Nitsch v. Dreamworks Animation SKG Inc. et al

Filing 116

ORDER by Judge Lucy H. Koh granting in part and denying in part 71 Motion to Compel (lhklc1, COURT STAFF) (Filed on 4/24/2015)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

10
SAN JOSE DIVISION

United States District Court
Northern District of California

11
12

ROBERT A. NITSCH, et al.,
Plaintiffs,

13
14
15
16

Case No. 14-CV-04062-LHK
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
COMPEL ARBITRATION

v.
DREAMWORKS ANIMATION SKG INC.,
et al.,
Defendants.

Re: Dkt. No. 71

17
18

Defendants DreamWorks Animation SKG, Inc.; The Walt Disney Company; Lucasfilm

19

Ltd., LLC; Pixar; ImageMovers, LLC.; Two Pic MC LLC (f/k/a ImageMovers Digital); Sony

20

Pictures Animation Inc.; Sony Pictures Imageworks Inc.; and Blue Sky Studios have filed a joint

21

motion to compel arbitration and stay proceedings. (“Mot.”), ECF No. 71. Having considered the

22

parties’ submissions, the relevant law, and the record in this case, the Court GRANTS in part and

23

DENIES in part Defendants’ motion.

24

I. BACKGROUND

25
26

This is a consolidated class action brought by former employees alleging antitrust claims
against their former employers, various animation studios with principal places of business in

27
28

1
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

California.1 Plaintiffs contend that Defendants engaged in a conspiracy to fix and suppress

2

employee compensation and to restrict employee mobility.

3

A. Factual Background
The Court draws the following factual background from the uncontroverted allegations in

4
5

the Consolidated Amended Complaint (“CAC”), and from judicially noticed documents. Unless

6

otherwise noted, Plaintiffs’ allegations are presumed to be true for purposes of ruling on

7

Defendants’ motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
1. The Parties

9

Defendants include the following animation and visual effects studios: Blue Sky Studios,

10

Inc. (“Blue Sky”), a Delaware corporation with its principal place of business in Greenwich, CT;

11
United States District Court
Northern District of California

8

DreamWorks Animation SKG, Inc. (“DreamWorks”), a Delaware corporation with its principal

12

place of business in Glendale, CA; ImageMovers LLC, a California corporation with its principal

13

place of business in Los Angeles, CA; ImageMovers Digital LLC, a Delaware corporation with its

14

principal place of business in Burbank, CA; Lucasfilm Ltd., LLC (“Lucasfilm”), a California

15

corporation with its principal place of business in San Francisco, CA;2 Pixar, a California

16

corporation with its principal place of business in Emeryville, CA; 3 Sony Pictures Animation, Inc.

17

and Sony Pictures Imageworks, Inc. (collectively, “the Sony Defendants”), California corporations

18

with their principal places of business in Culver City, CA; and The Walt Disney Company

19

(“Disney”), a Delaware corporation with its principal place of business in Burbank, CA.4 CAC ¶¶

20

21–29.

21

Plaintiffs Robert A. Nitsch, Jr., Georgia Cano, and David Wentworth (collectively,

22

“Plaintiffs”), are artists and engineers that were previously employed by four of the named

23
24
25
26
27
28

1

Defendant Blue Sky Studios, Inc. has its principal place of business in Greenwich, CT, but
Plaintiffs allege that it is owned by Twentieth Century Fox Film Corporation, which has its
principal place of business in Los Angeles, California. Consol. Am. Compl. (“CAC”), ¶ 21.
2
Plaintiffs aver that Industrial Light & Magic (“ILM”) is a division of Lucasfilm.
3
According to Plaintiffs, ILM, Lucasfilm, and Pixar have been owned by Defendant The Walt
Disney Company since 2012. CAC ¶¶ 25–26.
4
Disney also “oversees the operations of” Walt Disney Animation Studios, formerly known as
Walt Disney Feature Animation. CAC ¶ 29.
2
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

Defendants. Id. ¶¶ 18–20. Nitsch worked for Sony Picture Imageworks in 2004 and DreamWorks

2

from 2007 to 2011. Id. ¶ 18. Cano worked for Walt Disney Feature Animation from 2004 to 2005,

3

ImageMovers Digital in 2010, and at various other visual effects and animation studios. Id. ¶ 19.

4

Wentworth worked at ImageMovers Digital from 2007 to 2010. Id. ¶ 20. Nitsch is a resident of

5

Massachusetts, and Cano and Wentworth are residents of California. Id. ¶¶ 18–20.
Plaintiffs seek to represent the following class:

6
7

All persons who worked at any time from 2004 to the present for
Pixar, Lucasfilm, DreamWorks Animation, Walt Disney Animation
Studios, Walt Disney Feature Animation, Blue Sky Studios, Digital
Domain, ImageMovers Digital, Sony Pictures Animation or Sony
Pictures Imageworks in the United States. Excluded from the Class
are officers, directors, senior executives and personnel in the human
resources and recruiting departments of the Defendants.

8
9
10

United States District Court
Northern District of California

11

Id. ¶ 113.5

12

2. In re High-Tech Employees Litigation and the Department of Justice Investigation

13

There is significant factual overlap between Plaintiffs’ allegations and the related action In

14

re High-Tech Employees Litigation, No. 11-CV-02509-LHK, as well as the civil complaints filed

15

by the Department of Justice (“DOJ”) against several Silicon Valley technology companies, Pixar,

16

and Lucasfilm. As both the factual and procedural history of the related action, In re High-Tech,

17

and the DOJ investigations and complaints are relevant to the substance of Defendants’ motion to

18

dismiss, the Court briefly summarizes the background of that litigation below.
From 2009 to 2010, the Antitrust Division of the DOJ investigated the employment and

19
20

recruitment practices of various Silicon Valley technology companies, including Adobe Systems,

21

Inc., Apple, Inc., Google, Inc., Intel Corp., and Intuit, Inc. See In re High-Tech Employees Litig.,

22

856 F. Supp. 2d 1103, 1109 (N.D. Cal. 2012). In September of 2010, the DOJ then filed civil

23

complaints against the above-mentioned technology companies, in addition to Pixar and

24

Lucasfilm. Id. The DOJ filed its complaint against Adobe, Apple, Google, Intel, Intuit, and Pixar

25
26
27
28

5

Plaintiffs also allege that “[t]he members of the Settlement Class under the September 20, 2013
Settlement Agreement with Pixar and Lucasfilm [in High-Tech] . . . do not bring in this complaint
any claims against Pixar, Lucasfilm, and Disney that were released pursuant to the Settlement
Agreement.” Id. ¶ 114.
3
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

on September 24, 2010. Id. On December 21, 2010, the DOJ filed another complaint against

2

Lucasfilm and Pixar. CAC ¶ 94. The defendants, including Pixar and Lucasfilm, stipulated to

3

proposed final judgments in which they agreed that the DOJ’s complaints had stated claims under

4

federal antitrust law and agreed to be “enjoined from attempting to enter into, maintaining or

5

enforcing any agreement with any other person or in any way refrain from . . . soliciting, cold

6

calling, recruiting, or otherwise competing for employees of the other person. 856 F. Supp. 2d at

7

1109–10. (quoting Adobe Proposed Final Judgment at 5). The D.C. District Court entered the

8

stipulated proposed final judgments in March and June of 2011. Id.

9

The High-Tech plaintiffs filed five separate state court actions between May and July of
2011. Following removal, transfer to San Jose to the undersigned judge, and consolidation, the

11
United States District Court
Northern District of California

10

High-Tech plaintiffs filed a consolidated amended complaint on September 13, 2011. Id. at 1113.

12

In their complaint, the High-Tech plaintiffs alleged antitrust claims against their employers,

13

claiming that the defendants had conspired “to fix and suppress employee compensation and to

14

restrict employee mobility.” Id. at 1108. More specifically, the High-Tech plaintiffs alleged a

15

conspiracy comprised of “an interconnected web of express bilateral agreements.” Id. at 1110. One

16

agreement, the “Do Not Cold Call” agreement involved one company placing the names of the

17

other company’s employees on a “Do Not Cold Call” list and instructing its recruiters not to cold

18

call the employees of the other company. Id. In addition to the “Do Not Cold Call” agreements,

19

the High-Tech plaintiffs also alleged that Pixar and Lucasfilm, defendants in both High-Tech and

20

the instant action, entered into express, written agreements to (1) not cold call each other’s

21

employees, (2) to notify the other company whenever making an offer to an employee of the other

22

company, and (3) not to engage in “bidding wars.” Id. at 1111.

