Morvant et al v. P.F. Chang's China Bistro, Inc. et al

Filing 64

ORDER by Judge Yvonne Gonzalez Rogers granting in part and denying in part 40 Motion to Compel Plaintiffs' Individual Claims to Arbitration. (fs, COURT STAFF) (Filed on 5/7/2012)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 8 9 10 11 ZACHARY MORVANT, JEAN ANDREWS, individually and on behalf of all others similarly situated, 12 Plaintiffs, 13 Case No. 11-CV-05405 YGR ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO COMPEL PLAINTIFFS’ INDIVIDUAL CLAIMS TO ARBITRATION vs. 14 15 16 P.F. CHANG’S CHINA BISTRO, INC., P.F. CHANG’S III, LLC, and DOES 1 through 100, inclusive, Defendants. 17 18 Plaintiffs Zachary Morvant and Jean Andrews, former employees of P.F. Chang’s China 19 Bistro restaurants, bring this putative class action on behalf of all current and former P.F. Chang’s 20 China Bistro restaurant workers, for violations of the California Labor Code and other California 21 laws. They allege that Defendants P.F. Chang’s China Bistro, Inc. and P.F. Chang’s III, LLC, 22 (“Defendants” or “P.F. Chang’s”) failed to provide meal and rest breaks, refused to pay for 23 missed meal and rest breaks, failed to pay all overtime compensation due, and failed to provide 24 accurate wage statements. 25 Defendants have filed a Motion to Compel Plaintiffs Zachary Morvant and Jean Andrews’ 26 Individual Claims to Arbitration on the grounds that Plaintiffs’ claims are covered by the terms of 27 P.F. Chang’s dispute resolution policy, which requires employees to arbitrate any dispute arising 28 out of their employment with P.F. Chang’s. See Defs.’ Mot., Dkt. No. 40. Having carefully considered the papers submitted, and the argument of counsel, and for 1 2 the reasons set forth below, the Court finds that Defendants’ dispute resolution policy is 3 enforceable as against Plaintiff Andrews who must arbitrate her claims. Defendants have not 4 established that Plaintiff Morvant agreed to arbitrate his claims and thus, Morvant cannot be 5 compelled to arbitrate. Accordingly, the Court hereby GRANTS IN PART and DENIES IN PART the 6 Motion to Compel Arbitration. 7 I. 8 BACKGROUND P.F. Chang’s Dispute Resolution Policy requires that “any dispute arising out of or related 9 to an Employee’s employment with P.F. Chang’s” must be “resolved only by an arbitrator 10 through final and binding arbitration and not by way of court or jury trial.” Dkt. No. 42-1, 11 Exhibit A, § 1 (“Arbitration Agreement”). The Arbitration Agreement also contains a class 12 action waiver, which states that there “will be no right or authority for any dispute to be brought, 13 heard or arbitrated” as a class action. Id. § 4. P.F. Chang’s implemented its Dispute Resolution 14 Policy in September of 2006. P.F. Chang’s states that all then-current employees, and all new 15 hires going forward, were provided a copy of the Dispute Resolution Policy and required to sign 16 and return an acknowledgement of receipt of the Dispute Resolution Policy. 17 The notice accompanying the Dispute Resolution Policy states “this policy applies to you” 18 and explains that “[t]he Dispute Resolution Policy will provide all employees a quick and 19 efficient avenue to bring forward any employment-related disputes that may arise between you 20 and the Company.” Id. at 2. It requests that the employee sign the acknowledgement form and 21 return it to his or her supervisor. Id. The acknowledgement form states “this Policy goes into 22 effect immediately upon [the employee’s] signature below but in no event later than September 23 15, 2006.” Id. at 5. 24 A. FACTUAL HISTORY 25 Plaintiff Zachary Morvant worked for P.F. Chang’s from early 2005 until December 26, 26 2006, first as a food runner and later as a bartender. Thus, Morvant already was employed with 27 P.F. Chang’s when it implemented its Dispute Resolution Policy in September of 2006. 28 Defendants maintain that they would have provided Morvant with a copy of the Dispute 2 1 Resolution Policy and required him to sign and return an acknowledgement of receipt but 2 “Defendants have, as yet, been unable to locate a physical copy of Mr. Morvant’s signed 3 acknowledgement.” Defs.’ Reply 3, Dkt. No. 49. Morvant explains that the reason P.F. Chang’s 4 is unable to locate a signed acknowledgement is because he never signed the Arbitration 5 Agreement. Morvant claims that he received a copy of the Arbitration Agreement but chose not 6 to sign the document because he did not want to be bound by its terms. See Morvant Supp. Dec., 7 Dkt. No. 53-1. Plaintiff Jean Andrews worked as a food server for P.F. Chang’s from August 26, 2008 8 9 through April 11, 2009. On the date of her hire, Andrews signed P.F. Chang’s Dispute 10 Resolution Policy Acknowledgement form, stating that she had received the Dispute Resolution 11 Policy, “which goes into effect immediately upon my signature.” A copy of Andrews’ signed 12 acknowledgement is attached to Defendants’ Motion to Compel. See Dkt. No. 42-3. 13 B. PROCEDURAL HISTORY 14 Plaintiff Zachary Morvant commenced this lawsuit as an individual action in the 15 Sacramento County Superior Court on December 14, 2010. Plaintiff never served the individual 16 complaint on Defendants. On June 17, 2011, the complaint was amended to add Jean Andrews as 17 a Plaintiff and to convert Morvant’s individual action into a putative class action. Defendants 18 were first served with this lawsuit on June 20, 2011. Defendants filed their answer to the 19 amended complaint on July 18, 2011. The following day, July 19, 2011, Defendants removed the 20 case to the Eastern District of California based upon the Class Action Fairness Act of 2005 21 (“CAFA”), 28 U.S.C. § 1332(d)(2)(A), and diversity jurisdiction, 28 U.S.C. §1332(a). 22 Subsequently, on October 28, 2011, the case was transferred to the Northern District of 23 California. Plaintiffs filed the operative, Second Amended Complaint on January 9, 2012. 