Pedroza v. P.J. Pizza San Diego, LLC et al

Filing 40

ORDER denying 5 Motion to Compel Arbitration. Signed by Judge M. James Lorenz on 5/11/2017. (sjt)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 PETER ROSS, Case No.: 3:16-cv-02330-L-JMA Plaintiff, 12 13 v. 14 ORDER DENYING DEFENDANTS’ MOTION [Doc. 5] TO COMPEL ARBITRATION P.J. PIZZA SAN DIEGO, LLC., et al, Defendants. 15 16 17 Pending before the Court is Defendants P.J. Pizza San Diego, LLC and P.J. Pizza 18 19 Holdings, LLC’s (“Defendants”) motion to compel Plaintiff Peter Ross (“Plaintiff”) to 20 submit his claims to arbitration on an individual basis. The Court decides the matter on 21 the papers submitted and without oral argument. See Civ. L. R. 7.1(d.1). For the reasons 22 stated below, the Court DENIES Defendants’ Motion. 23 // 24 // 25 // 26 // 27 // 28 // 1 3:16-cv-02330-L-JMA 1 I. BACKGROUND Defendants own and operate a chain of Papa John’s Pizza franchises in the San 2 3 Diego area. Plaintiff was a delivery driver for Defendants. As a condition of 4 employment, Plaintiff signed an Arbitration Agreement requiring arbitration of any 5 claims between Plaintiff and Defendants. (Arbitration Agreement [Doc. 5-3 Ex. 2].) The 6 Arbitration Agreement also contains a clause (“Class Action Waiver”) which, if valid, 7 would deny each side the right to file a class action claim against the other, whether in 8 court, arbitration, or otherwise. 9 On November 30, 2016, Plaintiff filed an amended complaint against Defendants 10 alleging various putative class and collective action claims stemming from violations of 11 California and federal labor laws. (See FAC [Doc. 3].) Defendants now move to compel 12 Plaintiff to submit his claims to arbitration on an individual basis. (See Mot. [Doc. 5].) 13 Plaintiff opposes. (See Opp’n [Doc. 16].) 14 15 II. LEGAL STANDARD 16 There is no dispute as to the fact that the Federal Arbitration Act (“FAA”) governs 17 here. Under the FAA, a Court need consider only two questions to determine whether to 18 compel arbitration: (1) is there a valid agreement to arbitrate? And, if so, (2) does the 19 agreement cover the matter in dispute? Chiron Corp. v. Ortho Diagnostic Systems, Inc., 20 207 F.3d 1126, 1130 (9th Cir. 2000). The Arbitration Agreement clearly covers the 21 matters in dispute here. Accordingly, the Court need only consider whether the 22 Arbitration Agreement is valid. 23 An agreement to arbitrate is “valid, irrevocable, and enforceable, save upon such 24 grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. 25 Under California law, the elements of a valid contract are (1) parties capable of 26 contracting; (2) mutual consent; (3) a lawful object; and (4) consideration. Cal. Civ. Code 27 § 1550. However, a court will not enforce an otherwise valid contract if there exists a 28 2 3:16-cv-02330-L-JMA 1 viable defense, such as illegality. 1 Witkin, Summary 10th (2005) Contracts, § 331, p. 2 365. 3 4 5 III. DISCUSSION Plaintiff argues that the Arbitration Agreement is illegal, and therefore invalid, 6 because the Class Action Waiver violates the National Labor Relations Act (“NLRA”). 7 Section 7 of the NLRA provides that 8 10 [e]mployees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. . .” 11 29 U.S.C. § 157. Plaintiff argues that this language creates a federal substantive right on 12 behalf of employees to join together in class action litigation to prosecute employment 13 disputes. In support, Plaintiff cites Morris v. Ersnt & Young, LLP, 834 F.3d 975 (9th Cir. 14 2016), cert. granted, 85 U.S.L.W. 3341 (U.S. Jan. 13, 2017) (No. 16–300). 9 15 In Morris, Plaintiff Morris filed class and collective action claims against his 16 employer Ernst & Young alleging that it violated the Fair Labor Standards Act and 17 California labor laws by misclassifying him and others similarly situated as exempt 18 employees to avoid paying them overtime. Morris, 834 F.3d at 979. Because Morris had 19 signed an arbitration agreement purporting to require him to bring all legal claims against 20 Ernst & Young via arbitration as an individual and in separate proceedings, Ernst & 21 Young moved to compel arbitration. Id. Morris opposed by arguing that the arbitration 22 agreement, by requiring only individual prosecution of employment claims, violated his 23 federal substantive rights under the NLRA to engage in “concerted action” against his 24 employer. Id. at 979–80. The Ninth Circuit agreed. Id. at 990. 25 The parties are in disagreement as to whether the Ninth Circuit’s decision in 26 Morris compels the finding that the Class Action Waiver at issue here violates the 27 NLRA. Defendants present two arguments as to why Morris does not compel such a 28 holding. First, Defendants seem to argue that Morris is not controlling because (1) other 3 3:16-cv-02330-L-JMA 1 federal circuits have held that the Fair Labor Standards Act does not create a substantive 2 right to concerted action and (2) the Supreme Court has granted certiorari on the Morris 3 decision. The main problem with this argument is that, regardless of what other circuit 4 courts may have decided on an issue, it is hornbook law that this Court is bound by a 5 published Ninth Circuit decision unless and until it is overturned by Congress, the Ninth 6 Circuit, or the Supreme Court. See United States v. Frank, 956 F.2d 872, 882 (9th Cir. 7 1991). 8 9 Next, Defendants argue that the present case is distinguishable from Morris because the Class Action Waiver at issue here does not ban all forms of “concerted 10 action.” Rather, under Defendants’ interpretation, the Class Action Waiver only prohibits 11 Plaintiff from bringing class or collective actions. Thus, unlike the agreement in Morris, 12 the Class Action Waiver does not prohibit Plaintiff from joining together with other 13 employees and bringing a joint, multi-plaintiff action. Because the Class Action Waiver 14 permits such a joint action, Defendants argue it does not prohibit all “concerted action” 15 and therefore does not offend the NLRA. 16 The Court disagrees. Court’s must give considerable deference to the National 17 Labor Relations Board’s (“the Board”) reasonable interpretations as to the scope of the 18 NLRA. N.L.R.B. v. City Disposal Sys. Inc., 465 U.S. 822, 829–30 (1984). The Board has 19 articulated that an employer violates Section 7 of the NLRA 20 21 22 when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial. 23 Horton 1, 357 NLRB No. 184, slip op. at 1 (emphasis added). Under this interpretation, 24 to trigger Section 7 of the NLRA, it is not necessary that a waiver prohibits joint, class, 25 and collective claims. Rather, it is sufficient if such a waiver prohibits any one of these 26 three types of concerted actions. In Morris, the Ninth Circuit expressly ratified Horton 27 1’s interpretation of Section 7 of the NLRA. Morris, 834 F.3d at 983 (stating “the 28 Board’s interpretation of § 7 and § 8 is correct.”). 4 3:16-cv-02330-L-JMA 1 Here, there is no dispute that the Class Action Waiver, which Defendants required 2 Plaintiff to sign as a condition of employment, would preclude Plaintiff from engaging in 3 at least one of the three types of concerted actions the NLRA protects. For this reason, 4 the Class Action Waiver is invalid and the Court DENIES Defendants’ motion to compel 5 individual arbitration of Plaintiff’s class and collective action claims. 6 7 IT IS SO ORDERED. 8 Dated: May 11, 2017 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 3:16-cv-02330-L-JMA

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