Lucas et al v. Hertz Corporation
Filing
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ORDER DENYING 59 Plaintiff's Motion for Certification of Order for Interlocutory Appeal. Signed by Magistrate Judge Laurel Beeler on 10/21/2012. (lblc2, COURT STAFF) (Filed on 10/22/2012)
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UNITED STATES DISTRICT COURT
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Northern District of California
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San Francisco Division
KATHLEEN M. LUCAS, et al.,
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For the Northern District of California
UNITED STATES DISTRICT COURT
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No. C 11-01581 LB
Plaintiffs,
ORDER DENYING PLAINTIFF’S
MOTION FOR CERTIFICATION OF
ORDER FOR INTERLOCUTORY
APPEAL
v.
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HERTZ CORPORATION, et al.,
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Defendants.
[Re: ECF No. 59]
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_____________________________________/
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I. INTRODUCTION
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Kathleen Lucas and Dan Martin (collectively, “Plaintiffs”) filed the instant action against car
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rental company Hertz Corporation (“Hertz”) in San Francisco County Superior Court on November
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29, 2010. Notice of Removal, ECF No. 1 at 5-12 (“Complaint”).1 Hertz removed the action to this
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court on March 31, 2011. Notice of Removal, ECF No. 1. On June 21, 2012, the court granted
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Hertz’s motion to compel Mr. Martin to arbitrate his claims pursuant to an arbitration agreement
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incorporated by reference into the car rental agreement that Mr. Martin signed. 6/21/2012 Order,
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Citations are to the Electronic Case File (“ECF”) with pin cites to the electronic page
number at the top of the document, not the pages at the bottom.
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ORDER
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ECF No. 53. Mr. Martin now asks the court to certify its order for interlocutory appeal. Motion for
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Reconsideration or Certification, ECF No. 59.2 Upon review of papers submitted and consideration
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of the applicable rules and authority, the court DENIES Plaintiff’s motion.3
II. BACKGROUND4
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In its order granting Hertz’s motion to compel arbitration, the court ruled that a valid arbitration
53 at 5-19. Mr. Martin argued that the arbitration agreement was unenforceable because it is
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unconscionable, but the court rejected this argument. The court found the arbitration agreement to
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be “moderately procedurally unconscionable because of its obscured location and small print and
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because Mr. Martin did not have to sign or otherwise acknowledge that he saw it, see id. at 14-16,
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but it did not find the arbitration agreement to substantively unconscionable, even though the
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agreement exists, that Hertz can enforce it, and that it is enforceable. See 6/21/2012 Order, ECF No.
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UNITED STATES DISTRICT COURT
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arbitration will be governed by CICA’s procedural rules, and those rules may not allow for any pre-
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arbitration discovery, see id. at 16-19.5
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In so finding, the court set forth its reasoning in detail:
Mr. Martin argues that the arbitration agreement is substantively unconscionable
because it requires that any arbitration will be governed by CICA’s procedural rules,
and those rules may not allow for any pre-arbitration discovery. Opposition, ECF
No. 44 at 17-18.[] Hertz argues that this does not render the arbitration agreement
substantively unconscionable because any limitations on pre-arbitration discovery
would affect both parties equally. Reply, ECF No. 49 at 13.
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Mr. Martin also asked the court reconsider its decision, but the court declined to do so.
8/22/2012 Order, ECF No. 65.
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Pursuant to Civil Local Rule 7-1(b), the court finds this matter suitable for determination
without oral argument and VACATES the November 1, 2012 hearing.
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The court only sets forth the facts relevant to the instant motions. For a more detailed
description of the facts of this case, please refer to the court’s order dated June 21, 2012. See
6/21/2012 Order, ECF No. 53 at 1-4.
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The CICA arbitration rules do not affirmatively state that no pre-arbitration discovery is
allowed, but they also do not affirmatively allow for any discovery devices to be used. See
McGuinn Declaration, ECF No. 28-2, Ex. 1. The rules do suggest that the CICA arbitrators can
“order” the parties to provide “evidence,” but there is no stated standard for when such an order
could be obtained. See id. at 16, Art. 28.
