Chahla v. Jukko, Inc.

Filing 31

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that: 1. Plaintiff's Motion to Remand 8 is DENIED; 2. Defendant's Motion to Compel Arbitration 6 is GRANTED; and 3. This action is STAYED pending arbitration. (Written Opinion) Signed by The Hon. Paul A. Magnuson on 9/19/2018. (LLM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Daniel Chahla,

Civ. No. 18-1595 (PAM/BRT)
Plaintiff,

v.

MEMORANDUM AND ORDER

Jukko, Inc.,
Defendant.

This matter is before the Court on Plaintiff’s Motion to Remand (Docket No. 8)
and Defendant’s Motion to Compel Arbitration (Docket No. 6). For the following
reasons, the Motion to Remand is denied, the Motion to Compel Arbitration is granted,
and this action will be stayed pending arbitration.
BACKGROUND
In March 2017, Plaintiff Daniel Chahla was hired to be Chief Technology Officer
of a start-up technology company, Defendant Jukko, Inc. Jukko’s business model was to
develop a way to capture donations to nonprofits through digital advertising on mobile
devices. Chahla was terminated in November 2017, and alleges that he was fired for
opposing the sexual harassment of the company’s CEO, Elizabeth Sarquis, and for
questioning the company’s business practices. He brought this lawsuit in state court
raising claims under the Minnesota Human Rights Act (“MHRA”) (Minn Stat. §
363A.15) and Minnesota’s Whistleblower Act (id. § 181.932), and claims for unpaid
wages under Minnesota’s wage statute (id. § 181.13). Jukko removed the case, invoking
this Court’s diversity jurisdiction.

According to Jukko, Chahla signed an “offer letter” that included a broad
arbitration agreement.

Jukko now moves to compel Chahla to arbitrate, or in the

alternative, asks for a dismissal under Rule 12(b)(6). Chahla contends that Jukko is a
Minnesota company and that therefore the exercise of federal jurisdiction is
inappropriate.
DISCUSSION
A.

Jurisdiction
Federal jurisdiction “depends upon the state of things at the time of the action

brought.” Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567 (2004) (quoting
Mollan v. Torrance, 22 U.S. 537 (1824). In the case of removal on the basis of diversity
jurisdiction, jurisdiction is determined as of the date of removal, although some courts
have used the date of filing or the date the summons was served. Slater v. RepublicVanguard Ins. Co., 650 F.3d 1132, 1134 (8th Cir. 2011) (diversity determined as of date
of removal); McGill v. Conwed Corp., No. 17cv1047, 2017 WL 4534827, at *3-4 (D.
Minn. Oct. 10, 2017) (Nelson, J.) (diversity determined as of date summons was served).
Chahla served the summons on Jukko in early May, and Jukko removed the lawsuit on
June 7, 2018. Jukko contends that it was not a citizen of Minnesota on either date.
Jukko contends it maintained a Minnesota office only because Chahla wanted a
place to work in Minnesota. Once he was fired, Jukko closed its Minnesota office, and as
of February 2018, Jukko no longer maintains an office in Minnesota. Jukko de-registered
with the Minnesota Secretary of State in March 2018, and therefore is no longer
authorized to do business in Minnesota. It is a Delaware corporation and claims that its
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headquarters is in New York City, although it has no official office space there. Two of
its three officers live and work in New York; the third (CEO Sarquis) lives in Minnesota
but ostensibly travels to New York frequently to work.

The two New York-based

officers never travel to Minnesota. When Chahla interviewed for the job, he traveled to
New York to interview with these two individuals. Jukko’s employees/contractors live
all over the world, and only one employee other than Sarquis lives in Minnesota.
Because Jukko has not had an official presence in Minnesota or any business-related
contacts with Minnesota since Chahla’s termination, Jukko asserts that it cannot be
considered domiciled in Minnesota and diversity jurisdiction is proper.
In response to Jukko’s statement of facts supporting Jukko’s claims regarding
citizenship, Chahla asks for jurisdictional discovery. Chahla asks that the Court stay the
consideration of the motion to compel arbitration until he can take that discovery.
Jurisdictional discovery “is only warranted if the facts necessary to resolve the
jurisdictional inquiry are either unknown or can be genuinely disputed.” F.D.I.C. v.
Dosland, 50 F. Supp. 3d 1070, 1077 (N.D. Iowa 2014) (citing Viasys., Inc. v. EMB-Papst
St. Georgen GmbH & Co., 646 F.3d 589, 598 (8th Cir. 2011)).

“To request

[jurisdictional] discovery . . . a party must file an affidavit describing: (1) what facts are
sought and how they are to be obtained; (2) how these facts are reasonably expected to
raise a genuine issue of material fact [as to diversity jurisdiction]; (3) what efforts the
affiant has made to obtain them; and why the affiant’s efforts were unsuccessful.”
Johnson v. United States, 534 F.3d 958, 965 (8th Cir. 2008).

