Aliff v. Vervent, Inc.

District Court, S.D. California·Decided May 27, 2021·No. 3:20-cv-00697·Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 JODY ALIFF, MARIE SMITH, Case No.: 20-cv-00697-DMS (AHG) HEATHER TURREY, individually and 11 on behalf of all others similarly situated, ORDER DENYING MOTION TO 12 STAY PROCEEDINGS PENDING Plaintiffs, APPEAL 13 v. 14 VERVENT, INC. fka FIRST 15 ASSOCIATES LOAN SERVICING, LLC; ACTIVATE FINANCIAL, LLC; 16 DAVID JOHNSON; CHRISTOPHER 17 SHULER; LAWRENCE CHIAVARO; DEUTSCHE BANK TRUST COMPANY 18 AMERICAS, 19 Defendants. 20

21 This matter comes before the Court on Defendants Vervent, Inc., Activate Financial, 22 LLC, David Johnson, Christopher Shuler, and Lawrence Chiavaro’s (“the Vervent 23 Defendants”) motion to stay proceedings pending appeal. Plaintiffs filed a response in 24 opposition and the Vervent Defendants filed a reply. For the reasons discussed below, the 25 Court denies the motion. 26 / / / 27 / / / 28 1 I. 2 BACKGROUND 3 The factual background to this case is set forth in the Court’s September 24, 2020 4 order. (ECF No. 43.) In that order, the Court denied the motion to compel arbitration filed 5 by the Vervent Defendants, granted the motion to compel arbitration filed by Defendant 6 Deutsche Bank Trust Company Americas (“DBTCA”), and stayed the litigation pending 7 arbitration of Plaintiffs’ claims against DBTCA. (Id.) On October 23, 2020, the Vervent 8 Defendants appealed the denial of their motion to compel arbitration, which appeal is 9 currently pending before the Ninth Circuit. (See ECF No. 45.) On November 9, 2020, 10 Plaintiffs dismissed DBTCA as defendants and requested a lift of the stay pending 11 arbitration. (ECF Nos. 51, 52.) The Court lifted that stay on November 21, 2020. (ECF 12 No. 55.) The Vervent Defendants now move to stay proceedings pending their appeal. 13 (ECF No. 68.) 14 II. 15 DISCUSSION 16 Courts consider four factors (“the Nken factors”) when deciding to issue a stay 17 pending appeal: 18 (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured 19 absent a stay; (3) whether issuance of the stay will substantially injure the 20 other parties interested in the proceeding; and (4) where the public interest lies. 21 22 Al Otro Lado v. Wolf, 952 F.3d 999, 1006–07 (9th Cir. 2020) (quoting Nken v. Holder, 556 23 U.S. 418, 434 (2009)) (internal quotation marks omitted). “The first two factors . . . are 24 the most critical.” Nken, 556 U.S. at 434. 25 With respect to the first Nken factor, the Court has already considered, and rejected, 26 most of the Vervent Defendants’ arguments in its order denying their motion to compel 27 arbitration. Simply restating them here does not show the Vervent Defendants are likely to 28 succeed on the merits of this dispute. Although the Vervent Defendants raise several new 1 arguments which they contend indicate a likelihood of success on the merits, these 2 arguments are unpersuasive. 3 First, regarding agency theory, Defendants make much out of Plaintiffs’ statement 4 in Plaintiffs’ opposition that “Vervent agreed to play the role of loan servicer.” (Pls.’ 5 Opp’n 2.) The Court does not find this to be a concession that an agency relationship 6 legally existed between Vervent and DBTCA, but merely a characterization of Vervent’s 7 role in the context of the scheme alleged in Plaintiff’s Complaint. 8 Second, the Vervent Defendants cite the Ninth Circuit’s recent decision in Shivkov 9 v. Artex Risk Solutions, Inc., arguing a non-signatory may compel arbitration under an 10 equitable estoppel theory where a plaintiff’s claims “arise out of and relate directly to the 11 written agreement.” 974 F.3d 1051, 1070 (9th Cir. 2020). The Vervent Defendants attempt 12 to cast this language as a more recent formulation of the equitable estoppel test which is 13 “at odds with” this Court’s prior decision. (Vervent Defs.’ Mot. 10; Vervent Defs.’ Reply 14 5.) But as Plaintiffs point out, Shivkov applied Arizona law. See 974 F.3d at 1070 (citing 15 Arizona case law). Under the Federal Arbitration Act, a non-signatory may invoke 16 arbitration “if the relevant state contract law allows the litigant to enforce the agreement.” 17 Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 2013) (emphasis added). 18 Here, the Court previously found California law applied to the loan agreements at issue 19 and applied California law pursuant to Ninth Circuit precedent as set forth in Kramer and 20 other cases. The Vervent Defendants do not contend that Arizona law governs the 21 agreements here and thus Shivkov does not increase their likelihood of success on appeal. 22 The Court remains unpersuaded that Plaintiffs’ claims rely on the loan agreements 23 to such a degree that permits the Vervent Defendants to compel arbitration under a theory 24 of equitable estoppel. See Murphy v. DirecTV, Inc., 724 F.3d 1218, 1230–31 & n.7 (9th 25 Cir. 2013); Rajagopalan v. NoteWorld, LLC, 718 F.3d 844, 847–48 (9th Cir. 2013) 26 (holding defendant could not compel arbitration based on equitable estoppel where plaintiff 27 had “statutory claims that are separate from the [ ] contract itself”). The first Nken factor 28 accordingly weighs against a stay. 1 The second factor asks whether the Vervent Defendants will be irreparably injured 2 absent a stay. The Vervent Defendants argue they are being irreparably harmed by having 3 to engage in discovery broader than that which would be available in arbitration. First, 4 they contend they are being harmed by having to provide class-wide discovery, relying on 5 Delisle v. Speedy Cash, No. 3:18-CV-2042-GPC-RBB, 2019 WL 7755931 (S.D. Cal. Oct. 6 3, 2019). In Delisle, the defendants argued that the harm to them was “acute” because 7 further proceedings would require them to litigate class certification and engage in class- 8 wide discovery. Id. at *4. There, unlike here, the plaintiff did not contest the defendants’ 9 irreparable harm arguments. Id. The court found given the procedural posture of the case, 10 the harm was “clear” because no discovery schedule had been created. Id. By contrast, in 11 this case, discovery is proceeding in accordance with the Magistrate Judge’s scheduling 12 orders, and class discovery is set to be completed by June 30, 2021. (ECF Nos. 65, 74.) 13 The Court noted in its November 21, 2020 order lifting the stay pending arbitration that the 14 Vervent Defendants could move for a stay pending appeal, but the Vervent Defendants did 15 not file the present motion until March 30, 2021. The Court finds the Vervent Defendants 16 have not met their burden to establish that engaging in class-wide discovery constitutes 17 irreparable harm. 18 Next, the Vervent Defendants argue that participating in depositions while their 19 appeal is pending constitutes irreparable harm because depositions are unlikely to be 20 permitted if the Ninth Circuit compels arbitration. However, the cases they rely upon 21 address harm in the context of whether arbitration had been waived, not whether to grant a 22 stay pending appeal. See Morgan Stanley & Co. LLC v. Couch, 659 F. App’x 402, 406 23 (9th Cir. 2016) (affirming district court’s finding of prejudice in the context of waiver of 24 arbitration agreement); Simmons v. Morgan Stanley Smith Barney, LLC, 872 F. Supp. 2d 25 1002, 1010 (S.D. Cal. 2012) (court may consider “taking advantage of judicial discovery 26 procedures not available in arbitration” as factor when determining whether arbitration has 27 been waived).

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