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Prior to the Supreme Court’s ruling in Concepcion, numerous courts, at both the
state and federal level, found arbitration agreements substantively unconscionable
where the rules of the arbitral forum allowed for only minimal discovery or where the
affect of the discovery rules operated solely to one side’s benefit. See, e.g., Ontiveros
v. DHL Express (USA), Inc., 164 Cal. App. 4th 494, 513 (2008) (finding arbitration
agreement substantively unconscionable because it allowed for only one deposition
absent a showing of substantial need); Fitz v. NCR Corp., 118 Cal. App. 4th 702,
716–17 (2004) (finding arbitration agreement was substantially unconscionable
because, “[t]hough NCR contends that the ACT policy’s limits on discovery are
mutual because they apply to both parties, the curtailment of discovery to only two
depositions does not have mutual effect and does not provide Fitz with sufficient
discovery to vindicate her rights”); see also Doubt v. NCR Corp., No. C 09-05917
SBA, 2010 WL 3619854, at *7 (N.D. Cal. Sep. 13, 2010) (citing Fitz and finding
arbitration agreement substantively unconscionable where it limited discovery to only
two depositions (aside from depositions of any expert witnesses expected to testify at
the hearing) unless the arbitrator found a “compelling need to allow it”). Indeed, Mr.
Martin relies on pre-Concepcion decisions in support of her argument. See
Opposition, ECF No. 44 at 18 (citing Fitz, 118 Cal. App. 4th at 717-18; Martinez v.
Master Protection Corp., 118 Cal. App. 4th 107, 118-19 (2004); Kinney v. United
Healthcare Servs., Inc., 70 Cal. App. 4th 1322, 1322 (1999)).
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UNITED STATES DISTRICT COURT
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Concepcion, however, suggests that limitations on arbitral discovery no longer
support a finding of substantive unconscionability. The Supreme Court provided the
following guidance:
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When state law prohibits outright the arbitration of a particular
type of claim, the analysis is straightforward: The conflicting rule is
displaced by the FAA. Preston v. Ferrer, 552 U.S. 346, 353, 128
S.Ct. 978, 169 L.Ed.2d 917 (2008). But the inquiry becomes more
complex when a doctrine normally thought to be generally applicable,
such as duress or, as relevant here, unconscionability, is alleged to
have been applied in a fashion that disfavors arbitration. In Perry v.
Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), for
example, we noted that the FAA’s preemptive effect might extend
even to grounds traditionally thought to exist “‘at law or in equity for
the revocation of any contract.’” Id., at 492, n.9, 107 S.Ct. 2520
(emphasis deleted). We said that a court may not “rely on the
uniqueness of an agreement to arbitrate as a basis for a state-law
holding that enforcement would be unconscionable, for this would
enable the court to effect what . . . the state legislature cannot.” Id., at
493, n.9, 107 S.Ct. 2520.
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An obvious illustration of this point would be a case finding
unconscionable or unenforceable as against public policy consumer
arbitration agreements that fail to provide for judicially monitored
discovery. The rationalizations for such a holding are neither difficult
to imagine nor different in kind from those articulated in Discover
Bank. A court might reason that no consumer would knowingly waive
his right to full discovery, as this would enable companies to hide their
wrongdoing. Or the court might simply say that such agreements are
exculpatory-restricting discovery would be of greater benefit to the
company than the consumer, since the former is more likely to be sued
than to sue. See Discover Bank, supra, at 161, 30 Cal. Rptr. 3d 76,
113 P.3d, at 1109 (arguing that class waivers are similarly one-sided).
And, the reasoning would continue, because such a rule applies the
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general principle of unconscionability or public-policy disapproval of
exculpatory agreements, it is applicable to “any” contract and thus
preserved by § 2 of the FAA. In practice, of course, the rule would
have a disproportionate impact on arbitration agreements; but it would
presumably apply to contracts purporting to restrict discovery in
litigation as well.