23

3. Alleged Conspiracy in the Instant Action

24

Here, Plaintiffs allege that Defendants conspired to suppress compensation in two ways.

25

First, Defendants allegedly entered into a scheme not to actively solicit each other’s employees.

26

CAC ¶ 41. Second, Defendants allegedly engaged in “collusive discussions concerning

27

competitively sensitive compensation information and agreed upon compensation ranges,” which

28

4
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

would artificially limit compensation offered to Defendants’ current and prospective employees.

2

Id.

3
4

a. Anti-Solicitation Scheme
According to Plaintiffs, “Defendants agreed not to contact their coconspirators’ employees

5

to inform them of available positions unless that individual employee had applied for a job

6

opening on his or her own initiative.” Id. ¶ 42. This solicitation, also known as “cold calling,” is “a

7

key competitive tool in a properly functioning labor market, especially for skilled labor.” Id. ¶ 42.

8

Plaintiffs aver that employees of competitor studios represent “one of the main pools of potential

9

hires,” and that employees of competitor studios that are not actively searching for new
employment are “more likely to be among the most sought after employees.” Id. ¶ 43. Hiring an

11
United States District Court
Northern District of California

10

employee from a competitor studio “can save costs and avoid risks.” Id. Absent active solicitation,

12

these employees are also difficult to reach. Id. Defendants’ anti-solicitation scheme also allegedly

13

included “notifying each other when an employee of one Defendant applied for a position with

14

another Defendant, and agreeing to limit counteroffers in such situations.” Id. ¶ 44. Moreover,

15

Defendants allegedly “often refrained from hiring other Defendants’ employees at all without the

16

permission of the current employer,” and would sometimes decline to make offers of employment

17

to an unemployed prospective hire if that individual had an outstanding offer from another

18

Defendant. Id. ¶ 45.

19

Pixar and Lucasfilm: According to Plaintiffs, “the roots of the conspiracy reach back to the

20

mid-1980s,” when George Lucas, the former Lucasfilm Chairman of the Board and CEO, sold

21

Lucasfilm’s “computer division” to Steve Jobs, who had recently left Apple. Id. ¶ 46. Jobs named

22

his new company Pixar. Id. Pixar’s President, Ed Catmull, Lucas, and “other senior executives,

23

subsequently reached an agreement to restrain their competition for the skilled labor that worked

24

for the two companies.” Id. Pixar drafted the terms of the agreement, which both Defendants

25

communicated to their senior executives and “select human resources and recruiting employees.”

26

Id. Lucas stated in an email that Pixar and Lucasfilm “have agreed that we want to avoid bidding

27

wars,” and that the agreement prevented the two companies from “raid[ing] each other’s

28

5
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

companies.” Id. Pixar and Lucasfilm allegedly agreed to the following terms: (1) not to cold call

2

each other’s employees; (2) to notify each other when making an offer to the other company’s

3

employee; and (3) that any offer by the other company would be “final,” i.e., neither Pixar nor

4

Lucasfilm would engage in counteroffers. Id. ¶¶ 46–48 (citing internal Pixar email sent on January

5

16, 2006).

6

Plaintiffs further allege that while the conspiracy originated with Pixar and Lucasfilm,

7

Catmull brought additional studios into the fold. Id. ¶ 49. In a 2005 email, then Vice President of

8

Human Resources at Pixar, Lori McAdams, wrote “With regard to ILM, Sony, Blue Sky, etc., we

9

have no contractual obligations, but we have a gentleman’s agreement not to directly solicit/poach
from their employee pool.” Id. ¶ 50. Pixar also drafted an internal “competitors list” that “listed

11
United States District Court
Northern District of California

10

anti-solicitation rules for each of the Defendants . . . .” Id. According to Plaintiffs, Blue Sky,

12

DreamWorks, ImageMovers Digital, Sony Pictures Imageworks, and Walt Disney Animation

13

Studios were “all listed with directions not to ‘recruit directly’ or ‘solicit or poach employees.’”

14

Id. Plaintiffs’ allegations as to each Defendants’ alleged role and participation in the anti-

15

solicitation scheme is detailed below.

16

DreamWorks: Jobs and DreamWorks CEO, Jeffrey Katzenberg, “personally discussed

17

DreamWorks joining into the conspiracy.” Id. ¶ 52. In a February 18, 2004 email from Catmull to

18

Jobs, Catmull stated that the mutual agreement “worked quite well.” Id. A January 14, 2007 email

19

from Catmull to Disney’s Chairman Dick Cook, also provided that “we have an agreement with

20

DreamWorks not to actively pursue each other’s employees.” Id. In further emails between

21

Catmull, McAdams, and DreamWorks’ head of human resources, Kathy Mandato, Pixar and

22

DreamWorks reiterated their “non-poaching practices.” Id. ¶ 53. When a Pixar recruiting email

23

was sent to a DreamWorks employee, Mandato reached out to McAdams, and McAdams

24

responded that she’d “put a stop to it!” Id. ¶ 54.

25

Disney: A 2005 Pixar email “confirmed that Pixar would not recruit workers out of Disney

26

or other studios.” Id. ¶ 56. In 2006, Disney purchased Pixar, and Catmull assumed responsibility

27

for Walt Disney Animation Studios. Id. In communications between Disney Chairman Cook and

28

6
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

Catmull, Cook agreed that “avoid[ing] raiding each other” was necessary to avoid “seriously

2

mess[ing] up the pay structure.” Id. Cook allegedly promised to “reaffirm our position again” with

3

ImageMovers Digital, which Plaintiffs contend is a joint venture Disney launched with

4

ImageMovers.6 Id. In 2006, Disney’s Director of Animation Resources apparently asked ILM, a

5

division of Lucasfilm, to “observe ‘the Gentlewomen’s agreement’” that ILM not recruit Disney

6

digital artists. Id. ¶ 57.
Sony Defendants: Beginning in 2002, Sony Pictures Imageworks expanded significantly by

7

offering higher salaries to lure workers away from other studios. Id. ¶ 58. In response, Catmull

9

allegedly met with Sony executives in person in 2004 or 2005 to “ask[] them to quit calling our

10

employees.” Id. ¶ 59. Plaintiffs allege that Catmull reached an agreement with Sony at that time

11
United States District Court
Northern District of California

8

that the companies would not directly solicit or poach from each other. Id. Moreover, Sony

12

allegedly then began to “restrain its relatively higher-wage practices to levels below what would

13

otherwise have existed in a competitive market.” Id. ¶ 62.

14

Blue Sky Studios: Plaintiffs aver that Blue Sky “similarly entered the conspiracy,” did not

15

recruit from other studios, and requested that other studios not recruit from Blue Sky. Id. ¶ 63. In

16

2005, Blue Sky allegedly declined to pursue a DreamWorks employee that would have been “an

17

amazing addition,” because Blue Sky did not “want to be starting anything with [Katzenberg, the

18

DreamWorks CEO] over one story guy.” Id. Blue Sky’s Director of Human Resources, Linda

19

Zazza, also allegedly spoke with Pixar’s McAdams to discuss “our sensitive issue of employee

20

retention,” and McAdams assured Blue Sky that Pixar was not attempting to poach Blue Sky

21

employees. Id. ¶ 64.
ImageMovers Defendants:7 The ImageMovers Defendants allegedly also joined the

22
23
24
25
26
27
28

6

Defendants submit that Exhibit F in their request for judicial notice, consisting of Certificates of
Corporate Formation and Amendment filed with the Secretary of State of the State of Delaware,
Division of Corporations, disproves Plaintiffs’ allegation that ImageMovers LLC was a party to
the joint venture that created ImageMovers Digital. See ECF No. 76. Plaintiffs voluntarily
dismissed ImageMovers LLC from this action after Defendants filed their motion to dismiss and
request for judicial notice. Consequently, the Court concludes that ImageMovers’ involvement in
the purported joint venture is not relevant.
7
Plaintiffs dismissed ImageMovers LLC without prejudice pursuant to a tolling agreement on
7
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

conspiracy. Catmull wrote in a January 2007 email to Disney Chairman Cook that Catmull knew

2

ImageMovers would “not target Pixar.” Id. ¶ 65. Plaintiffs allege, however, that ImageMovers

3

continued to recruit from other conspiring studios, including DreamWorks, by “offering higher

4

salaries.” Id. ¶ 66. Catmull then met with one of the founders of ImageMovers, Steve Starkey.