But a party’s “bare

assertion” that discovery might reveal facts supporting jurisdiction is insufficient to
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prompt jurisdictional discovery.

Dosland, 50 F. Supp. 3d at 1077.

Aside from

contending that discovery is necessary, Chahla has not complied with the requirements
set forth above. His request for discovery is “entirely speculative” and thus the Court
will deny his request. Viasys., 646 F.3d at 598.
The only facts before the Court establish that Jukko is no longer a Minnesota
company. Therefore, the exercise of diversity jurisdiction is proper.
B.

Arbitration
The offer of employment Jukko extended to Chahla contained an arbitration

provision, requiring arbitration in Manhattan County, New York, for “any and all
disputes, claims, or causes of action . . . arising from or relating to the enforcement,
breach, performance, or interpretation of this Agreement, your employment with the
Company, or the termination of your employment.” (Sosna Aff. (Docket No. 11) Ex. B.)
Chahla signed the offer on March 30, 2017.

(Id.)

Jukko conditioned its offer of

employment on Chahla signing the offer and agreeing to the arbitration provision.
Chahla first argues that it is “procedurally unconscionable” for Jukko to remove
the case to federal court and then move to compel arbitration. However, these actions are
commonplace in the federal courts.
Chahla next argues that the arbitration agreement is unenforceable because it is a
contract of adhesion under Minnesota law. He contends that he was forced to sign the
contract because he had already quit his previous job. But as Jukko points out, the
allegations of Chahla’s Complaint belie this contention, as he alleges that negotiations
over the terms of his employment went on for several weeks. (Compl. ¶ 34.) Indeed,
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Jukko asserts that Chahla vigorously negotiated his employment terms, but never
expressed reservations about the arbitration provision.
Minnesota courts routinely enforce arbitration provisions unless (1) the forum is
so “seriously inconvenient” that a “party would be completely unable to pursue or defend
a claim” in that forum, Cell v. Moore & Schley Sec. Corp., 449 N.W.2d 144, 149 (Minn.
1989) (quotation omitted); (2) the choice of forum is one of adhesion; and (3) the
agreement is “otherwise unreasonable.”

Hauenstein & Bermeister, Inc. v. Met-Fab

Indus., Inc., 320 N.W.2d 886, 890 (Minn. 1982).
Chahla is not completely unable to pursue his claims in arbitration in New York.
Although it is not convenient for Chahla to have to travel to New York to arbitrate, “[t]he
defense that the forum is seriously inconvenient will not be successful in the usual case
because the presumption is that consideration was received at the time of contracting for
the alleged inconvenience.” Hauenstein, 320 N.W.2d at 890. “A party cannot be heard
to complain about inconvenience resulting from an agreement [he] freely entered into.”
Id. (quotation omitted). There is no indication that Chahla did not receive consideration
for the inconvenient forum.
Nor is the contract one of adhesion or otherwise unreasonable.

There is no

indication that the employment offer was a “take-it-or-leave-it” contract, the product of
unequal bargaining power between the parties. Matthiessen v. Nat’l Trailer Convoy, Inc.,
294 F. Supp. 1132 (D. Minn. 1986) (Lord, J.). Chahla has not established “a great
disparity in bargaining power [or] that there was no opportunity for negotiation.”
Hauenstein, 320 N.W.2d at 891.

Chahla is a sophisticated businessperson who
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vigorously negotiated the terms of his employment with Jukko. The arbitration clause is
not written in jargon, and it contains bolded type to draw Chahla’s attention to the rights
he is waiving as a result: “You acknowledge that by agreeing to this arbitration
procedure, both you and the Company waive the right to resolve any such dispute
through a trial by jury or judge or administrative proceeding.” (Sosna Aff. Ex. B.)
He cannot claim to be surprised by the arbitration requirement.
Finally, Chahla argues that he will be unable to pursue his statutory claims in
arbitration. However, “[b]y agreeing to arbitrate a statutory claim, [Chahla] does not
forgo the substantive rights afforded by the statute; [he] only submits to their resolution
in an arbitral, rather than judicial, forum.” Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 473 U.S. 614, 628 (1985).
Chahla has presented no legitimate basis to ignore the clear arbitration provision in
the employment offer, and therefore the Court will enforce the provision. The Court will
stay this matter pending the outcome of the arbitration. 9 U.S.C. § 3.
CONCLUSION
Plaintiff has failed to show that jurisdiction is improper or that the arbitration
provision should not be enforced.

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Accordingly, IT IS HEREBY ORDERED that:
1. Plaintiff’s Motion to Remand (Docket No. 8) is DENIED;
2. Defendant’s Motion to Compel Arbitration (Docket No. 6) is GRANTED;
3. This action is STAYED pending arbitration.

s/ Paul A. Magnuson

Dated: September 19, 2018

Paul A. Magnuson
United States District Court Judge

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