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Other examples are easy to imagine. The same argument might
apply to a rule classifying as unconscionable arbitration agreements
that fail to abide by the Federal Rules of Evidence, or that disallow an
ultimate disposition by a jury (perhaps termed “a panel of twelve lay
arbitrators” to help avoid preemption). Such examples are not
fanciful, since the judicial hostility towards arbitration that prompted
the FAA had manifested itself in “a great variety” of “devices and
formulas” declaring arbitration against public policy. Robert
Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (C.A.2
1959).
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UNITED STATES DISTRICT COURT
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Concepcion, 131 S.Ct. at 1747. Although there is a difference between a failure to
provide for “judicially monitored discovery” and a failure to affirmatively allow for
any discovery devices to be used, the court believes the above reasoning applies with
equal force here. And although they do not cite Concepcion, many post-Concepcion
federal district court decisions taking up this issue suggest the same. See, e.g.,
Simmons v. Morgan Stanley Smith Barney, LLC, No. 11cv2889 WQH-MDD, 2012
WL 1900110, at *11-12 (S.D. Cal. May 24, 2012); Valle v. Lowe’s HIW, Inc., No.
11-1489 SC, 2011 WL 3667441, at *8 (N.D. Cal. Aug. 22, 2011); Pilitz v. Bluegreen
Corp., No. 6:11-cv-388-Orl-19KRS, 2011 WL 3359641, at *5 (M.D. Fla. Aug. 4,
2011); Hopkins v. World Acceptance Corp., No. 1:10-cv-03429-SCJ, 798 F. Supp. 2d
1339, 1349-50 (N.D. Ga. 2011); Tierra Right of Way Servs., Ltd. v. Abengoa Solar,
Inc., No. CV-11-00323-PHX-GMS, 2011 WL 2292007, at *5 (D. Ariz. June 9, 2011);
but see Unimax Express, Inc. v. Cosco North America, Inc., No. CV 11–02947 DDP
(PLAx), 2011 WL 5909881, at *4 (C.D. Cal. Nov. 28, 2011) (finding arbitration
agreement to be substantively unconscionable where one party would have had to
“articulate its arguments with a clarity bordering on prescience, for it has no right to
discovery and will have no opportunity to rebut the other party’s response).
In addition, Hertz’s counsel stated at the June 21, 2012 hearing that Hertz had
already voluntarily produced some discovery to Plaintiffs and that Hertz would
continue to act in good faith in this regard. The parties are deposing witnesses, too.
Accordingly, the court finds that in this post-Concepcion landscape, the
arbitration agreement is not substantively unconscionable. See Concepcion, 131
S.Ct. at 1747.
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6/21/2012 Order, ECF No. 53 at 16-19 (footnotes omitted). Because both procedural and
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substantive unconscionability must be present before a court will refuse to enforce a contract,
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Armendariz v. Found. Health Psychcare Servs., 24 Cal.4th 83, 114 (2000), the court rejected Mr.
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Martin’s unconscionability argument and granted Hertz’s motion to compel arbitration, 6/21/2012
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Order, ECF No. 53 at 19.
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On August 10, 2012, Mr. Martin filed a motion asking the court to reconsider its decision or,
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alternatively, to certify its order for interlocutory appeal. Motion for Reconsideration or
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Certification, ECF No. 59. The court denied his motion for reconsideration, but ordered the parties
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to submit further briefing with respect to his motion for certification of its 6/21/2012 Order for
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interlocutory appeal. 8/22/2012 Order, ECF No. 65. In accordance with that order, Hertz filed an
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opposition, and Mr. Martin filed a reply. Opposition, ECF No. 66; Reply, ECF No. 67.
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III. LEGAL STANDARD
28 U.S.C. § 1292(b) provides a means for litigants to bring an immediate appeal of a
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non-dispositive order with the consent of both the district court and the court of appeals. See 28
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U.S.C. § 1292(b); In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982). But a district
avoid protracted and expensive litigation.” In re Cement Antitrust Litig., 673 F.2d at 1026 (citing
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court may do so “only in exceptional situations in which allowing an interlocutory appeal would
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UNITED STATES DISTRICT COURT
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U.S. Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir. 1966)). The party seeking certification of an
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interlocutory order has the burden of establishing the existence of such an exceptional situation.