24 II. LEGAL STANDARD 25 The Federal Arbitration Act (“FAA'”) reflects “a liberal federal policy favoring 26 arbitration” and requires federal courts to compel arbitration of any claim covered by a written 27 and enforceable arbitration agreement. AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 28 1745-47 (2011) (Concepcion). In ruling on a motion to compel arbitration, the court’s role is 3 1 limited to determining whether: (1) there is an agreement between the parties to arbitrate; (2) the 2 claims at issue fall within the scope of the agreement; and (3) the agreement is valid and 3 enforceable. Lifescan, Inc. v. Pernaier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). 4 If those questions are answered in the affirmative, the court must compel the parties to arbitrate 5 their claims. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (“By its terms, 6 the [FAA] leaves no place for the exercise of discretion by a district court, but instead mandates 7 that district courts shall direct the parties to proceed to arbitration”). Agreements to arbitrate are valid, irrevocable, and enforceable, save upon such grounds as 8 9 exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2. Courts must apply 10 ordinary state-law principles in determining whether to invalidate an agreement to arbitrate. 11 Ferguson v. Countrywide Credit Indus., 298 F.3d 778, 782 (9th Cir. 2002). Thus, arbitration 12 agreements may be invalidated by generally applicable contract defenses, such as fraud, duress, 13 or unconscionability. Concepcion, supra, 131 S.Ct. at 1745-47. Courts may not proceed beyond 14 those well-established contractual defenses and employ defenses solely based on the fact that the 15 agreement at issue is an arbitration agreement. Id. at 1746-47. 16 III. DISCUSSION 17 The first task is to determine whether there is an agreement between the parties to 18 arbitrate. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). 19 As arbitration is a matter of contract, a party cannot be required to arbitrate a claim that it has not 20 agreed to arbitrate. AT&T Tech., Inc. v. Communs. Workers of Am., 475 U.S. 643, 648-50 (1986). 21 In other words, the Court may not compel a party to comply with the terms of an agreement to 22 which he or she never agreed. ZACHARY MORVANT 23 A. 24 The parties dispute whether Morvant agreed to arbitrate his employment related claims 25 pursuant to the Arbitration Agreement. Defendants have not provided a signed copy of the 26 contract they seek to enforce. Morvant has filed a Declaration stating that he remembers 27 receiving the document and did not sign the document because he did not want to be bound by its 28 terms. Morvant argues that he did not agree to arbitrate because he did not sign an Arbitration 4 1 Agreement. Defendants argue that Morvant did not need to sign the Arbitration Agreement in 2 order to be bound by its terms. According to Defendants, “[a]ll California employees were 3 deemed to be subject to P.F. Chang’s Dispute Resolution Policy if they continued their 4 employment with P.F. Chang’s after the September 2006 policy distribution and 5 implementation.” Defs.’ Mot. 5. 6 While a party’s acceptance of an agreement need not be explicit, “[a]s a general rule, 7 silence or inaction does not constitute acceptance of an offer.” Circuit City Stores, Inc. v. Najd, 8 294 F.3d 1104, 1109 (9th Cir. 2002). An employee’s continued employment has been found to 9 constitute implied acceptance of the changed terms of employment where the employee was 10 informed that his or her continued employment would constitute acceptance of those changed 11 terms. Although Defendants contend continued employment constitutes acceptance, the 12 decisional law they cite to support this proposition is distinguishable. In Kruzich v. Chevron 13 Corp., the employer’s dispute resolution policy requiring arbitration expressly stated that “[a]n 14 employee’s continued employment in Chevron will mean they agree to use [the dispute resolution 15 policy].” 2011 WL 6012959, at *4 (N.D. Cal. Dec. 1, 2011). Because the employee plaintiff 16 continued his employment, the court found that he had agreed to be bound by the arbitration 17 agreement. Defendants also cite Doubt v. NCR Corp., where the employer sent an email to 18 employees explaining that acceptance of the agreement to arbitrate would be demonstrated by an 19 employee’s continued employment. 2010 WL 3619854, at *3 (N.D. Cal. Sep. 13, 2010). Again, 20 because the employee plaintiff continued his employment, the court found that he had agreed to 21 be bound by the arbitration agreement. In Hicks v. Macy’s Dep’t Store, Inc., the employer 22 instituted a voluntary binding arbitration program to which the employee plaintiff was bound 23 unless he opted out. 2006 WL 2595941, at *1-3 (N.D. Cal. Sep. 11, 2006). The employee 24 plaintiff’s failure to turn in an “opt-out” form was deemed acceptance of the changed terms of 25 employment. Id. 26 In support of their motion, the Defendants point to language in the cover letter that 27 accompanied the Arbitration Agreement, which provides that the Dispute Resolution Policy “goes 28 into effect on September 15, 2006,” and “this policy applies to you.” Id.; Reply 5 (citing 5 1 Arbitration Agreement). Nothing in the Arbitration Agreement or accompanying material 2 expressly states that continued employment will constitute acceptance of the terms of the Dispute 3 Resolution Policy, see Kruzinich and Doubt, supra, and Defendants do not assert that Morvant 4 agreed to arbitrate because he failed to affirmatively opt-out, see Hicks, supra. Given the facts of 5 the instant case, continued employment does not prove acceptance of the terms of the Arbitration 6 Agreement.1 Based on the foregoing analysis, the Court finds that Defendants have not met their 7 8 burden to establish that they entered into an agreement with Morvant to arbitrate his claims. 