5

Starkey allegedly told Catmull that ImageMovers had informed Lucas that ImageMovers would

6

“not raid ILM.” Id. ¶ 67. Catmull then contacted Disney Studio’s President, Alan Bergman, and

7

Senior Vice President of Human Resources, Marjorie Randolph, requesting that they require the

8

ImageMovers Defendants to comply with the anti-solicitation scheme. Id. ¶ 68. According to

9

Plaintiffs, Randolph “responded that Disney had in fact gotten the ImageMovers Defendants to

10

United States District Court
Northern District of California

11

agree to the ‘rules’ of the anti-solicitation scheme.” Id.
Digital Domain8: Digital Doman allegedly joined the conspiracy and had anti-solicitation

12

agreements with “at least” DreamWorks, Lucasfilm/ILM and the Sony Defendants. Id. ¶ 69.

13

According to Plaintiffs, starting in 2007, Digital Domain’s Head of Human Resources was Lala

14

Gavgavian, who had previously worked at Lucasfilm’s ILM division “in senior roles in talent

15

acquisition . . . during which time Pixar President Jim Morris explicitly informed her that Pixar

16

and Lucasfilm” had an anti-solicitation/no-poaching agreement. Id. ¶ 70. Gavgavian and other

17

senior personnel at Digital Domain allegedly “specifically instructed employees not to cold call or

18

otherwise solicit other Defendants’ employees.” Id. ¶ 71.

19
20
21
22

As to all Defendants, Plaintiffs contend that Defendants “repeatedly sought to recruit” new
studios into the scheme, including a small studio in 2008. Id. ¶ 72.
b. Compensation Ranges
In addition to the anti-solicitation scheme, Plaintiffs further allege that Defendants

23

“directly communicated and met regularly to discuss and agree upon compensation ranges.” Id.

24

¶ 74. According to Plaintiffs, Defendants met at least once a year in California at meetings

25
26
27
28

January 14, 2015. ECF No. 83.
8
Plaintiffs also dismissed Digital Domain 3.0 without prejudice pursuant to a tolling agreement.
See CAC at 16 n.3.
8
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

organized by the Croner Company, a third-party that apparently collects industry-specific salary

2

information. At the official meetings, the Defendants “set the parameters of a compensation

3

survey” that “provides wage and salary ranges for the studios’ technical or artistic positions,

4

broken down by position and experience level.” Id. ¶ 75. Senior human resources and recruiting

5

personnel from DreamWorks, Pixar, Lucasfilm/ILM, Disney, ImageMovers Digital, the Sony

6

Defendants, Blue Sky, and Digital Domain attended these survey meetings, in addition to other

7

studios. Id. ¶ 76. Plaintiffs aver that Defendants used the Croner meetings to “go further than their

8

matching of job positions across companies; they discussed, agreed upon and set wage and salary

9

ranges during meals, drinks and other social gatherings that they held outside of the official
Croner meetings.” Id. ¶ 77. Defendants’ human resources and recruiting personnel also allegedly

11
United States District Court
Northern District of California

10

held “side” meetings at the Siggraph conference, a major visual effects industry conference, which

12

senior personnel from Blue Sky, Pixar, DreamWorks, Lucasfilm, and Sony Picture ImageWorks

13

attended. Id. ¶ 79.

14

Defendants’ Directors of Human Resources also allegedly “frequently sought to create new

15

relationships when one of their counterparts was replaced at a co-conspirator to ensure the efficacy

16

of communications about the conspiracy,” and met with each other one-on-one “on many

17

occasions.” Id. ¶¶ 79–80. Plaintiffs further allege that Defendants regularly emailed each other

18

with specific salary ranges. On May 13, 2005, DreamWorks requested that Disney provide salary

19

information on three positions, and Disney promptly responded. Id. ¶ 81. The following spring,

20

DreamWorks also requested similar information from Pixar and Disney, and “made clear it was

21

surveying multiple studios.” Id. ¶ 82. On September 2, 2009, Blue Sky’s Director of Human

22

Resources requested salary range information from Pixar. Id. ¶ 83. In a 2007 email, DreamWorks’

23

Head of Compensation explained that “we do sometimes share general comp information (ranges,

24

practices) in order to maintain the relationships with other studios and to be able to ask for that

25

kind of information ourselves when we need it.” Id. ¶ 84.

26
27
28

According to Plaintiffs, Defendants’ communications regarding salary ranges were not
limited to bilateral “one off” exchanges, but rather Defendants would “openly email[] each other
9
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

in large groups with competitively sensitive confidential current and future compensation

2

information.” Id. ¶ 85. On November 17, 2006, Pixar’s McAdams emailed senior human resources

3

personnel at DreamWorks, Sony Pictures Imageworks, Lucas Film, Walt Disney Animation

4

Studios, and others:

5

Quick question from me, for those of you who can share the info.

6

What is your salary increase budget for FY ’07? Ours is
[REDACTED] but we may manage it to closer to [REDACTED] on
average. Are you doing anything close, more, or less?

7
8

Id. ¶ 86. In January 2009, DreamWorks’ Head of Production Technology emailed the heads of

9

human resources at Pixar, ILM, Sony Pictures Animation, and Disney to “learn how they handled
overtime.” More specifically, DreamWorks wanted to “see if the other companies were ‘as

11
United States District Court
Northern District of California

10

generous.’” Id. ¶ 88.

12

Defendants’ human resources and recruiting personnel also allegedly regularly

13

communicated via telephone. Id. ¶ 89. Plaintiffs quote emails from Pixar’s McAdams to Sony

14

Pictures Imageworks, ILM, DreamWorks, Disney, and Blue Sky “in early 2007” stating

15

“[c]hatting with all of you each day is really becoming a fun habit,” and an email response from

16

Walt Disney Animation Studios Vice President of Human Resources also commenting that “[i]t is

17

fun to hear from you all on a daily basis.” Id. ¶ 90.

18

As Plaintiffs describe it, the Croner survey meetings, side meetings, emails, and telephone

19

calls “provided the means and opportunities for Defendants to collude and to implement and

20

enforce the conspiracy to suppress workers’ compensation.” Id. ¶ 91. Plaintiffs further allege that

21

while press reports in 2009 noted that the DOJ was investigating anti-solicitation agreements

22

among high-tech companies, including Google and Apple, there was no indication that the DOJ

23

was also investigating Pixar, Lucasfilm, or any other animation company. Id. ¶ 95. Plaintiffs aver

24

that September 17, 2010 marked the first news story naming Pixar as a company under

25

investigation, but that there was no public disclosure that any other Defendant in the instant action

26

was part of the conspiracy. Id. According to Plaintiffs, Lucasfilm was implicated in the Pixar

27

investigation in December 2010, but until the Court unsealed certain filings in the High-Tech case,

28

10
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

there was no public information that the other Defendants in this action had engaged in similar

2

conduct. Id.

3

4. Claims

4

Plaintiffs’ CAC contains three claims for relief under the following statutes: (1) Section 1

5

of the Sherman Act, 15 U.S.C. § 1; (2) California’s Cartwright Act, Cal. Bus. & Prof. Code

6

§ 16720; and (3) California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200

7

et seq. Plaintiffs seek damages, pre- and post-judgment interest, attorney’s fees and expenses, and

8

a permanent injunction. Id. ¶ 147.

9

B. Procedural Background

10

United States District Court
Northern District of California

11

In light of the relationship between the instant case and the High-Tech case, the Court
briefly summarizes the relevant procedural history in High-Tech in addition to the instant case.

