Unreported / Non-Citable
Background
Harpreet Singh Rai, an early investor who became Ouraring Inc.’s President and later its CEO, sued the wearable-technology maker and its Finnish affiliate Oura Health Oy after his 2021 termination, claiming the company never delivered equity and severance benefits promised under his 2019 employment agreement. Rai brought four claims: breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and promissory estoppel.
Defendants moved to compel arbitration, pointing to language in the 2019 employment agreement stating that, as a further condition of employment, Rai was required to execute a separate “Dispute Resolution Agreement” (Exhibit B) and that the employment agreement would not be effective until he did. Neither side could produce a signed copy of that Dispute Resolution Agreement. Defendants also moved, in the alternative, to dismiss the complaint for failure to state a claim.
The Court’s Holding
The court denied the motion to compel arbitration on two independent grounds. First, it rejected Defendants’ equitable estoppel theory — that Rai could not rely on the employment agreement to support his claims while avoiding its arbitration clause — because equitable estoppel presumes a valid underlying contract exists, and Defendants had deliberately declined to take any position on whether a valid employment agreement was actually formed. Following the Ninth Circuit’s reasoning in Sanford v. MemberWorks and the Third Circuit’s decision in Sandvik AB v. Advent International, the court held a party cannot invoke an arbitration provision’s severability while simultaneously refusing to concede the underlying contract is valid.
Second, applying a summary-judgment-like standard to contract formation under California law, the court found Defendants failed to prove Rai ever assented to the Dispute Resolution Agreement. Defendants pointed to an email transmitting the document, Rai’s experience negotiating similar agreements for other Ouraring employees, and Rai’s failure to affirmatively deny signing it — but no executed copy existed, and Rai declared he never reviewed the agreement as containing final terms. The court also rejected Defendants’ fallback theory that Rai waived the signature requirement by continuing to work at the company, explaining that continued employment is not conduct “so inconsistent with an intent to enforce” the signature requirement that it implies a waiver; if anything, the more reasonable inference from an unsigned document is that no agreement was reached.
On the motion to dismiss, the court let the promissory estoppel and unjust enrichment claims proceed against the Finnish affiliate Oura Health Oy, since the complaint plausibly alleged the two Oura entities shared a board that approved Rai’s compensation and that Oura Health board members personally promised him stock options. But the breach of contract and implied covenant claims against Oura Health Oy failed because only a signatory to a contract can be liable for breaching it, and Rai did not plausibly allege that Kevin Lin — who signed on Ouraring’s behalf — was acting for Oura Health Oy, or that the two entities were alter egos.
Key Takeaways
- A party cannot invoke equitable estoppel to compel arbitration while refusing to take a position on whether the underlying contract containing the arbitration clause is actually valid — estoppel presumes a valid agreement exists.
- Courts apply a summary-judgment standard to contract-formation disputes over arbitration agreements, meaning the employer must prove assent by a preponderance of the evidence, with inferences drawn in the employee’s favor.
- Continuing to work for an employer, standing alone, is not conduct sufficiently inconsistent with enforcing a signature requirement to establish waiver of that requirement under California law.
- Breach of contract and implied covenant claims generally run only against the signatory entity; related corporate affiliates can still face unjust enrichment and promissory estoppel claims based on shared governance and direct promises from their own board members, even without being a contract signatory.
Why It Matters
For California employers, this decision is a cautionary tale about relying on boilerplate language declaring an agreement “ineffective” without a signed arbitration exhibit — if the exhibit is never actually executed, courts will not assume the employee agreed to arbitrate just because employment continued.
For executives and employees negotiating compensation across corporate affiliates, the ruling shows that promissory estoppel and unjust enrichment claims can reach a non-signatory parent or sister company when its own board members made direct promises and shared governance with the signing entity, even where a formal breach of contract claim against that affiliate would fail.