Beauperthuy et al v. 24 Hour Fitness USA, Inc. et al

Filing 457

ORDER by Judge Samuel Conti granting 432 Motion to Compel Arbitration as Amended by 449 Amendment to Motion to Compel Arbitration (sclc2, COURT STAFF) (Filed on 12/2/2011)

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1 2 3 IN THE UNITED STATES DISTRICT COURT 4 FOR THE NORTHERN DISTRICT OF CALIFORNIA 5 6 GABE BEAUPERTHUY, et al., ) ) Plaintiffs, ) ) v. ) ) 24 HOUR FITNESS USA, INC., a ) California corporation dba 24 HOUR ) FITNESS; SPORT AND FITNESS CLUBS ) OF AMERICA, INC., a California ) corporation dba 24 HOUR FITNESS, ) ) Defendants. ) ) 7 8 9 For the Northern District of California United States District Court 10 11 12 13 14 15 I. Case No. 06-715 SC ORDER GRANTING PLAINTIFFS' MOTION TO COMPEL ARBITRATION INTRODUCTION Before the Court is a Motion to Compel Arbitration filed by 16 17 Plaintiffs Gabe Beauperthuy, et al., ("Moving Plaintiffs")1 against 18 Defendants 24 Hour Fitness USA, Inc. and Sport and Fitness Clubs of 19 America, Inc. (collectively "24 Hour Fitness" or "Defendants"). 20 ECF No. 432 ("Mot."). 21 on October 14, 2011. 22 an Opposition, and Moving Plaintiffs filed a Reply. 23 ("Opp'n"), 454 ("Reply"). 24 GRANTS Moving Plaintiffs' Motion. 25 1 26 27 28 Plaintiffs filed an amendment to the Motion ECF No. 449 ("Am. Mot."). Defendants filed ECF Nos. 452 For the following reasons, the Court As further explained below, the instant Motion, as amended, is brought by a subset of the named Plaintiffs in this action. Moving Plaintiffs are Gabe Beauperthuy, John Davidsson, Lindsay D'errico, Anne Dillon, Nathaniel Fennell, Patrick A. Frey, Heidi Gabalski, David L. Guy, Nathaniel Hoelk, David Kaipi, Andrew W. Newcomb, Steve Orrico, Adam Sherrill, Evan Sooper, Kimberly S. Struble, and Christopher Vincent. ECF No. 449 ("Am. Mot.") at ii-iii. 1 II. BACKGROUND The Court has issued numerous prior orders detailing the 2 See ECF Nos. 28, 66, 124, 190. 5 employees of 24 Hour Fitness -- filed this suit in 2006 alleging 6 that 24 Hour Fitness denied them overtime payments in violation of 7 the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. ("FLSA"). 8 See First Am. Compl. ("FAC"), ECF No. 33, ¶¶ 85-97. 9 2008, the Court conditionally certified two classes under the FLSA: 10 United States District Court procedural and factual background in this dispute. 4 For the Northern District of California 3 a class of former managers and a class of former personal trainers 11 who worked for 24 Hour Fitness after November 14, 2001. 12 124 (conditionally certifying manager class), 190 (conditionally 13 certifying trainer class). 14 Defendants' motion to decertify both classes and dismissed all 15 class members other than the named Plaintiffs. 16 ("Decert. Order"). 17 Plaintiffs should inform the Court within sixty days whether they 18 wished to proceed to trial on an individual basis or seek 19 resolution of their claims via the arbitration provisions of their 20 respective employment contracts. In short, Plaintiffs -- former and current In 2007 and ECF Nos. On February 24, 2011, the Court granted ECF No. 428 The Court noted that the fifty-eight named Id. at 41. On March 21-25, 2011, about thirty days after the 21 22 Decertification Order, Plaintiffs' counsel filed "Demand[s] and 23 Claim[s] for Individual Arbitration" on behalf of 983 claimants -- 24 some of whom are named Plaintiffs and some of whom are former class 25 members -- with Judicial Arbitration and Mediation Services 26 ("JAMS"), Inc., in San Francisco.2 Mot. at 2; Kloosterman Decl. 27 28 2 As the operative arbitration clause does not specify a location for arbitration, Plaintiffs' counsel chose JAMS in San Francisco 2 1 Ex. A ("Sample Demand").3 2 claimants' claims pursuant to an arbitration agreement contained in 3 the 2001 version of 24 Hour Fitness's employee handbook ("the 2001 4 Agreement"). 5 parties agree to arbitrate disputes in accordance with the Federal 6 Arbitration Act ("FAA"). 7 where disputes shall be arbitrated. 8 ("2001 Agreement"). 9 on Defendants contemporaneously with their filing at JAMS. United States District Court For the Northern District of California 10 Mot. at 1. The demands sought arbitration of all The 2001 Agreement specifies that the However, the Agreement does not specify See Kloosterman Decl. Ex. I Copies of the arbitration demands were served See Kloosterman Decl. Ex. G. 11 In a letter dated April 1, 2011, counsel for Defendants 12 indicated that they would not agree to proceed with arbitration in 13 San Francisco. 