12

1. High-Tech Procedural Background

13

The High-Tech defendants removed the first state-court action on May 23, 2011. No. 11-

14

2509, ECF No. 1. On April 18, 2012, the Court granted in part and denied in part the High-Tech

15

defendants’ joint motion to dismiss and denied Lucasfilm’s motion to dismiss. No. 11-2509, ECF

16

No. 119. On April 5, 2013, the Court granted in part and denied in part the High-Tech plaintiffs’

17

motion for class certification with leave to amend. No. 11-2509, ECF No. 382. The Court granted

18

the High-Tech plaintiffs’ supplemental motion for class certification on October 24, 2013. No. 11-

19

2509, ECF No. 531. On November 13, 2013, the High-Tech defendants filed a Rule 23(f) petition

20

before the Ninth Circuit, requesting permission to appeal this Court’s October 24, 2013 class

21

certification order. No. 13-80223, ECF No. 1. The Ninth Circuit denied the defendants’ petition on

22

January 14, 2014. No. 13-80223, ECF No. 18.

23

In the interim, three of the High-Tech defendants, Intuit, Lucasfilm, and Pixar, reached an

24

early settlement with the plaintiffs. On September 21, 2013, the High-Tech plaintiffs filed a

25

motion for preliminary approval of a proposed class action settlement as to defendants Intuit,

26

Lucasfilm, and Pixar. No. 11-2509, ECF No. 501. On October 30, 2013, the Court preliminarily

27

approved the proposed settlement with Intuit, Lucasfilm, and Pixar. No. 11-2509, ECF No. 540.

28

11
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

The Court granted final approval as to that settlement on May 16, 2014. No. 11-2509, ECF No.

2

915. The Court entered a final judgment with regards to Lucasfilm, Pixar, and Intuit on June 9,

3

2014. No. 11-2509, ECF No. 936. At the request of Intuit, the Court entered an amended final

4

judgment on June 20, 2014. No. 11-2509, ECF No. 947.
The remaining High-Tech defendants, Adobe, Apple, Google, and Intel, filed individual

5
6

motions for summary judgment, and joint motions for summary judgment and to strike certain

7

expert testimony on January 9, 2014. No. 11-2509, ECF Nos. 554 (Intel), 556–57 (joint motions),

8

560 (Adobe), 561 (Apple), 564 (Google). The Court denied the High-Tech defendants’ individual

9

motions for summary judgment on March 28, 2014. No. 11-2509, ECF No. 771. On April 4, 2014,
the Court granted in part and denied in part the High-Tech defendants’ motion to strike, and

11
United States District Court
Northern District of California

10

denied the defendants’ joint motion for summary judgment. No. 11-2509, ECF No. 778.
On May 22, 2014, the High-Tech plaintiffs filed a motion for preliminary approval of class

12
13

action settlement as to the remaining defendants. No. 11-2509, ECF No. 920. On August 8, 2014,

14

the Court denied the High-Tech plaintiffs’ motion for preliminary approval, concluding that the

15

proposed settlement did not fall “within the range of reasonableness.” No. 11-2509, ECF No. 974,

16

at 30. On September 4, 2014, the High-Tech defendants filed a petition for a writ of mandamus

17

with the Ninth Circuit. No. 14-72745, ECF No. 1. On January 13, 2015, the High-Tech defendants

18

filed correspondence with the Ninth Circuit referring to a new proposed settlement agreement. No.

19

14-72745, ECF No. 21. On January 30, 2015, the defendants filed an unopposed motion to dismiss

20

the petition, which the Ninth Circuit granted on February 2, 2015. No. 14-72745, ECF Nos. 23,

21

24.

22

On January 15, 2015, the High-Tech plaintiffs filed a motion for preliminary approval of

23

class action settlement as to the remaining defendants. No. 11-2509, ECF No. 1032. In this second

24

proposed class action settlement, the parties had reached a settlement amount exceeding the

25

previously rejected settlement by approximately $90.5 million dollars. Id. at 1. Following a

26

fairness hearing on March 2, 2015, the Court granted preliminary approval to the January 2015

27

settlement agreement on March 3, 2015. No. 11-1509, ECF Nos. 1051, 1054. A final approval

28

12
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

hearing is scheduled for July 9, 2015.

2

2. Procedural Background in the Instant Action

3

Plaintiff Nitsch filed the first complaint against all Defendants but Blue Sky on September
8, 2014. ECF No. 1. The Court related Nitsch’s action to In re High-Tech Employee Antitrust

5

Litigation, No. 11-2509, on September 23, 2014. Plaintiff Cano filed the second complaint against

6

all Defendants on September 17, 2014, which the Court related to High-Tech on October 7, 2014.

7

See Case No. 14- 4203, ECF Nos. 1, 9. Plaintiff Wentworth filed the third complaint against all

8

Defendants but Blue Sky on October 2, 2014, which the Court related to High-Tech on October

9

28, 2014. See Case No. 14-4422, ECF Nos. 1, 26. On November 5, 2014, the Court granted

10

Plaintiffs’ motion to consolidate the above-mentioned three cases into a single action, In re

11
United States District Court
Northern District of California

4

Animation Workers Antitrust Litigation. See Case No. 14-4062, ECF No. 38.

12

Pursuant to the Court’s case management order, Plaintiffs filed their CAC on December 2,

13

2014. ECF No. 63. On January 9, 2015, Defendants filed a joint motion to dismiss, and a request

14

for judicial notice. ECF Nos. 75, 76. Defendants also filed an administrative motion to seal

15

exhibits in support of their motion to dismiss. ECF No. 79. Plaintiffs filed a timely opposition,

16

ECF No. 97, and Defendants replied, ECF No. 100. On April 3, 2015, the Court granted

17

Defendants’ motion to dismiss, finding that Plaintiffs’ claims were time barred. ECF No. 105. The

18

Court granted Plaintiffs leave to amend their CAC within thirty days of the Court’s order.

19

On January 9, 2015, Defendants also filed the instant motion to compel arbitration. ECF

20

No. 71. Plaintiffs filed a timely opposition, ECF No. 96, and Defendants replied, ECF No. 99.

21

II. LEGAL STANDARD

22

The Federal Arbitration Act (“FAA”) applies to arbitration agreements in any contract

23

affecting interstate commerce. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001); 9

24

U.S.C. § 2. Under Section 3 of the FAA, “a party may apply to a federal court for a stay of the trial

25

of an action ‘upon any issue referable to arbitration under an agreement in writing for such

26

arbitration.’” Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010) (quoting 9

27

U.S.C. § 3). If all claims in litigation are subject to a valid arbitration agreement, the court may

28

13
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

dismiss or stay the case. See Hopkins & Carley, ALC v. Thomson Elite, No. 10-CV-05806, 2011

2

U.S. Dist. LEXIS 38396, at *28–29 (N.D. Cal. Apr. 6, 2011).

3

The FAA states that written arbitration agreements “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any

5

contract.” 9 U.S.C. § 2. In deciding whether a dispute is arbitrable, a court must answer two

6

questions: (1) whether the parties agreed to arbitrate, and, if so, (2) whether the scope of that

7

agreement to arbitrate encompasses the claims at issue. See Chiron Corp. v. Ortho Diagnostic

8

Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If a party seeking arbitration establishes these two

9

factors, the court must compel arbitration. Id.; 9 U.S.C. § 4. “The standard for demonstrating

10

arbitrability is not a high one; in fact, a district court has little discretion to deny an arbitration

11
United States District Court
Northern District of California

4

motion, since the [FAA] is phrased in mandatory terms.” Republic of Nicar. v. Std. Fruit Co., 937

12

F.2d 469, 475 (9th Cir. 1991). In cases where the parties “clearly and unmistakably intend to

13

delegate the power to decide arbitrability to an arbitrator,” the court’s inquiry is “limited . . . [to]

14

whether the assertion of arbitrability is ‘wholly groundless.’” Qualcomm Inc. v. Nokia Corp., 466

15

F.3d 1366, 1371 (Fed. Cir. 2006) (applying Ninth Circuit law). Nonetheless, “arbitration is a

16

matter of contract and a party cannot be required to submit to arbitration any dispute which [s]he

17

has not agreed so to submit.” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648

18

(1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)).