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Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978). A court has substantial discretion in
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deciding whether to grant a party’s motion for certification. Brown v. Oneonta, 916 F. Supp. 176,
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180 (N.D.N.Y. 1996), rev’d in part on other grounds, 106 F.3d 1125 (2d Cir. 1997).
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The district court may certify an order for interlocutory appellate review under section 1292(b) if
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the following three requirements are met: “(1) there is a controlling question of law, (2) there are
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substantial grounds for difference of opinion, and (3) an immediate appeal may materially advance
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the ultimate termination of the litigation.” In re Cement Antitrust Litig., 673 F.2d at 1026.
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The Ninth Circuit defines a controlling question as one in which “the resolution of the issue on
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appeal could materially affect the outcome of litigation in the district court.” Id. at 1027. A
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question may be controlling even though its resolution does not determine who will prevail on the
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merits. But it is not controlling simply because its immediate resolution may promote judicial economy.
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With regard to the second factor, “[c]ourts traditionally will find that a substantial ground for
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difference of opinion exists where the circuits are in dispute on the question and the court of appeals
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of the circuit has not spoken on the point, if complicated questions arise under foreign law, or if
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novel and difficult questions of first impression are presented.” Couch v. Telescope, Inc. 611 F.3d
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629, 633 (9th Cir. 2010) (quotations omitted).
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Finally, the Ninth Circuit has not expressly defined material advancement of the ultimate
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termination of the litigation. Still an immediate appeal will not materially advance the ultimate
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termination of litigation where the appeal might postpone the scheduled trial date. See Shurance v.
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Planning Control Int’l, Inc. 839 F.2d 1347, 1348 (9th Cir. 1988).
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IV. DISCUSSION
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Mr. Martin has not met his burden to show that this is an exceptional situation warranting an
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interlocutory appeal.
He does not cite any orders from other courts that conflict with the court’s 6/21/2012 Order. See Bd.
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of Trustees of Leland Stanford Junior Univ. v. Roche, No. C 05-04158 MHP, 2007 WL 1119193, at
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First, Mr. Martin has now shown that there is a “substantial ground for difference of opinion.6
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*2 (N.D. Cal. Apr.16, 2007) (A party “‘must demonstrate a legitimate and substantial ground for
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difference of opinion’ between and among judicial bodies.”) (citing omitted); APCC Servs., Inc. v.
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AT & T Corp., 297 F. Supp. 2d 101, 107 (D.D.C. 2003) (“A substantial ground for dispute [ ] exists
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where a court’s challenged decision conflicts with decisions of several other courts.”). And
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although Mr. Martin does not raise it, “the mere fact that there is no Ninth Circuit authority precisely
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on point does not satisfy the requirement that there by a substantial ground for a difference of
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opinion.” Owner-Operator Indep. Drivers Assoc., Inc. v. Swift Transp. Co., Inc. (AZ), No. CV 02-
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1059-PHX-PGR, 2004 WL 5376210, at *1 (D. Ariz. July 28, 2004).
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Instead, Mr. Martin focuses his energies on arguing that the court simply got its decision wrong.
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The court finds that Mr. Martin has met the first factor and shown that the issue to be
certified is a “controlling question of law.” Essentially, Mr. Martin challenges that court’s
determination that Concepcion suggests that limitations on arbitral discovery no longer support a
finding of substantive unconscionability. See 6/21/2012 Order, ECF No. 53 at 17-19. This
understanding of Concepcion is the basis for the court’s determination that the arbitration agreement
is not substantively unconscionable. See id. If this understanding is incorrect, then the court would
have found the arbitration agreement to be substantively unconscionable and denied Hertz’s motion
to compel. Nevertheless, because Mr. Martin has not met the other factors in this analysis, the court
will deny his motion for certification.
