Wyndham Vacation Resorts, Inc. et al v. Garcia
Filing
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ORDER DENYING 33 MOTION TO VACATE CLAUSE CONSTRUCTION AWARD by Hon. William H. Orrick. (jmdS, COURT STAFF) (Filed on 8/30/2016)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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WYNDHAM VACATION RESORTS,
INC., et al.,
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Plaintiffs,
v.
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MICHELLE GARCIA,
Case No. 15-cv-01540-WHO
ORDER DENYING MOTION TO
VACATE CLAUSE CONSTRUCTION
AWARD
Re: Dkt. No. 33
Defendant.
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INTRODUCTION
Plaintiff Michelle Garcia moves under 9 U.S.C § 10(a)(4) to vacate an arbitrator’s decision
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United States District Court
Northern District of California
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finding that class arbitration is not available under her arbitration agreement with defendants
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Wyndham Vacation Resorts, Inc., Wyndham Vacation Ownership, Inc., and Wyndham
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Worldwide, Corp. (collectively, “Wyndham”). Because Garcia has not established that the
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arbitrator “exceeded [his] powers,” 9 U.S.C. § 10(a)(4), the motion is DENIED.
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BACKGROUND
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The relevant background here involves both this case and the related case, Crook v.
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Wyndham Vacation Ownership, Inc., No. 13-cv-03669-WHO (N.D. Cal filed Aug. 7, 2013).
On November 16, 2012, Thomas and Donna Crook filed a putative class action in state
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court against Wyndham Vacation Resorts, Inc. and Wyndham Worldwide Corporation1 alleging a
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number of state law causes of action, including elder financial abuse, intentional
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misrepresentation, and violations of California’s Unfair Competition Law (“UCL”) and Consumer
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Legal Remedies Act (“CLRA”). Crook, No. 13-cv-03669, Dkt. No. 1. Wyndham removed the
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case to federal court under the Class Action Fairness Act (“CAFA”) and moved to compel
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arbitration pursuant to the dispute resolution clause in the parties’ most recent timeshare
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The Crooks incorrectly sued Wyndham Vacation Resorts, Inc. as “Wyndham Vacation
Ownership, Inc.” and Wyndham Worldwide Corporation as “Wyndham Worldwide.” See Crook,
No. 13-cv-03669, Dkt. No. 1 at 12 of 76; id. at Dkt. No. 15 at 3; id. at Dkt. No. 27 at 1 n.1; id. at
Dkt. No. 55 at 1 n.1. As stated above, the Wyndham entities in this case are Wyndham Vacation
Resorts, Inc., Wyndham Vacation Ownership, Inc., and Wyndham Worldwide Corporation. For
ease of reference, I use “Wyndham” in this Order to refer to all Wyndham entities.
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agreement. Id. at Dkt. Nos. 1, 15. I granted the motion on November 4, 2013 and issued an
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amended order on November 8, 2013. Id. at Dkt. Nos. 26, 27 (“Order Compelling Arbitration”).
When the Crooks filed their arbitration demand with the American Arbitration Association
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(“AAA”), they requested that the arbitration include class relief. Id. at Dkt. Nos. 47-1, 47-2.
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Wyndham refused to consent to class treatment and filed a motion for clarification in this Court
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seeking an order compelling arbitration of the Crooks’ claims and declaring that class arbitration
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was not available under the parties’ arbitration agreement. Id. at Dkt. No. 47. I denied the motion
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on the ground that the parties had agreed to submit the question of the availability of class
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arbitration to the arbitrator, meaning that it was for the arbitrator, not me, to decide that issue. Id.
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at Dkt. No. 55 (“Order Denying Motion for Clarification”).
Garcia also entered a timeshare agreement with Wyndham. See, e.g., Compl. ¶ 10 (Dkt.
United States District Court
Northern District of California
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No. 1). The dispute resolution clause in her timeshare agreement is identical to the dispute
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resolution clause in the Crooks’ timeshare agreement. Compare Garcia, No. 15-cv-01540, Dkt.