19

The FAA creates a body of federal substantive law of arbitrability that requires a healthy

20

regard for the federal policy favoring arbitration and preempts state law to the contrary. Volt Info.

21

Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 475–79 (1989); Ticknor v.

22

Choice Hotels Int’l, Inc., 265 F.3d 931, 936–37 (9th Cir. 2001). State law is not entirely displaced

23

from the federal arbitration analysis, however. See Ticknor, 265 F.3d at 936–37. When deciding

24

whether the parties agreed to arbitrate a certain matter, courts generally apply ordinary state law

25

principles of contract interpretation. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944

26

(1995). Parties may also contract to arbitrate according to state rules, so long as those rules do not

27

offend the federal policy favoring arbitration. Volt, 489 U.S. at 478–79. Thus, in determining

28

14
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

whether parties have agreed to arbitrate a dispute, the court applies “general state-law principles of

2

contract interpretation, while giving due regard to the federal policy in favor of arbitration by

3

resolving ambiguities as to the scope of arbitration in favor of arbitration.” Mundi v. Union Sec.

4

Life Ins. Co., 555 F.3d 1042, 1044 (9th Cir. 2009) (quoting Wagner v. Stratton Oakmont, Inc., 83

5

F.3d 1046, 1049 (9th Cir. 1996)). “[A]s with any other contract, the parties’ intentions control, but

6

those intentions are generously construed as to issues of arbitrability.” Mitsubishi Motors Corp. v.

7

Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). If a contract contains an arbitration

8

clause, there is a presumption of arbitrability, AT&T, 475 U.S. at 650, and “any doubts concerning

9

the scope of arbitrable issues should be resolved in favor of arbitration,” Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

11
United States District Court
Northern District of California

10

III. DISCUSSION

12

In the instant case, Defendants contend that Plaintiff Nitsch is bound by an arbitration

13

agreement with Defendant DreamWorks. As such, Defendants request that the Court issue three

14

separate orders: (1) an order compelling Plaintiff Nitsch to arbitrate his claims against

15

DreamWorks; (2) an order compelling Plaintiff Nitsch to arbitrate his claims against the other

16

Defendants pursuant to the doctrine of equitable estoppel; and (3) and an order staying the

17

prosecution of Plaintiff Nitsch’s claims pending completion of the arbitration. The Court addresses

18

each issue below.

19

A. Plaintiff Nitsch’s claims against DreamWorks

20

The Court begins by addressing whether Plaintiff Nitsch is obligated to arbitrate any of his

21

claims against Defendant DreamWorks. As discussed below, the Court concludes that the

22

threshold question of arbitrability as to some of Plaintiff Nitsch’s claims against DreamWorks

23

must be decided by an arbitrator under the terms of Plaintiff Nitsch’s arbitration agreements with

24

Defendant DreamWorks. For the reasons stated below, the Court grants Defendants’ motion for

25

the purpose of allowing an arbitrator to decide, in the first instance, whether the arbitrator should

26

exercise jurisdiction over Plaintiff Nitsch’s claims against Defendant DreamWorks arising out of

27

Plaintiff’s employment at DreamWorks.

28

15
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

1. Plaintiff Nitsch’s Claims against DreamWorks Arising out of Plaintiff’s
Employment at DreamWorks

2

Here, the parties do not dispute that Plaintiff Nitsch entered into written employment

3

agreements with Defendant DreamWorks on July 12, 2007 and January 23, 2010. See Declaration

4

of Vinelath Bowling in support of Defendants’ motion to compel arbitration (“Bowing Decl.”),

5

ECF No. 74, Exhs. A, B. Both employment agreements contain identical arbitration provisions:

6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

ARBITRATION. Any dispute arising out of or relating to payment
to Artist of any amount hereunder or the amount or calculation
thereof, or any other dispute arising in any way out of the
Agreement, including its existence, validity or breach will be
arbitrated privately and confidentially in Los Angeles, California, by
one arbitrator mutually agreed (or if none, appointed pursuant to the
commercial arbitration rules of the American Arbitration
Association), and the arbitrator may examine in DWA’s offices, all
documents which Artist is entitled to examine pursuant to the above,
subject to the arbitrator’s executing an appropriate confidentiality
agreement. The result of any such arbitration shall be binding. . . .
Except as provided above to the contrary, any such arbitration will
be conducted in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association. The
provisions contained in this paragraph shall survive the termination
of the Artist’s employment with DWA.
See id., Exh. A ¶ P; Exh. B ¶ R. Here, the arbitration provisions explicitly incorporate the
American Arbitration Association (“AAA”) rules. Under AAA rules, “[t]he arbitrator shall have
the power to rule on his or her own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.” See Declaration of Shannon Mader
(“Mader Decl.”), ECF No. 72, Exh. A, AAA Employment Arbitration Rules and Mediation
Procedures Rule 6.
Plaintiff Nitsch does not contest that the employment agreements’ explicit incorporation of
AAA rules serves as “clear[] and unmistakabl[e]” evidence of the parties intent “to delegate the
power to decide arbitrability to an arbitrator.” Qualcomm, 466 F.3d at 1371; see also Guidewire
Software, Inc. v. Chookaszian, No. 12-CV-3224-LHK, 2012 WL 5379589, at *4 (N.D. Cal. Oct.
31, 2012) (collecting cases holding that incorporation of AAA rules satisfies “clear and
unmistakable evidence” standard). Where, as here, the parties “clearly and unmistakably intend to
delegate the power to decide arbitrability to an arbitrator,” the court’s inquiry is “limited . . . [to]
16
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

whether the assertion of arbitrability is ‘wholly groundless.’” Qualcomm, 466 F.3d at 1371.

2

Defendants contend that Plaintiff Nitsch’s claims relate to his “payment” or compensation and

3

arise out of his employment agreements. According to Defendants, at bottom Plaintiff Nitsch’s

4

claim against DreamWorks is that DreamWorks conspired with the other Defendants to limit or

5

reduce Plaintiff Nitsch’s compensation.

6

Here, Plaintiff Nitsch concedes that DreamWorks’ assertion of arbitrability is not wholly

7

groundless. See Opp. at 10. The Court agrees. The arbitration provisions encompass “[a]ny dispute

8

arising out of or relating to payment to Artist of any amount . . . or any other dispute arising in any

9

way out of the Agreement.” Defendants have raised at least a colorable argument that Plaintiff
Nitsch’s claim against DreamWorks is related to DreamWorks’ “payment” under the employment

11
United States District Court
Northern District of California

10

agreements. As such, the Court concludes that DreamWorks’ argument that Plaintiff Nitsch’s

12

claims against DreamWorks arising out of Plaintiff’s employment at DreamWorks should be

13

referred to arbitration is not wholly groundless.

14

The Court therefore grants Defendants’ motion to compel arbitration as to Plaintiff

15

Nitsch’s claims against Defendant DreamWorks arising out of Plaintiff’s employment at

16

DreamWorks.

17

2. Plaintiff Nitsch’s Claims against DreamWorks Arising out of Plaintiff’s
Employment at Sony Pictures Imageworks

18
In addition to Plaintiff Nitsch’s claims arising out of Plaintiff’s employment at Defendant
19
DreamWorks, Plaintiff Nitsch also asserts claims against all Defendants arising out of Plaintiff’s
20
employment at Defendant Sony Picture Imageworks. According to Plaintiff Nitsch, some of
21

Plaintiff’s claims against DreamWorks would not arise out of Plaintiff’s employment or

22
compensation by DreamWorks, but rather by DreamWorks’ alleged participation in an
23

anticompetitive conspiracy that depressed Plaintiff’s compensation from Sony Picture

24
Imageworks. See Opp. at 10–11. Defendants concede that Plaintiff Nitsch may state claims against
25
Defendant DreamWorks separate and apart from Plaintiff’s claims related to Plaintiff’s
26
employment at DreamWorks, and that those claims are not subject to arbitration. Reply at 1 n.1.
27
28

17
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

(“Defendants . . . do not seek an order compelling Nitsch to arbitrate claims relating to his

2

employment at Sony Pictures Imageworks.”).The parties appear to agree that Plaintiff Nitsch’s

3

claims against DreamWorks related to his employment at Sony Pictures do not fall within the

4

scope of the arbitration clauses. The Court agrees that the plain language of Plaintiff Nitsch’s two

5

arbitration clauses do not encompass any claims that arise out of Plaintiff’s employment with

6

Defendant Sony Pictures Imageworks, and that any argument to the contrary would be wholly

7

groundless. See AT&T Techs, 475 U.S. at 648.