9 Accordingly, the Court cannot compel Morvant to arbitrate his claims. 10 B. JEAN ANDREWS 11 As to Andrews, the parties agree that Andrews and P.F. Chang’s entered into an 12 Arbitration Agreement and that the claims at issue here are covered by the terms of that 13 Arbitration Agreement. The parties dispute whether the terms of the Arbitration Agreement, 14 particularly the class action waiver, render the agreement unenforceable as unconscionable or 15 contrary to public policy. 16 To be unenforceable as unconscionable, a contract must be both procedurally and 17 substantively unconscionable. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 4th 18 83, 114 (Cal. 2000). Procedural unconscionability concerns the manner in which the agreement 19 was negotiated, while substantive unconscionability concerns the terms of the agreement itself. 20 Both elements of unconscionability must be present to render a contract unenforceable, but they 21 need not be present in the same degree. Id. “In other words, the more substantively oppressive 22 the contract term, the less evidence of procedural unconscionability is required to come to the 23 conclusion that the term is unenforceable, and vice versa.” Id.; see also Olvera v. El Pollo Loco, 24 Inc., 173 Cal. App. 4th 447, 454 (Cal. Ct. App. 2010). Plaintiffs argue that the agreement is both 25 26 27 28 1 In the remaining cases that Defendants cite, the employee plaintiffs were at-will employees. In California, “as a matter of law, an at-will employee who continues in the employ of the employer after the employer has given notice of changed terms or conditions of employment has accepted the changed terms and conditions.” See DiGiacinto v. Ameriko-Omserv Corp., 59 Cal. App. 4th 629, 635 (Cal. Ct. App. 1997). As Defendants do not provide evidence, let alone argue that Morvant was an at-will employee, these cases also do not support a finding that Morvant’s continued employment constitutes acceptance of the terms of the Arbitration Agreement. 6 1 procedurally and substantively unconscionable and is therefore invalid and unenforceable. 2 1. 3 Procedural unconscionability concerns the manner in which an agreement is 4 negotiated, and is present if a contract is the product of oppression or surprise. Armendariz, 5 supra, 24 Cal. 4th at 114. A contract is the product of oppression if it is a contract of adhesion, 6 one in which there was an inequality of bargaining power denying the weaker party the 7 opportunity to negotiate the terms of the contract. Id. at 113. “[I]n the case of preemployment 8 arbitration contracts, the economic pressure exerted by employers on all but the most sought-after 9 employees may be particularly acute, for the arbitration agreement stands between the employee Procedural Unconscionability 10 and necessary employment, and few employees are in a position to refuse a job because of an 11 arbitration requirement.” Id. at 115. Plaintiffs argue that the Arbitration Agreement is adhesive 12 because it was offered on a take-it-or-leave-it basis as a condition of employment with no 13 opportunity to negotiate. 14 Additionally, Plaintiffs argue that the Arbitration Agreement has the element of unfair 15 surprise because it does not put an employee on notice that he or she is agreeing to arbitration. 16 Plaintiffs argue that the form of the Arbitration Agreement, titled “Dispute Resolution Policy,” is 17 confusing because (1) it contains no reference to the fact that the policy applies to the employee; 18 (2) the class waiver is “confusingly worded”; and (3) the class waiver is “buried in the longest 19 paragraph, . . . not set out in bold or capital typeface.” Even a cursory review of the Arbitration 20 Agreement reveals that the arbitration provisions are not hidden and thus, there was no unfair 21 surprise about the terms to the Arbitration Agreement. First, the memo provided with the 22 Arbitration Agreement states: “this policy applies to you,” and the Arbitration Agreement itself 23 states: “[t]his Policy applies to any dispute arising out of or related to an Employee’s employment 24 with P.F. Chang’s.” Thus, Plaintiffs’ argument that an employee would not know to whom this 25 policy applies is unpersuasive. Second, the class waiver language is fairly straightforward. The 26 waiver states that the employee may not bring “a class or collective action,” or “participate in a 27 class, representative or collective action.” Third, the class waiver is not “buried” in a long 28 paragraph, but rather, the class waiver is set out in the last two sentences of a six sentence 7 1 paragraph. However, agreeing to arbitration was apparently a condition of employment, and was 2 3 presented on a take-it-or-leave-it basis. Thus, Plaintiffs have demonstrated at least some amount 4 of procedural unconscionability due to the adhesive nature of the Arbitration Agreement. 5 2. 6 Substantive unconscionability concerns the terms of the Arbitration Agreement 7 and whether those terms are overly harsh or one-sided. Armendariz, supra, 24 Cal. 4th at 114. 8 The first consideration turns on whether there is a “modicum of bilaterality.” There is no 9 suggestion that the agreement to arbitrate lacks mutuality. Substantive Unconscionability The second consideration looks to the integrity of the arbitration proceeding to ensure the 10 11 employee effectively may vindicate his or her statutory cause of action in the arbitral forum.2 12 Here, Plaintiffs argue that the class action waiver is substantively unconscionable because it 13 interferes with the vindication of substantive statutory rights. 