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No. 1-1 at 4 of 8, with Crook, No. 13-cv-03669, Dkt. No. 15-1 at 10 of 40. She and the Crooks are
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both represented by the Figari Law Firm.2
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In or around February 2015, Garcia filed an arbitration demand with the AAA asserting
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claims on behalf of herself and a national class and California subclass of timeshare purchasers
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whose “use years” were “improperly and illegally changed by [Wyndham].” Compl. ¶ 12;
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Consumer Class Action Demand for Arbitration ¶ 14 (Dkt. No. 1-2). Wyndham responded by
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filing this action, seeking declaratory relief that Garcia is “precluded by law from pursuing her
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claims in arbitration on behalf of any purported class” and an injunction prohibiting Garcia from
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pursuing her class claims in arbitration. Compl. ¶¶ 3-4. Garcia filed an answer and “cross-
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complaint” on May 5, 2015. Dkt. Nos. 12, 14. In her “cross-complaint,” she asserted the same
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individual claims, class claims, and class definitions as in her AAA arbitration demand. Compare
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Dkt. No. 12 with Consumer Class Action Demand for Arbitration. On May 26, 2015, Wyndham
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filed a motion to compel arbitration. Dkt. No. 15. The motion sought an order (1) compelling
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Crook was dismissed with prejudice on April 12, 2016 pursuant to stipulation by the parties.
Crook, No. 13-cv-03669, Dkt. No. 60.
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Garcia to arbitrate her individual claims and (2) precluding her from pursuing her class claims in
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arbitration. Id.
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The case was transferred to me on August 11, 2015. Dkt. No. 24. On August 14, 2015, I
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held a telephone conference with the parties to discuss whether the reasoning in the Order
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Compelling Arbitration and Order Denying Motion for Clarification in Crook applied equally to
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the circumstances of this case and effectively decided Wyndham’s motion to compel arbitration.
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Dkt. No. 25. I gave the parties leave to submit supplemental briefs on the issue, which they did.
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Dkt. Nos. 26, 27. On September 24, 2016, I issued an order granting Wyndham’s motion to
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compel arbitration to the extent that it sought it to compel Garcia to arbitrate the claims asserted in
her cross-complaint, but denying the motion to the extent that it sought to preclude Garcia from
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United States District Court
Northern District of California
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pursuing in arbitration her class claims. Dkt. No. 31 (“Prior Order”). I held that, “as in Crook, it
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will be up to the arbitrator to decide whether class arbitration is available under the parties’
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arbitration agreement.” Prior Order at 4.
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The parties proceeded to arbitration. On June 10, 2016, following extensive briefing and
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oral argument, the Arbitrator issued a 20-page “Reasoned Partial Award on the Construction of the
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Arbitration Clause” finding that “this arbitration may not proceed as an arbitration on behalf of the
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class identified in [Garcia’s] demand for arbitration.” Figari Decl. Ex. 9 at 19-20 (Dkt. No. 33-1)
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(“Clause Construction Award”).
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Garcia filed the instant motion on July 13, 2016. Dkt. No. 33 (“Mot.”). She asks that I
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vacate the Clause Construction Award and issue an order “permitting her [UCL] claims to proceed
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on a representative basis in arbitration [and] permitting the balance of [her] claims to proceed on a
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classwide basis in arbitration.” Mot. at 1, 16. Wyndham opposes the motion. Dkt. No. 37
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(“Oppo.”).
LEGAL STANDARD
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The Federal Arbitration Act (“FAA”) allows a court to vacate an arbitration award on four
enumerated grounds:
(1) where the award was procured by corruption, fraud, or undue
means;
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(2) where there was evident partiality or corruption in the arbitrators,
or either of them;
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(3) where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the controversy; or of any
other misbehavior by which the rights of any party have been
prejudiced; or
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9 U.S.C. § 10(a). These limited, exclusive grounds for vacating an arbitration award “are designed
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to preserve due process but not to permit unnecessary public intrusion into private arbitration
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procedures.” U.S. Life Ins. Co. v. Superior Nat. Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010)
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(internal quotation marks omitted). The burden is on the party seeking to vacate the arbitration
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United States District Court
Northern District of California
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(4) where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.
award to establish that one of these grounds justifies vacating it. Id.
