Cook v. Rent-A-Center, Inc. et al

Filing 24

MEMORANDUM AND ORDER signed by District Judge Morrison C. England, Jr. on 09/25/17 ORDERING that this case is STAYED until such time as the Supreme Court issues its decision in Ernst & Young LLP v. Morris. The parties are directed to notify the Cour t in writing within 14 days after that decision has been reached. Defendant's 7 Motion is consequently GRANTED to the extent it requests the above-referenced stay. Given the Court's decision to stay this matter, however, the remaining portions of said Motion, which ask the Court to dismiss and/or strike portions of the proceedings, are DENIED without prejudice to refiling once the stay in this case has been lifted. (Benson, A.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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KUREEN COOK, individually, and on
behalf of other members of the general
public similarly situated,

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Plaintiff,

No. 2:17-cv-00048-MCE-EFB

MEMORANDUM AND ORDER

v.
RENT-A-CENTER, INC., a Delaware
corporation; RENT-A-CENTER WEST,
INC., a Delaware corporation; RENT-ACENTER FRANCHISING
INTERNATIONAL INC., a Texas
corporation; and DOES 1 through 10,
inclusive,

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Defendants.

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Plaintiff Kureen Cook (“Plaintiff”) alleges a nationwide collective action claim

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against his former employer, Rent-A-Center (“RAC”),1 for overtime under the Fair Labor

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Standards Act (“FLSA”), as well as numerous Rule 23 class action claims under

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California law for alleged unpaid wages, unpaid overtime, unpaid meal and rest breaks,

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unreimbursed business expenses, failure to compensate for split shifts, and penalties

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arising from allegedly non-compliant wage statements under the California Labor Code

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and California Business and Professions Code.

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Plaintiff’s Complaint names three Rent-A-Center entities as Defendants: Rent-A-Center, Inc.,
Rent-A Center West, Inc. and Rent-A-Center Franchising International, Inc. All three entities will be
collectively referred to as RAC in this Memorandum and Order unless otherwise noted.

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RAC now moves to dismiss Plaintiff’s individual claims on grounds that under the

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terms of an arbitration agreement reached with Plaintiff, Plaintiff agreed to arbitrate all

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“past, present and future” disputes with RAC, including all claims for “wages and other

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compensation due” and any statutory claims (the “Arbitration Agreement” or

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“Agreement”). RAC further moves to strike Plaintiff’s collective and class action claims

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on grounds that the Arbitration Agreement precludes such claims. Finally, and in the

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alternative, since resolution of a case currently pending before the United States

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Supreme Court may be dispositive of much of Plaintiff’s action in any event, RAC asks

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the Court to stay the entire action if it is disinclined to simply enforce the terms of the

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Arbitration Agreement.

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As set forth below, the Court finds it appropriate to stay this action pending further

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guidance from the Supreme Court. To the extent RAC’s motion requests a stay of these

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proceedings, then, the motion is GRANTED. Given the stay that is hereby imposed, the

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Court declines to address RAC’s motion to the extent it requests the striking of certain

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matters and/or dismissal of the case. That portion of RAC’s motion is therefore DENIED

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without prejudice to the refiling of the motion at such time as the Court’s stay of the case

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is lifted.2

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BACKGROUND

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On or about July 30, 2013, at the inception of his employment with RAC, Plaintiff

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executed the Arbitration Agreement that is the subject of this motion. Declaration of

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Marc Tuckey (“Tuckey Decl.”), Ex. 1. That Agreement contains the following provision

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requiring that all claims asserted by Plaintiff against RAC be arbitrated:

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The Company and I mutually consent to the resolution by
arbitration of all claims or controversies (“claims”), past,
present or future, including without limitation, claims arising
out
of
my
application
for
employment,

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Having determined that oral argument would not be of material assistance, the Court ordered this
matter submitted on the briefs in accordance with E.D. Cal. Local Rule 230(g).

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assignment/employment, and/or the termination of my
assignment/employment that the Company may have against
any of the following: (1) the Company, . . . (3) the Company’s
parent, subsidiary , and affiliated entities.3

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******

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. . . The claims covered by this Agreement include, but are
not limited to : . . . claims for wages or other compensation
due . . . and claims for violation of any federal, state or other
governmental law, statute, regulation, or ordinance . . .