14 a) The Supreme Court’s Concepcion decision 15 At the heart of the issue of substantive unconscionability is the 16 applicability to this dispute of the Supreme Court’s decision in Concepcion. Prior to Concepcion, 17 the controlling California authority concerning class action waivers was Discover Bank v. 18 Superior Court, 36 Cal. 4th 148 (Cal. 2005). There, the California Supreme Court analyzed the 19 FAA, as well as state law principles of unconscionability to determine whether to enforce an 20 arbitration agreement containing a class action waiver: when the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” Under these circumstances, such waivers are unconscionable under California law and should not be enforced. 21 22 23 24 25 Discover Bank, supra, 36 Cal. 4th at 162. 26 27 28 2 Other considerations include whether there is a neutral arbitrator, more than minimal discovery, a written award, and it requires the employee, as a condition of access to the arbitral forum, to pay unreasonable costs, arbitrator’s fees, or expenses. 8 1 Concepcion overruled Discover Bank. Concepcion, supra, 131 S.Ct. 1740. In 2 Concepcion, the Supreme Court analyzed a consumer phone services contract that included an 3 arbitration provision and a class-action waiver. Id. at 1744. The Court in Concepcion started 4 from the principle that the FAA was enacted to reflect “both a liberal federal policy favoring 5 arbitration and the fundamental principle that arbitration is a matter of contract.” Id. at 1745 6 (internal citations and quotations omitted). The Court’s ruling in Concepcion followed from its 7 earlier decisions in Southland v. Keating, 465 U.S. 1, 10 (1984) and Perry v. Thomas, 482 U.S. 8 483, 492 n.9 (1987), where it held that state statutes or judicial rules treating agreements to 9 arbitrate in a different manner from other agreements were impermissible under the FAA. 10 Concepcion held that arbitration agreements are to be enforced “according to their terms.” 11 Concepcion, supra, 131 S.Ct. at 1748 (internal citations omitted). While the FAA permits certain 12 contract-based defenses to enforcement, “defenses that apply only to arbitration or that derive 13 their meaning from the fact that an agreement to arbitrate is at issue” are not permitted. Id. at 14 1747-48. Accordingly, Concepcion abrogated the “Discover Bank rule,” because it “interfere[d] 15 with fundamental attributes of arbitration and thus create[d] a scheme inconsistent with the 16 FAA.” Id. at 1747-48. Defendants argue that in light of Concepcion, the existence of such a 17 class action waiver in the Arbitration Agreement poses no impediment to its enforcement. 18 b) 19 Plaintiffs attempt to distinguish Concepcion to avoid enforcement of the Concepcion applies with equal force to employment agreements 20 Arbitration Agreement. They argue that Concepcion was in the consumer context and left 21 undisturbed California Supreme Court precedent on the enforceability of class action waivers in 22 the employment context. See Gentry v. Superior Court, 42 Cal. 4th 443, 463 (Cal. 2007) 23 (“Gentry”). Plaintiffs contend that because different substantive legal rights are at issue in 24 employment agreements than consumer contracts, courts must view class waivers in the 25 employment context with particular scrutiny. Pls.’ Opp’n 8. Moreover, Plaintiffs argue that 26 because Gentry rests on policy concerns stemming from employees’ statutory rights not 27 addressed in Concepcion, it did not overrule Gentry. 28 9 Plaintiffs argue that the validity of the class arbitration waiver must be analyzed using the 1 2 factors set forth in Gentry: “‘the modest size of the potential individual recovery, the potential for 3 retaliation against members of the class, the fact that absent members of the class may be ill 4 informed about their rights, and other real world obstacles to the vindication of class members’ 5 rights to overtime pay through individual arbitration.’” Pls.’ Opp’n 9 (quoting Gentry, 42 Cal. 6 4th at 463). If class action waivers in arbitration agreements are enforced, Plaintiffs argue, it 7 would make it too difficult and expensive for individual employees to pursue claims for wage 8 violations. Pls.’ Opp’n 8-10 (citing Gentry, supra, 42 Cal. 4th at 456, 459). Moreover, they 9 argue that the ability to bring a collective action may be necessary to ensure that the labor laws 10 are enforced, particularly because many workers are unaware of their legal rights or fear 11 retaliation by their employers for asserting those rights. Id. 10-11 (citing Gentry, supra, 42 Cal. 12 4th at 461). Thus, Plaintiffs argue that class action waivers in employment agreements are 13 unenforceable because they impermissibly interfere with an employee’s ability to vindicate these 14 statutory rights. Id. 15 Here, the Court can find no principled basis to distinguish between Discover Bank, which 16 was expressly overruled in Concepcion, and Gentry.3 Each decision looked to the modest size of 17 individuals’ potential recovery, unequal knowledge and bargaining power in the contractual 18 relationship, and “other real world obstacles” to vindication of the individuals’ rights. Compare 19 Discover Bank, supra, 36 Cal. 4th at 162 with Gentry, supra, 42 Cal. 4th at 463. Concepcion was 20 clear that in abrogating the Discover Bank rule it was rejecting the California Supreme Court’s 21 reasoning that: [W]hen the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver 22 23 24 25 26 27 28 3 This conclusion is in line with this Court’s recent decision in Jasso v. Money Mart Express, Inc., 2012 WL 1309171 (N.D. Cal. Apr. 13, 2012), as well as other district courts in California that have examined the question of Concepcion’s applicability to class action claims in employment cases. See, e.g., Lewis v UBS Fin’l, 818 F. Supp. 2d 1161 (N.D. Cal. 2011); Quevedo v. Macy’s Inc., 798 F. Supp. 2d 1122 (C.D. Cal. 2011); Valle v. Lowe’s HIW, Inc., 2011 WL 3667441 (N.D. Cal. Aug. 22, 2011); Murphy v. DirecTV, Inc., 2011 WL 3319574 (C.D. Cal. 2011); Morse v. ServiceMaster Global Holdings, Inc., 2011 WL 3203919 (N.D. Cal. Jul. 27, 2011). 