14 employment was not governed by the 2001 Arbitration Agreement, but 15 rather by subsequent arbitration agreements set forth in the 2005 16 and 2007 employee handbooks (respectively, "the 2005 Agreement" and 17 "the 2007 Agreement"). 18 the 2001 Agreement, provide that arbitration shall take place in 19 the geographic vicinity of the place where the dispute arose or 20 where the claimant last worked for 24 Hour Fitness. Id. Ex. D. Id. They argued that some claimants' The 2005 and 2007 Agreements, unlike Id. 21 On April 25, 2011, Plaintiffs filed the instant Motion, 22 seeking to compel arbitration on behalf of the 983 claimants here 23 in the Northern District of California. 24 on October 14, 2011, Plaintiffs amended the Motion so that it now Mot. at 1. Significantly, 25 26 27 28 because it is located within this judicial district and because Defendants' national headquarters are also located in this district. Mot. at 3. 3 John C. Kloosterman ("Kloosterman"), attorney for Defendants, filed a declaration in support of the Opposition. ECF No. 453. 3 1 only seeks to compel arbitration on behalf of sixteen individuals, 2 all of whom are named Plaintiffs who ceased working for 24 Hour 3 Fitness while the 2001 Agreement was still in effect (the "Moving 4 Plaintiffs"). Am. Mot. at ii. 5 6 III. LEGAL STANDARD The Court's jurisdiction to resolve disputes stemming from an 7 The FAA provides that written arbitration agreements "shall be 10 United States District Court arbitration agreement derives from the FAA. 9 U.S.C. §§ 1 et seq. 9 For the Northern District of California 8 valid, irrevocable, and enforceable, save upon such grounds as 11 exist at law or in equity for the revocation of any contract." 12 § 2. 13 arbitration, provides: Id. Section 4 of the FAA, which governs petitions to compel A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction . . . of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. 14 15 16 17 18 19 9 U.S.C. § 4 ("Section 4"). Upon a showing that a party has failed 20 to comply with a valid arbitration agreement, the Court must issue 21 an order compelling arbitration in the district in which the 22 petition was filed. 23 282, 285 (9th Cir. 1988) (emphasis added); 9 U.S.C. § 4.4 Cohen v. Wedbush, Noble Cooke, Inc., 841 F.2d 24 25 26 27 28 4 Defendants argue that a party's refusal to arbitrate must be "unequivocal" before a court may issue an order compelling arbitration. Opp'n at 9-12. The "unequivocal refusal" standard originated in PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1066 (3d Cir. 1995), where the Third Circuit stated that "an action to compel arbitration under the [FAA] accrues only when the respondent unequivocally refuses to arbitrate, either by failing to comply with an arbitration demand or by otherwise unambiguously 4 1 2 IV. DISCUSSION As an initial matter, the parties do not dispute that the 2001 claims fall within the scope of the 2001 Agreement. 5 core of their dispute is whether, by refusing to arbitrate in this 6 district but professing a willingness to arbitrate elsewhere, 7 Defendants have "refused" to arbitrate under the meaning of Section 8 4, thereby entitling Moving Plaintiffs to file the instant Motion. 9 Plaintiffs argue that Defendants' conduct constitutes a "failure, 10 United States District Court Agreement is valid and enforceable and that Moving Plaintiffs' 4 For the Northern District of California 3 neglect, or refusal" to arbitrate under Section 4, and that this 11 Court is therefore required by Section 4 to compel arbitration in 12 this district. 13 to arbitrate elsewhere precludes a finding that they have "refused" 14 to arbitrate and renders the Motion premature. 15 argue that Moving Plaintiffs failed to follow the proper procedure 16 for initiating arbitration under the 2001 Agreement, and that 17 Moving Plaintiffs "have effectively withdrawn from this action 18 pursuant to this Court's Decertification Order." 19 the following reasons, the Court agrees with Moving Plaintiffs. 