Ralph v. Hosseini et al

Filing 46

ORDER provisionally granting in part and denying in part 37 Motion to Compel arbitration; Staying action. The court provisionally grants the motion to compel arbitration of Plaintiffs state law claims, defers ruling on the motion to compel arbitration of the FLSA claim pending resolution of the Morris case, and stays the entire action. Signed by Judge Jeffrey T. Miller on 11/13/2017. (jpp)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10

JOHN RALPH,

11
12

v.

CASE NO. 17cv1332 JM(JMA)
Plaintiff,

15

HAJ, INC.; D.O.S. PIZZA, INC.;
NORTH COUNTY PIZZA, INC.;
PIZZAFELLA, LLC.; SLAMMED
PIZZA, INC.; and SLAMMED PIZZA
JR., INC.,

16

ORDER PROVISIONALLY
GRANTING IN PART AND
DENYING IN PART MOTION TO
COMPEL ARBITRATION; STAYING
ACTION

Defendants.

13
14

17
18

Pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §1 et seq., Defendant

19 D. O. S. Pizza, Inc. (“DOS”) moves to compel arbitration of Plaintiff John Ralph’s
20 claims. Plaintiff opposes the motion. Pursuant to Local Rule 7.1(d)(1), the court finds
21 the matters presented appropriate for resolution without oral argument. For the reasons
22 set forth below, the court provisionally grants the motion to compel arbitration of the
23 state law claims, defers ruling on the motion to compel arbitration of the Fair Labor
24 Standard Act (“FLSA”) claim, and stays the entire action pending resolution of Morris
25 v. Ernst & Young, 834 F.3d 975 (9th Cir. 2017), cert. granted, 137 S.Ct. 809 (2017).
26 All other pending motions (ECF 21, 39, and 42) are denied as moot. The parties are
27 also instructed to inform the court of the Supreme Court’s decision in Morris within
28 seven days of issuance of the opinion.
-1-

17cv1332

1
2

BACKGROUND
On July 31, 2017, Plaintiff John Ralph filed the First Amended Complaint

3 (“FAC”) in this federal question collective action by alleging four claims for relief: (1)
4 violation of the FLSA; (2) violation of Cal. Labor Code §2802; (3) violation of Cal.
5 Labor Code §§1194, 1194.2, 1197, 1197.1, and IWC Minimum Wage Order and Wage
6 Order No. 5; and (4) Cal. Bus & Prof Code §17200 et seq. Even though Plaintiff is
7 directly employed DOS, he alleges that Defendants, collectively, operate about 74
8 Domino’s Pizza stores in Southern California, and operate as a single integrated
9 enterprise and jointly operate the Domino’s restaurants “as they maintain interrelated
10 operations, centralized control of labor relations, common management and common
11 ownership and financial control.” (FAC ¶17).
12

At the heart of Plaintiff’s claims is the allegation that Defendants’ delivery

13 reimbursements policy fails to compensate employees for their out-of-pocket expenses
14 and fails “to reimburse [] delivery drivers at any approximation of the cost of owning
15 and operating their vehicles for Defendants’ benefit.” (FAC ¶30). One result of this
16 allegedly failed policy is that Defendants “willfully fail to pay the federal minimum
17 wage to their delivery drivers.” (TAC ¶47).
18

During Plaintiff’s employment, the parties signed an “Alternative Dispute

19 Resolution Agreement” (the “ADR Agreement”), which provides:
20
21
22

"This ADR Agreement shall apply to any claim or dispute arising out of
or relating to the employment relationship or its termination including, but
not limited to, claims of . . . violation of statute, non-payment of wages,
and all other similar claims."