10 1 becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” 2 131 S.Ct. at 1746 (quoting Discover Bank, supra, 36 Cal. 4th at 162) (internal citations 3 omitted, alteration in original). 4 While the Court in Concepcion may not have taken into account the potential for 5 retaliation when there is an ongoing employment relationship between the parties, it did consider 6 other important public policy concerns regarding fraud and willful injury to consumers. The 7 failure to address employment retaliation alone does not permit a departure from Concepcion’s 8 broad statement that the FAA prohibits state-law created barriers to arbitration. “When state law 9 prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The 10 conflicting rule is displaced by the FAA.” Id. at 1747 (citing Preston v. Ferrer, 552 U.S. 346, 11 353 (2008)). 12 Moreover, to the extent that Gentry’s holding rested on the principle that a class waiver 13 should be unenforceable where the amounts at issue in the claims and the expense of prosecuting 14 the claims would effectively preclude vindication of statutory rights, that argument has been 15 soundly rejected by the Ninth Circuit’s subsequent decision in Coneff v. AT&T Corp., based upon 16 a reading of the “broadly written” language of Concepcion. 673 F.3d 1155, 1158 (9th Cir. 2012). 17 As the Ninth Circuit noted in Coneff, the majority in Concepcion rejected the argument that 18 precluding collective claims decreases effective enforcement, and therefore deterrence, because 19 the small size of individual claims is worth much less than the cost of litigating them or are 20 insufficient to give individual consumers incentive to bring them. Id. at 1159. The Ninth Circuit 21 read Concepcion to hold that “[s]uch unrelated policy concerns, however worthwhile, cannot 22 undermine the FAA.” Id. (citing Concepcion, supra, 131 S.Ct. at 1753). This Court cannot do 23 other than read the Concepcion decision the same way. Thus, Plaintiffs’ effort to distinguish 24 Concepcion on this basis fails. 25 As such, Plaintiffs’ argument that the presence of the class action waiver renders the 26 Arbitration Agreement substantively unconscionable is unavailing. Because this was Plaintiffs’ 27 sole basis for the Court to find the Arbitration Agreement substantively unconscionable, the Court 28 11 1 concludes that the Arbitration Agreement is not unconscionable. Therefore, the Court will not 2 hold the Arbitration Agreement unenforceable on this ground. 3 C. PUBLIC POLICY 4 Based on the National Labor Relations Board’s (“NLRB”) decision in D.R. Horton Inc., 5 357 N.L.R.B. No. 184, 2012 WL 36274 (January 3, 2012),4 Plaintiffs argue that class waivers in 6 employment agreements are prohibited by the National Labor Relations Act (“NLRA”). In D.R. 7 Horton, the NLRB considered whether an employer violates the NLRA when it requires an 8 employee to sign an agreement precluding class or collective claims concerning their 9 employment. The NLRA makes it an unfair labor practice for an employer to interfere with an 10 employee’s right “to engage in . . . concerted activities for the purpose of collective bargaining or 11 other mutual aid or protection.” 29 U.S.C. §§ 157, 158. Relying on numerous NLRB and 12 Supreme Court decisions interpreting the NLRA, the NLRB held that the requirement of a class 13 action waiver as a condition of employment is an unfair labor practice under the NLRA and 14 violates Section 7 of the NLRA, 29 U.S.C. §157.5 The NLRB found that the employer’s 15 agreement, by barring class and collective claims, “directly violates the substantive rights vested 16 in employees by Section 7 of the NLRA,” because such an agreement precludes collective or 17 representative claims by employees, which impermissibly interferes with those employees’ rights 18 to engage in concerted activity for mutual aid or protection. D.R. Horton, supra, at * 12. Plaintiffs argue that this Court should refuse to enforce an arbitration agreement that 19 20 includes a class action waiver provision because to do so would be enforcing an agreement that is 21 forbidden by the NLRA. Their analysis starts with the FAA’s savings clause, which provides that 22 agreements to arbitrate may be invalidated “on such grounds as exist at law or in equity for the 23 revocation of any contract.” 9 U.S.C. § 2. One such ground that “exist[s] at law or in equity for 24 the revocation of any contract” is where a contract is contrary to public policy. Thus, Plaintiffs 25 4 26 27 28 Pinpoint citations are to Westlaw. Defendants argue that the D.R. Horton decision is not entitled to any deference because it was decided in a procedurally improper posture, without a quorum of three members, and because decisions by the NLRB are not self-enforcing. Defs.’ Supp. Br. 2. While the NLRB’s decision is not binding upon this Court, the Supreme Court authority cited in the decision plainly is. In that respect, Defendants argue that D.R. Horton misreads and misapplies these Supreme Court decisions. 5 12 1 argue, if an agreement to arbitrate requires an employee to waive the right to engage in collective 2 activity as a condition of employment, then the agreement constitutes an unfair labor practice 3 under the NLRA, is contrary to public policy and under the FAA, such an agreement cannot be 4 enforced by a court. Pls.’ Supp. Br. 5. 5 Defendants argue that the NLRA is not a bar to enforcement of agreements to arbitrate 6 non-NLRA claims on an individual basis. The Court agrees. Concepcion articulates a strong 7 federal policy choice in favor of enforcing arbitration agreements and thereupon holds that class 8 waiver provisions should not be stricken or be grounds to render entire agreements unenforceable. 