20 21 22 23 24 25 26 27 28 Rather, the Defendants disagree, arguing that their willingness Defendants also Opp'n at 15. For manifesting an intention not to arbitrate the subject matter of the dispute." The Third Circuit imported the "unequivocal refusal to arbitrate" standard from § 301(a) of the Labor Management Relations Act. Id. at 1067. Defendants cite several orders from district courts in this circuit that import the "unequivocal failure" standard from PaineWebber. See, e.g., Gelow v. Cent. Pac. Mortg. Corp., 560 F. Supp. 2d 972, 978 (E.D. Cal. 2008); Kim v. Colorall Techs., Inc., No. C-00-1959-VRW, 2000 U.S. Dist. LEXIS 12321, at *2 (N.D. Cal. Aug. 18, 2000) (incorporating PaineWebber standard while mistakenly stating that PaineWebber was a Ninth Circuit case). Because the Ninth Circuit has not adopted the "unequivocal refusal" standard, and because Plaintiff makes compelling arguments that such a standard imported from the NLRA should not apply to the FAA, the Court declines to adopt the PaineWebber standard and instead adheres to the text of Section 4 itself, which states that a court may compel arbitration upon a party's "failure, neglect, or refusal to arbitrate." 5 1 A. Defendants have "refused" to arbitrate under Section 4 2 Defendants deny that they are refusing to arbitrate within the 3 meaning of Section 4 because, although they refuse to arbitrate in 4 this district, they are willing to arbitrate elsewhere. 5 note that they sent letters to Moving Plaintiffs providing the 24 6 Hour Fitness location at which each Moving Plaintiff last worked 7 and requesting that each Moving Plaintiff provide a list of at 8 least three arbitrators or retired judges located in that 9 geographical area and whom he or she proposed to hear the dispute. Defendants United States District Court For the Northern District of California 10 Kloosterman Decl. Ex. F ("Sample Letter"). 11 Moving Plaintiffs to provide the names within fourteen days. 12 Defendants also note that they expressly stated in a letter to 13 Plaintiffs' counsel: "Let me be perfectly clear -- 24 Hour Fitness 14 has not refused to arbitrate your clients' claims." 15 Decl. Ex. G ("May 2, 2011 Kloosterman Letter"). 16 The letters asked Id. Kloosterman Defendants do not expressly state their position as to where 17 the arbitrations should occur. 18 sent to Moving Plaintiffs, Defendants apparently take the position 19 that each Moving Plaintiff's claims should be arbitrated in the 20 geographical area where the Moving Plaintiff last worked for 24 21 Hour Fitness, as provided in the 2005 and 2007 Agreements. 22 Plaintiffs argue that Defendants' rejection of their demands to 23 arbitrate in this district constitutes a refusal to arbitrate under 24 Section 4, regardless of whether Defendants are willing to 25 arbitrate in some other venue. 26 Court to agree with Moving Plaintiffs. 27 28 However, based on the letters they Moving Both logic and precedent compel the In Bauhinia Corporation v. China National Machinery and Equipment Import and Export Corporation, 819 F.2d 247, 250 (9th 6 1 Cir. 1989), the Ninth Circuit addressed what should be done when 2 the parties to an arbitration agreement leave open the question of 3 where arbitration should occur. 4 the following two provisions relating to arbitration venue: 5 6 7 8 9 United States District Court For the Northern District of California 10 11 The contract at issue contained In case an arbitration is necessary and is to be held in Peking, the case in dispute shall then be submitted for arbitration to the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade, Peking . . . In case the Arbitration is to take place at (BLANK) either party shall appoint one arbitrator, and the arbitrators thus appointed shall nominate a third person as umpire, to form an arbitration committee. The award of the Arbitration Committee shall be accepted as final by both Parties. The Arbitrators and the umpire shall be confined to persons of Chinese or (BLANK) Nationality. 12 Id. at 248. 13 in the Eastern District of California seeking to compel arbitration 14 in China, the court granted the motion but ordered that the 15 arbitration occur in the Eastern District of California. 16 defendant appealed, arguing that the court had overridden the 17 parties' choice of arbitrator. 18 federal policy in favor of arbitration, and the fact that Section 4 19 only authorizes a district court to order arbitration in its own 20 district, the Ninth Circuit affirmed, stating: "[t]he contracts 21 left the location open. 22 to resolve the matter themselves. 23 took the only action within his power." 24 When the defendant, a Chinese entity, filed a motion Id. at 249. Id. The Noting the strong The judge gave the parties an opportunity When they failed to do so, he Id. at 250. In Capitol Converting Company v. Officine Curioni, No. 87 C 25 10439, 1989 U.S. Dist. LEXIS 13904, at *5 (N.D. Ill. Nov. 9, 1989), 26 the Northern District of Illinois addressed an arbitration 27 agreement that, like the one at issue here, contained absolutely no 28 language regarding the location of arbitration. 