8

In sum, under the terms of the arbitration clauses, an arbitrator must determine his or her
own jurisdiction with respect to the arbitrability of Plaintiff Nitsch’s claims against DreamWorks

10

arising out of Plaintiff’s employment at DreamWorks. However, Plaintiff Nitsch’s claims against

11
United States District Court
Northern District of California

9

DreamWorks arising out of Plaintiff’s employment at Sony Pictures Imageworks do not fall within

12

the scope of the arbitration clauses. The Court therefore denies Defendants’ motion to compel

13

arbitration as to Plaintiff Nitsch’s claims against Defendant DreamWorks arising out of Plaintiff’s

14

employment at Sony Pictures Imageworks.

15
16

B. Equitable estoppel and the remaining Defendants
In addition to arguing that Plaintiff Nitsch is obligated to arbitrate certain claims against

17

Defendant DreamWorks, Defendants further contend that Plaintiff is equitably estopped from

18

refusing to arbitrate his claims against the remaining Defendants.

19

As the Ninth Circuit explained in Kramer, “a litigant who is not a party to an arbitration

20

agreement may invoke arbitration under the FAA if the relevant state contract law allows the

21

litigant to enforce the agreement.” 705 F.3d at 1128. Under California law, a nonsignatory may

22

enforce an arbitration agreement if equitable estoppel applies. See Molecular Analytical Sys. v.

23

Ciphergen Biosystems, Inc., 186 Cal. App. 4th 696, 714 (Ct. App. 2010). More specifically, where

24

a nonsignatory seeks to enforce an arbitration clause, the doctrine of equitable estoppel applies in

25

two limited circumstances:

26
27
28

(1) when a signatory must rely on the terms of the written agreement
in asserting its claims against the nonsignatory or the claims are
“intimately founded in and intertwined with” the underlying
18
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1
2
3

contract, and (2) when the signatory alleges substantially
interdependent and concerted misconduct by the nonsignatory and
another signatory and “the allegations of interdependent misconduct
[are] founded in or intimately connected with the obligations of the
underlying agreement.”
Id. at 1128–29 (quoting Goldman v. KPMG LLP, 173 Cal.App.4th 209, 219–221 (Ct. App. 2009))

4

(internal citations omitted). Moreover, “equitable estoppel in this context is narrowly confined.”

5
Murphy v. DirecTV, Inc., 724 F.3d 1218, 1229 (9th Cir. 2013). Defendants contend that both
6
circumstances are present in the instant litigation. For the reasons stated below, the Court
7
8
9
10

United States District Court
Northern District of California

11
12

concludes that Plaintiff Nitsch’s claims do not fall within either circumstance.
As to the first circumstance, Defendants assert that “there can be no question that Nitsch is
relying on the terms of his written agreements with DreamWorks Animation.” Mot. at 10. More
specifically, Defendants argue that Plaintiff Nitsch’s claims against all Defendants rely on the
theory that Defendants conspired to “limit the compensation offered to” their employees. CAC
¶¶ 39, 88, 99; Reply at 3. According to Defendants, Plaintiff Nitsch’s reference to the allegedly

13
artificially depressed compensation DreamWorks actually offered him requires the Court to refer
14
15

to Plaintiff Nitsch’s employment agreement. In opposition, Plaintiff Nitsch contends that
Defendants have failed to show that Plaintiff’s claims actually “rely on” any provision of the

16
employment agreements.
17
18
19
20
21
22
23

Here, the Court concludes that Defendants have failed to show that Plaintiff Nitsch’s
claims “rely on” any term of the employment agreements. As the Ninth Circuit held in Kramer,
whether a plaintiff’s claims “must rely on” a written agreement involves “look[ing] to whether the
claims that the nonsignatories [seek] to arbitrate [are] ‘intimately founded in and intertwined with
the underlying contract obligations.’” 705 F.3d at 1129 (quoting Goldman, 173 Cal. App. 4th at
221). Put another way, the inquiry is “whether Plaintiffs would have a claim independent of the
existence of the [agreement containing the arbitration clause].” Id. at 1131.

24
In Kramer, the nonsignatory-defendant Toyota sought to enforce arbitration clauses to
25
which third-party dealers and the plaintiffs, who were purchasers of Toyota vehicles, agreed. Id. at
26
1124. The arbitration clauses were contained in purchase agreements, that included terms
27
28

19
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

concerning purchase price, financing, and rescission rights. Id. The Kramer plaintiffs alleged

2

claims under various California consumer protection laws based on alleged misrepresentations

3

regarding the braking system. Id. Toyota argued that the plaintiffs’ claims were intertwined with

4

the purchase agreements because the plaintiffs requested revocation of acceptance and relied on

5

the “price term” in the damages request. Id. at 1130. In rejecting Toyota’s arguments, the Ninth

6

Circuit concluded that the plaintiffs’ claims “merely reference[d]” the agreements and did not

7

“intimately rely on the existence” of the agreements. Id. at 1132. More specifically, because a

8

plaintiff who had purchased a vehicle in cash without a purchase agreement would still be able to

9

state a claim for relief under the consumer protection statutes, the Ninth Circuit held that the

10

plaintiffs’ claims “arose independently of the terms of the agreements containing arbitration

11
United States District Court
Northern District of California

1

provisions.” Id. at 1132.

12

Similarly, here the Court concludes that while Plaintiff Nitsch’s claims might refer to the

13

employment agreements, Plaintiff Nitsch “would have a claim independent of the existence of the”

14

employment agreements. See id. at 1131. Plaintiff Nitsch alleges that Defendants engaged in a

15

conspiracy to artificially depress employee compensation and mobility. While these allegations are

16

related to Plaintiff’s compensation, Plaintiff’s claims for relief under the Sherman Act, Cartwright

17

Act, and UCL would be cognizable even if Plaintiff Nitsch had worked for DreamWorks without a

18

written employment agreement. Simply put, Plaintiff Nitsch does “not seek to enforce or challenge

19

the terms, duties, or obligations” of the employment agreements, but instead takes issue with

20

alleged wrongful conduct that occurred outside the scope of the employment agreements. See id. at

21

1132; see also Rajagopalan v. Noteworld, LLC, 718 F.3d 844, 847–48 (9th Cir. 2013) (holding

22

that plaintiff did not allege breach of contract but instead had independent statutory claims,

23

making equitable estoppel inappropriate). Defendants’ assertion is even less persuasive in light of

24

Defendants’ concession that Plaintiff Nitsch can state claims against DreamWorks that arise out of

25

Plaintiff’s employment at Sony Pictures Imageworks. As Plaintiff can state claims against all

26

Defendants, including DreamWorks, that are separate from Plaintiff’s employment at

27

DreamWorks, the Court concludes that Plaintiff’s claims against the nonsignatory Defendants

28

20
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

“arose independently of the terms of the agreements containing arbitration provisions.” See

2

Kramer, 705 F.3d at 1132.

3

Moreover, the Court agrees with Plaintiffs that Defendants fail to distinguish Kramer or

4

offer contrary authority. Defendants attempt to distinguish Kramer by focusing on the Ninth

5

Circuit’s analysis as to the second circumstance, where the Ninth Circuit noted that the plaintiffs

6

had not actually alleged “substantially interdependent and concerted misconduct.” See id. at 1132–

7

33; Reply at 4. However, Defendants fail to address the Kramer court’s analysis with respect to

8

the first circumstance. Defendants are correct that the Ninth Circuit concluded that the Kramer

9

plaintiffs had not alleged concerted misconduct, in contrast to the alleged anticompetitive
conspiracy at issue in the instant litigation. That observation, however, does not bear on whether

11
United States District Court
Northern District of California

10

equitable estoppel applies under the first circumstance, i.e., where a signatory’s claims “must rely

12

on” an agreement containing an arbitration clause, such that the signatory’s claims are “intimately

13

founded in and intertwined with” the agreements. See Kramer, 705 F.3d at 1128–29 (internal

14

quotation marks omitted). As discussed above, the Court finds that Plaintiff’s claims do not rely

15

on the employment agreements.