9 The Court in Concepcion stated that “[r]equiring the availability of classwide arbitration 10 interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with 11 the FAA.” Concepcion, supra, 131 S.Ct. at 1748. The Court then emphasized that the FAA is 12 meant to ensure enforcement of the terms of arbitration agreements, including terms that limit 13 “with whom a party will arbitrate its disputes.” Id. at 1749, citing Stolt-Nielsen at 1773. In short, 14 Concepcion holds that collective arbitration is contrary to the purposes of the FAA and thus the 15 FAA requires not just compelling arbitration, but compelling arbitration on an individual basis in 16 the absence of a clear agreement to proceed on a class basis. 17 1. 18 In D.R. Horton, the NLRB relied, not just the on NLRA, but also the Norris- Norris-LaGuardia Act 19 LaGuardia Act, 29 U.S.C. §§ 102 et seq., a statute that restricts the power of federal courts to 20 issue injunctions to prohibit certain activities. Under the Norris-LaGuardia Act, specific acts not 21 subject to restraining order or injunction include “aiding any person participating or interested in 22 any labor dispute who . . . is prosecuting, any action or suit in any court.” D.R. Horton, supra, at 23 *7 (quoting 29 U.S.C. § 104(d) (emphasis in original)). The NLRB looked at the policy 24 underlying the Norris-LaGuardia Act, which observes that “the individual unorganized worker is 25 commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and 26 thereby to obtain acceptable terms and conditions of employment, wherefore . . . it is necessary 27 that he have full freedom of association . . . and that he shall be free from the interference, 28 restraint, or coercion of employers . . . in other concerted activities for . . . mutual aid or 13 1 protection.” 29 U.S.C. § 102. According to the NLRB, contracts in conflict with this policy are 2 not enforceable in any court and cannot form the basis of legal or equitable relief. D.R. Horton, 3 supra, at *7 (citing 29 U.S.C. § 103). The NLRB concluded that “an arbitration agreement 4 imposed upon individual employees as a condition of employment cannot be held to prohibit 5 employees from pursuing an employment-related class, collective, or joint action in Federal or 6 State court.” Id. at *8. 7 Plaintiffs argue that the Arbitration Agreement directly conflicts with the Norris- 8 LaGuardia Act’s policy against interference by an employer with an employee’s right to engage 9 in collective activity. Further, they argue that the Norris-LaGuardia Act prevents this Court from 10 enforcing the Arbitration Agreement because it conflicts with the public policy articulated in the 11 Norris-La Guardia Act. Thus, they argue that enforcement of the class action waiver is barred by 12 the Norris-LaGuardia Act and therefore unenforceable under the FAA. 13 Defendants counter that the NLRB is not charged with administering the Norris- 14 LaGuardia Act and to the extent the NLRB interprets a statute other than the NLRA, its 15 interpretation is not entitled to any deference. Defs.’ Supp. Br. 2. Additionally, Defendants argue 16 that the NLRB’s – and Plaintiffs’ – interpretation of the Norris-LaGuardia Act is “patently 17 wrong.” Id. at 6. According to Defendants, the Norris-LaGuardia Act specifically applies only to 18 “yellow-dog” contracts – contracts not to join a union or to quit employment if one joins a union. 19 Defendants argue that nothing in the Norris-LaGuardia Act prevents courts from enforcing other 20 types of contracts, including arbitration agreements. See id. at 7 (citing Local 205 v. Gen. Elec. 21 Co., 233 F.2d 85, 90 (1st Cir. 1956) (“[I]t is our conclusion that jurisdiction to compel arbitration 22 is not withdrawn by the Norris-LaGuardia Act.”)). Thus, Defendants assert, because neither the 23 Arbitration Agreement at issue in this case nor the arbitration agreement at issue in D.R. Horton 24 were “yellow-dog” contracts, the Norris-LaGuardia Act does not apply. 25 The Court agrees that the Norris-LaGuardia Act does not bar enforcement of the 26 Arbitration Agreement. While the NLRB’s interpretation of the NLRA should be given some 27 deference, its interpretation of other federal statutes is not. See Hoffman Plastic Compounds, Inc. 28 v. NLRB, 535 U.S. 137, 144 (2002) (citing NLRB v. Bildisco & Bildisco, 465 U.S. 513, 527-534, 14 1 529, n. 9 (1984) (“While the Board's interpretation of the NLRA should be given some deference, 2 the proposition that the Board’s interpretation of statutes outside its expertise is likewise to be 3 deferred to is novel”)). Additionally, the Norris-LaGuardia Act specifically defines those 4 contracts to which it applies. 29 U.S.C. § 103(a), (b). An agreement to arbitrate is not one of 5 those contracts to which the Norris LaGuardia Act applies. 6 2. 7 The NLRB in D.R. Horton indicated that its decision did not create a conflict Conflict between FAA and NLRA 8 between the FAA and the NLRA or the FAA and the Norris-LaGuardia Act. According to 9 Plaintiffs, so long as the NLRA and Norris-La Guardia Act treat agreements to arbitrate no 10 differently than any other agreement, there is no conflict with the FAA. Plaintiffs argue that the 11 NLRA and Norris-La Guardia’s prohibitions on class waivers in arbitration agreements apply 12 only if employers seek to prevent their employees from engaging in collective action and thus, are 13 not targeted at arbitration agreements generally. The NLRB reached this same conclusion in D.R. 14 Horton after interpreting the FAA and the Norris-LaGuardia Act to resolve a conflict between 15 those two statutes, and between the FAA and the NLRA. Defendants argue that because the 16 NLRB does not administer the FAA or the Norris-LaGuardia Act, neither the NLRB’s 17 accommodation of the FAA, nor its interpretations of the FAA and Norris-LaGuardia Act are 18 entitled to deference. 