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Id. at Ex. 1, p. 1
Plaintiff worked as an hourly-paid, non-exempt, Customer Accounts
Representative and Accounts Manager for RAC at various locations between July of

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2013 and April of 2016. Pl.’s Compl., ¶ 6. After his employment with RAC ended,

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Plaintiff instituted the present lawsuit in this Court despite the above-enumerated

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arbitration provisions.

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As indicated above, in addition to individual claims, Plaintiff also asserts collective

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and class action claims on behalf of other similarly situated individuals. The Arbitration

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Agreement, however, purports to expressly preclude such claims, stating as follows:

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Class Action Waiver

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There will be no right or authority for any dispute to be
brought, heard, or arbitrated as a class action and/or as a
collective action (“Class Action Waiver”). Nor shall the
Arbitrator have any authority to hear or arbitrate any such
dispute.

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Id. at Ex. 1, p. 2.
Given this provision of the Arbitration Agreement, RAC 1) moves to dismiss

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Plaintiff’s individual claims as being brought by this lawsuit in contravention of the

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Arbitration Agreement; 2) moves to strike Plaintiff’s collective and class action

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allegations on grounds they are precluded by the Class Action Waiver; and 3) moves to

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compel arbitration as to Plaintiff’s individual claims, only.

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Rent-A-Center, Inc. is the parent company of Rent-A-Center West, Inc. Both companies do
business as “Rent-A-Center”. Rent-A-Center Franchising International. Inc. is an affiliate of Rent-ACenter, Inc. See Tuckey Decl., ¶ 4. The Arbitration Agreement defines “Company” to include both RentA-Center-Inc. and “all parent, subsidiary, partners, divisions, and affiliated entities . . . “ Id. at Ex. 1, p. 1.

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With respect to the Class Action Waiver, however, RAC recognizes that in

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Morris v. Ernst & Young, 834 F.3d 975, 984 (9th Cir. 2016), the Ninth Circuit held that

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class action waivers are unlawful if made a mandatory condition of employment. There

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appears to be no dispute that Plaintiff’s execution of the Arbitration Agreement, and the

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Class Action Waiver it contained, were indeed a mandatory condition of his employment.

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Despite recognizing that Morris is controlling law in this Circuit, RAC nonetheless

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alleges that Morris was wrongly decided. In support of its position, RAC points to the

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fact that on January 13, 2017, the United States Supreme Court granted petitions for

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certiorari in both Morris and in two related decisions from the Seventh and Fifth Circuits,

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all of which address the enforceability of class action waivers. Ernst & Young LLP v.

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Morris, 137 S. Ct. 809 (Jan. 13, 2017). While the Seventh Circuit case, Lewis v. Epic

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Systems Corp., 823 F.3d 1147 (7th Cir. 2016), agreed with Morris, the Fifth Circuit’s

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decision in Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015) did not, and

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other cases decided by the Fifth, Eighth, and Second Circuits are in accord with Murphy.

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See, e.g., D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344 (5th Cir. 2013); Cellular Sales of

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Missouri, LLC v. N.L.R.B., 824 F.3d 772 (8th Cir. 2016); and Sutherland v. Ernst &

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Young LLP, 726 F.3d 290 (2d Cir. 2013). Consequently, it would appear that by taking

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the issue, the Supreme Court’s intention is to resolve the circuit split that has developed.

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Given the uncertainty with respect to whether class action waivers are

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enforceable, as an alternative to addressing this case on its merits RAC urges the Court

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to stay this entire action pending direction from the Supreme Court. Because the Court

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concludes that a stay is indicated under the circumstances, the analysis below focuses

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on the propriety of a stay.

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STANDARD

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Staying proceedings in the interest of judicial economy is a matter within the

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Court’s inherent power to control the disposition of cases on its docket with a view

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towards economy of time. Landis v. North Am. Co., 299 U.S. 248, 254 (1936);

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Fernandez v. Obesity Research Inst., LLC., 2013 WL 4587005 at *6 (E.D. Cal. Aug. 28,

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2013). In determining the propriety of such a stay, courts look to issues of judicial

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economy and the prejudice to either party that may result if the stay is granted or denied.

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CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). Whether to issue a stay in this

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regard is a decision necessarily relegated to the court’s discretion. Nken v. Holder,

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556 U.S. 418, 433-34 (2009).

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Staying a case is appropriate where an imminent decision of the Supreme Court

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will control and resolve issues presented in the action pending before this Court. See

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Roman v. Northrop Grumman Corp., 2016 U.S. Dist. LEXIS 173022 at *7-8 (C.D. Cal.

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Dec. 14, 2016) (court grants defendant’s opposed motion to stay proceedings on motion

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to compel individual arbitration of class claims pending resolution by the Supreme Court

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of Morris, supra); see also U.S. v. Deleon, 2016 U.S. Dist. LEXIS 99675, at *6-7 (E.D.

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Cal. Jul. 29, 2016).

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ANALYSIS

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As indicated above, RAC urges the Court to dismiss Plaintiff’s individual claims

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given his agreement to arbitrate those claims pursuant to the Arbitration Agreement, to

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strike Plaintiff’s collective and class action allegations given the Class Action Waiver

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contained in the Agreement, and to compel arbitration in accordance with the Arbitration

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Agreement. In the alternative, however, RAC recognizes that the competing interests of

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the parties and the Court may well justify staying these proceedings pending the

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Supreme Court’s decision in Morris. In that case, the Ninth Circuit held that employers
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may not require waiver of an employee’s right to bring class or collective action by way

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of an arbitration agreement presented as a condition of employment, on grounds that

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such waivers interfere with an employee’s right under the National Labor Relation Act to

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engage in concerted activity. Therefore, the Ninth Circuit found class/collective action

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waivers to be unenforceable. As indicated above, on January 13, 2017, the Supreme

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Court granted certiorari as to Morris and the Fifth Circuit’s decision, Murphy Oil USA, Inc.

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v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015) which came to just the opposite conclusion.

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According to the parties, a decision from the Supreme Court is expected in early 2018.

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As already indicated, it is within this Court’s inherent power to stay an action where an

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imminent decision by the Supreme Court will be dispositive of issues pending in a case

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before it. See Roman v. Northrop Grumman Corp., 2016 U.S. Dist. LEXIS 173022, at

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*7-8.

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The Court agrees that a stay is compelling under the circumstances of this case.

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Despite Plaintiff’s individual claims, the gravamen of his lawsuit would appear to rest with

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the viability of his collective and class action allegations. If the Supreme Court agrees

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with the Fifth, Eighth, and Second Circuit decisions holding that class action waivers are

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enforceable, and disagrees with the contrary position taken by the Ninth Circuit in Morris,

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the collective and class action claims here will fail. As a practical matter, that

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determination could well be dispositive of Plaintiff’s entire lawsuit.

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Requiring the parties to go forward with litigation given the uncertainty in this

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regard would waste the time and resources of both the parties and the Court. Engaging

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in collective and class action discovery, not to mention handling disputes over

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conditional certification, potential class members, and the merits of the collective/class

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action allegations themselves, will require substantial effort on the part of all concerned,

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efforts that may well be unnecessary depending on the Supreme Court’s ultimate

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decision in Morris. Additionally, by forcing RAC to litigate this matter while the class

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waiver issue is pending before the Supreme Court, would effectively deprive RAC of its

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right under the Federal Arbitration Act to enforce its Arbitration Agreement as written.
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Moreover, since a decision from the Supreme Court in this matter is anticipated

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by sometime early next year, a stay to accommodate that decision would not be open-

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ended and will likely be relatively short. Finally, particularly given the savings of time

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and money that will result in refraining from litigation that may not be necessary

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depending on the Supreme Court’s findings, it appears there will be no prejudice to

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either party. While Plaintiff argues that it would be prejudiced by an indefinite stay, that

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circumstance is not present here since it appears likely that a decision will be

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forthcoming by early 2018.

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Consequently, after considering the factors for and against a stay of these
proceedings, the Court finds a stay to be proper at this time.

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CONCLUSION

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For all the foregoing reasons, the Court will stay this lawsuit until such time as the

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Supreme Court issues its decision in Ernst & Young LLP v. Morris, 137 S. Ct. 809

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(Jan. 13, 2017). The parties are directed to notify the Court in writing not more than

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fourteen (14) days after that decision has been reached.

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Defendant’s Motion (ECF No. 7) is consequently GRANTED to the extent it

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requests the above-referenced stay. Given the Court’s decision to stay this matter,

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however, the remaining portions of said Motion, which ask the Court to dismiss and/or

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strike portions of the proceedings, are DENIED without prejudice to refiling once the stay

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in this case has been lifted.

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IT IS SO ORDERED.

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Dated: September 25, 2017

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