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See Motion for Reconsideration or Certification, ECF No. 59 at 6-7; Reply, ECF No. 4.7 This does
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not suffice. A party does not establish a “substantial ground for difference of opinion” simply by
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strongly disagreeing with the court’s ruling. In re Static Random Access Memory (SRAM) Antitrust
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Litig., No. 07-md-01819 CW, 2011 WL 250317, at *1 (N.D. Cal. Jan. 25, 2011) (citing Mateo v.
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M/S Kiso, 805 F. Supp. 792, 800 (N.D. Cal. 1992)); see Chehalem Physical Therapy, 2010 WL
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952273, at *4 (“To establish ‘a substantial ground for difference of opinion exists,’ a party ‘must
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show more than its own disagreement with a court’s ruling.’”) (quoting Marsall v. City of Portland,
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No. CV-01-1014-ST, 2004 WL 1774532, at *6 (D. Or. Aug. 9, 2004)).
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Second, the court also is not convinced that an interlocutory appeal will “materially advance the
litigation while he appeals the 6/21/2012 Order. Motion for Reconsideration or Certification, ECF
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ultimate termination of the litigation.” As part of his motion, Mr. Martin asks the court to stay the
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No. 59 at 8. This would delay the case even more than it already has been. Plaintiffs filed this case
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in March 2011, discovery has been open since August 2011, the last day for hearing dispositive
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motions is January 17, 2012, and trial on Ms. Lucas’s claims is set for April 15, 2013. See
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9/25/2012 Case Management Order, ECF No. 74. Indeed, this deadlines in this case already have
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been continued once before. See id.
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Third, in addition to the factors discussed above, the court also notes that certifying its 6/21/2012
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Order also “would frustrate the decidedly pro-arbitration tilt of the Federal Arbitration Act, with its
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concomitant policy of avoiding unnecessary delays in prosecuting arbitrations in part through the
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discouragement of immediate appellate review of orders compelling arbitration.” Owner-Operator
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Indep. Drivers Assoc., Inc. v. Swift Transp. Co., Inc. (AZ), No. CV 02-1059-PHX-PGR, 2004 WL
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5376210, at *1 (D. Ariz. July 28, 2004) (citing 9 U.S.C. § 16(b) (barring an immediate appeal of an
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In so arguing, Mr. Martin points to several facts that he says render the arbitration clause
substantively unconscionable, such as that he will have to retain an attorney in Costa Rica, make the
necessary motions to determine whether discovery is permitted in the Costa Rican arbitral forum,
and that he is unclear whether he faces a statute of limitations problem there. See Motion for
Reconsideration or Certification, ECF No. 59 at 7; Reply, ECF No. 67 at 3-4. Mr. Martin did not
present these facts to the court during the briefing on the motion to compel arbitration, although they
are all things that he could have pointed out at that time.
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order compelling arbitration absent a § 1292(b) certification); Salim Oleochemicals v. M/V
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Shropshire, 278 F.3d 90, 93 (2nd Cir. 2002) (“Unnecessary delay of the arbitral process through
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appellate review is disfavored.”) (citation omitted)); cf. Moses H. Cone Memorial Hospital v.
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Mercury Construction Corp., 460 U.S. 1, 22 (1983) (Congress’s clear intent in enacting the Federal
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Arbitration Act was “to move the parties to an arbitrable dispute out of court and into arbitration as
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quickly and easily as possible.”). Although an order compelling arbitration may under some
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circumstances appropriately be a subject for certification under § 1292(b), see Kuehner v. Dickinson
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& Co., 84 F.3d 316, 319 (9th Cir. 1996) (noting that “an interlocutory order pursuant to the Federal
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Arbitration Act may in some circumstances satisfy the requirements of 28 U.S.C. § 1292(b)”), in this
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context and on this record, the court finds that certification of the court’s 6/21/2012 order would not
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be appropriate.
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UNITED STATES DISTRICT COURT
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V. CONCLUSION
Based on the foregoing, the Mr. Martin’s motion for an order certifying the June 21, 2012 order
for interlocutory appeal is DENIED.
IT IS SO ORDERED.
Dated: October 21, 2012
_______________________________
LAUREL BEELER
United States Magistrate Judge
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