Crago v. Charles Schwab & Co., Inc. et al
Filing
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ORDER GRANTING 203 MOTION TO COMPEL ARBITRATION AND DENYING 204 RENEWED MOTION FOR CLASS CERTIFICATION. Signed by Chief Judge Richard Seeborg on February 2, 2023. (rslc3, COURT STAFF) (Filed on 2/2/2023)
Case 3:16-cv-03938-RS Document 211 Filed 02/02/23 Page 1 of 4
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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ROBERT CRAGO, et al.,
Case No. 16-cv-03938-RS
Plaintiffs,
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United States District Court
Northern District of California
v.
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CHARLES SCHWAB & CO., INC., et al.,
Defendants.
ORDER GRANTING MOTION TO
COMPEL ARBITRATION AND
DENYING RENEWED MOTION FOR
CLASS CERTIFICATION
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Pending here are two competing motions. Lead Plaintiff Robert Wolfson and named
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Plaintiff K. Scott Posson (collectively, “Plaintiffs”) filed a renewed motion for class certification,
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which seeks certification of an issues class under Federal Rule of Civil Procedure 23(c)(4). See
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Dkt. 204. Defendants Charles Schwab & Co., Inc., and The Charles Schwab Corporation
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(collectively, “Schwab”), move to compel arbitration. See Dkt. 203. For the reasons discussed
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below, Defendants’ motion is granted, and Plaintiffs’ renewed motion is denied as moot.
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The factual background of this action has been adequately discussed in prior orders and
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need not be restated. E.g., Dkt. 192 (“Class Cert. Order”), at 2–4. Relevant here is the fact that
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Plaintiffs previously moved for class certification under Federal Rules of Civil Procedure 23(b)(1)
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and (b)(3). That motion was denied on October 27, 2021, on the grounds that there was “no
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presumption of reliance in this case, and requiring individualized proof of reliance as to each
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plaintiff defeat[ed] the commonality requirement of Rule 23(a). Further, the lack of a presumption
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of reliance . . . preclude[d] establishing predominance as required by Rule 23(b)(3).” Id. at 1–2.
Case 3:16-cv-03938-RS Document 211 Filed 02/02/23 Page 2 of 4
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The order did not specify whether class certification was denied with prejudice. To address the
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deficiencies identified in the order, Plaintiffs filed a renewed motion for class certification on
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September 23, 2022, seeking a narrower issues class under Rule 23(c)(4).
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Defendants, meanwhile, argue that Plaintiffs’ renewed motion must be denied, and
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arbitration must now be compelled, under the terms of Schwab’s Account Agreement. The parties
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agree that the Agreement contains the following provision:
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United States District Court
Northern District of California
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No person shall bring a putative or certified class action to arbitration,
nor seek to enforce any predispute arbitration agreement against any
person who has initiated in court a putative class action; or who is a
member of a putative class who has not opted out of the class with
respect to any claims encompassed by the putative class action until:
(1) the class certification is denied; (2) the class is decertified; or (3)
the client is excluded from the class by the court.
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Dkt. 203, at 3 (emphasis added). Since class certification was denied as of October 27, 2021,
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Defendants argue, the claims must now be arbitrated. Plaintiffs argue that their claims “remain
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part of this putative class action” and that the pendency of their renewed motion “rebuts
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Defendants’ premise that this proceeding is no longer a class action.” Dkt. 206, at 3.
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The operative question, then, is what it means for class certification to be “denied” in the
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context of the Agreement. Clearly class certification has already been denied once, but whether the
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Agreement contemplates renewed motions for class certification, such as the one Plaintiffs now
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bring, is far from clear. Defendants contend that the Agreement cannot possibly permit “unlimited
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opportunities to move for class certification or forestall arbitration with procedural
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gamesmanship,” Dkt. 203, at 10, while Plaintiffs dismiss this as a “doomsday argument” and
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argue Defendants are “proposing a rule saying that a plaintiff attempting to certify a class only
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gets one opportunity to do so” in this scenario, yet “[n]o such rule exists or should exist,” Dkt.
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206, at 6 (quoting Abraham v. WPX Energy Prod., LLC, 322 F.R.D. 592, 640 (D.N.M. 2017)).
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Two background principles affect the resolution of this question. First, federal courts have
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wide latitude to allow plaintiffs in a putative class action to renew their class certification motions
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after an initial denial, a procedure implicitly allowed under the Federal Rules. See Fed. R. Civ. P.
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23(c)(1)(C) (“An order that grants or denies class certification may be altered or amended before
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ORDER ON MOTION TO COMPEL ARBITRATION AND CLASS CERTIFICATION
CASE NO. 16-cv-03938-RS
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United States District Court
Northern District of California
Case 3:16-cv-03938-RS Document 211 Filed 02/02/23 Page 3 of 4
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final judgment.”). That being said, courts “rarely grant” these motions, in part due to a “reluctance
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to allow parties to have a second bite at the apple by relitigating issues that have already been
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decided.” 3 NEWBERG AND RUBENSTEIN ON CLASS ACTIONS § 7:35 (6th ed. 2022). This policy, in
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turn, “incentiviz[es] parties to put their best foot forward at the outset and avoid[s] costly delays to
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the proceedings.” Id. Courts reviewing such renewed motions therefore “have routinely applied
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the ordinary standards for reconsideration.” English v. Apple Inc., No. 14-cv-01619-WHO, 2016
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WL 1108929, at *5 (N.D. Cal. Mar. 22, 2016). This altogether underscores that plaintiffs bring
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such motions at the court’s discretion, rather than as of right.
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Second, Supreme Court and Ninth Circuit precedent has repeatedly commanded that, under
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the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2 et seq., “due regard must be given to the federal
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policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved
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in favor of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of the Leland Stanford Jr. Univ., 489
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U.S. 468, 476 (1989); accord Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742 (9th Cir.
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2014). “The court’s role under the [FAA] is therefore limited to determining (1) whether a valid
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agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at
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issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).
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Applying these two principles here leads to the conclusion that class certification has in
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fact been “denied” within the meaning of the Schwab Agreement, and the claims should now be
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sent to arbitration. While the Agreement is potentially ambiguous on this point, precedent
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mandates resolving any ambiguity in favor of arbitration. Plaintiffs, who bear the burden here of
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rebutting the presumption of arbitrability, see Wynn Resorts, Ltd. v. Atlantic-Pacific Capital, Inc.,
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497 Fed. App’x 740, 742 (9th Cir. 2012), have not pointed to anything in the legislative history of
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the FAA nor relevant rulemaking history that would suggest a different outcome is appropriate.
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Cf. Dep’t of Enf’t v. Charles Schwab & Co., Inc., No. 2011029760201, 2014 FINRA Discip.
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LEXIS 5 (Apr. 24, 2014) (discussing relevant rulemaking history of FINRA disclosure rules
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regarding mandatory disclosures in predispute arbitration agreements). Further, this conclusion is
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consonant with the principle that plaintiffs seeking class certification should put their best foot
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ORDER ON MOTION TO COMPEL ARBITRATION AND CLASS CERTIFICATION
CASE NO. 16-cv-03938-RS
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Case 3:16-cv-03938-RS Document 211 Filed 02/02/23 Page 4 of 4
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forward in their first motion. Nothing prevented Plaintiffs here from alternatively seeking class
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certification under Rule 23(c)(4) in their initial motion; they thus have been offered a “meaningful,
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but not unbounded, opportunity to seek class certification.” Dkt. 207, at 6 n.4.
United States District Court
Northern District of California
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The cases Plaintiffs cite, besides being noncontrolling, are also readily distinguishable.
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Klein v. TD Ameritrade Holding Corp., No. 14-cv-00396, 2021 WL 6075865 (D. Neb. Dec. 23,
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2021), presented a factually similar situation in which defendants sought to compel arbitration
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(under an identical arbitration provision) after the Eighth Circuit partially reversed the district
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court’s grant of class certification. See id. at *1. There, however, the Eighth Circuit only reserved
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one of plaintiffs’ grounds for class certification, leaving the district court free to consider
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plaintiffs’ other grounds in a renewed motion for class certification. See id. at *2. Here, by
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contrast, class certification was never granted to begin with. Plaintiffs further cite Abraham v.
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WPX Energy Production, LLC, 322 F.R.D. 592 (D.N.M. 2017), for the proposition that putative
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class plaintiffs should not be limited to one shot at class certification. See id. at 640. This may be
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true generally, but Abraham did not make this pronouncement in the context of an agreement to
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arbitrate — which, for the reasons noted above, militates the opposite way.
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Since class certification here has been “denied” within the meaning of the Schwab
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Agreement, and because this Agreement is both valid and encompasses Plaintiffs’ claims,
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arbitration must now be compelled. Defendants’ motion is therefore granted, and Plaintiffs’
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renewed motion for class certification is denied as moot. This action is stayed pending the
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outcome of the arbitration.
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IT IS SO ORDERED.
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Dated: February 2, 2023
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RICHARD SEEBORG
Chief United States District Judge
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ORDER ON MOTION TO COMPEL ARBITRATION AND CLASS CERTIFICATION
CASE NO. 16-cv-03938-RS
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