Khan v. Orkin Exteminating Company, Inc. et al

Filing 43

ORDER re 40 Amended MOTION to Compel Arbitration filed by Rollins, Inc., Orkin, LLC, ORDER STAYING CASE, ***Civil Case Terminated.. Signed by Judge ARMSTRONG on 10/12/11. (lrc, COURT STAFF) (Filed on 10/13/2011)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 OAKLAND DIVISION 8 AMIR KHAN, on behalf of himself and all 9 similarly situated, 10 Plaintiff, 11 vs. Case No: C 10-02156 SBA ORDER GRANTING DEFENDANTS’ MOTION TO COMPEL ARBITRATION Dkt. 40 12 ORKIN EXTERMINATING COMPANY, 13 INC., a Delaware corporation; ROLLINS, INC., a Delaware corporation; ORKIN, INC., 14 a Delaware corporation; ORKIN LLC, a 15 Delaware Limited Liability Corporation, 16 Defendants. 17 18 Plaintiff Amir Khan brings the instant consumer class action on behalf of himself 19 and all others similarly situated against Orkin LLC (formerly known as Orkin, Inc., and 20 Orkin Exterminating Co., Inc.) and Rollins, Inc, claiming that their Direct Liquid Plus Bait 21 system is ineffective. The parties are presently before the Court on Defendants Orkin LLC 22 and Rollins, Inc.’s (collectively “Defendants”) motion to compel arbitration. Having read 23 and considered the papers submitted, and being fully informed, the Court GRANTS 24 Defendants’ motion. The Court, in its discretion, finds this matter suitable for resolution 25 without oral argument. See Fed. R. Civ. P. 78(b); N.D. Cal. L.R. 7-1(b). 26 27 28 1 2 I. BACKGROUND In November 2006, plaintiff entered into a Residential Single Family Dwelling 3 California 10-Year Drywood Termite or Subterranean Termite Program Directed Liquid 4 Bait Control Service Agreement (“Service Agreement”). Compl. ¶ 35. The Service 5 Agreement provided for initial treatment of Plaintiff’s property for drywood or 6 subterranean termites, and retreatment at no cost if termites returned to the treated structure 7 Defs.’ Ex. 1 ¶ 1. Plaintiff paid $2,108 as the initial fee for the service, which was 8 renewable for ten years annually upon payment of a $496 renewal fee. Id. Plaintiff alleges 9 that he has renewed the service annually. Compl. ¶ 35. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Paragraph 4 of the Service Agreement sets forth an arbitration clause, which includes a class action waiver, which states as follows: 4. MEDIATION/ARBITRATION: ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE SERVICES PERFORMED BY ORKIN UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT, REGARDLESS OF WHETHER THE CONTROVERSY OR CLAIM AROSE BEFORE OR AFTER THE EXECUTION, TRANSFER OR ACCEPTANCE OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY TORT AND STATUTORY CLAIMS, AND ANY CLAIMS FOR PERSONAL OR BODILY INJURY OR DAMAGE TO REAL OR PERSONAL PROPERTY, SHALL BE SETTLED BY BINDING ARBITRATION. UNLESS THE PARTIES AGREE OTHERWISE, THE ARBITRATION SHALL BE ADMINISTERED UNDER THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) AND SHALL BE CONDUCTED BY AAA. IF ADMINISTERED UNDER THE AAA RULES, A CLAIM SHALL BE DETERMINED UNDER THE AAA SUPPLEMENTARY PROCEDURES FOR CONSUMER-RELATED DISPUTES IN CASES WHERE SUCH PROCEDURES ARE APPLICABLE. ANY OTHER CONTROVERSY OR CLAIM SHALL BE DETERMINED UNDER THE AAA COMMERCIAL ARBITRATION RULES. THE CUSTOMER AND ORKIN AGREE THAT THE ARBITRATOR SHALL FOLLOW THE LAW, INCLUDING THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE ARBITRATOR’S POWERS TO CONDUCT ANY ARBITRATION PROCEEDING UNDER THIS AGREEMENT SHALL BE LIMITED AS FOLLOWS: ANY ARBITRATION PROCEEDING UNDER THIS AGREEMENT WILL NOT BE CONSOLIDATED OR JOINED WITH ANY ACTION OR LEGAL PROCEEDING UNDER ANY OTHER AGREEMENT OR INVOLVING ANY OTHER PREMISES, AND WILL NOT PROCEED AS A CLASS ACTION, PRIVATE ATTORNEY GENERAL ACTION OR SIMILAR REPRESENTATIVE ACTION. THE AWARD RENDERED BY THE ARBITRATOR(S) SHALL BE FINAL AND BINDING. JUDGMENT MAY BE ENTERED ON THE AWARD IN ANY COURT HAVING JURISDICTION THEREOF. CUSTOMER AND ORKIN ACKNOWLEDGE AND AGREE THAT THIS ARBITRATION PROVISION IS MADE PURSUANT TO A TRANSACTION INVOLVING INTERSTATE COMMERCE AND SHALL BE GOVERNED BY THE FEDERAL -2- 1 2 3 4 ARBITRATION ACT. BEFORE HAVING RECOURSE TO ARBITRATION, CUSTOMER AND ORKIN EACH AGREES TO TRY IN GOOD FAITH TO SETTLE ANY CONTROVERSY OR CLAIM BY AT LEAST FOUR (4) HOURS OF MEDIATION ADMINISTERED UNDER THE AAA COMMERCIAL MEDIATION RULES WITH ORKIN AGREEING TO PAY THE COSTS OF THE MEDIATION. THE AAA MAY BE CONTACTED AT THE TOLL-FREE NUMBER 800-778-7879, OR THROUGH THE FOLLOWING WEBSITE: 5 6 7 Compl. Ex A ¶ 4 (emphasis added). On May 19, 2010, Plaintiff filed the instant action in this Court alleging seven 8 causes of action for: (1) breach of contract and warranty and breach of the duty of good 9 faith and fair dealing; (2) breach of duty to warn; (3) negligent training, supervision and 10 retention; (4) assumpsit/money had and received; (5) violation of the California Consumer 11 Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq.; (6) violation of California 12 Business and Professions Code § 17200 et seq., and (7) violation of California Business and 13 Professions Code § 17500 et seq. These claims are predicated on allegations that the Direct 14 Liquid Plus Bait is misleadingly presented as an effective solution for preventing termite 15 infestation. The action originally was assigned to the Honorable Vaughn R. Walker (ret.). 16 Shortly after the Complaint was filed, Defendants filed a motion to compel 17 arbitration, based on the arbitration clause contained in Plaintiff’s Service Agreement. 18 Plaintiff opposed the motion, arguing that Orkin’s arbitration clause is unconscionable 19 under California law and Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005). The 20 parties completed briefing on the motion and Judge Walker heard oral argument. At 21 Defendants’ request, Judge Walker stayed further proceedings in light of AT&T Mobility 22 LLC v. Concepcion, No. 09-893, which was pending before the Supreme Court. On April 23 27, 2011, the Supreme Court decided Concepcion, holding that the test of unconscionability 24 in Discover Bank is pre-empted by the FAA. AT&T Mobility v. Concepcion, 131 S. Ct. 25 1740, 753 (2011) (internal citation omitted). In light of Concepcion, Defendants again 26 move to compel arbitration. 27 28 -3- 1 II. 2 LEGAL STANDARD Under the Federal Arbitration Act (“FAA”), any party bound by an arbitration 3 agreement that falls within the scope of the FAA may bring a petition in federal district 4 court to compel arbitration. 9 U.S.C. § 4. When faced with a petition to compel 5 arbitration, the district court’s role is a discrete and narrow one. “By its terms, the [FAA] 6 ‘leaves no place for the exercise of discretion by a district court, but instead mandates that 7 district courts shall direct the parties to proceed to arbitration on issues as to which an 8 arbitration agreement has been signed.’” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 9 F.3d 1126, 1130 (9th Cir. 2000) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 10 218 (1985)). 11 “The court’s role under the Act is therefore limited to determining (1) whether a 12 valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses 13 the dispute at issue. … If the response is affirmative on both counts, then the Act requires 14 the court to enforce the arbitration agreement in accordance with its terms.” Id. “To 15 require arbitration, [plaintiff]’s factual allegations need only ‘touch matters’ covered by the 16 contract containing the arbitration clause and all doubts are to be resolved in favor of 17 arbitrability.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 (9th Cir. 1999). Where the 18 claims alleged in a pleading are subject to arbitration, the Court may stay the action 19 pending arbitration or dismiss the action. See 9 U.S.C. § 3; Sparling v. Hoffman Constr. 20 Co., 864 F.2d 635, 638 (9th Cir. 1988). 