23 (Petrosian Decl. Ex. A.). The ADR Agreement also contains a class and collective
24 action waiver:
25
26
27
28

… the Arbitrator shall not consolidate or combine the resolution of any
claim or dispute between the two Parties to this ADR Agreement with the
resolution of any claim by any other party or parties, including but not
limited to any other employee of the Company. Nor shall the Arbitrator
have the authority to certify a class under Federal Rule of Civil Procedure
Rule 23, analogous state rules, or Arbitrator’s rules pertaining to class
arbitration, and the Arbitrator shall not decide claims on behalf
of any other party or parties.
-2-

17cv1332

1 Doc. No. 37-1, Ex. A at 2. The ADR Agreement further provides that “The Parties wish
2 to resolve any disputes between them in an individualized, informal, timely, and
3 inexpensive manner to eliminate, to the maximum extent possible, any resort to
4 litigation in a court of law.” Id. Regarding arbitrability, the agreement provides that
5 “The Arbitrator selected by the Parties shall be solely responsible for resolving any
6 disputes over the interpretation or application of this Arbitration Agreement.” Id. at 1.
7

Pending before the court are several motions: Defendant North County Pizza,

8 Inc.’s motion for a more definite statement; Defendant Haj, Inc.’s motion to dismiss;
9 and Plaintiff’s motion to amend. As the court provisionally grants Defendants’ Motion
10 to Compel Arbitration of the state law claims, it does not reach the merits of these
11 motions.
12

DISCUSSION

13 The Arbitration Provision
14

The Federal Arbitration Act (“FAA”) provides that

15

a written provision in . . . a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising . . . shall
be valid, irrevocable and enforceable, save upon such grounds as exist at
law or equity for the revocation of any contract.

16
17
18
19
20
21
22
23
24
25
26
27
28

9 U.S.C. §2. The FAA establishes federal policy favoring arbitration of disputes.
AT&T Mobility LLC v. Concepcion, 563 U.S. 339 (2011). Federal courts are required
to “rigorously” enforce the parties agreement to arbitrate. Sherson/American Express,
Inc. v. McMahon, 482 U.S. 220 (1987). Indeed, “any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the problem at hand
is the construction of the contract language or an allegation of waiver, delay, or a like
defense to arbitrability.” Moses H. Cone Memorial Hosp. v. Mercury Const. Corp.,
460 U.S. 1, 24 (1983).
[W]here a contract contains an arbitration clause, there is a presumption
of arbitrability in a sense that [a]n order to arbitrate the particular
grievance should not be denied unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation
that covers the asserted dispute. Doubts should be resolved in favor of
coverage.
-3-

17cv1332

1 A.T.&T. Tech. Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986)
2 (citations omitted).
3

The FAA creates “a body of federal substantive law of arbitrability,” enforceable

4 in both state and federal courts and preempting any state laws or policies to the
5 contrary. Moses H. Cone, 460 U.S. at 24. “The availability and validity of defenses
6 against arbitration are therefore to be governed by application of federal standards.”
7 Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 285 (9th Cir. 1988). This body
8 of federal law also requires that federal courts apply state law, “whether of legislative
9 or judicial origin [] if that law arose to govern issues concerning the validity,
10 revocability and enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483,
11 493, fn. 9 (1987). Thus, state law applies to interpret arbitration agreements as long
12 as those state laws are generally applicable to all contracts, and not just agreements to
13 arbitrate.
14

Here, there is no serious dispute that Plaintiff’s claims arise out of or relate to his

15 employment with DOS, as all claims are based upon the alleged violation of federal and
16 state labor codes. The arbitration provision is sufficiently clear and broad enough to
17 encompass Plaintiff’s claims. All of Plaintiff’s state law claims, except the FLSA
18 claim, discussed separately below, are subject to arbitration.
19

In opposition, Plaintiff contends that he is “unsophisticated” and, therefore, the

20 arbitration provision is not enforceable. Plaintiff’s argument lacks factual and legal
21 support. The FAC and Plaintiff’s declaration establish that he has worked for DOS as
22 a delivery driver for about four years, graduated from high school, and completed one
23 year of junior college. Further, Plaintiff fails to establish that he suffers from a
24 disability or other condition which would undermine his capacity to enter into an
25 agreement.