DISCUSSION
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Garcia contends that the Arbitrator “exceeded [his] powers.” 9 U.S.C. § 10(a)(4).3 An
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arbitrator exceeds his powers within the meaning of section 10(a)(4) “not when [he] merely
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interpret[s] or appl[ies] the governing law incorrectly, but when the award is completely irrational
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or exhibits a manifest disregard of law.” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc.,
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341 F.3d 987, 997 (9th Cir. 2003) (internal quotation marks omitted).
“An award is completely irrational only where [it] fails to draw its essence from the
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agreement.” Lagstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d 634, 642 (9th Cir.
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2010) (internal quotation marks omitted). “An arbitration award draws its essence from the
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agreement if the award is derived from the agreement, viewed in light of the agreement’s language
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and context, as well as other indications of the parties’ intentions.” Id. “Under this standard of
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review, [the court] do[es] not decide the rightness or wrongness of the [arbitrator’s] contract
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interpretation, only whether [his] decision ‘draws its essence’ from the contract.” Bosack v.
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Soward, 586 F.3d 1096, 1106 (9th Cir. 2009); see also Oxford Health Plans LLC v. Sutter, 133 S.
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Ct. 2064, 2068 (2013) (“It is not enough to show that the arbitrator committed an error – or even a
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Garcia does not dispute that none of the first three grounds set out in section 10(a) applies here.
See, e.g., Reply at 2-3 (Dkt. No. 39).
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serious error. Because the parties bargained for the arbitrator’s construction of their agreement, an
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arbitral decision even arguably construing or applying the contract must stand.”) (internal
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quotation marks, citations, and alterations omitted).
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To show that an arbitration award exhibits a manifest disregard of the law, a party must
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show “something more than just an error in the law or a failure on the part of the arbitrators to
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understand or apply the law. It must be clear from the record that the arbitrators recognized the
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applicable law and then ignored it.” Collins v. D.R. Horton, Inc., 505 F.3d 874, 879-80 (9th Cir.
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2007) (internal quotation marks omitted). “Moreover, . . . the governing law alleged to have been
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ignored . . . must be well defined, explicit, and clearly applicable.” Id. (internal quotation marks
and emphasis omitted); accord Matthews v. Nat’l Football League Mgmt. Council, 688 F.3d 1107,
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United States District Court
Northern District of California
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1116-17 (9th Cir. 2012).
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Garcia has not shown that the Clause Construction Award is completely irrational or that it
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exhibits a manifest disregard of the law. The Arbitrator begins his analysis in the Clause
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Construction Award by examining in detail the language of the parties’ arbitration agreement and
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finding that it does not “reveal any expectation of the parties . . . that class action arbitration was
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an option being given to [Garcia].” Clause Construction Award at 15. Garcia offers no
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explanation of how the Arbitrator’s analysis fails to qualify as “arguably construing or applying
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the contract.” Oxford, 133 S. Ct. at 2068. Indeed, she identifies nothing about the language of the
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arbitration agreement that supports her view that it authorizes class arbitration, except to
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repeatedly emphasize that it does not include an explicit waiver of class arbitration. See, e.g., Mot.
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at 1, 4, 5, 6, 7, 11, 16. That argument runs squarely into the Supreme Court’s holding in Stolt-
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Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), that “a party may not be compelled
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under the FAA to submit to class arbitration unless there is a contractual basis for concluding that
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the party agreed to do so.” Id. at 684 (emphasis omitted); see also Reed Elsevier, Inc. ex rel.
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LexisNexis Div. v. Crockett, 734 F.3d 594, 600 (6th Cir. 2013). The Arbitrator did not act
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irrationally, or in manifest disregard of the law, in rejecting this same argument in the Clause
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Construction Award. See Clause Construction Award at 15 (finding that Garcia’s reliance on the
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absence of a class arbitration waiver is “specifically at odds with . . . Stolt-Nielsen”).4
Garcia’s other arguments for vacating the Clause Construction Award are based on
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(1) Wyndham’s removal of Crook under CAFA, which Garcia contends should now result in
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judicial estoppel precluding Wyndham from disputing the availability of class arbitration in this
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case, Mot. at 14-15; and (2) her UCL claims, which she contends “must be permitted to proceed
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on a representative basis in arbitration,” id. at 9-11. Garcia also made these arguments to the
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Arbitrator, who rejected them as unsupported by any authority cited by Garcia and insufficient to
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justify class arbitration in the absence of any contractual basis for class treatment. Clause
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Construction Award at 16-19.
In her motion to vacate, Garcia again fails to present any convincing authority to support
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United States District Court
Northern District of California
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either of these arguments. The doctrine of judicial estoppel “is not reducible to an exhaustive
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formula” but generally bars a party from asserting a certain position where “(1) the party’s current
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position is clearly inconsistent with its earlier position, (2) the party was successful in persuading
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a court to accept its earlier position, and (3) the party would derive an unfair advantage or impose
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an unfair detriment on the opposing party if not estopped.” Williams v. Boeing Co., 517 F.3d
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1120, 1134 (9th Cir. 2008) (internal quotation marks omitted). Garcia cites no case to support her
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contention that the removal of Crook under CAFA should result in judicial estoppel here.5 Cf.
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Morvant v. P.F. Chang’s China Bistro, Inc., 870 F. Supp. 2d 831, 846 (N.D. Cal. 2012) (rejecting
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argument that defendant’s removal of the case under CAFA resulted in waiver of defendant’s right
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to compel arbitration; noting that invoking CAFA jurisdiction “does not serve as an admission of
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[the] allegations [in the complaint]”).
With respect to her UCL claims, Garcia relies on cases recognizing that the public policy
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Garcia also argues that because the AAA Commercial Rules (which are incorporated into the
parties’ arbitration agreement) reference “large, complex commercial disputes” involving claims
of $500,000 or more, the parties effectively agreed to class arbitration by agreeing to arbitrate
under the AAA Commercial Rules. Mot. at 15-16. The Arbitrator did not act irrationally, or in
manifest disregard of the law, in rejecting this argument either. See Clause Construction Award at
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The basis for subject matter jurisdiction in this case is diversity jurisdiction under 28 U.S.C. §
1332(a), not CAFA. See Compl. ¶ 7.
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of California prohibits pre-dispute arbitration agreements that require signatories to waive the right
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to bring a representative action under the Private Attorneys General Act (“PAGA”). See Mot. at
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9-11 (citing, e.g., Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 382-84 (2014);
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Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 430-31 (9th Cir. 2015); Hernandez v. DMSI
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Staffing, LLC., 79 F. Supp. 3d 1054, 1061-62 (N.D. Cal. 2015)); see also Reply at 1-6.6 Garcia
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cites no case that has held the same with respect to UCL claims, and I am not aware of any.
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Meanwhile, the cases the parties do cite weigh against Garcia’s position. In Arias v. Superior
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Court, 46 Cal.4th 969 (2009), the California Supreme Court distinguished between representative
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PAGA actions versus representative UCL actions, holding that while the former did not have to
comply with class action certification requirements, the latter still did. Id. at 975-76, 988. And in
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United States District Court
Northern District of California
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Iskanian v. CLS Transp. Los Angeles, LLC, where the California Supreme Court held that the
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plaintiff’s right to bring a representative PAGA action could not be barred by the terms of the
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parties’ pre-dispute arbitration agreement, it simultaneously held that the plaintiff’s UCL claims
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would have to proceed in bilateral arbitration. See 59 Cal.4th at 361, 391.
“[T]he task of an arbitrator is to interpret and enforce a contract, not to make public
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policy.” Stolt-Nielsen, 559 U.S. at 672. The Arbitrator here did not exceed his powers by ruling
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that Garcia’s UCL claims would have to be addressed through bilateral arbitration along with the
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rest of her claims against Wyndham. See Matthews, 688 F.3d at 1116 (“For an award to be in
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manifest disregard of the law, the governing law alleged to have been ignored . . . must be well
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defined, explicit, and clearly applicable.”) (internal quotation marks and alterations omitted).
CONCLUSION
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Garcia’s motion to vacate is DENIED.
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IT IS SO ORDERED.
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Dated: August 30, 2016
______________________________________
WILLIAM H. ORRICK
United States District Judge
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This is the only argument Garcia addresses in her reply brief; she does not defend any of her
other arguments in support of vacating the Clause Construction Award. See Reply at 1-6.
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