19 3. Whether arbitration prevents vindication of substantive rights 20 In D.R. Horton, the NLRB read Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 21 20 (1991) to hold that the NLRB does not need to enforce class and collective arbitration waivers 22 where an arbitration agreement would cause a party to “forego the substantive rights afforded by 23 the statute” and that agreements to arbitrate non-NLRA claims on an individual basis fall within 24 this exception because they would deprive individuals of their rights under Section 7 of the 25 NLRA. D.R. Horton, supra, at *9 (quoting Gilmer, supra, 500 U.S. at 26). Defendants argue 26 that the NLRB misconstrues the Gilmer exception, which provides an arbitration agreement 27 cannot require a party to forego the substantive rights afforded by the statute under which the 28 plaintiff brings suit, not any statute. Defendants note that this is not an unfair labor practices case 15 1 brought under the NLRA. Defendants assert that Plaintiffs’ claims are under California law, and 2 there is no suggestion that the Plaintiffs will not be able to vindicate their substantive rights under 3 California law in the arbitral forum. 4 Additionally, Defendants argue that Gilmer made clear that proceeding as a class or 5 collective action was a procedural, not a substantive right falling within the Gilmer exception: 6 “[b]y agreeing to arbitrate a statutory claim, a party does not forego the substantive rights 7 afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, 8 forum.” 500 U.S. 20, 26 (1991) (quoting Mitsubishi Motors Corp., supra, 473 U.S. at 628) 9 (internal quotations omitted). Thus, Defendants assert, agreements to arbitrate non-NLRA claims 10 on an individual basis do not require employees to forego substantive rights. The Court in Gilmer 11 went on to declare that the plaintiff’s employment claims under the Age Discrimination in 12 Employment Act (“ADEA”) must be arbitrated “even if the arbitration could not go forward as a 13 class action or class relief could not be granted by the arbitrator.” Id. at 32. Although decided 14 under the ADEA, this Court finds no reason that the dicta in Gilmer would not apply with equal 15 force to other non-NLRA claims. 16 4. 17 Plaintiffs also attempt to distinguish Concepcion by arguing that Concepcion Preemption 18 involved preemption analysis, where, here, the Court is asked to consider federal statutes such 19 that preemption of state law is not at issue. While Concepcion was focused on preemption 20 analysis and whether a state could establish a rule contrary to the FAA, its statement of the 21 meaning and purposes of the FAA applies equally in the context of determining which federal 22 statute controls here. Moreover, the Supreme Court’s post-Concepcion decision in CompuCredit 23 v. Greenwood, 132 S.Ct. 665, 668-69 (2012), held that, absent a clear statement in a federal 24 statute showing Congressional intent to override the use of arbitration, the FAA prevails. Id. at 25 669. This is so even if the federal statute provides a “right to sue” and states that any waiver of 26 rights “shall be treated as void.” Id. at 670-71. CompuCredit held that courts are required to 27 enforce agreements to arbitrate according to their terms, “unless the FAA’s mandate has been 28 ‘overridden by a contrary congressional command.’” Id. (quoting Shearson/American Express 16 1 Inc. v. McMahon, 482 U.S. 220, 226 (1987)). Because Congress did not expressly provide that it 2 was overriding any provision in the FAA when it enacted the NLRA or the Norris-La Guardia 3 Act, the Court cannot read such a provision into either Act and must enforce the parties’ 4 Arbitration Agreement according to its terms. 5 While the NLRB’s analysis in D.R. Horton, makes a somewhat compelling argument that 6 agreements that require employees to submit to individual arbitration should not be enforced as 7 against public policy, that reasoning does not overcome the direct, controlling authority holding 8 that arbitration agreements, including class action waivers contained therein, must be enforced 9 according to their terms. As the Ninth Circuit recently stated in Coneff, supra, “[e]ven if we 10 could not square Concepcion with previous Supreme Court decisions, we would remain bound by 11 Concepcion, which more directly and more recently addresses the issues . . . in this case.” 637 F. 12 3d at 1159 (citing Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989) 13 (“If a precedent of this Court has direct application in a case, yet appears to rest on reasons 14 rejected in some other line of decisions, the Court of Appeals should follow the case which 15 directly controls, leaving to [the Supreme] Court the prerogative of overruling its own 16 decisions.”). As a result, the inclusion of a class action waiver provides no basis to hold the 17 Arbitration Agreement unenforceable as contrary to public policy. 18 D. PAGA WAIVER IN ARBITRATION AGREEMENT 19 In addition, Plaintiffs argue that because the class waiver provision prevents Plaintiffs 20 from acting as private attorneys general, it violates California’s Private Attorney General Act 21 (“PAGA”), Cal. Labor Code §§ 2698 et seq., which renders the Arbitration Agreement illegal and 22 unenforceable. This argument is based on the “Broughton-Cruz” rule that prohibits arbitration of 23 claims for public injunctive relief. See Broughton v. Cigna Healthplans of Calif., 21 Cal. 4th 24 1066 (Cal. 1999) and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (Cal. 2003). 25 Plaintiffs cite post-Concepcion cases in which state and federal district courts in California have 26 invalidated arbitration agreements with PAGA waivers on the basis of unconscionability. See 27 Pls.’ Opp’n 11-12. In Kilgore v. KeyBank, Nat. Ass’n, 673 F.3d 947, 951 (9th Cir. 2012), the 28 Ninth Circuit recently addressed this precise issue: whether, in light of Concepcion, the FAA 17 1 preempts California’s state law rule prohibiting the arbitration of claims for broad, public 2 injunctive relief. The Ninth Circuit held that “[t]he FAA preempts California’s Broughton-Cruz 3 rule that claims for public injunctive relief cannot be arbitrated.” Id. at 965. Thus, the Court 4 must enforce the parties’ Arbitration Agreement even if this might prevent Plaintiffs from acting 5 as private attorneys general.6 6 E. WAIVER OF RIGHT TO ARBITRATE 7 Finally, the Court will address Plaintiffs’ argument that Defendants somehow “waived” 8 their right to arbitrate. A party seeking to prove waiver of a right to arbitration must show: “(1) 9 knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; 10 and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Fisher 11 v. A.G. Becker Paribas, Inc., 791 F.2d 691, 694 (9th Cir. 1986). Because waiver of a contractual 12 right to arbitration is not favored, “any party arguing waiver of arbitration bears a heavy burden 13 of proof.” Id. Plaintiffs have not met that burden. Plaintiffs argue that invoking CAFA as the basis for removal is conduct inconsistent with 14 15 the intent to arbitrate, and that Plaintiffs have been prejudiced by the delay in the proceedings. 16 Neither argument is persuasive. Plaintiffs argue that removal pursuant to CAFA is logically 17 irreconcilable with the intent to arbitrate based upon an erroneous assumption that such removal 18 amounts to an admission that this action is suitable to class treatment. Pls.’ Opp’n 5. Defendants 19 invoked CAFA because the allegations in the Plaintiffs’ First Amended Complaint met the 20 statutory criteria for removal. See Notice of Removal, Dkt. No. 1. Removal does not serve as an 21 admission of those allegations. See Defs.’ Reply 1, n.1 (“P.F. Chang’s vigorously disputes 22 Plaintiffs’ baseless allegations”). Additionally, removal prior to compelling arbitration is neither 23 uncommon nor inconsistent with the right to arbitrate. Plaintiffs also argue that Defendants have taken “full advantage of numerous procedural 24 25 26 27 28 tools available only through the court system.”7 Plaintiffs have not identified any procedural tool 6 As Defendants point out in their Reply, Plaintiffs have not asserted a claim for injunctive relief on behalf of the public or otherwise. 7 As an aside, both parties accuse the other side of forum shopping. Defendants argue that Plaintiffs forum shopped by filing this action in the wrong jurisdiction. According to Defendants, Plaintiffs’ counsel 18 1 the Defendants have used. Other than removal and change of venue, the Court is not aware of 2 any procedural tools available only through the court system that Defendants have used. Mere delay cannot constitute the prejudice necessary to waive a party’s right to arbitrate 3 4 the dispute. Where courts have found prejudice from delay, the parties had engaged in extensive 5 discovery, or the case was in the verge of trial and the parties had engaged in significant trial 6 preparation. The parties have not engaged in any discovery and have no plans to engage in 7 discovery prior to the Court deciding the arbitration issue. Simply removing the case to federal 8 court and transferring the case to the appropriate venue before moving to compel arbitration has 9 not imposed any costs on Plaintiffs that could not have been avoided by filing the case in the 10 Northern District of California in the first place. The delay Plaintiffs complain of – waiting seven 11 months while the case was transferred – is about the same duration Plaintiffs waited before 12 serving the Defendants with the complaint and is a significantly shorter period than the four years 13 Morvant waited before filing this lawsuit. Indeed, an email attached to Plaintiffs’ opposition brief 14 demonstrates that no later than June 30, 2011, Defendants asked Plaintiffs to submit their claims 15 to arbitration. No waiver of arbitration can be found from these facts. 16 IV. 17 18 19 20 21 22 23 24 25 26 27 28 CONCLUSION For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART Defendants’ Motion to Compel Arbitration. The Court GRANTS Defendants’ Motion to Compel Arbitration as to Plaintiff Jean Andrews. The Court DENIES Defendants’ Motion to Compel Arbitration as to Plaintiff Zachary voluntarily dismissed a near identical putative class action that was before Judge Alsup in the Northern District of California prior to filing this action in the Sacramento Superior Court. Defendants argue that this forced them to remove the case and transfer it to the Northern District. Plaintiffs argue that these same acts by Defendants – i.e., removal, transfer, and now moving to compel the arbitral forum – constitute forum shopping. Plaintiffs also point out that the case has now been before five judges, which they suggest is judge shopping. The chronology is as follows: the case was originally filed in the Sacramento Superior Court where it was assigned to a Superior Court Judge; after the case was removed to the Eastern District of California, it was assigned to Judge Morrison C. England, Jr.; the case was then transferred to the Northern District of California, where it was assigned to Magistrate Judge Donna Ryu; P.F. Chang’s declined to consent to a magistrate judge, after which the case was reassigned to Judge Claudia Wilken; and finally, the case was one of over 300 cases automatically (and randomly) assigned to the undersigned after appointment to the federal bench. 19 1 Morvant. 2 This Order Terminates Docket Number 40. 3 IT IS SO ORDERED. 4 5 Dated: May 7, 2012 _____________________________________ YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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