7 Citing Bauhinian, 1 the court held that the parties' inability to agree on a location 2 constituted a failure to arbitrate under Section 4 and ordered, 3 over the defendant's objection, that arbitration proceed in the 4 Northern District of Illinios. 5 inability of the parties to reach agreement on the location of 6 their arbitration constitutes a 'failure' or 'refusal' to arbitrate 7 just as much as it would be if the parties had agreed upon a 8 location for arbitration but then one of them refused to go ahead 9 with it." Id. The Court reasoned that "the "Congress, in drafting the [FAA], was more United States District Court For the Northern District of California 10 concerned with promoting arbitration than with making sure that 11 arbitration would go forward in some particular place." Id. Defendants do not address Bauhinian or Capitol Converting, and 12 13 the Court finds both cases compelling authority on the matter at 14 hand. 15 would defeat the "policy of rapid and unobstructed enforcement of 16 arbitration agreements" embodied in the FAA. 17 Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23 (1983). 18 were deemed not to have "refused" arbitration so long as it 19 expressed a willingness to arbitrate in some venue somewhere, then 20 a valid arbitration agreement could be rendered meaningless by the 21 parties' inability to settle on a mutually agreeable location, and 22 courts would be powerless to intervene. 23 here could file motions to compel arbitration in various other 24 districts, to which Moving Plaintiffs could respond that they would 25 be happy to arbitrate but only in this district. 26 paralysis would result in which Moving Plaintiffs' claims could 27 never be adjudicated until one party caved to the other's venue 28 demands. Moreover, Defendants' proposed interpretation of Section 4 8 Moses H. Cone Mem'l If a party For example, Defendants A state of 1 Accordingly, the Court finds that Defendants' rejection of 2 Moving Plaintiffs' arbitration demands constitutes a failure to 3 arbitrate under Section 4. 4 B. Defendants' Remaining Arguments Are Unavailing 5 Defendants next argue that Moving Plaintiffs' motion must be 6 denied because Moving Plaintiffs did not properly follow the 7 procedure for initiating arbitration set forth in the 2001 8 Agreement. 9 1114, 1122 (9th Cir. 2008) for the proposition that a party's Defendants cite Cox v. Ocean View Hotel Corp., 533 F.3d United States District Court For the Northern District of California 10 failure to initiate arbitration in the manner provided for in the 11 arbitration agreement precludes that party from claiming that the 12 other side refused to arbitrate. 13 In Cox, the procedure for initiating arbitration was governed 14 by the Model Employment Arbitration Procedures of the American 15 Arbitration Association ("AAA"), which provided that the initiating 16 party must: (1) file a written arbitration demand with the AAA; (2) 17 provide a copy of the demand to the other party; and (3) include 18 the applicable filing fee. 19 it failed to comply with any of those requirements. 20 the basic contract law principle that "[b]reach or repudiation of a 21 contract by one party excuses nonperformance by the other," the 22 court held that the plaintiff repudiated the arbitration agreement 23 by failing to follow the initiation procedures and therefore could 24 not seek to enforce it against the defendant. 25 Id. The initiating party admitted that Id. Invoking Id. Here, the 2001 Agreement provides that, in order the initiate 26 arbitration, a party must submit a written "Request for 27 Arbitration" to the other party that includes: (1) a description of 28 the dispute; (2) names and contact information of witnesses with 9 1 knowledge of the dispute; and (3) the relief requested. 2 Agreement at 1-2. 3 for individual arbitration on Defendants at the same time they 4 filed the demands with JAMS. 5 contained a detailed description of the case, including the relief 6 sought. 