Plaintiff also fails to establish his legal argument that being

26 “unsophisticated” is somehow a defense to arbitration. Under California law, the
27 unconscionability doctrine provides a defense to arbitration. See Stirlen v. Supercuts,
28 Inc., 51 Cal.App.4th 1519 (1997). However, Plaintiff does not argue that California’s
-4-

17cv1332

1 unconscionability doctrine applies under the circumstances nor does he provide an
2 appropriate analysis.
3

In sum, the court provisionally grants the motion to compel arbitration of all state

4 law claims, but not the FLSA claim.
5

The FLSA Claim

6

After Morris, the parties dispute whether a FLSA claim is subject to arbitration.

7 Based upon the recent Ninth Circuit decision in Morris, 834 F.3d 975, Plaintiff argues
8 that his FLSA claim is not subject to arbitration.1 Defendants, in turn, urge this court
9 to find “that the class action waiver in the ADR Agreement is severable, order
10 Plaintiff’s individual claims to arbitration, and either stay the rest of this action [the
11 FLSA claim] or refer the collective claims to a referee.” (Reply at p.4:7-9).
12

In Morris, employees of Ernst & Young sought to bring a collective action

13 alleging the violation of federal and state labor laws. As the parties had executed
14 arbitration provisions with class action waivers, the district court compelled arbitration
15 of plaintiffs’ claims. The Ninth Circuit concluded, based upon the National Labor
16 Relations Act (“NLRA”), 29 U.S.C. §§151 et seq., and the FLSA, that the statutory
17 concerted action provisions afford employees substantive rights that cannot be waived
18 by a class or concerted action waiver provision in an arbitration agreement. In essence,
19 the Ninth Circuit concluded that the ability of an injured employee to bring a concerted
20 action is part and parcel of a FLSA claim. As noted by the dissent in Morris, the
21 opinion is at odds with the Second, Fifth, and Eighth Circuits, which hold that the
22 NLRA and FLSA do not invalidate collective action waivers in arbitration agreements.
23

In sum, the court concludes that resolution of the issues on appeal in Morris will

24 directly impact the course of this litigation. Accordingly, the court defers ruling on the
25 arbitrability of the FLSA claim until after the Supreme Court issues its opinion in
26 Morris.
27
28

1

To the extent the court compels arbitration, Plaintiff urges the court to stay,
rather than dismiss, this action. (Oppo. at p.7:10).
-5-

17cv1332

1

The Order to Stay the Action

2

In light of the Supreme Court’s grant of certiorari, the court stays this entire

3 action. While a stay is an extraordinary remedy, see Landis v. North American Co.,
4 299 U.S. 248, 254 (1936), a short stay is presently warranted as the Supreme Court is
5 likely to determine whether FLSA claims are subject to arbitration. The court rejects
6 Defendants’ suggestion to compel arbitration of the state law claims and stay the FLSA
7 claim, or refer the FLSA claim to a “referee” pursuant to Cal. Code Civ. Pro. §638(a).
8 To hear a portion of Plaintiff’s claim in this court, or before a referee, and the
9 remainder of Plaintiff’s claims before an arbitrator, duplicates the litigation,
10 undermines the perceived efficiencies to arbitration, and runs counter to Fed.R.Civ.P.
11 1, which seeks the fair, just, and inexpensive resolution of every action.
12

In sum, the court provisionally grants the motion to compel arbitration of

13 Plaintiff’s state law claims, defers ruling on the motion to compel arbitration of the
14 FLSA claim pending resolution of the Morris case, and stays the entire action.
15

IT IS SO ORDERED.

16 DATED: November 13, 2017
17

Hon. Jeffrey T. Miller
United States District Judge

18
19

cc:

All parties

20
21
22
23
24
25
26
27
28
-6-

17cv1332