21 III. DISCUSSION 22 A. 23 In Concepcion, the Supreme Court reviewed the Ninth Circuit’s decision in Laster v. ENFORCEMENT OF THE ARBITRATION CLAUSE 24 AT & T Mobility LLC, 584 F.3d 849 (9th Cir. 2009), rev’d sub nom., Concepcion, 131 25 S.Ct. 1740, which had held that a class action waiver provision in an arbitration agreement 26 was unenforceable under the test for unconscionability set forth in Discover Bank. The 27 Supreme Court reversed Laster, and held that the Discover Bank rule was preempted 28 because “[r]equiring the availability of classwide arbitration interferes with fundamental -4- 1 attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Concepcion, 2 131 S.Ct. at 1748. As such, “[w]hen state law prohibits outright the arbitration of a 3 particular type of claim, the analysis is straightforward: The conflicting rule is displaced by 4 the FAA.” Id. at 1747. After Concepcion, a challenge to an arbitration clause is limited to 5 “generally applicable contract defenses, such as fraud, duress, or unconscionability. Id. at 6 1746. Defenses “that apply only to arbitration or that derive their meaning from the fact 7 that an agreement to arbitrate is at issue” are preempted by the FAA. Id. 8 Plaintiff contends that Concepcion is inapt because Defendants’ arbitration clause 9 expressly provides that arbitration is permitted only to the extent that it does not conflict 10 with state law. In support of his contention, Plaintiff cites the final sentence of the 11 Paragraph 5 of the Service Agreement, entitled, Limitation of Liability,” which states: 12 “Nothing in this Agreement shall be construed as depriving the Customer of remedies 13 available under applicable state consumer protection laws.” Defs.’ Ex. A ¶ 5. According to 14 Plaintiff, California’s CLRA authorizes class actions, see Cal. Civ. Code §§ 1781(a), and 15 expressly renders as “unenforceable and void” any waiver of statutory rights, including the 16 right to bring class actions, provided for under the CLRA, id. § 1751. In view of these 17 CLRA provisions, Plaintiff contends that enforcement of the class action waiver contained 18 in the arbitration clause would deprive him of rights codified under state law, thereby 19 rendering the arbitration clause unenforceable. The Court disagrees. 20 As a threshold matter, “[t]he class action device is a procedural mechanism to 21 aggregate individual claims for purposes of judicial efficiency.” Dukes v. Wal-Mart Stores, 22 Inc., 603 F.3d 571, 651 (9th Cir. 2010)), rev’d on other grounds, 131 S.Ct. 2541 (2011) 23 (emphasis added). As such, it is unclear whether Defendants’ class action waiver actually 24 deprives Plaintiff of any substantive remedies under the CLRA. But even if it did, 25 Plaintiff’s contention that the purported carve-out in Paragraph 5 of the Service Agreement 26 allows “the consumer laws of the state take precedence” over the class action waiver is 27 misplaced. See Pl.’s Opp’n at 4. It is a well settled canon of contract interpretation that 28 specific terms of an agreement control its general terms. See, e.g., Cent. Ga. Elec. -5- 1 Membership Corp. v. Ga. Power Co., 121 S.E.2d 644, 646 (1961) (citing Restatement 2 (First) of Contracts, § 236(c) (1932)).1 Here, the arbitration clause expressly provides that 3 the parties agree “that this arbitration provision . . . shall be governed by the Federal 4 Arbitration Act.” Compl. Ex. A ¶ 4 (emphasis added). The Ninth Circuit has held that the 5 FAA preempts the CLRA’s prohibition against class action waivers. Ting v. AT & T, 319 6 F.3d 1126, 1148 (9th Cir. 2003). Because the arbitration clause expressly relies upon the 7 FAA, and because the FAA preempts the CLRA’s class action waiver, the carve-out 8 contained in the separate Limitation of Liability section of the Service Agreement cannot 9 be interpreted as a bar to the enforcement of its arbitration clause. 10 B. 11 As an alternative matter, Plaintiff requests that the Court defer resolution of 12 Defendants’ motion to allow him the opportunity “to gather evidence to demonstrate that 13 the practical effect of the class ban is that of an unconscionable exculpatory provision.” 