16

Defendants further argue that Plaintiff Nitsch’s claims are distinguishable from those in

17

Kramer because Plaintiff Nitsch alleges that but-for Defendants’ anticompetitive conspiracy,

18

Plaintiff would have been paid more under his employment agreements. However, the Court finds

19

Kramer to be instructive. The Kramer plaintiffs alleged that the defect in their vehicles resulted in

20

a “diminution of value,” which was the basis for the plaintiffs’ request for damages. Id. at 1132. In

21

other words, the plaintiffs in Kramer alleged that but-for the defendant’s alleged

22

misrepresentations regarding the safety of the braking systems, the plaintiffs would have paid less

23

for their vehicles than they otherwise did. Despite this apparent relationship between the plaintiffs’

24

injury, requested relief, and the purchase agreements, the Ninth Circuit held that the plaintiffs’

25

claims arose independently of the purchase agreements, and the mere fact that the court would

26

have to “look to” the purchase agreements “to ascertain the requested relief,” was insufficient to

27

trigger equitable estoppel. Id. at 1131–32.

28

21
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

Here, the Court also concludes that Plaintiff Nitsch’s claims arose independently of his

2

employment agreements. Plaintiff Nitsch is not suing for breach of contract and his claims do not

3

rely on the existence of any particular contractual term. See, e.g., Murphy, 724 F.3d at 1231 n.7

4

(noting that many California cases applying equitable estoppel to compel arbitration against

5

nonsignatories involved “contract-based causes of action, such as tortious interference or breach of

6

contract”); see also Rajagopalan, 718 F.3d at 847–48. That Plaintiff Nitsch’s claims against

7

Defendants may require reference to his employment agreements to establish the fact of his

8

employment and the amount of compensation “to ascertain the requested relief” does not satisfy

9

the requirements for equitable estoppel. See Kramer, 705 F.3d at 1132.

10

Defendants’ arguments as to why the second circumstance for equitable estoppel should

United States District Court
Northern District of California

11

apply are unpersuasive for the same reasons. The second circumstance applies “when the signatory

12

alleges substantially interdependent and concerted misconduct by the nonsignatory and another

13

signatory and the allegations of interdependent misconduct [are] founded in or intimately

14

connected with the obligations of the underlying agreement.” Id. (internal quotation marks

15

omitted). Setting aside whether Plaintiff Nitsch has alleged “substantially interdependent and

16

concerted misconduct” between Defendants, the Court concludes that Plaintiff’s allegations are

17

not “founded in or intimately connected with the obligations of the underlying agreement.” See id.

18

As a California Court of Appeal explained:

19
20
21
22
23
24

In any case applying equitable estoppel to compel arbitration despite
the lack of an agreement to arbitrate, a nonsignatory may compel
arbitration only when the claims against the nonsignatory are
founded in and inextricably bound up with the obligations imposed
by the agreement containing the arbitration clause. In other words,
allegations of substantially interdependent and concerted
misconduct by signatories and nonsignatories, standing alone,
are not enough: the allegations of interdependent misconduct
must be founded in or intimately connected with the obligations
of the underlying agreement.
Goldman, 173 Cal. App. 4th at 219 (bold emphasis added). Thus, the second circumstance, like

25
26

the first circumstance, requires that Plaintiff Nitsch’s claims “be founded in or intimately
connected with the obligations of the underlying agreement.” Id.

27
28

22
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

As discussed above, Plaintiff Nitsch does “not seek to enforce or challenge the terms,
duties, or obligations” of the employment agreements. Kramer, 705 F.3d at 1132. As such, the

3

Court concludes that Plaintiff’s claims that Defendants engaged in an illegal conspiracy under

4

federal and state antitrust laws are independent of the terms of Plaintiff’s employment agreements

5

with Defendant DreamWorks. Defendants argue that Plaintiff Nitsch has alleged “substantially

6

interdependent and concerted” misconduct between the Defendants, and the bulk of Defendants’

7

briefing focuses solely on the element of collusive misconduct. Even assuming Defendants are

8

correct that Plaintiff Nitsch has alleged “substantially interdependent and concerted” misconduct

9

between DreamWorks and the remaining Defendants, those allegations alone are insufficient to

10

trigger equitable estoppel. As the Ninth Circuit explained in Murphy, “[e]ven where a plaintiff

11
United States District Court
Northern District of California

2

alleges collusion, ‘[t]he sine qua non for allowing a nonsignatory to enforce an arbitration clause

12

based on equitable estoppel is that the claims the plaintiff asserts against the nonsignatory are

13

dependent on or inextricably bound up with the contractual obligations of the agreement

14

containing the arbitration clause.’” 724 F.3d at 1232 (quoting Goldman, 173 Cal. App. 4th at

15

537)). As the Court concludes that Plaintiff Nitsch’s claims are not “dependent on or inextricably

16

bound up with the” obligations of Plaintiff’s employment agreements, the second circumstance

17

triggering equitable estoppel does not apply.

18

Defendants cite Brown v. Pacific Life Insurance, 462 F.3d 384, 389 (5th Cir. 2006), in

19

support of their argument that the second circumstance is satisfied here. More specifically,

20

Defendants contend that Plaintiff Nitsch has failed to allege claims against the remaining

21

Defendants that are “separate and apart” from Plaintiff’s claims against DreamWorks. See Reply

22

at 6. However, Brown did not apply California law and is not controlling authority. See id.

23

Moreover, Brown is unhelpful here, as the Fifth Circuit’s limited analysis with regards to whether

24

the district court had abused its discretion focused only on whether the plaintiffs had alleged

25

concerted misconduct. While Defendants focus on the “separate and apart” language, the full

26

statement by the Brown court states: “As the Browns fail to allege tortious acts by [the

27

nonsignatory defendants] that are separate and apart from [the signatory defendant’s], we can only

28

23
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

conclude that the complaint asserts concerted misconduct by all parties.” Id. at 399. Contrary to

2

Defendants’ characterization, this statement in Brown does not eliminate the requirement that a

3

plaintiff’s claims allege concerted misconduct and that the claims rely on obligations in the

4

underlying agreements. See, e.g., Murphy, 724 F.3d at 1232.
Additionally, the Court notes that Defendants’ equitable estoppel arguments fail to

6

recognize the underlying purpose of the doctrine in this context: to prevent signatories to a

7

contract with an arbitration clause from “simultaneously invok[ing] the duties and obligations . . .

8

under the [agreement] . . . while seeking to avoid arbitration.” Kramer, 705 F.3d at 1134; see also

9

Metalclad Corp. v. Ventana Env. Org. P’ship, 109 Cal. App. 4th 1705, 1713–19 (Ct. App. 2003)

10

(“[Plaintiff] agreed to arbitration in the underlying written contract but now, in effect, seeks the

11
United States District Court
Northern District of California

5

benefit of that contract in the form of damages from [defendant] while avoiding its arbitration

12

provision. Estoppel prevents this.”). Defendants argue that it would be inefficient to compel

13

Plaintiff Nitsch to arbitrate his claims against Defendant DreamWorks but not compel arbitration

14

against the nonsignatory Defendants. However, the Court “cannot expand the parties’ agreement

15

to arbitrate in order to achieve greater efficiency. The Federal Arbitration Act requires piecemeal

16

resolution when necessary to give effect to an arbitration agreement.” Tracer Research Corp. v.

17

Nat’l Env. Servs. Co., 42 F.3d 1292, 1294–95 (9th Cir. 1994) (internal quotation marks omitted).

18

Here, only one Defendant, DreamWorks, is a signatory to the arbitration clauses. The doctrine of

19

equitable estoppel is “narrowly confined” when applied to compel arbitration as to nonsignatories,

20

and Defendants’ focus on efficiency misunderstands the limited applicability of equitable estoppel

21

in this context. Murphy, 724 F.3d at 1229.