7 and contact information of witnesses. Moving Plaintiffs served copies of their demands See Sample Demand. Kloosterman Decl. ¶ 2. Each demand The demands do not include the names The Court finds that by serving the demands on Defendants, 8 9 2001 Moving Plaintiffs substantially complied with the procedures for United States District Court For the Northern District of California 10 initiating arbitration in the 2001 Agreement. Unlike in Cox, where 11 the plaintiff failed to comply with any of the initiation 12 procedures, here Moving Plaintiffs complied with two of three 13 requirements. 14 by providing names of witnesses was certainly not prejudicial to 15 Defendants given the extensive discovery that has occurred during 16 the five-year lifespan of this case. 17 Moving Plaintiffs failure to include a list of witnesses in their 18 arbitration demands is not a material breach of the 2001 Agreement 19 that would preclude Moving Plaintiffs from enforcing the Agreement 20 against Defendants.5 Their failure to comply with the third requirement Thus, the Court finds that 21 22 23 24 25 26 27 28 5 Defendants also contend that "it is improper for Named Plaintiffs to seek to compel arbitration on a collective or class basis" because the 2001 Agreement precludes class-wide arbitration. Opp'n at 13. Because Defendants refer to "Named Plaintiffs" instead of "Moving Plaintiffs," it is unclear if Defendants still assert this argument despite Plaintiffs' amendment to their Motion reducing the number of claimants from 983 to sixteen. Regardless, the demands submitted to JAMS are clearly labeled "Demand and Claim for Individual Arbitration." Sample Demand (emphasis added). Moreover, counsel for Defendants stated after receiving the demands "[w]e are pleased that [claimants] have elected to proceed with individual arbitration under the terms of each individual's arbitration agreement . . . ." Kloosterman Decl. Ex. B (emphasis 10 1 Lastly, Defendants argue that that Moving Plaintiffs "have 2 effectively withdrawn from this action pursuant to this Court's 3 Decertification Order." 4 the Court's statement in its Decertification Order that "[t]he 5 named Plaintiffs have the option of withdrawing from the instant 6 action and seeking resolution of their claims by arbitration 7 pursuant to their arbitration agreement with Defendants, or 8 proceeding to trial before this Court . . . . 9 the Court within 60 days of whether they wish to proceed to trial." United States District Court For the Northern District of California 10 Opp'n at 15. They base this argument on They shall notify Decert. Order at 41. The Court finds that Moving Plaintiffs did comply with the 11 12 Decertification Order. 13 statement informing the Court that they had elected to pursue 14 arbitration of their claims, but they did not withdraw from the 15 action. 16 Decertification Order to require that Moving Plaintiffs' claims be 17 automatically dismissed in the event that they opt to pursue 18 arbitration. 19 option of withdrawing from the instant action and continuing to 20 pursue their claims through arbitration, by no means was withdrawal 21 from this action a prerequisite to pursuing arbitration. 22 Court's Decertification Order does not state otherwise. 23 /// 24 /// 25 /// 26 /// ECF No. 436. On April 25, 2011, Plaintiffs filed a Defendants misconstrue the Court's While it is true that Moving Plaintiffs had the The 27 28 added). Accordingly, there is no basis for Defendants' claim that Plaintiffs seek impermissible collective arbitration. 11 1 2 V. CONCLUSION For the foregoing reasons, the Court GRANTS the Amended Motion 3 to Compel Arbitration filed by Moving Plaintiffs Gabe Beauperthuy, 4 John Davidsson, Lindsay D'errico, Anne Dillon, Nathaniel Fennell, 5 Patrick A. Frey, Heidi Gabalski, David L. Guy, Nathaniel Hoelk, 6 David Kaipi, Andrew W. Newcomb, Steve Orrico, Adam Sherrill, Evan 7 Sooper, Kimberly S. Struble, and Christopher Vincent against 8 Defendants 24 Hour Fitness USA, Inc. and Sport and Fitness Clubs of 9 America, Inc. United States District Court For the Northern District of California 10 The Court ORDERS that the Moving Plaintiffs' claims shall be 11 arbitrated here in the Northern District of California. 12 Additionally, the Court ORDERS the parties to meet and confer to 13 determine whether the arbitrations shall proceed at JAMS, Inc., or 14 with another arbitration service within this district. 15 thirty (30) days of this Order, the parties shall notify the Court 16 of when and where the arbitrations shall commence. Within 17 18 IT IS SO ORDERED. 19 20 21 Dated: December 2, 2011 UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 28 12

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