutory appeal (66 F.4th 348), the First Circuit affirms the denial in part of Cultural Care's motion to dismiss, including its Yearsley derivative sovereign immunity defence.
7 July 2023Cultural Care files its answer and pleads the arbitration agreements as a defence.
18 August 2023Cultural Care moves to compel arbitration under the FAA and the New York Convention.
28 February 2024The District Court denies the motion. It finds waiver by litigation conduct and rules that Cultural Care cannot enforce the ICL Contract's arbitration clause.
18 June 2025The First Circuit affirms the denial of the motion to compel arbitration.