22

Here, Defendants argue that it would be “unfair” for an arbitrator to resolve the factual and

23

legal questions concerning DreamWorks’ alleged participation in an anticompetitive conspiracy

24

that depressed Plaintiff Nitsch’s compensation, and for this Court to also resolve these issues with

25

respect to the nonsignatory Defendants. While the “linchpin for equitable estoppel is fairness,”

26

Defendants confuse efficiency for fairness. See Kramer, 705 F.3d at 1133 (internal quotation

27

marks omitted). It is also not evident to the Court that Defendants’ claimed inefficiencies are

28

24
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

likely to occur. Defendants’ argument presumes, potentially incorrectly, that an arbitrator will

2

conclude that some of Plaintiff Nitsch’s claims against DreamWorks fall within the scope of the

3

arbitration clauses. That this Court is bound to review DreamWorks’ claims of arbitrability under

4

a “wholly groundless” standard in deciding whether an arbitrator must decide his or her own

5

jurisdiction does not establish that any of Plaintiff Nitsch’s claims against DreamWorks actually

6

fall within the scope of the arbitration clauses.

7

Furthermore, Defendants concede that Plaintiff Nitsch cannot be compelled to arbitrate his

8

claims against DreamWorks that arise out of Plaintiff’s employment at Sony Pictures Imageworks,

9

as those claims do not arise out of Plaintiff’s employment agreements with DreamWorks.
Defendants offer no explanation for why “efficiency” would justify compelling Plaintiff Nitsch to

11
United States District Court
Northern District of California

10

arbitrate claims that plainly, concededly fall outside the scope of the arbitration clauses. The Court

12

further notes that neither Plaintiff Cano nor Plaintiff Wentworth is subject to any arbitration

13

agreement with Defendants, and that this action will proceed regardless of whether Plaintiff Nitsch

14

is compelled to arbitrate certain claims against any or all Defendants. To the extent Defendants

15

rely on the fact that both an arbitrator and this Court may have to address the factual and legal

16

basis for Plaintiff Nitsch’s claims regarding Defendants’ alleged anticompetitive conspiracy, this

17

overlap is inevitable as Plaintiffs Cano and Wentworth allege the same conspiracy, and as Plaintiff

18

Nitsch cannot be compelled to arbitrate his claims against DreamWorks that arise out of Plaintiff’s

19

employment with Sony Pictures Imageworks. The Court therefore finds Defendants’ argument

20

both untenable and unpersuasive.

21

Moreover, even assuming that there would be potentially duplicative proceedings, neither

22

the California courts nor the Ninth Circuit have concluded that such a risk is a factor to be

23

weighed in the equitable estoppel analysis. The Ninth Circuit, on at least two separate occasions,

24

has held that a plaintiff was obligated to arbitrate her claims against a signatory defendant, but that

25

equitable estoppel did not compel arbitration against nonsignatory defendants. See Kramer, 705

26

F.3d at 1132–34; Murphy, 724 F.3d at 1230–32. Defendants cite no authority holding that the risk

27

of duplicative proceedings is an inequity that the Court must consider in determining whether

28

25
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

Plaintiff Nitsch should be compelled to arbitrate his claims against the nonsignatory Defendants

2

under the doctrine of equitable estoppel. “California courts have explicitly noted that parties

3

should only be estopped if their ‘own conduct renders assertion of those rights contrary to

4

equity.’” Kramer, 705 F.3d at 1133 (quoting Goldman, 173 Cal. App. 4th at 221)). In the instant

5

case, Defendants have identified no conduct by Plaintiff Nitsch that requires that Plaintiff be

6

estopped from asserting his claims against the nonsignatory Defendants before this Court.

7
8
9
10

The Court therefore denies Defendants’ motion to compel arbitration with respect to the
nonsignatory Defendants.
C. The Appropriate Scope of a Stay
Defendants’ third request is an order staying Plaintiff Nitsch’s prosecution of his claims

United States District Court
Northern District of California

11

against DreamWorks pending the outcome of the arbitration. Defendants also request that the

12

Court stay Plaintiff Nitsch’s prosecution of all of his claims against all Defendants, in the event

13

that the Court compels Plaintiff Nitsch to arbitrate his claims against all Defendants.

14

Under § 3 of the FAA, courts must “stay litigation of arbitral claims pending arbitration of

15

those claims ‘in accordance with the terms of the agreement.’” AT&T Mobility LLC v.

16

Concepcion, 131 S. Ct. 1740, 1748 (2011). When a court “determines that all of the claims raised

17

in the action are subject to arbitration,” the court “may either stay the action or dismiss it

18

outright.” Johnmohammadi v. Bloomingdale’s Inc., 755 F.3d 1072, 1074 (9th Cir. 2014). Where

19

plaintiffs assert both arbitrable and nonarbitrable claims, district courts have “discretion whether

20

to proceed with the nonarbitrable claims before or after the arbitration and [have] . . . authority to

21

stay proceedings in the interest of saving time and effort for itself and litigants.” Wilcox v. Ho-

22

Wing Sit, 586 F. Supp. 561, 567 (N.D. Cal. 1984); see also Levya v. Certified Grocers of

23

California, Ltd., 593 F.2d 857, 863–64 (9th Cir. 1979).

24

Here, the Court concludes that a stay as to Plaintiff Nitsch’s claims against Defendant

25

DreamWorks based on Plaintiff Nitsch’s employment at DreamWorks is appropriate. See

26

Concepcion, 131 S. Ct. at 1748. Plaintiff Nitsch does not contest that a limited stay as to Plaintiff’s

27

claims against DreamWorks based on Plaintiff’s employment at DreamWorks is appropriate under

28

26
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

the FAA. The Court therefore grants Defendants’ request to stay the prosecution of Plaintiff

2

Nitsch’s claims against Defendant DreamWorks arising out of Plaintiff’s employment at

3

DreamWorks. This stay does not, however, prevent Plaintiff Nitsch from prosecuting his claims

4

against DreamWorks that arise out of Plaintiff’s employment at Sony Pictures Imageworks.

5

As the Court finds that equitable estoppel does not compel Plaintiff Nitsch to arbitrate any

6

of Plaintiff’s claims against the nonsignatory Defendants, the Court denies Defendants’ request to

7

stay the prosecution of Plaintiff’s claims against the remaining Defendants. Defendants do not

8

argue that a stay of all of Plaintiff Nitsch’s claims would be appropriate for any other reason. See

9

Reply at 8–9.9
In sum, the Court grants a limited stay only as to Plaintiff Nitsch’s claims against

11
United States District Court
Northern District of California

10

DreamWorks arising out of Plaintiff’s employment at DreamWorks. Plaintiff Nitsch may

12

prosecute his claims arising out of his employment with DreamWorks against the nonsignatory

13

Defendants, and may prosecute his claims arising out of his employment with Sony Pictures

14

Imageworks against DreamWorks.

15

IV. CONCLUSION
For the reasons stated above, the Court GRANTS in part and DENIES in part Defendants’

16
17

motion to compel arbitration and stay proceedings.
The Court grants Defendants’ motion to compel arbitration with respect to Plaintiff

18
19

Nitsch’s claims against Defendant DreamWorks arising out of Plaintiff’s employment at

20

DreamWorks and grants a stay only as to these claims.
The Court denies Defendants’ motion to compel arbitration with respect to, and motion to

21
22

stay, Plaintiff Nitsch’s claims against Defendant DreamWorks arising out of Plaintiff’s

23

employment at Defendant Sony Pictures Imageworks.

24

The Court denies Defendants’ motion to compel arbitration with respect to Plaintiff

25

Nitsch’s claims against the nonsignatory Defendants and denies Defendants’ request to stay these

26
27
28

9

The Court notes that Defendants do not argue that a stay of this entire action would be
appropriate.
27
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

1

claims.

2

IT IS SO ORDERED.

3

Dated: April 24, 2015

4
5

______________________________________
LUCY H. KOH
United States District Judge

6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

28
Case No.14-CV-04062-LHK
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION