Levy v. Lytx, Inc

Filing 15

ORDER granting in part and denying in part Defendant's 8 Motion to Compel Individual Arbitration and Dismiss Class Claims. Court grants in part Defendant's request to compel arbitration and orders Plaintiff and Defendant to submit to arb itration. Court denies Defendant's request to strike Plaintiff's class allegations. Court stays this action pending resolution of the arbitration. Court directs the Clerk to administratively close this case. The decision to administratively close this case pending resolution of the arbitration does not have any jurisdictional effect. Signed by Judge Cynthia Bashant on 6/28/2017. (jah)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 15 16 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO COMPEL INDIVIDUAL ARBITRATION AND DISMISS CLASS CLAIMS Plaintiff, 13 14 Case No. 16-cv-03090-BAS(BGS) DANIEL LEVY, individually and on behalf of others similarly situated, v. LYTX, INC., Defendant. [ECF No. 8] 17 18 Pending before the Court is Defendant Lytx, Inc.’s motion to compel Plaintiff 19 Daniel Levy’s claims for alleged violations of the Fair Labor Standards Act 20 (“FLSA”) and California Labor Code to individual arbitration and dismiss class 21 allegations. (ECF No. 8.) Also pending is Defendant’s request to stay the proceedings 22 until the Supreme Court’s review of Morris v. Ernst & Young, LLP, 834 F.3d 975 23 (9th Cir. 2016), cert. granted, 127 S. Ct. 809 (2017). (Reply, ECF No. 13.) Plaintiff 24 filed an opposition, arguing that he may pursue class claims in this Court because 25 Defendant’s arbitration agreement (“Agreement”) violates the National Labor 26 Relations Act (“NLRA”). (ECF No. 11.) 27 The Court finds this motion suitable for determination on the papers submitted 28 and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the –1– 16cv3090 1 reasons that follow, the Court GRANTS IN PART and DENIES IN PART 2 Defendant’s motion to compel individual arbitration and dismiss class allegations 3 and DENIES Defendant’s request to stay the proceedings. 4 5 I. BACKGROUND 6 Plaintiff Daniel Levy is a resident of San Diego, California. (Compl. ¶ 9, ECF 7 No. 1.) Defendant, a technology company, provides analytics services for businesses 8 that use fleets of drivers. (Id. ¶ 10; Cross Decl. ¶ 3, ECF No. 8.) Plaintiff began 9 working for Defendant as a Technology Tech on April 14, 2008. (Cross Decl. ¶ 4.) 10 On that day, Plaintiff signed the Agreement. (Cross Decl. Ex. B at 9.) The Agreement 11 states in part: 12 13 14 15 16 17 18 19 20 21 22 Although [Defendant] (“the Company”) hope[s] that employment disputes will not occur, the Company believes that where such disputes do arise, it is in the mutual interest of everyone involved to handle them pursuant to the complaint process outlined in the Employee Handbook and then, if necessary, binding arbitration, which generally resolves disputes quicker than court litigation and with a minimum of disturbance to all parties involved. By entering into this agreement, the Company and the undersigned Employee are waiving the right to a jury trial for most employment-related disputes . . . . The Company and the undersigned Employee hereby agree that any dispute with any party that may arise from Employee’s employment with the Company or the termination of Employee’s employment with the company shall be resolved by mandatory, binding arbitration before a retired judge. (Id. at 8.) 23 Although the Agreement does not cover some claims, such as those presented 24 to an administrative agency or those based on the NLRA, the Agreement does cover 25 claims made pursuant to the FLSA and California Labor Code. (See Cross Decl. Ex. 26 B at 8-9.) The relevant coverage provision states in part: “The arbitration requirement 27 applies to all statutory, contractual and/or common law claims arising from 28 employment with the Company including, but not limited to . . . claims under the –2– 16cv3090 1 federal Fair Labor Standards Act, or any other federal or state statute covering these 2 subjects . . . .” (Id. at 8.) Finally, the Agreement incorporates the rules of the 3 American Arbitration Association (“AAA”). (Id. at 9.) The rules provision states: 4 “Binding arbitration under this Agreement shall be conducted in accordance with any 5 applicable state statutes [sic] exist; then the arbitration shall be conducted pursuant 6 to the rules of the [AAA] for employment law disputes.” (Id.) The Agreement makes 7 no specific mention of class or individual proceedings. (See id. at 8-9.) 8 On November 4, 2016, Plaintiff resigned from his employment with 9 Defendant. (Cross Decl. ¶ 6.) On December 27, 2016, Plaintiff commenced this suit, 10 alleging that Defendant violated federal and California labor laws by failing to pay 11 wages and keep records according to the standards of the FLSA, the California Labor 12 Code, and California’s Unfair Competition Laws. Plaintiff brings a collective action 13 for the alleged FLSA violations and a class action for the alleged violations of 14 California labor law. Defendant now moves to compel individual arbitration of the 15 nine claims asserted in Plaintiff’s complaint and dismiss the class allegations. (ECF 16 No. 8.) In the alternative, Defendant requests that the Court stay the proceedings 17 pending the Supreme Court’s ruling in Morris.1 (ECF No. 13.) Plaintiff opposes. 18 (ECF No. 11.) 19 // 20 // 21 // 22 // 23 24 25 26 27 28 Defendant requests that the Court stay this litigation pending the Supreme Court’s review of Morris, if the Court finds Morris applies to this case. (Reply 7:28-8:3.) However, “the Ninth Circuit has held that ‘once a federal circuit court issues a decision, the district courts within that circuit are bound to follow it and have no authority to await a ruling by the Supreme Court before applying the circuit court’s decision as binding authority.’” Rivera v. Saul Cheverolet, Inc., No. 16vc-05966-LHK, 2017 WL 1862509, at *5 (N.D. Cal. May 9, 2017) (Koh, J.) (quoting Yong v. I.N.S., 208 F.3d 1116, 1119 n.2 (9th Cir. 2000)) (denying defendant’s request to stay litigation pending the Supreme Court’s review of Morris). Because Defendant fails to supply any justification for a stay beyond stating that the Morris decision is approaching (Reply 7:26-7:28), the Court denies Defendant’s request to stay the litigation pending the Supreme Court’s review of Morris. 1 –3– 16cv3090 1 II. LEGAL STANDARD 2 The Federal Arbitration Act (“FAA”) applies to contracts that evidence 3 transactions involving interstate commerce. 9 U.S.C. §§ 1, 2. The FAA provides that 4 contractual arbitration agreements “shall be valid, irrevocable, and enforceable, save 5 upon such grounds as exist at law or in equity for the revocation of any contract.” Id. 6 § 2. The “primary” purpose of the FAA is to ensure that “private agreements to 7 arbitrate are enforced according to their terms.” Volt Info. Scis., Inc. v. Bd. of Trs. of 8 the Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989). Therefore, “as a matter 9 of federal law, any doubts concerning the scope of arbitrable issues should be 10 resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. 11 Corp., 460 U.S. 1, 24–25 (1983). 12 Given this strong federal preference for arbitration and the contractual nature 13 of arbitration agreements, “a district court has little discretion to deny an arbitration 14 motion” once it determines that a claim is covered by a written and enforceable 15 arbitration agreement. Republic of Nicar. v. Standard Fruit Co., 937 F.2d 469, 475 16 (9th Cir. 1991). Arbitration agreements, “[l]ike other contracts . . . may be invalidated 17 by ‘generally applicable contract defenses, such as fraud, duress, or 18 unconscionability.’” Rent–A–Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) 19 (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). “In 20 determining whether to compel a party to arbitration, a district court may not review 21 the merits of the dispute[.]” Marriot Ownership Resorts, Inc. v. Flynn, No. 14-00372 22 JMS-RLP, 2014 WL 7076827, at *6 (D. Haw. Dec. 11, 2014). Instead, a district 23 court’s determinations are limited to (1) whether a valid arbitration agreement exists 24 and, if so, (2) whether the agreement covers the relevant dispute. See 9 U.S.C. § 4; 25 Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). 26 // 27 // 28 // –4– 16cv3090 1 2 III. ANALYSIS A. The Ninth Circuit’s Decision in Morris Will Not Apply If the Agreement Permits Class Proceedings. 3 4 Plaintiff argues that the Agreement is illegal and invalid because Defendant’s 5 interpretation of the Agreement as precluding class claims violates the NLRA. 6 (Opp’n, ECF No. 11.) In support, Plaintiff cites to Morris v. Ernst & Young, in which 7 the Ninth Circuit examined “whether an employer violates the [NLRA] by requiring 8 employees to sign an agreement precluding them from bringing, in any forum, a 9 concerted legal claim regarding wages, hours, and terms and conditions of 10 employment.” 834 F.3d at 979. Applying Chevron deference to the National Labor 11 Relations Board’s interpretations of Sections 7 and 8 of the NLRA, the court 12 observed that “[t]he NLRA establishes a core right to concerted activity.” Id. at 980- 13 84, 989.2 The court concluded that “[i]rrespective of the forum in which disputes are 14 resolved, employees must be able to act in the forum together.” Id. at 989. 15 The Ninth Circuit found that the mandatory concerted action waiver at issue 16 in Morris violated the NLRA because (1) the “separate proceedings clause” 17 prevented employees’ concerted activity in arbitration proceedings and (2) the 18 requirement that employees use only arbitration precluded them from seeking 19 concerted legal action in another forum. See 834 F.3d at 983-84. According to the 20 court, an NLRA violation arises regardless of forum “so long as the exclusive forum 21 provision is coupled with a restriction on concerted activity in that forum.” Id. at 989. 22 Ultimately, “[a]rbitration, like any other forum for resolving disputes, cannot be 23 structured so as to exclude all concerted employee legal claims.” Id. 24 Morris applies when employees are (1) limited to pursuing claims in only one 25 forum and (2) prevented from acting in concert in that forum. See 834 F.3d at 983- 26 27 28 Section 7 gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” while Section 8 makes it “an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in” Section 7. 29 U.S.C. §§ 157, 158. 2 –5– 16cv3090 1 84. Neither party disputes that the Agreement limits Plaintiff to only pursuing FLSA 2 and related state law claims in arbitration. The Agreement’s alleged illegality and 3 invalidity arise from its disputed preclusion of class claims. 3 Therefore, the first 4 question that must be resolved is whether the Agreement in fact prevents Plaintiff 5 and other employees from acting in concert in arbitration. 6 B. The Agreement’s Silence on the Issue of Class Proceedings Is Not 7 Determinative of Whether an Agreement to Permit Class 8 Arbitration Exists. 9 A court may not presume that “parties’ mere silence on the issue of class-action 10 arbitration constitutes consent to resolve their disputes in class proceedings.” See 11 Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 687 (2010) (footnote 12 omitted). However, the parties in Stolt-Nielsen “stipulated that there was ‘no 13 agreement’ on [the] question” of whether they agreed to permit class arbitration. Id. 14 In contrast, the parties in this case dispute whether the Agreement demonstrates an 15 agreement to allow class arbitration. Defendant asserts that the Agreement neither 16 intended nor authorized class arbitration, on the grounds that the Agreement 17 mentions only two parties to the agreement (“the Company” and “the Employee”) 18 and specifically covers claims that arose from the “Employee’s employment with the 19 Company.” (Mot. 11:5-11:17, ECF No. 8; Cross Decl. Ex. B. at 8-9.) Meanwhile, 20 Plaintiff argues that the Agreement incorporates class arbitration by reference to the 21 AAA rules and references to “all parties” and “all claims.” (Opp’n 6:10-7:8.) Because 22 a “failure to mention class arbitration in the arbitration clause itself does not 23 necessarily equate with the ‘silence’ discussed in Stolt-Nielsen,” the Court finds it 24 necessary to determine whether this question of contract interpretation is one for the 25 Plaintiff’s and Defendant’s briefs make further assertions as to why Morris should or should not apply (e.g., whether Plaintiff had a meaningful opportunity to opt out of the Agreement and whether the Agreement was a condition of employment). However, the first threshold question that must be addressed is whether the Agreement in fact prevents employees’ participation in concerted activities in arbitration. Absent an answer to that threshold question, the Court will not address the parties’ further arguments. 3 26 27 28 –6– 16cv3090 1 arbitrator. See Yahoo! Inc. v. Iversen, 836 F. Supp. 2d 1007, 1011 (N.D. Cal. 2011) 2 (quoting Vasquez v. ServiceMaster Glob. Holding Inc., No. 09-cv-05148-SI, 2011 3 WL 2565574, at *3 n.1 (N.D. Cal. June 29, 2011)). 4 A Supreme Court plurality in Bazzle determined that “[a]rbitrators are well 5 situated to answer” the question of whether a contract permits class arbitration 6 because “[i]t concerns contract interpretation and arbitration procedures.” Green 7 Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 453 (2003) (Stevens, J., concurring in the 8 judgment but finding it only arguable that the arbitrator, rather than the court, should 9 determine whether the contract allows for class claims). However, noting that Justice 10 Stevens “did not endorse the plurality’s rationale,” the Stolt-Nielsen majority 11 explained that “Bazzle did not yield a majority decision” as to whether an arbitrator 12 must determine whether a contract allows for class proceedings. 559 U.S. at 679; see 13 also Yahoo! Inc., 836 F. Supp. 2d at 1011. Consequently, absent Ninth Circuit 14 precedent on the issue, no binding authority “has explained definitively when the 15 availability of class-wide arbitration might be a question for a court and when it might 16 be a question for an arbitrator.” Vasquez, 2011 WL 2565574, at *3. 17 More generally, the “question whether the parties have submitted a particular 18 dispute to arbitration, i.e., the ‘question of arbitrability’” is reserved for judicial 19 determination. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) 20 (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 21 (1986)). When making that determination, courts “should apply ordinary state-law 22 principles that govern the formation of contracts.” First Options of Chi., Inc. v. 23 Kaplan, 514 U.S. 938, 944 (1995). However, the arbitrator may decide whether the 24 parties have agreed to arbitrate a particular dispute when the question has “clearly 25 and unmistakably” been delegated to the arbitrator. AT & T Techs., Inc., 475 U.S. at 26 649; accord. Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). Clear and 27 unmistakable evidence of delegating the arbitrability question can include “an 28 agreement to arbitrate a gateway issue,” which is “simply an additional, antecedent –7– 16cv3090 1 agreement the party seeking arbitration asks the federal court to enforce[.]” See Rent- 2 A-Ctr., W., 561 U.S. at 70. Thus, the Court looks to the Agreement to determine 3 whether the parties intended for the arbitrator to determine whether the Agreement 4 allows for class arbitration. Because the parties agreed that arbitration “shall be 5 conducted in accordance with any applicable state statutes” and “then . . . pursuant 6 to the rules of the [AAA] for employment law disputes” (Cross Decl. Ex. B at 9), the 7 Court will examine in turn whether California law or the AAA rules govern this 8 determination. 9 C. 10 The California Arbitration Act Does Not Require the Court to Determine the Availability of Class Arbitration. 11 Parties may agree to arbitrate and be bound by rules different from the FAA, 12 provided that there is no conflict between federal and state law. See Volt Info. Scis., 13 489 U.S. at 478-79 (“Where . . . the parties have agreed to abide by state rules of 14 arbitration, enforcing those rules according to the terms of the agreement is fully 15 consistent with the goals of the FAA . . . .”); Wosley, Ltd. v. Foodmaker, Inc., 144 16 F.3d 1205, 1209 (9th Cir. 1998) (“[P]arties are free to contract around the FAA by 17 incorporating state arbitration rules into their agreements.”). However, “if parties to 18 an arbitration agreement (subject to the FAA) intend to be bound by state procedural 19 rules, they must expressly incorporate those state procedural rules into their 20 contract.” Stone & Webster, Inc. v. Baker Process, Inc., 210 F. Supp. 2d 1177, 1183 21 (S.D. Cal. 2002) (footnote omitted); see also Brennan, 796 F.3d at 1129 (finding 22 federal arbitrability law to apply when the contract fails to “expressly state that 23 California law governs the question of arbitrability”). When parties fail to 24 incorporate such procedural rules into the agreement, the “strong default presumption 25 is that the FAA, not state law, supplies the rules for arbitration.” Sovak v. Chugai 26 Pharm. Co., 280 F.3d 1266, 1269 (9th Cir. 2002) (citing Wosley, 144 F.3d at 1213) 27 (interpreting a general choice-of-law clause as incorporating substantive state law, 28 but not state arbitration procedures). –8– 16cv3090 1 For example, even when the relevant agreement stipulated that “[a]ny dispute 2 arising under this Agreement shall be settled by arbitration . . . in accordance with 3 the English Arbitration Act . . . ,” the Ninth Circuit concluded that although “English 4 arbitration law clearly applie[d] to disputes that [we]re subject to arbitration,” the 5 agreement was “ambiguous concerning whether English law also applie[d] to 6 determine whether a given dispute [was] arbitrable in the first place.” Cape Flattery 7 Ltd. v. Titan Maritime, LLC, 647 F.3d 941, 916, 921 (2011). Given that ambiguity, 8 the court applied federal law, rather than English law, to determine arbitrability. Id. 9 Further, in another example, the Ninth Circuit determined that an agreement 10 containing a general California choice-of-law provision did not incorporate a section 11 of the California Arbitration Act because the particular section impacted the state’s 12 “allocation of power between alternative tribunals” rather than affecting only 13 substantive rights the state afforded to the parties. Wosley, 144 F.3d at 1212 (citing 14 Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 64 (1995)). 15 The California Arbitration Act instructs the court to enforce arbitration 16 agreements “unless it determines that . . . grounds exist for revocation of the 17 agreement.” Cal. Civ. Proc. Code § 1281.2(b) (emphasis added); see also, e.g., 18 Breazeale v. Victim Servs., Inc., 198 F. Supp. 3d 1070, 1079 (N.D. Cal. 2016) (stating 19 that “a court must refuse to compel arbitration” if grounds exist under § 1281.2(b)); 20 Dotson v. Amgen, Inc., 181 Cal. App. 4th 975, 987 (2010) (stating that § 1281.2(b) 21 “requires the court to decide the conscionability of an agreement in the process of 22 deciding whether to grant or deny a motion to compel”). A finding as to whether the 23 Agreement permits or prohibits concerted activity in any forum will inform whether 24 there are any grounds for revocation of the Agreement under Morris. See Morris, 834 25 F.3d at 983-84 (concluding an arbitration agreement’s separate proceedings clause is 26 unenforceable on grounds that it violates a substantive federal right). The state law 27 provision in the Agreement appears to allocate the question of class availability to 28 the Court. However, the general clause in the Agreement does not expressly –9– 16cv3090 1 incorporate the state procedural rules that govern allocation of the arbitrability 2 question between the courts and arbitrators. (Cross Decl. Ex. B. at 9.) See Wosley, 3 144 F.3d at 1212 (finding the FAA, rather than the California Arbitration Act, 4 applicable when a contract fails to make specific reference to the state arbitration 5 rule). The Agreement neither references the California Arbitration Act nor 6 incorporates § 1281.2(b). (See Cross Decl. Ex. B. at 8-9.) Consequently, the Court 7 will not apply state statutes in determining the allocation of the class availability 8 question, and therefore turns to whether the AAA rules resolve this issue. 9 10 D. Incorporation of the AAA Rules Delegates to the Arbitrator the Issue of Whether Class Arbitration Is Available. 11 Like similarly situated courts, the Court finds that the Ninth Circuit’s 12 willingness to rely upon “clear and unmistakable evidence” when dealing with 13 allocation of the question of arbitrability to be instructive when dealing with the 14 question of availability of class proceedings. See, e.g., Yahoo! Inc., 836 F. Supp. 2d 15 at 1011-1012; supra p. 7. Though not directly on point, the Ninth Circuit has held 16 that when an agreement incorporates the AAA rules, it clearly and unmistakably 17 demonstrates that the parties delegated the question of arbitrability to the arbitrator. 18 See Brennan, 796 F.3d at 1130; Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069, 19 1074 (9th Cir. 2013) (following “[v]irtually every circuit” in considering 20 incorporation of the AAA rules to constitute clear and unmistakable evidence of an 21 agreement to arbitrate arbitrability). 22 Other district courts in the Ninth Circuit treat the question of whether an 23 agreement allows for class-wide arbitration similarly to how the Ninth Circuit treats 24 the question of arbitrability. See Guess?, Inc. v. Russell, No. 16-cv-00780-CAS-ASX, 25 2016 WL 1620119, at *1 (C.D. Cal. Apr. 18, 2016); Castaldi v. Signature Retail 26 Servs. Inc., No. 15-cv-00737-JSC, 2016 WL 74640, at *16 (N.D. Cal. Jan. 7, 2016); 27 Accentcare, Inc. v. Jacobs, No. 15-03668-JSW, 2015 WL 6847909, at *1 (N.D. Cal. 28 Nov. 9, 2015); Yahoo! Inc., 836 F. Supp. 2d at 1012. When an arbitration agreement – 10 – 16cv3090 1 in an employment contract incorporates by reference the AAA rules, the reference 2 “clearly and unmistakably” delegates the question of whether the agreement allows 3 for class-wide arbitration to the arbitrator. See Guess?, Inc., 2016 WL 1620119 at *6 4 (“[B]y incorporating the AAA’s Model Rules for Arbitration of Employment 5 Disputes, the parties . . . agreed to delegate the question of whether respondents could 6 pursue their claims on a class-wide basis to an arbitrator.”); Accentcare, Inc., 2015 7 WL 6847909 at *4 (finding that “the question of arbitrability may be, and was, 8 delegated to the arbitrator by the incorporation of the AAA rules”); Yahoo! Inc., 836 9 F. Supp. 2d at 1012 (finding an arbitration agreement requiring “binding arbitration 10 under the then current [AAA] National Rules for the Resolution of Employment 11 Disputes” to constitute a “‘clear[ ] and unmistakab[le]’ agreement to have the 12 arbitrator decide questions regarding the arbitrability of class-wide claims”). 13 Defendant correctly asserts that an arbitration agreement’s mere reference to 14 the AAA rules does not establish that the agreement permits class arbitration. (Reply 15 5:9-5:24.) The AAA Supplementary Rules for Class Arbitrations (“Supplementary 16 Rules”) expressly dictate that when construing an arbitration clause, “the arbitrator 17 shall not consider the existence of the Supplementary Rules, or any other AAA rules, 18 to be a factor either in favor of or against permitting arbitration to proceed on a class 19 basis.” (Opp’n Ex. 2 at 2.) However, this does not resolve the present issue before 20 the Court: whether the arbitrator is responsible for determining if class arbitration is 21 available. 22 The Agreement’s reference to the AAA rules controls the allocation of this 23 threshold determination. A reference to the AAA rules incorporates the 24 Supplementary Rules, as the Supplementary Rules “shall apply to any dispute arising 25 out of an agreement that provides for arbitration pursuant to any of the rules of the 26 [AAA] where a party submits a dispute to arbitration on behalf of or against a class 27 or purported class” and when “a court refers a matter pleaded as a class action to the 28 AAA for administration.” (Opp’n Ex. 2 at 1) (emphasis added). The Supplementary – 11 – 16cv3090 1 Rules further instruct that “the arbitrator shall determine as a threshold matter . . . 2 whether the applicable arbitration clause permits the arbitration to proceed on behalf 3 of or against a class.” Id. at 2 (emphasis added). Consequently, references to the AAA 4 rules, even without specific reference to the Supplementary Rules, “clearly and 5 unmistakably evidence” the parties’ intention to delegate the question of availability 6 of class proceedings to the arbitrator. See Yahoo! Inc., 836 F. Supp. 2d at 1012. 7 Here, the Agreement, entered into in April 2008, incorporated by reference the 8 AAA rules. (Cross Decl. Ex. B at 9.) By agreeing to resolve disputes according to the 9 AAA rules, Plaintiff and Defendant also agreed to follow the Supplementary Rules, 10 which became effective on October 8, 2003. (Opp’n Ex. 2 at 1). Absent further, 11 binding guidance, the Court finds that the incorporation of the Supplementary Rules 12 constitutes clear and unmistakable evidence that the parties intended to allow the 13 arbitrator, rather than the Court, to determine whether the Agreement permits class 14 arbitration.4 Consequently, the Court will grant in part Defendant’s motion to compel 15 arbitration because it finds that the parties agreed to arbitrate disputes regarding the 16 availability of class proceedings. However, the Court will deny in part Defendant’s 17 motion to compel individual arbitration and further deny Defendant’s motion to 18 dismiss Plaintiff’s class claims because the Court finds the arbitrator, not the Court, 19 must determine whether class arbitration is permitted. 20 4 21 22 23 24 25 26 27 28 A similar line of analysis applies broadly to disputes regarding the validity of the Agreement because “incorporation of the AAA rules constitutes clear and unmistakable evidence that contracting parties agreed to arbitrate arbitrability.” See Brennan, 796 F.3d at 1130. Rule 6(a) in the AAA’s Employment Arbitration Rules and Mediation Procedures specifies that the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the . . . validity of the arbitration agreement.” Consequently, the Court finds the Agreement’s incorporation of the AAA rules (Cross Decl. Ex. B at 9) clearly and unmistakably delegates the question of the Agreement’s validity to the arbitrator. When an arbitration agreement “clearly and unmistakably” delegates questions of arbitrability to the arbitrator, the “only remaining question is whether the particular agreement to delegate arbitrability . . . is itself unconscionable.” Brennan, 796 F.3d at 1132. Because Plaintiff claims that the entire Agreement is illegal and invalid under the NLRA and Morris, and fails to argue that the particular delegation provision itself is unconscionable, the validity claim also remains reserved for the arbitrator. See Rent-A-Ctr., W., 561 U.S. at 74-75 (refusing to consider the plaintiff’s unconscionability claims because the plaintiff raised no challenge particular to the delegation provision). – 12 – 16cv3090 1 IV. CONCLUSION & ORDERS 2 In light of the foregoing, the Court GRANTS IN PART and DENIES IN 3 PART Defendant’s motion to compel individual arbitration and dismiss class claims. 4 (ECF No. 8.) Specifically, the Court grants in part Defendant’s request to compel 5 arbitration and ORDERS Plaintiff and Defendant to submit to arbitration—in the 6 manner provided for in the Agreement—the threshold issue of whether class 7 arbitration is permitted. See 9 U.S.C. § 4. Further, because the issue of whether 8 Plaintiff’s class claims should be dismissed is properly one for the arbitrator, the 9 Court denies Defendant’s request to strike Plaintiff’s class allegations. In addition, 10 the Court STAYS this action pending resolution of the arbitration. See 9 U.S.C. § 3. 11 Finally, the Court directs the Clerk of the Court to ADMINISTRATIVELY 12 CLOSE this case. The decision to administratively close this case pending resolution 13 of the arbitration does not have any jurisdictional effect. See Dees v. Billy, 394 F.3d 14 1290, 1294 (9th Cir. 2005) (“[A] district court order staying judicial proceedings and 15 compelling arbitration is not appealable even if accompanied by an administrative 16 closing. An order administratively closing a case is a docket management tool that 17 has no jurisdictional effect.”). 18 IT IS SO ORDERED. 19 20 DATED: June 28, 2017 21 22 23 24 25 26 27 28 – 13 – 16cv3090

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