14 Pl.’s Opp’n at 6. Aside from vague assertions regarding the need to conduct discovery, see 15 id. at 6-12, Plaintiff fails to articulate with any specificity what discovery he seeks to 16 obtain. To the extent that Plaintiff is seeking to establish that it is too costly for him to 17 pursue consumer protection claims on an individual as opposed to a class basis, the Court 18 notes that post-Concepcion decisions have rejected the cost of litigation as a basis for 19 invalidating a class action waiver. See, e.g., In re Apple and AT & T iPad Unlimited Data 20 Plan Litig., No. C 10-2553 RMW, 2011 WL 2886407, at *3 (N.D. Cal. July 19, 2011) 21 (“Plaintiffs’ contention that their modest claims ‘simply do not provide sufficient 22 motivation for an aggrieved customer to seek redress’ on an individual basis (Opp. at 10) is 23 the very argument that was struck down in Concepcion.”) (Whyte, J.); Arellano v. T- 24 Mobile USA, Inc., No. C 10-5663 WHA, 2011 WL 1842712, at *2 (N.D. Cal. May 16, 25 2011) (finding that Concepcion forecloses argument that an arbitration agreement is void PLAINTIFF’S REQUEST FOR DISCOVERY 26 1 Although Defendants cite California law for this proposition, the Court notes that the Service Agreement provides that “[t]his agreement shall be governed by and construed 28 under the laws of the State of Georgia.” Compl. Ex. A ¶ 11. 27 -6- 1 because small claims might be prohibitively expensive to pursue on an individual basis) 2 (Alsup, J.). 3 Plaintiff also posits that the evidence necessary to establish that Defendants’ 4 arbitration clause is unconscionable “is exclusively within the possession of the 5 Defendant[s],” as ostensibly shown by the fact that Defendants supported their motion with 6 declarations of their employees. Pl.’s Opp’n at 9-10. The only supporting employee 7 declaration proffered by Defendants, however, is from Sonja Rice, a litigation specialist 8 with Defendant Rollins. Rice Decl., Dkt. 40-1.2 In her declaration, Ms. Rice simply 9 confirmed that Plaintiff entered into a Service Agreement on November 3, 2006, that he 10 made an initial payment of $3,100 and that he renewed his service twice at a cost of $496 11 per year. Id. ¶¶ 2-5. These facts obviously are within Plaintiff’s possession. There simply 12 is nothing in Ms. Rice’s declaration or anything else in the record to support the conclusion 13 that Defendants possess facts unavailable to him that bear upon the enforceability of the 14 Service Agreement.3 15 In sum, the Court finds that Plaintiff has failed to present any compelling grounds to 16 grant Plaintiff’s belated request to conduct discovery and to hold the instant motion in 17 abeyance, and therefore, denies said requests. 18 19 20 21 22 2 This is the same declaration filed on September 23, 2010, by Defendants with their reply in support of their earlier motion to compel arbitration. Dkt. 27. 23 3 24 25 26 27 28 The Court also notes that Plaintiff’s request to conduct discovery is untimely. The Supreme Court issued its opinion in Concepcion on April 27, 2011, and on the same date, requested that the Court reopen the action. In the parties’ case management statement filed on June 29, 2011, Plaintiff stated that he continued to oppose Defendants’ efforts to compel arbitration, but made no mention of needing to conduct any discovery. Dkt. 36. Nor is there any indication in the record that Plaintiff has made any attempt to conduct any discovery since the issuance of Concepcion. To the extent that Plaintiff legitimately believed that discovery was necessary to opposed Defendants’ motion, he should have made endeavored to commence discovery sooner, as opposed to embedding such a request in his opposition. -7- 1 IV. CONCLUSION 2 For the reasons stated above, 3 IT IS HEREBY ORDERED THAT: 4 1. 5 6 7 Defendants’ motion to compel arbitration is GRANTED. Plaintiff’s request to conduct discovery and to hold Defendants’ motion in abeyance is DENIED. 2. The instant action is STAYED and administratively closed pending the arbitration of Plaintiff’s claims. 8 3. 9 IT IS SO ORDERED. 10 This Order terminates Docket 40. Dated: October 12, 2011 ______________________________ SAUNDRA BROWN ARMSTRONG United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8-

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